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MAJOR
THEMES AND
ADDITIONAL
BUDGET
DETAILS
FISCAL YEAR 1984
EXECUTIVE OFFICE OF THE PRESIDENT
OFFICE OF MANAGEMENT AND BUDGET
Major Themes and Additional Budget Details
Table of Contents
PAGE
1.
OVERVIEW
7
2.
INCOME SECURITY AND HEALTH
11
A. Social Security and Other Retirement
15
Social Security (Bipartisan Solution)
Railroad Retirement Board
Federal Windfall Subsidy
B. Means-Tested Individual Benefits
Aid to Families with Dependent Children
Child Support Enforcement
Food Stamps and Nutrition Assistance for Puerto Rico
Child Nutrition Programs
HUD Subsidized Housing Programs
Public Housing Reform Proposals
C. Health Policy
3.
18
20
22
25
36
39
41
43
45
48
51
Medicare: Overview
Medicare: Catastrophic Hospital Costs Protection
and Cost Sharing
Medicare: Physician Payment Freeze
and Hospital Reimbursement Limit
Medicare: Supplementary Medical Insurance - Premiums and Deductibles
Medicare: Voluntary Vouchers
Medicare: First Full Month of Eligibility
Medicare: Eliminate PSRO, PRO and Mandatory Utilization
Review Funding
Medicaid
Cap Tax Subsidy for Private Health Insurance Premiums
56
57
59
60
62
63
64
65
67
OTHER NON-DEFENSE SPENDING
69
A. Infrastructure/Public Works
77
Highways
Transit
Modernization of the Aviation Infrastructure
Economic Development Administration
Enterprise Zones
Corps of Engineers Waterway and Port User Fees
3
79
81
83
85
87
89
PAGE
B. Education, Training and Employment Services
Helping Workers Find Jobs
Student Financial Aid
Tuition Tax Credit
Science and Mathematics Education
Head Start
Services for Groups with Special Educational Needs
C. Special Assistance
93
96
98
100
102
104
107
Funding for Indian Programs - Government-wide
Indian Housing and Community Development Programs
Indian Health Service
Native Americans Programs
Veterans Pensions
Hospital and Medical Care for Veterans
Veterans Disability Compensation
Minority Business Assistance
Assistance to Historically Black Colleges
Howard University
Federal Civil Rights Activities
Legal Services Corporation
Older Americans Programs
ACTION
Refugee and Entrant Assistance
Farm Programs
Soil and Water Conservation
Export Credits and Guarantees
Urban Development Action Grants
Rental Rehabilitation Grants
Federal Subsidy for Saint Elizabeths Hospital
Termination of D.C. Borrowing from Treasury
Subsidies for Non-Profit Mailers
Public Broadcasting Funds
Nuclear Waste Fund
D. Science and Technology
109
112
114
115
117
119
121
123
125
126
127
130
132
134
135
137
139
142
144
145
147
149
151
152
154
157
Federal R&D Programs and Support for Basic Research
National Science Foundation
National Aeronautics and Space Administration
National Institutes of Health
Energy Research and Development:
Reductions in Non-nuclear Programs
91
4
159
162
164
167
168
PAGE
E. Ongoing Functions of Government
Federal Buildings Fund (SLUC)
Property Sales
Recreation User Fees
Federal Recreation Land Acquisition
Law Enforcement Crosscut
Organized Crime Drug Enforcement
Criminal Justice Assistance
Prison Construction
Tax Administration
EPA Operating Program
Strategic Petroleum Reserves
Outer Continental Shelf Oil and Gas Leasing
4.
NATIONAL SECURITY
CREDIT
204
206
209
211
212
213
214
216
218
221
Federal Housing Administration
Small Business Credit Assistance
Rural Telephone Bank
Agricultural Export Credit
6.
173
174
176
178
180
182
184
185
186
188
190
193
195
Strategic Forces
Conventional Forces
Selected NATO Related Programs
Guard and Reserve Forces
Military Personnel
Military Retirement
International Security Assistance
Foreign Economic and Financial Assistance
Foreign Information and Exchange Activity
5.
171
228
230
232
234
FEDERALISM
237
Federalism Initiative
General Revenue Sharing
Community Development Block Grants
Rural Housing Programs Financed by
the Farmers Home Administration
Health Block Grants
Social and Community Services Block Grants
Low-Income Home Energy Assistance (LIHEA)
5
244
248
249
251
253
254
256
PAGE
7.
FEDERAL PERSONNEL POLICY
257
Civil Service Retirement
Allowance for Pay Increase
Federal Employees Health Benefits Program
263
266
267
REFORM '88 AND OTHER MANAGEMENT INITIATIVES
269
Reform of Financial Systems
President's Council on Integrity and
Efficiency/Inspectors General
Internal Controls
Federal Procurement Reform
Paperwork Reduction
Debt Collection
Reducing Federal Employment
Space Management
273
8.
.
INDICES
275
277
279
281
283
286
288
289
6
OVERVIEW
7
CHAPTER I
OVERVIEW
In his State of the Union Address, the President spoke of the criteria used in developing the 1984
Budget.
•
It must be bipartisan. Overcoming the deficits and putting the Government's house in order
will require the best efforts of all of us.
•
It must be fair. Just as we all will share in the benefits that will come from recovery, all
should share fairly in the burden of transition.
•
It must be prudent. The strength of our national defense must be restored so that we can
pursue prosperity in peace and freedom, while maintaining our commitment to the truly
needy.
•
Finally, it must be realistic. We cannot rely on hope alone.
Application of these principles leads to the four major elements of the 1984 budget:
•
A freeze on Federal spending. Taken as a whole, the budget will increase no more than the
rate of inflation.
The bipartisan National Commission on Social Security Reform
recommendation for a 6-month freeze on cost of living adjustments will be applied to other
Government benefit programs. A one year freeze will also be applied to Federal civilian and
military pay.
•
Specific measures to control the growth of the "uncontrollable" spending programs.
•
$55 billion in defense savings over the next 5 years; and,
•
A stand-by tax, limited to no more than 1 % of GNP, to start in fiscal year 1986 and to last no
more than 3 years. The tax is contingent upon Congressional enactment of the President's
proposed budget.
The principles of bipartisanship, fairness, prudence and realism were also applied to specific
programmatic proposals. As shown below, the 1984 changes in the budget can be organized
according to themes. This perspective yields a useful grouping of programs by purpose, and changes
by rationale.
INCOME SECURITY AND HEALTH
The President has endorsed the bipartisan National Commission on Social Security Reform's
proposed solution to the social security crisis.
Reforms in the means-tested programs, such as food stamps and AFDC, are aimed at reducing
administrative costs, while preserving benefits for those individuals who must depend on the Federal
Government for their welfare. Housing reforms replace costly inefficient subsidy programs with
programs that serve more eligible households at substantially lower costs.
To slow the skyrocketing cost of Federal health care provisions, the Administration will introduce a
number of incentives and constraints into the Medicare and Medicaid systems. By reducing some of
the inflationary pressures in the nation's health care system, these reforms will benefit all. The
President also proposes that the Government provide catastrophic coverage for Medicare
beneficiaries.
9
OTHER NON-DEFENSE SPENDING
The 1984 Budget contains a number of initiatives designed to improve the nation's infrastructure.
Investment in human capital is also stressed, with several initiatives and program increases targeted
at helping workers find jobs, more effectively providing financial assistance to needy students, and
creating incentives for teachers in math and science.
The Administration also proposes a number of changes in programs designed to assist special
groups. The initiatives range from increasing the Federal fiscal commitment to providing State and
local government with more resources and responsibilities to relying more on the private sector.
The Federal Government will also increase its investment in research and development (R&D),
including a 29% increase in Department of Defense R&D and a 10% increase in support of basic
research through the National Science Foundation and other agencies.
Finally, the Administration is continuing its efforts to focus agency resources more efficiently on
services that the taxpayers want the most and that the Federal government can best provide.
NATIONAL SECURITY
The 1984 Budget continues the President's policy of strengthening our military capability, a
capability that declined substantially throughout the 1970's. A sustained commitment to reduce any
significant imbalance will not only strengthen our deterrent capabilities but will also improve
prospects for agreements on arms control and reductions.
CREDIT
During the last decade, the rapid growth of Federal credit assistance has had serious effects on the
Nation's financial markets. Federal intervention through direct and guaranteed lending preempts
capital that could be used more efficiently by unsubsidized, private borrowers; and since federally
assisted borrowers are frequently less productive than private borrowers, Federal credit activity
diminishes economic efficiency.
The Administration is committed to controlling the growth of Federal credit assistance, and upon
assuming office, the Administration took immediate steps to reverse previous growth trends. These
efforts will continue in 1984.
FEDERALISM
The President continues his effort to devolve to State and local government the responsibility for
those programs for which Federal administration and rules are too cumbersome. Several new block
grants and consolidations will increase the ability of citizens to direct collective resources to those
areas where they will be most effectively used.
FEDERAL PERSONNEL POLICY
The dramatic growth in Federal personnel expenditures over the past decade has forced this
Administration to carefully scrutinize several of the factors that drive up these costs.
The proposed reforms for 1984 deal directly with controlling costs of salary, retirement and health
insurance benefits. The pay freeze is short-term in nature, while the changes proposed for the
Federal retirement and health benefit programs represent substantial structural reforms.
REFORM '88
One of the highest Administration priorities is significant and lasting improvement in the
management of the Federal Government. The Administration will maintain its efforts to reduce
fraud, waste and abuse. At the same time it will initiate or expand several activities to modernize
and restructure the management and administrative systems with which the Government operates.
10
INCOME SECURITY AND HEALTH
11
CHAPTER 2
INCOME SECURITY AND HEALTH
Income security and health are two of the largest and most important functions in the Federal
budget. The 1984 Budget contains several significant new reforms in these areas, as well as proposals
for change which build upon major improvements enacted in the first two years of the Reagan
Administration.
In this chapter, the following proposals are discussed:
•
Social Security and Other Retirement. Major new reforms in Social Security, along with
changes in the related Railroad Retirement System, are examined in the first section of this
chapter. Fundamental reforms in Federal employee retirement programs are discussed in
chapter 7, which deals with Federal personnel policy.
•
Means-Tested Benefits. Proposals for means-tested entitlement or automatic spending
programs, which build upon previously enacted reforms, are discussed in the second section
of this chapter.The proposals are designed to:
- Simplify and improve the integrity of these programs.
-- Strengthen employment incentives so that those who can work do so.
-- Take more fully into account the family circumstances of program beneficiaries, in order
to better target means-tested assistance and prudently manage scarce public resources.
In addition, proposed reforms in assisted housing programs, which also provide benefits to
individuals, are explained. Numerous other programs which are designed to benefit lowincome individuals are discussed in other chapters, most notably Other Non-Defense
Spending (Chapter 3) and Federalism (Chapter 6). Thus, for example, education programs
benefiting low-income college students are discussed in the context of Administration
proposals for a major restructuring of Federal student financial aid. Similarly, Head Start and
programs targeted to specific minority groups are reviewed in Chapter 3, while block grant
programs helping the needy fall under the discussion of Federalism
•
Health Entitlements. The final section of this chapter deals with major reforms proposed in
Medicare and modest proposals for Medicaid, all designed to stem the rising tide of health
care costs without adversely affecting the health of the nation's elderly and poor. As part of
the Medicare reform, beneficiaries would be provided catastrophic protection against
hospital expenses. Federal employees health care programs are discussed in the chapter on
Federal personnel policy.
13
SOCIAL SECURITY AND OTHER RETIREMENT
15
SOCIAL SECURITY AND OTHER RETIREMENT
Without corrective legislation in the very near future, beginning no later than July 1983 the Old-Age
and Survivors Insurance (OASI) trust fund will be unable to make benefit payments on time. Under
present law, and on the basis of any reasonable set of economic assumptions, the expenditures of
the OASI program will continue to exceed income from payroll taxes and other sources through at
least 1986. To date, benefit payments have been made on a timely basis by drawing down the assets
of the OASI trust fund and interfund borrowing to cover the shortfall. However, the assets of the
OASI trust fund have been reduced to such a low level that they will not be able to continue making
up the difference between outgo and income much longer. The bipartisan National Commission on
Social Security Reform was created by the President as a result of this continuing deterioration of the
financial position of the OASI trust fund, the inability of the President and the Congress to agree to a
solution, and the concern about eroding public confidence in the social security system.
The Commission was assigned the critical job of assessing whether the social security program has
financing problems in the short run and over the long-range future and, if so, recommending how
such problems can be resolved. The Commission agreed that there is a financing problem for both
the short run, 1983-89, and the long range, through 2056, and that action should be taken to
strengthen the financial status of the program.
The Commission reached a bipartisan consensus for meeting the short-range financial requirements.
The bipartisan solution recommended by the Comission was an Accord endorsed by the President,
the Speaker of the House, and the Senate Majority Leader. The bipartisan solution assures the timely
payment of full social security benefits and would restore social security to long range actuarial
balance.
The bipartisan solution is based on a balanced approach, one constructed after months of detailed
study, meetings, and analysis. While neither the Commission members, the President, the Speaker of
the House, nor the Senate Majority leader would necessarily support each individual element, taken
as a whole, they strongly endorse the overall package and urge enactment of the Accord in its
entirety.
The provisions of the Accord are detailed in the section on social security. As discussed, the elements
of the Accord have relatively minor effects on employees, employers, and the retired, but have the
significant outcome of putting the social security system on a sound financial basis - which is the
goal of the bipartisan Accord. The Accord has a special provision protecting the needy elderly social
security recipients who might otherwise by adversely affected by the six month COLA delay, as well
as a series of provisions which improve the equity of social security and the treatment of women.
The social security Accord will improve somewhat the financial condition of railroad retirement,
which includes both social security equivalent benefits (financed by social security) and rail industry
pensions. Under the 1981 law enacted at rail labor and management's urgings, rail industry pension
annuities are linked to rail industry pension contributions. Since the social security level of railroad
retirement would be automatically conformed to the enacted provisions of the Accord, for
administrative simplicity the industry pension will also be conformed as appropriate.
Qon_onn n
oo
17
o . r\r o
SOCIAL SECURITY (BIPARTISAN SOLUTION)
AGENCY:
Social Security Administration
Funtional Code: 601
Funding
($ in millions)
1982
1983
1984
1985
1986
1987
1988
CURRENT LAW
Budget Authority
Outlays
146,207 161,948 163,047 183,584 203,373 221,399 242,718
154,144 170,324 182,388 196,326 210,719 226,239 242,269
REAGAN BUDGET
Budget Authority
Outlays
146,207 182,448 172,963 198,833 219,497 241,510 278,201
154,144 168,268 178,310 191,869 205,991 221,092 236,823
PROPOSED CHANGES
Budget Authority
Outlays
20,500
-2,056
9,916
-4,078
15,249
-4,457
16,125
-4,728
20,111
-5,147
35,482
-5,446
PROGRAM DESCRIPTION
The social security program provides income to retired and disabled workers, their dependents, and
survivors. The program has been financed by payroll taxes paid by employees, employers, and selfemployed individuals.
PROPOSED CHANGE
The National Commission on Social Security Reform recommended a bipartisan solution to the social
security solvency problem that has been endorsed by the President, the Speaker of the House, and
the Majority Leader of the Senate.
The main elements of the recommended solution are:
•
Cover all non-profit employees and new Federal employees under social security, and ban
withdrawal from coverage by State and local employers;
•
Credit to the OASDI trust funds the revenues raised by having only those taxpayers with
adjusted gross incomes in excess of $20,000 for an individual and $25,000 for a couple pay
income taxes on 50% of their OASDI benefits;
•
Shift the automatic increase in benefits to a calendar year basis, making the increase payable
in January instead of July;
•
Move the OASDI tax rate increase scheduled for 1985 to 1984, reschedule the 1988- 89 rate,
and provide a refundable tax credit for the year 1984 for the part of the emplyee rate that
was rescheduled;
•
Improve the equity of social security benefits;
•
Make the self-employment tax rate comparable to the combined employer- employee rate,
allowing one-half of the combined rate to be deducted as a business expense;
•
Reimburse the OASDI trust funds for the full cost of certain military service credits and
uncashed OASDI checks;
•
Provide for reallocating the OASDI tax rates between OASI and Dl and for inter-fund
borrowing during 1983-87, from Hospital Insurance to OASDI; and,
18
•
Provide a series of long-range reforms to stablize the financial condition of the OASDI trust
funds and restore the system to actuarial balance.
The recommended bipartisan solution also included an additional $30 of social security benefits to
be disregarded in calculating Supplemental Security Income (SSI) benefits.
RATIONALE
Without changes to current law, the largest of the social security trust funds, the old age and
survivors insurance (OASI), trust funds would be unable to pay full benefits on a timely basis starting
in July 1983.
The SSI disregard proposal is designed to prevent adverse impact on the retired elderly poor of the
six-month delay for the social security cost-of-living adjustment. By increasing the SSI disregard, lowincome recipients who have worked and are eligible for social security will receive a greater increase
in total benefits, beginning July 1, 1983, than they would have received if regular cost-of-living
adjustment had been made.
EFFECTS OF THE PROPOSED CHANGE
The bipartisan solution recommended by the National Commission on Social Security Reform is
projected to keep social security solvent in the short term as well as correct the long-range actuarial
imbalance facing social security. Approximately 1.6 million SSI/OASDI recipients would receive
increases in their SSI benefits starting in July 1983. The cost of the proposal is already included in
1984 Budget at $195 million for 1983, $530 million for 1984, and comparable amounts for future
years.
19
RAILROAD RETIREMENT BOARD
AGENCY:
Railroad Retirement Board
Functional Code: 601
Funding
($ in millions)
1982
1983
1984
1985
1986
1987
1988
CURRENT LAW
Budget Authority
Outlays
5,210
5,732
5,356
5,828
5,501
5,375
5,778
5,547
5,957
5,884
6,1 18
5,999
6,304
6,285
REAGAN BUDGET
Budget Authority
Outlays
5,210
5,732
5,356
5,828
5,501
5,375
5,778
5,547
5,957
5,884
6,118
5,999
6,304
6,285
PROPOSED CHANGES
Budget Authority
Outlays
PROGRAM DESCRIPTION
The Railroad Retirement Board (RRB) administers social security plus rail industry pension benefits to
former rail workers and their families:
•
Social security benefits are funded from social security trust funds.
•
Rail industry pensions are financed by rail pension contributions, which were collectively
bargained by rail labor and management and subsequently enacted by Congress.
The social security benefits administered by the Board remain financially sound because they are
funded by the social security trust funds. Major changes in the rail industry pension plan sought by
rail labor and management and enacted by the Congress in 1981 require the Board to adjust industry
pensions to available resources. These "benefit preservation" provisions require that:
—
Full social security benefits be paid;
—
Monthly rail pensions be paid during the year at the highest level rate financed by rail
industry contributions; and
—
Representatives of rail labor and management may submit proposals to alter the
system's financing or pensions.
PROPOSED POLICY
As required by the provisions of law negotiated by the rail sector and enacted in 1981, full social
security level of benefits and the level of industry pensions financed by the rail sector will be paid.
The rail industry pension, even though Federally administered, should be funded by rail labor and
management, as are all private industry pensions. The American taxpayer should not "bail out" the
rail industry pension fund. Rather, rail labor and management should collectively bargain any
desired increased in industry pension contributions or restructuring of industry pension payments.
RATIONALE
•
Current law benefit preservation provisions agreed to by rail labor and management in 1981
and enacted by the Congress:
—
"protect the government's primary responsibility for social security
benefits", according to the Congress; and
20
equivalent
—
•
•
"... save the system for its millions of present and future beneficiaries and will do so not
at public expense but at the expense of railroad employees and employers ...",
according to rail representatives.
All agree that rail labor and management should assume full responsbility for financing rail
pensions.
—
Representatives of rail labor and management in 1974: "[the rail sector] is perfectly
prepared to fund the Railroad Retirement System in every respect in which it bears a
reasonable resemblance to any other private industry pension plan."
—
The General Accounting Office, 1981: "Funding of the private portion of benefits is the
railroad industry's responsibility."
—
The congressionally chartered Commission on Railroad Retirement, 1972: "[there are]
no valid grounds for Federal subsidy to the system, either directly or indirectly."
Rail labor and management's strong tradition of proprietary stewardship for the rail pension
carries with it the responsibility that changes in benefits and/or financing come from within
the rail sector.
Major Rail Sector Representatives:
—
criticize Federal oversight as subjecting the rail pension system to "changing viewpoints
and whims -- of both the executive and legislative branches of government";
—
state with pride that "the [rail industy pension] is paid for by the industry, the Federal
Government pays nothing, absolutely nothing ... the U.S. Treasury Department acting as
a mere conduit of funds - our funds". (Emphasis in original)
EFFECTS OF THE PROPOSED CHANGE
Current law provisions sought jointly by rail labor and management:
•
guarantee retirees their basic social security benefit;
•
grant rail retirees the industry pension financed by rail contributions;
•
do not restrict rail labor and management from negotiating changes to their industry
pension contributions or restructuring industry pension payments.
21
FEDERAL WINDFALL SUBSIDY
AGENCY:
Railroad Retirement Board
Functional Code: 601
Funding
($ in millions)
1982
1983
1984
1985
1986
1987
1988
CURRENT SERVICES
Budget Authority
Outlays
390
378
430
441
420
420
405
405
385
385
365
365
350
350
REAGAN BUDGET
Budget Authority
Outlays
390
378
430
441
350
350
350
350
350
350
350
350
350
350
70
70
55
55
35
35
15
15
0
0
1984
946
1985
972
1986
986
1987
1,000
1988
1,014
PROPOSED SAVINGS
Budget Authority
Outlays
Subsidy Per Rail Worker Under Reagan Budget
PROGRAM DESCRIPTION
The Federal Windfall Subsidy funds duplicative payments for certain former rail employees, their
spouses and their survivors. Rail workers and their families gained unintended, anomolous benefits
because the rail sector kept its social insurance and retirement system separate from social security.
Rail employees who worked in normal social security covered employment at some time in their
careers -- or those whose spouses worked -- gained disproportionately higher benefits, with the
excess due solely to the failure of the rail industry pension to coordinate with social security.The cost
of windfalls was shifted from the rail sector to the American taxpayer in the Railroad Retirement Act
of 1974, which was based on rail labor and management's negotiated agreement. The subsidy
lowers rail industry pension costs by hundreds of millions of dollars annually. Both this
administration and the two previous ones sought to limit the taxpayers' subsidy to the rail industry
pension. The Carter Administration sought to cap the annual Federal subsidy at $350 million or 40%
more than the parties' previous $250 million annual estimated cost to the taxpayer.
Based on rail labor and management's negotiated agreement, the Omnibus Budget Reconciliation
Act of 1981 restructured windfalls. Representatives of rail labor and management claimed these
changes would:
"...save the system for its millions of present and future beneficiaries and will do so not at public
expense but at the expense of railroad employees and employers...the proposal controls the
overall rate of benefit escalation...there are constraints imposed...[these changes] automatically
limits windfall benefits [to $350 million annually]...."
PROPOSED CHANGE
Limit the Federal subsidy for windfall payments, as proposed by this and prior administrations.
RATIONALE
•
Subsidies are not needed.
— Rail workers are one of the highest paid industries, with projected average earnings of
$34,000 in 1984.
22
— Railroad retirement, according to a Congressional Budget Office (CBO) study, is one of
the most generous pension systems in the country. The average rail worker receives taxfree pension income exceeding pre-retirement take-home pay according to CBO.
— 97% of windfalls go to families receiving monthly benefits in excess of the average social
security benefit level, according to the General Accounting Office. The same study found
that only $16 million went to pay windfalls of those who would otherwise be below the
poverty level.
•
Sudsidiesto this industry pension are inappropriate.
— In response to requests from both rail labor and management for a Federal subsidy, the
Commission on Railroad Retirement in its report and 1,785 page, three volume
supporting analysis found:
"...no valid grounds for Federal subsidy to the system, directly or indirectly. The payment
of basic social security benefits to railroad workers can be fully assured in the future by a
proper realignment: a statutory amendment providing for their direct payment by the
Social Security Administration. A special Federal subsidy for the second tier would be
undesirable on economic grounds and is not defensible on social grounds, given the
many competing needs pressing on the Federal budget. If this system received a subsidy,
many other pensions would then want subsidies, too."
•
Windfall costs exploded after rail labor and management's original $250 million estimate for
the 25 level annual subsidy appropriations was made.
EXPLODING WINDFALL COSTS
Enacted Subsidy
Estimate
"Revised" Subsidy
Estimate
Congressional
Appropriation
250
250
250
250
250
250
250
250
350
350
350
499
250
250
250
313
313
350
1,500
2,049
1,726
1982
1983
250
250
440
430
390
430
Subsidy under
1981 Act
500
870
820
TOTAL Subsidy
2,000
2,919
2,546
Fiscal Year
1976
1977
1978
1979
1980
1981
Subsidy under
1974 Act
EFFECTS OF THE PROPOSED CHANGE
•
The subsidy per rail worker would increase from $946 in 1984 to $1,000 in 1987, even under
the President's budget policy of maintaining the Federal windfall subsidy appropriation at
the same level.
•
Reduces Federal deficit by $70 million in 1984.
23
MEANS-TESTED INDIVIDUAL BENEFITS
25
MEANS-TESTED INDIVIDUAL BENEFITS
THE NEED FOR REFORM
In the decade and a half before the Reagan Administration came into office, the number of Federal
programs providing means-tested cash or in-kind benefits to individuals doubled. During this time,
the number of people receiving such benefits soared by almost 300 percent, from 9 to 35 million,
although the U.S population grew by only 17 percent. While in 1965 welfare recipients, on average,
participated in one means-tested program, by 1980 they participated in 3 to 4.
Although undertaken with the laudable intention of helping the needy, this expansion in benefits
left a bitter legacy. At the time the Administration came into office, means-tested programs were
fraught with problems.
•
Benefits were excessive and poorly targeted.
•
Waste and error were rife, partly as a result of poor program design and coordination and
partly because of pervasive mismanagement.
•
In some cases, fundamental program designs were so profoundly deficient that even the best
management could not overcome the perverse incentives, inequities and needless
expenditures that resulted.
As a consequence of these problems, literally billions of scarce tax dollars were needlessly wasted.
EXCESSIVE AND POORLY TARGETED BENEFITS
An indication of the extent to which means-tested benefits were excessive and poorly targeted is
shown by analyses of Census survey data for 1981, prior to the time when legislative changes enacted
under the Reagan Administration had fully taken effect. The results of the analyses are striking,
showing that:
•
$16.9 billion or 35.7 percent of the income-tested benefits covered in the survey were
devoted to households, containing over 23 million people, whose cash benefits and other
cash income placed them above the poverty level.
•
Significant percentages of benefits in all of the six means-tested programs covered by the
survey - AFDC, SSI, Food Stamps, Medicaid, free or reduced priced school lunches, and
assisted housing ~ were received by members of households with incomes above the poverty
level. The percentages ranged from 21 percent in Food Stamps to 44 percent in Medicaid.
Indeed, the lack of targeting was so acute that substantial resources were received by households
whose cash benefits and other cash income exceeded 150 percent of the poverty level.
•
Households in which total income exceeded 150 percent of poverty contained individuals
who received $8.3 billion in means-tested benefits. These households comprise 12.7 million
people.
•
The percentage of benefits going to individuals in these nonpoor households was significant
in all programs, as shown in the table below:
Percent in Households Above 150% of Poverty Level:
Cash Income (including cash benefits)
Member of Household Receives
Persons in Households
AFDC
SSI
Food Stamps
Medicaid (Insurance Value)
Free and Reduced Price School Lunch
Public Housing Benefits
Section 8 Rent Subsidy
One or More of the Above Benefits
14.2%
33.2
15.1
27.5
25.9
10.6
12.5
28.6
27
Benefits
10.7%
26.8
8.1
26.2
23.3
5.7
7.0
17.5
•
To put these findings in perspective, it should be noted that 150% of the poverty level for a
family of four in 1981 was $13,930 -- an income level equal to 92% of the median annual
earnings of employed workers that year.
As troubling as this picture is, it understates the lack of targeting because the conventional poverty
statistics ignore the value of in-kind benefits in measuring individual and family well-being. These
benefits constituted 66.4 percent of the total funds for means-tested benefits in the Census survey.
When the value of in-kind benefits is taken into account, the analyses indicate that $39.2 billion of
income-tested benefits - fully 82.7 percent of the total - was devoted to nonpoor households. Of
these resources, significant amounts benefited households whose total income (cash plus in-kind)
placed them above 150 percent of the poverty level. These households accounted for $20.0 billion or
42.1 percent of total income-tested benefits, as shown in the table below:
Percent in Households Above 150% of Poverty Level:
Cash Plus In-Kind Income (including ail benefits)
Member of Household Receives
Persons in Households
AFDC
SSI
Food Stamps
Medicaid (Insurance Value)
Free and Reduced Price School Lunch
Public Housing Benefits
Section 8 Rent Subsidy
One or More of the Above Benefits
29.0%
62.5
30.2
46.2
34.9
38.3
45.9
42.4
Benefits
26.9%
61.4
24.5
53.3
32.5
46.7
54.0
42.1
These analyses understate the impact of goverment spending for benefits, as people responding to
the survey generally do not report all their income and benefits. In addition, the survey covers only
non-institutionalized persons so that many Federal program expenditures are not fully reflected.
WASTE AND ERROR
Error and waste are due in part to poor program design, such as overly complex requirements and a
lack of coordination among related programs. However, they also result from poor program
administration, which was common in means-tested programs when the Administration took office.
The magnitude of error and waste was significant at that time, as illustrated by the examples below:
•
States, which administer the AFDC, Medicaid, and Food Stamp programs, improperly paid
$3.5 billion in benefits in FY 1981. In the Food Stamp program alone, $1 out of every $10, or
over $1 billion, was spent on overpayments and payments to ineligible families. Of this total,
one-third was associated with a complex set of deductions and exclusions from the income
counted for purposes of determining benefit eligibility and amount.
•
In Medicaid, States were failing to collect funds from private health insurers for coverage the
insurers were legally responsible for paying on behalf of Medicaid recipients. Studies by the
Health Care Financing Administration indicate that in 1980 a half billion dollars of insurance
payments could have been collected to offset program costs.
•
States were also failing to ensure that parents who had left their families met their
responsibilities for contributing to their support by collecting court-ordered support
payments for AFDC families. Only one-third of AFDC recipients were covered by court orders,
and only half of covered cases were receiving full payment. Overall, about $1 billion in courtordered payments for AFDC recipients went uncollected in 1981.
•
Local school systems were improperly claiming Federal reimbursements for school lunches.
The USDA Inspector General and the General Accounting Office estimated that $400-500
million was overpaid in FY 1980 as a result of invalid applications for free and reduced price
lunch benefits and inflated meal counts.
28
DEFICIENT PROGRAM DESIGN
In many cases, scarce tax dollars have been needlessly spent as a result of program design defects so
profound that even superlative management could not have averted the expenditures. The inherent
flaws in the basic concepts underlying public assistance, medical care and housing programs when
the Administration took office illustrate this point.
PUBLIC ASSISTANCE
For over a decade a fundamental concept underlying means-tested programs has been that work
effort is most appropriately encouraged by not reducing welfare benefits dollar for dollar as earned
income increases. Thus, work incentive disregards of some earned income and deductions for work
expenses were added to many welfare programs. The concept was never fully implemented, for
carrying it to its conclusion would result in a welfare system that is both unaffordable and
untenable.
To illustrate: under this concept, benefit levels must be generous enough to support a family in
which members cannot find work, and the system must apply a low benefit reduction rate on earned
income. The result of these provisions in combination, however, is that families with substantial
income are eligible for welfare. The graph below shows the benefits which a family of four would
receive at different income levels, if the benefits were $6,000 reduced by 20 percent of earned
income. As indicated, benefit eligibility would continue until the $30,000 income level:
Benefits
$6,000-
$4,000-
$2,000-
$20,000
$10,000
$30,000
Earned Income
The end result of attempting for more than a decade to pursue this concept while limiting benefits
to lower income families was a welfare system with generally high combined benefits and relatively
high benefit reduction rates on earned income. The work disincentives and inequities in this system
were apparent when the Administration came into office.
•
Only 12.6 percent of AFDC adults and 17.7 percent of Food Stamp household heads age 18 to
59 worked at all according to survey data for FY 1981.
•
Those on welfare who did work, as a group, were substantially better off than the majority
of working low income families not on welfare. In 1981, 70 percent of wage earning families
with cash incomes below 150 percent of the poverty level received no AFDC, Food Stamps,
Medicaid or housing benefits at all, while, as discussed above, significant tax resources
designed to benefit those in need went to families whose cash incomes placed them above
150 percent of the poverty level.
HOUSING AND MEDICAL PROGRAMS
These programs depend on the private sector to provide benefits to recipients, but the programs
have failed to rely on market forces to control costs and supply appropriate services. Normal
incentives for efficiency, cost effectiveness and price competition were being neutralized or even
reversed by perverse program design.
29
In the Section 8 housing program, the Government has offered to pay an administratively
determined local "fair market rent." This practice has guaranteed a price higher than normal rents in
many instances.
•
Owners of units joining the Section 8 Existing Housing Program have been able to raise their
rents to the Government guarantee level. With the amounts tenants pay set by their income,
there has been no incentive for them to negotiate on their rents. Consequently, rents for
units in the Section 8 Existing Housing Program average 26 percent above rents for
comparable non-subsidized units.
•
Section 8 New Construction units have also been excessively costly because they are built to
justify higher than normal rents. The President's Housing Commission's 1981 Final Report
found costs of these new units were 17 percent higher than their "market value."
The lack of cost control incentives stemming from basic design flaws in Medicaid has been a major
factor in service, utilization and cost increases far in excess of inflation and beneficiary population
growth.
•
Medicaid has relied on conventional cost-based fee-for-service medical care delivery with its
incentives for excessive use of services and its insulation of the provider from any financial
risk for overutilization. Cost reimbursement for hospitals intensified the incentives in fee-forservice delivery toward overutilization and waste. Having been assured of a pass-through of
costs to taxpayers, hospitals had no reasons to prudently and efficiently manage resources
and thereby hold down prices.
•
Rigid Federal requirements also restricted State capacity to introduce incentives for efficiency
and cost control into the Medicaid program. For example:
•
—
Volume purchases of services such as laboratory tests were prohibited and States were
required to buy services "retail", despite their capacity to make wholesale purchasing
arrangements.
—
Beneficiaries could not be channeled into primary provider relationships, although such
arrangements provide continuity of care, are more likely to emphasize preventive care,
and would reduce reliance on expensive outpatient hospital facilities - such as
emergency rooms - for primary care.
Compounding these design flaws on the supply side of the market was a basic problem on
the consumer side.In the Medicaid program, medical care was almost totally free for most
beneficiaries, who had, therefore, no reason to be concerned about the cost of services.
As a result, in the decade 1971 to 1981 Medicaid costs rose 354.3 percent or 16.3 percent per year,
while the number of Medicaid recipients grew only 1.3 percent per year and the general price index
increased 8.4 percent per year. (Medicaid design flaws and their effects are more fully discussed in
the next section on Health Policy.)
NEW POLICIES: THE PATH TO IMPROVED WELL-BEING FOR LOW-INCOME FAMILIES
If the means-tested programs essential to helping poor people are to maintain public support,
program reform is vital to assure Federal resources are used wisely. Equally important, elimination of
unnecessary Federal spending aids the economic recovery program whose success will benefit all
low-income Americans.
History teaches us that economic growth is a critical determinant of individual and family well-being.
In the decade of the 1970s, the economy failed to perform as well as in the 1960s. Price increases in
the 1970s were four times as large as in the 1960s, labor productivity grew at half the rate, and
unemployment rates averaged 30 percent higher. At the end of the 1970s, real income per
household began to drop. As a result, it was in the 1960s rather than in the 1970s that the greater
inroads against poverty were made.
30
•
Between 1960 and 1966, the poverty rate fell from 22.2 percent to 14.7 percent.
•
Between 1966 and 1969, when spending on many of the Great Society programs began, the
poverty rate dropped an additional 2.6 percentage points.
•
During the 1970s, the poverty rate went up and down slightly, as domestic spending
burgeoned, but it stood at over 11 percent for most of the decade. As the economy
stagnated, it began an upward climb in 1980.
A similar pattern appears when the poverty rate is examined counting only earnings. Special
analyses on Census data, drawn from two studies on the years 1963 to 1973 and 1974 to 1981, show
the following:
•
From 1963 to 1969, the poverty rate based on earnings alone decreased by one-third for all
households with earnings, dropping from 17.9 percent to 12.0 percent.
•
In contrast, during the period of poor economic performance from 1974 to 1981, the poverty
rate based on earnings alone increased for all non-aged persons, rising from 17.2 to 21.1
percent.
Clearly, economic growth is vital to promoting the well-being of working families. But it also
benefits those who cannot work, because as the wealth of the nation grows, more money is
available to help those in need. Reform of means-tested programs to better target benefits, reduce
waste and inefficiency, and eliminate structural design flaws is critical to this growth - and will
promote a better life for all Americans.
REFORMS AND THEIR IMPACT
During this Administration, significant reforms have been enacted. Many of these changes had long
been sought and were widely considered meritorious. Others were more controversial, but the fears
of critics as to their consequences have not been borne out. In 1984, the Administration proposes to
build upon this base of reform to further improve the means-tested programs. The majority of
savings reflected in the 1984 proposals would have little or no effect on the typical beneficiary. For
example, of the savings proposed in the five entitlement accounts covered in this section, fully 79%
would stem from error reduction and other program efficiencies. Only 6% would result from further
improvements in benefit targeting. While the remaining 14% would result from the six month delay
in cost of living adjustments, the per recipient effects of the delay are small.
TARGETING
In order to focus means-tested benefits on the truly needy and improve equity between those who
are subsidized and those who are not, a number of changes have been made and are proposed.
•
Gross income caps have been introduced in AFDC and Food Stamps, restricting eligibility to
persons whose income before exclusions and deductions is within certain reasonable limits.
Income limitations in assisted housing programs also now target benefits to families with
incomes below 50 percent of the area median.
•
Deductions and exclusions from countable income which permitted AFDC and Food Stamp
benefits for families with substantial income have been reduced and partially standardized,
and earnings disregards in AFDC have been limited to a four-month transition period.
Variations in permissible deductions between Section 8 and Public Housing programs have
been ended, so that standardized rent contributions are now made by all assisted tenants.
Administration proposals for 1984 would further these reforms by standardizing shelter and
earnings deductions in Food Stamps, and by counting Food Stamps as income in the Section 8
and Public Housing programs.
•
Various changes in AFDC and Food Stamps have been made to define more appropriately
which individuals require support and to include the income and resources of persons who
31
are in fact part of the family, such as step-parents, in determining eligibility and benefit
amounts. For 1984, the Administration is seeking further improvements to ensure the
income available to applicants and recipients is more fully taken into account:
—
In AFDC, States would be required to include the incomes of parents and all children
(except SSI recipients) in household income for purposes of benefit computations,
eliminating the option now where a family can exclude the needs and income of a child
or other related person when it is advantageous to do so.
—
In the Food Stamp program, all individuals living together would be required to file for
benefits as a single household, so that recipients no longer can qualify for higher
benefits by filing as separate households.
•
States have been permitted to pro-rate rent and utility expenses, which are taken into
account in setting benefit levels, over non-AFDC household members to reflect the
contribution these other household members can make to defraying household expenses.
The Administration proposes to make proration a mandatory procedure in 1984.
•
Greater recognition has been given in AFDC, Food Stamps and Medicaid to the assets
available for the support of the recipient. No additional changes are being proposed in this
area.
•
Excessive automatic Food Stamp benefit increases have been restricted to be more in line
with wage and other income and price increases, as well as to discourage States from holding
down AFDC benefits. (Food Stamp benefits are now set and fully funded by the Federal
Government, whereas AFDC benefits, which are intended to include basic food costs, are set
and funded 46 percent by the States. By holding down AFDC benefits while Food Stamp
benefits have continued to increase, States have been able to increase the Federal share of
the combined benefits package from 65 percent in 1972 to 76 percent in 1981.)
•
Tenant payments in public and Section 8 subsidized housing are gradually being increased to
30 percent of their income (after exclusions), improving equity by requiring subsidized
families to pay a share of their income for rent that is more comparable to that paid by nonsubsidized families.
In reporting on the changes that have been made, it is important to note that:
•
The truly needy have been protected. Benefits to households which have no other sources of
support are largely unaffected.
•
Critics' fears that reducing benefits for families who work would result in their quitting their
jobs to retain their benefits have not been borne out. Initial findings from special State
studies on AFDC indicate that, for the vast majority of working recipients, the changes
provided the incentive needed to make the transition from welfare to self-support. These
studies have been conducted in a number of States that have substantial geographic,
demographic, and programmatic diversity. Almost all show the number of individuals who
quit their jobs to be very low. For example, studies in Massachusetts, New Jersey, Vermont,
Illinois, Michigan, New Mexico and Los Angeles County all suggest that only about 10 percent
of all families removed from the rolls have returned. This figure includes not only individuals
who may have voluntarily quit their jobs in order to receive welfare, but also individuals who
lost their jobs or had their hours of work reduced involuntarily. This latter group was found
in a Michigan study to be relatively large, leaving only a negligible number of individuals
who were actually quitting their jobs to return to welfare. These findings suggest that labor
force attachment is an important factor in avoiding welfare dependency.
•
Targeting benefits to reduce excessive costs seems to have positive results for poor
beneficiaries. In spite of the difficult economic situation, 22 States increased their AFDC
payment standards in 1982.
32
ERROR AND WASTE
A variety of changes have been made and are proposed for 1984 to improve the accuracy of meanstested benefit payments and to help ensure that parents who have left their families contribute to
their support if they are able to do so.
•
Recognizing that there is little justification for Federal financing of payment errors in Stateadministered programs, States now are statutorily responsible for overpayments in excess of
target error rates - for Medicaid, 3 percent; for AFDC, 4 percent in 1983 and 3 percent
thereafter; and for Food Stamps, 9 percent in 1983, 7 percent in 1984 and 5 percent in 1985
and thereafter. For 1984; the Administration will propose that the current target rate for
Food Stamps be reduced to 3 percent, a rate consistent with those in the other two
programs.
•
In Food Stamps, States have been given greater flexibility to verify income and eligibility and
otherwise improve program administration. The standardization of shelter and earnings
deductions proposed for 1984, noted above, would help States to meet their error rate
reduction targets.
•
To reduce program errors, States now are required in AFDC and Food Stamps to have
beneficiaries periodically report on their income and to use actual rather than projected
income and expense information in benefit determinations. To further cut down on error
and to decrease administrative costs, the Administration is proposing that in 1984 applicants
who have been approved for AFDC benefits would automatically be granted a
predetermined Food Stamp allotment.
•
The administrative requirements for determining eligibility for free and reduced price school
lunches have been substantially tightened over previous procedures to reduce the possibility
of invalid applications being accepted by schools. To further improve the integrity of
eligibility determinations in the school lunch program, the Administration is proposing that
the determination process be handled by Food Stamp offices, which have more experience to
handle this task.
•
Absent parents who have not met support obligations to families who receive AFDC are now
subject to withholding from Federal income tax refunds, military pay and allowances, and
unemployment insurance. The Administration is proposing reforms of Child Support
Enforcement (CSE) to increase total support collections and the cost-effectiveness of the
collection process. Federal administrative payments would be changed to provide financial
incentives for States to improve collections and would be made conditional on changes in
State law to increase CSE effectiveness. States would be required to obtain medical support
from absent parents through private (employers) insurance plans, thus making Medicaid the
payor of last resort. States would also be given financial incentives to obtain CSE collections
for SSI disabled children.
PROGRAM REDESIGN
Beyond better targeting and reducing waste and error, fundamental restructuring of means-tested
programs has been instituted, improving work incentives and marshalling natural market forces to
hold down costs.
•
States now have the option of requiring able-bodied AFDC and Food Stamp recipients to
participate in Community Work Experience Programs (CWEP). The Administration is
proposing that these optional programs be made mandatory in 1984 to strengthen work
incentives and discourage welfare dependency. Under CWEP, those people able to work are
encouraged and helped to find jobs in the private sector. If no jobs are available, CWEP
participants perform useful public services, meeting community needs that otherwise would
be unmet with existing public resources and retaining (or gaining) an attachment to the
33
labor force.Mandatory CWEP removes the disincentives to work inherent in the current
system by requiring work as a condition of receiving benefits. Because disregards for workrelated expenses and child care would remain in place for those with private sector jobs,
private sector employment would be more attractive to participants than community work
experience paying the same amount in the form of benefits.
•
The Administration will propose a Housing Payment Certificate Program to gradually replace
current Section 8 Existing Housing Program subsidies. The Housing Payment Certificate
Program would provide rental assistance for tenants based on an area payment standard,
with no guaranteed rent level for landlords. With these changes, subsidy recipients would be
encouraged to shop for the lowest cost acceptable housing and would be freer to select their
own neighborhoods and expenditure levels. Incentives to raise rents above market levels
would be ended.
•
In Medicaid, the Federal matching payment to each State has been reduced by 3 percent for
1982, 4 percent for 1983 and 4.5 percent for 1984, with a 1 percent offset to this reduction
available for each of the following: a qualified hospital cost review program, a high
unemployment rate, and third-party and fraud and abuse recoveries exceeding 1 percent of
the Federal matching payment. In addition, States whose Medicaid cost increases fall below
target rates of 9 percent for 1983 and the rate of increase in the medical care component of
the CPI in subsequent years can receive incentive payments up to the full amount of the
matching reduction. The Administration is proposing to extend Federal payment changes at
a 3 percent level after 1984.
•
States now have flexibility to alter the payment policies and modes of service delivery in the
Medicaid program to introduce incentives for appropriate utilization and cost control. The
changes now authorized, largely through waivers, include prospective hospital reimbursement systems; at-risk, prepaid, and/or case-management primary provider systems; volume
purchase arrangements for laboratory services and durable medical equipment; different
service packages for different optional eligibility groups; incentives to beneficiaries to use
low-cost prepaid providers; and home- and community-based care in lieu of institutional
care.
•
Blanket prohibitions in Medicaid on copayments for mandatory services to the categorically
eligible have been lifted. In recognition of the need for beneficiary cost-consciousness, the
Administration's 1984 budget proposes that States be required to charge modest
copayments ($1 to $2) on services to all beneficiaries except nursing home patients.
The realignment of incentives in the Medicaid program has successfully combined cost containment
and continued service to beneficiaries. The growth in Medicaid costs was dramatically reduced in
1982 to 9.8 percent compared to 18.1 percent in 1981. At the same time as this cost control was
being achieved, States were able to maintain or expand their Medicaid programs. States did not
make substantial cuts in eligibility or eliminate major optional services in 1982. On the contrary, 13
States added new services or removed service limitations, 10 States expanded eligibility and 12 States
increased provider reimbursements. This result reflects creative State use of the new flexibilities:
•
States are adopting prospective reimbursement or other non-cost-based hospital reimbursement systems to provide cost-containment incentives for hospitals, as well as ending
reimbursements for unnecessary use such as non-emergency weekend hospital admissions,
non-emergency use of hospital emergency rooms, or inappropriate use of hospital
outpatient departments.
34
•
States are developing, under waiver, case-management systems in which recipients are
assigned to a primary care physician, HMO or prepaid group practice which will provide a
primary physician relationship and more appropriate service utilization. States are also
controlling excessive or abusive physician use by locking in overutilizing participants to one
physician or prepaid provider.
•
States are arranging to make bulk purchases of laboratory tests, eyeglasses, hearing aids and
other durable medical equipment, thereby buying from the lowest bidder or at lower-thanretail price.
•
States are obtaining waivers to provide a broad range of home- and community-based
alternatives to institutional care for persons who would be eligible for Medicaid services if
institutionalized.
COLA CHANGES
In addition to the reforms discussed above, the 1984 proposal to delay cost of living (COLA) increases
for six months (see Chapter 1) will affect several means-tested programs. These delays will have little
impact on low-income beneficiaries.
•
The delay in the SSI COLA is accompanied by a proposal to increase by $30 per month the
amount of social security benefits disregarded in calculating SSI benefits, providing
additional income to SSI recipients.
•
The impact of the delay in the Food Stamp COLA will be small. For example, for a family of
four it would total $6 in 1984. The current Food Stamp benefit of about $3,000 for this family
will easily cover a standard diet because food prices now are rising less than one percent a
year, and the benefits contain an allowance for food discard of approximately $150.
•
School lunches will remain fully subsidized for low-income children.
35
AID TO FAMILIES WITH DEPENDENT CHILDREN
AGENCY:
Department of Health and Human Services
Funding
Functional Code: 609
($ in millions)
1982
1983
1984
1985
1986
1987
1988
CURRENT LAW
Budget Authority
Outlays
6,006
7,990
7,752
7,767
7,816
7,816
7,872
7,872
8,005
8,005
8,133
8,133
8,258
8,258
REAGAN BUDGET
Budget Authority
Outlays
6,006
7,990
7,752
7.767
7,094
7,094
6,917
6,917
7,064
7.064
7,202
7,202
7,313
7,313
722
722
955
955
941
941
931
931
945
945
PROPOSED SAVINGS
Budget Authority
Outlays
PROGRAM DESCRIPTION
Aid to Families with Dependent Children (AFDC) finances cash assistance for needy children deprived
of parental support by the death, disability, or continued absence of a parent from the home. About
half the States also have an AFDC-Unemployed Parent program for low-income families in which
both parents are present in the home, but where the principal earner is unemployed. AFDC is
administered by State and local governments in conformity with Federal guidelines. Benefit levels
are determined by each State, with the Federal Government matching these benefit costs at rates
ranging from 50% to 77%. The Federal Government also pays 50% of the cost of State and local
administration.
PROPOSED CHANGE
A variety of legislative changes to AFDC eligibility rules and benefit calculations is proposed, as
described below. These changes, which would be effective October 1, 1983, are designed to:
•
Strengthen AFDC employment incentives by requiring those who are able to work to do so.
•
Target AFDC benefit on the neediest by adjusting benefits to reflect actual family
circumstances.
•
Simplify administration and reduce erroneous and unnecessary payments.
RATIONALE
•
Require all employable AFDC applicants and recipients to participate in work programs as a
condition of eligibility. States now have the option to establish Community Work Experience
programs (CWEP) and mandatory job search requirements, but only half the States have
done so, even on a limited basis. This proposal would assure that AFDC recipients are
encouraged to find work in the private sector and perform useful public services when no
private job is available. These requirements would be closely coordinated with Food Stamps.
($-275 million)
•
Remove parent/caretaker from the assistance unit for voluntarily quitting work, reducing
earnings, refusing employment, or refusing a CWEP assignment. The benefit level for the
AFDC unit would be reduced because the parent/caretaker would not be counted as a
member of the unit when assistance needs are computed. The change would discourage
reductions in work effort simply to become eligible for welfare. ($-1 million)
36
•
Seek no further funding for the Work Incentives (WIN) program. New work opportunities
for welfare recipients created in the Omnibus Budget Reconciliation Act of 1981, including
Community Work Experience Programs and Work Supplementation programs, and the
reforms proposed in the 1984 Budget make WIN unnecessary. WIN has not been proven to
be successful in quickly moving AFDC recipients to permanent, private sector jobs. As WIN
funding had been separate from AFDC, savings from this proposal are not included in the
AFDC totals in the table above. ($-287 million)
•
End employable parents benefit when youngest child reaches 16. Since the parent's
presence in the home is no longer essential in these cases, the employable adult should be
expected to seek work rather relying solely on public assistance. The child's benefit would
not be affected. ($-22 million)
•
Prorate shelter and utilities for AFDC families in extended households. The economies of
shared living expenses in extended households are often not taken into account in AFDC. By
taking into account de facto support available to the AFDC unit from other members of the
household that is not now considered, benefits would be targeted on those most in need.
($-229 million)
•
Include the income of all parents and minor children as part of the AFDC assistance unit for
purposes of computing benefits. Parents and minor children who have significant separate
resources can currently be excluded from the AFDC unit at the option of the welfare family.
Counting the resources of all family members would ensure equitable treatment of families
with similar needs. Individuals with separate SSI benefits would continue to be excluded
from the unit. ($-131 million)
•
Eliminate absence from the home due to employment as a reason for AFDC eligibility.
Welfare benefits should be focused on families who are unable to provide for themselves.
Currently, some families qualify solely because a parent is away from home due to job search
or work-related activities, even though family ties and financial support continue. These
inappropriate benefits would be terminated. ($-5 million)
•
Permit States to require AFDC recipients whose youngest child is age 3 to 6 to register for
work if child care is available. AFDC recipients should seek employment as soon as possible to
help avoid long-term welfare dependency. This proposal would expand on demonstration
projects which have found work registration practical for recipients with young children,
when child care is available. ($-3 million)
The figures in the summary table above also include $56 million savings from increased child support
collections which offset Federal and State AFDC costs. The President proposes that States be
required to adopt beneficial child support laws and procedures. This and other child support
enforcement proposals are discussed in a separate paper in this volume.
EFFECTS OF PROPOSED CHANGE
These changes would ensure that Federal resources are targeted on the neediest, and that
individuals and families who are able to support themslves do not continue to rely on public
assistance. Federal outlay savings from these changes are estimated at $0.7 billion 1984 and $4.5
billion over the next five years. States will save an amount equal to about 85% of the Federal savings.
37
1982 AND 1983 CHANGES
Over the past two years, the President has proposed, and Congress has enacted, a variety of long
overdue changes in AFDC. These changes were designed to restore AFDC as a program of last resort
for those who must rely on it for limited time periods and to help ease severe budget constraints
facing all levels of government.
These changes have improved AFDC in four major ways:
•
Including income and resources available to a family but previously not counted by AFDC.
For example, the income of stepparents living in the same household as the AFDC family is
now counted.
•
Targeting assistance on those in greatest need. Time limits on earnings disregards,
standardization of other disregards and a gross income eligibility limit have all been enacted.
•
Strengthening work requirements and enhancing the employability of AFDC recipients.
States now have the option to establish Community Work Experience Programs, in which
recipients receive on-the-job training and actual work experience and provide useful public
services.
•
Improving program administration. Changes have included retrospective accounting and
mandatory recovery of all overpayments.
These changes have resulted in over $2 billion in annual Federal and State AFDC savings, and have
substantially restored AFDC to its originally intended purpose. The President's 1984 Budget
proposals build on the success of recently enacted reforms.
38
CHILD SUPPORT ENFORCEMENT
AGENCY:
Department of Health and Human Services
Funding
Functional Code: 609
($ in millions) ,
1982
1983
1984
1985
1986
1987
1988
CURRENT LAW
Budget Authority
Outlays
459
459
471
456
426
446
485
485
531
531
578
578
632
632
REAGAN BUDGET
Budget Authority
Outlays
459
459
471
456
416
436
434
434
462
462
501
501
546
546
10
10
51
51
69
69
77
77
86
86
PROPOSED SAVINGS
Budget Authority
Outlays
PROGRAM DESCRIPTION
The Federal Government funds State and local administrative expenses at a 70% matching rate for
establishing paternity and collecting support payments from legally liable absent parents. In AFDC
cases, these collections are shared between the Federal Government and the States to help offset
AFDC benefit costs. The figures above reflect CSE-related costs; the Federal share of collections is
reflected in the AFDC appropriation elsewhere in the Budget.
PROPOSED CHANGE
The Administration proposes to restructure Federal matching to provide incentives for improved
State and local performance. The current imbalanced structure of Federal matching payments and
distribution of AFDC collections would be repealed. Instead, a new Federal financing system
designed to reward States both for increasing collections and for operating cost-effective programs
would be instituted.
Other reforms to strengthen the CSE system are also proposed. States would be required to have in
place laws and procedures which facilitate increased collections and cost-effective operations,
including mandatory wage assignments when payments are delinquent, State income tax refund
offsets, liens against property and estates of absent parents, and use of quasi-judicial and
administrative procedures for establishing paternity and support orders. Savings from this proposal
($56 million in 1984) appear as an offset to AFDC costs elsewhere in the Budget, and are not
reflected in the figures above.
To ensure that Medicaid remains the payor of last resort, States would also be required to seek
medical support from absent parents who have employer-subsidized health insurance available
which could cover the AFDC family at reasonable cost. Savings from this proposal ($90 million in
1984) appear in the Medicaid account, which is discussed elsewhere in this volume.
RATIONALE
As the President pointed out in his State of the Union message, an effective child support program is
a key component of the Administration's policy of ensuring better financial security for women and
for children in single-parent households. Inadequate child support is a significant problem which
threatens to grow worse unless States are given strong financial incentives to increase collections
and improve the cost-effectiveness of their CSE operations.
39
•
Nine out of 10 AFDC recipients have an absent parent who should be providing financial
support to the family. Yet, only one-third of AFDC recipients are covered by court orders for
support, and in half of these cases little or no payments are actually made. The taxpayer
bears the financial burden when these parents abandon responsibility for their children.
•
Between 1970 and 1979, births to unwed mothers increased 50% -- to 600,000 per year. If
current trends continue, by the 1990's nearly half of all children will spend at least part of
their childhood in homes which have only one parent present.
Current State CSE performance is often poor, and can be improved significantly:
•
19 States collect less from AFDC absent parents than they spend on program administration.
Only 11 States have collections to cost ratios which exceed 2:1.
•
CSE collections offset only 6% of total AFDC payments nationwide. Some States only collect
1% of AFDC costs; other States collect 19%.
•
Marginal State performance is currently rewarded. States need only to collect
for each
$1 administrative costs to "break even" from their perspective. This is because under current
law States pay only about 30% of CSE costs, but retain over 60% of collections - not a
businesslike arrangement.
EFFECTS OF THE PROPOSED CHANGE
Restructuring Federal financing would increase the incentives for states to improve the performance
of their child support enforcement agencies, and would help to ensure that family financial
obligations are fulfilled. The proposed package of CSE reforms would have federal savings of $156
million in 1984 and over $1.1 billion over the next five years due to increased collections from absent
parents in AFDC cases and decreased medicaid payments and CSE administrative costs. Increased
child support collections would also reduce State AFDC and Medicaid costs by about 85% of this
amount.
As a result of these proposals:
•
Parental responsibility will be restored.
•
Children's needs will first be met by parents who should be responsible for their care.
•
Financial security for women and children will be enhanced.
•
The Federal Government and States will both realize savings due to improved operations.
These changes will benefit all women and children, not just those who are receiving AFDC. The
proposed financial restructuring includes a bonus to States based on cost avoidance due to
collections in non-AFDC cases. Improved State laws and procedures will also assist all women and
children in receiving the support which they deserve.
1982 AND 1983 CHANGES
Several proposals to strengthen and expand the child support enforcement process have been
enacted during the past two years.
•
Automatic deductions from Federal tax refunds, military pay and unemployment
compensation benefits are now required when absent parents do not fulfill legal support
obligations.
•
Excessive Federal payments for State and local administrative costs and inequities in
Federal/State sharing in CSE collections have been reduced.
These changes are just a beginning. The President's 1984 Budget proposals comprehensively address
underlying weaknesses in child support financing arrangements and procedures, as discussed above,
and will lead to improved performance and enhanced financial security for women and children.
40
FOOD STAMPS AND NUTRITION ASSISTANCE FOR PUERTO RICO
AGENCY:
Functional Code: 605
Department of Agriculture
Funding
($ in millions)
1982
1983
1984
1985
1986
1987
1988
CURRENT SERVICES
Budget Authority
Outlays
11,286
11,014
12,815
12,825
12,492
12,496
12,650
12,648
12,906
12,903
13,125
13,122
13,289
13,287
REAGAN BUDGET
Budget Authority
Outlays
11,286
11,014
12,815
12,825
11,726
11,739
11,598
11,599
1 1,804 12,112 12,314
11,802 12,108 12,312
766
757
1,052
1,049
PROPOSED SAVINGS
Budget Authority
Outlays
1,102
1,101
1,013
1,014
975
975
PROGRAM DESCRIPTION
Food Stamps subsidize the food purchases of low-income households. Monthly coupon allotments
are redeemable for food through commercial outlets. These allotments are periodically adjusted to
reflect changes in USDA's Thrifty Food Plan. Given its special needs, the Commonwealth of Puerto
Rico has authority to design its own food assistance program.
PROPOSED CHANGE
The Administration remains committed to restraining the cost of entitlement programs without
jeopardizing assistance to those with genuine needs. Accordingly, many of the 1984 Food Stamp
budget proposals are designed to control expenditures by reducing the $1 billion in overpayments
made each year. Other proposals will assure further targeting of the program on the neediest
individuals.
The President's proposals would:
•
Hold States liable for payment errors exceeding 3% of benefits.
•
Simplify the benefit calculation by standardizing the shelter and earnings deductions.
•
Reform and simplify the definition of a household by requiring all individuals living together
to file for benefits as a single unit.
•
Simplify Food Stamp application procedures by making AFDC recipients categorically eligible
for Food Stamps.
•
Require States to adopt a community work experience program in which able-bodied Food
Stamp recipients must participate in work-related activities as a condition of their eligibility.
•
Delay the cost-of-living adjustment from October 1, 1983, to April 1, 1984.
RATIONALE
•
Overpayments in the Food Stamp program account for almost 10% of all benefit costs.
Especially in an era of limited resources, we cannot afford to issue erroneously one out of
every $10 in Food Stamps. By improving program administration and reducing the amount
of dollars spent in error, we can target funds on those individuals in greatest need and
restore public confidence in this program.
41
•
A 3% error rate target would give States the incentive they now lack to improve
administration since benefits are 100% federally financed. Actual error rates are lower in the
AFDC and Medicaid programs, where States share program costs. This proposal would set the
Food Stamp error targets at the same level as those currently applicable for AFDC and
Medicaid.
•
A major cause of the present 10% error rate is the complicated process of calculating
benefits. For example, the total of a household's housing costs and utilities must exceed half
of its net income to qualify for a shelter deduction. The proposals to standardize the shelter
and earnings deduction as well as establish categorical eligibility for AFDC recipients would
simplify program administration and help States to meet their target rates.
•
Unrelated recipients can manipulate current rules and gain higher benefits as separate Food
Stamp households, although they live together and consequently have lower living expenses.
Requiring all individuals living together to file as a single unit would end this abuse.
•
The Community Work Experience Program would continue past Administration efforts to
target assistance on the neediest individuals and assure that able-bodied Food Stamp
recipients are encouraged to find work in the private sector, or to perform useful public
services when no private job is available.
•
In 1984, the COLA freeze can be offset by just a 4% reduction in the waste factor built into
Food Stamp allotments to account for waste.
EFFECTS OF THE PROPOSED CHANGE
•
An estimated 21.5 million persons are expected to receive Food Stamps in FY 84 - more
recipients in a full year than under any previous Administration.
•
The Food Stamp program's protections for the elderly remain intact, including the special
deduction for high medical expenses and the exemption from the regular income and asset
limits. The proposal to revise household definition will also allow elderly living with their
children to continue to apply as separate households.
•
The proposed changes will not become effective until fiscal year 1984. In the interim, the
Administration is requesting over $1 billion in supplemental 1983 funds to ensure that the
nutrition needs of low-income Americans are met.
1982 AND 1983 CHANGES
Among the major changes for 1982 were the creation of a gross income eligibility standard of 130%
of poverty rather than a net standard, prohibitions against participation by strikers, tougher
disqualification penalties for fraud and misrepresentation, periodic reporting and retrospective
accounting of income, an optional workfare program and adjustments in the value of the Thrifty
Food Plan.
The 1983 revisions included reforms in the error liability system, further adjustments in the Thrifty
Food Plan and an expansion of protections for the elderly and disabled.
42
CHILD NUTRITION PROGRAMS
AGENCY:
Functional Code: 605
Department of Agriculture
Funding
($ in millions)
1982
1983
1984
1985
1986
1987
1988
CURRENT SERVICES
Budget Authority
Outlays
2,847
3,020
3,178
3,199
3,245
3,243
3,439
3,428
3,668
3,655
3,934
3,919
4,163
4,149
REAGAN BUDGET
Budget Authority
Outlays
2,847
3,020
3,178
3,197
2,932
2,948
3,052
3,045
3,209
3,200
3,389
3,379
3,558
3,548
313
295
387
383
459
455
545
540
605
PROPOSED SAVINGS
Budget Authority
Outlays
601
PROGRAM DESCRIPTION
The Child Nutrition programs finance school lunches and breakfasts, meals served at child care
centers and summer feeding sites, and State administrative expenses. Meal subsidies consist of both
cash and commodity assistance.
The Child Nutrition programs do not represent the total resources devoted to nutrition assistance for
children. The listing below indicates other food program monies targeted to children and provides a
fuller context in which to consider Child Nutrition funding.
1977
1981
1983
1984
1985
1986
1987
1988
2,619
3,438
3,197
2.948
3,045
3,200
3,379
3,548
Special Milk
156
104
20
20
21
22
24
25
WIC**
202
731
879
859
859
859
859
859
97
175
365
365
365
365
365
365
3,074
4,448
4,461
4,192
4.290
4,446
4,627
4,797
Child Nutrition*
Section 32 Commodities
TOTAL
*
**
Funds for nutrition assistance for Head Start centers are not included in 1984-88 totals.
Portion of total funding attributed to assistance for infants and children.
PROPOSED CHANGE
The School Breakfast, Child Care Feeding and Summer Feeding programs would be consolidated into
a General Nutrition Assistance Grant to States. Meal assistance for Head Start centers, formerly
provided by the Child Care Feeding program, would be available through a corresponding increase
in Head Start funding. While States could choose to provide nutrition assistance to family day care
homes, funding for these groups would not be included in the grant base.
•
Eligibility for free and reduced price school meals would be determined by food stamp
offices instead of by school authorities.
•
Cost-of-living adjustments to meal reimbursement rates would be frozen for six months,
consistent with proposals for other entitlement programs.
•
Reimbursement rates for meals in all price categories would be increased by the same costof-living adjustment.
43
•
Federal mini-grants for nutrition education programs would be discontinued.
RATIONALE
•
The General Nutrition Assistance Grant would permit States greater flexibility to design
assistance programs for meals served to children outside a school lunch setting. States could
continue programs similar to those the grant would replace or establish new programs more
appropriate to the needs of their population. States would no longer have to apply a
complex set of reimbursement rates or comply with cumbersome Federal regulatory
requirements; 100 pages of Federal regulations would be eliminated.
•
Schools would be relieved of the burden of determining eligibility for school feeding
programs. Instead, food stamp offices, already experienced in this task, would perform
eligibility determination. Food stamp offices would be reimbursed for any costs they might
incur. More vigorous efforts to determine eligibility will better target meal benefits to the
truly needy.
•
The COLA freeze would be a part of a government-wide effort to contain escalating costs in
entitlement programs.
•
At present, cost-of-living adjustments to reduced price meal rates substantially
overcompensate for inflation. This proposal would adjust all meal rates, including those for
reduced price meals, by the same inflation factor.
EFFECTS OF THE PROPOSED CHANGE
•
Federal meal subsidies for all school lunches would continue for almost 23 million students.
Enhanced efforts to identify those wrongfully receiving benefits will permit Federal funds to
be concentrated on those truly needing assistance.
•
States would target nutrition assistance more effectively, developing programs that meet
the particular needs of their children and avoiding the current problems in program
administration and design.
•
Head Start centers would no longer have to fulfill the requirements of two programs
administered by different Federal agencies, thereby simplifying their financial management
and record-keeping.
1982 and 1983 CHANGES
In 1982, a number of changes were enacted to focus assistance on needy youngsters, to reduce
duplication in subsidies, and to restrain the growth in Federal costs: subsidies for non-needy
students were reduced; the Special Milk program was removed from schools that participate in other
Federal meal subsidy programs; procedural changes were made to discourage fraudulent claims and
to establish eligibility for Federal subsidies more accurately; and the summer feeding program was
limited to government sponsors in areas with high concentrations of lower-income households.
44
HUD SUBSIDIZED HOUSING PROGRAMS
AGENCY:
Functional Code: 604
Department of Housing & Urban Development
Funding
CURRENT SERVICES -V
Budget Authority
Outlays
($ in millions)
1982
1983
1984
1985
1986
1987
1988
12,245
6,880
5,846
7,937
13,234
8,981
11,460
9,936
13,848
10,804
14,440
11,417
15,064
12,116
1,362
346
2,489
1,314
2,878
2,220
6,793
2,670
1,197
2,913
4,267
7,774
-2,319
8,532
-2,093
9,235
2,053
9,690
8,052
10,004
2,942
10,258
1,579
163
15,553
449
13,553
701
11,795
1,114
6,388
1,413
12,122
1,858
REAGAN BUDGET
Housing Payment Certificate Program:
Budget Authority
Outlays
Total Subsidized Housing:!/?/
Budget Authority
Outlays
PROPOSED SAVINGS!/
Budget Authority
Outlays
V
2/
12,245
6,880
--2/
Includes funding for the Public Housing Modernization program.
The Administration would make $642 million available for Section 8 Housing Payment Certificates in 1983 if legislation is
enacted early enough in 1983 to implement these reforms.
Includes Housing Payment Certificate program.
3/
PROGRAM DESCRIPTION
The Department of Housing and Urban Development currently administers several programs that
assist low-income individuals in meeting the cost of purchasing and renting adequate housing.
Under these programs, the Federal Government has entered into long-term (15 to 40 year) contracts
with lenders, private landlords or local housing authorities to subsidize the mortgage interest
payments and rents for eligible low-income households. The 3.5 million households currently
receiving subsidies pay a monthly rent that is 27% to 30% of their income.
Each of the major HUD rental subsidy programs is described briefly below:
•
Public Housing. The Public Housing Program houses 1,224,000 families renting units owned
and operated by local public housing agencies (PHA's). HUD supports the construction of this
low- income public housing by making annual payments to PHA's to amortize their tax
exempt debt issued to finance these projects. The Government also spends over $1.5 billion
annually to assist PHA's in meeting the high cost of operating their projects (see Public
Housing Reform Proposals Fact Sheet).
•
Section 8 New Construction Program. HUD provides assistance to 571,000 households living
in privately owned, newly- constructed, and rehabilitated rental housing (i.e., built or
rehabilitated after 1975). Under this program, HUD makes commitments to housing
developers to pay "fair market" rents for these units for 20 to 40 years if the landlord agrees
to rent to eligible low-income tenants.
•
Section 8 Existing Housing Program. HUD currently provides subsidies to 955,000 households
living in private market rental housing that rents for amounts below a certain established
level and meets certain housing quality standards. Under this program, eligible tenants select
private housing that rents below a maximum "fair market rent" level established and revised
annually for the area by HUD. Tenants pay 27% to 30% of their income toward rent and
HUD's Section 8 Existing Housing Program subsidy covers the remainder.
45
PROPOSED CHANGE
•
The Administration proposes to replace the Section 8 Existing Housing Program with a
Housing Payment Certificate Program as current commitments with PHA's, which administer
the current Section 8 Existing Housing Program, expire and when current Section 8 Existing
Housing Program subsidy recipients leave the program.
The Housing Payment Certificate Program, which builds upon the Section 8 Existing Housing
Program, would:
replace the Existing Housing Program's maximum "fair market rent" with a "payment
standard";
shorten the length of the subsidy commitment from 15 years to 5 years; and
-
•
allow PHA's at the State and local level to determine the amount by which the subsidy
level should be adjusted to reflect changes in rent levels.
The Housing Payment Certificate Program would provide rental assistance for tenants
through housing certificates which are to be used to rent units meeting certain housing
quality standards.
The value of the certificate would be based on an assumed tenant contribution (based on
income) and an area "payment standard" reflecting area rental costs.
As under the current Section 8 Existing Housing Program, eligibility for the Housing
Payment Certificate Program would be limited to households with incomes less than 50%
of area median income.
-
The local PHA's issuing these housing ceritficates would give greater priority to displaced
tenants, tenants currently living in substandard housing, or those currently paying a
disproportionately high percentage (greater than 30%) of their income for housing.
-
The amount of the subsidy provided under the Housing Certificate Program would be a
function of a family's geographic location, size, and annual income. The average
beginning subsidy will be about $2,000 per recipient household.
RATIONALE
•
Under the current Section 8 Existing Housing Program, rents for subsidized units exceed
rental costs for private market rental units by about 26%. Landlords have an incentive to
raise rents to the published fair market rent level, and tenants have no incentive to negotiate
their own rents. In the Housing Payment Certificate Program, the subsidy would not be
related to actual rent for the unit chosen by the tenant and subsidy recipients would be
encouraged to "shop around" for the lowest cost acceptable unit, since any rent savings
would not reduce the value of the tenant's housing certificate and therefore would accrue to
the tenant. Unlike the current Section 8 Existing Housing Program, which has a maximum
rent level, tenants could rent above the "payment standard" if they desire. As a result,
subsidy recipients would have greater choice in selecting suitable neighborhoods and
expenditure levels. Current landlord incentives to raise rents above market levels would be
ended.
•
The subsidy commitment term under the current Section 8 Existing Program is 15 years. Such
long-term commitments lasting until the turn of the century are fiscally imprudent given the
uncertainty of the long-term need for such subsidies. The shortened 5-year Housing Payment
Certificate subsidy commitment would provide greater flexibility to adjust or reconsider
subsidized housing policy in the future.
46
•
Under the current Section 8 Existing Housing Program, subsidies are automatically increased
nationwide to reflect increases in estimated rental costs. Unlike last year s Modified Section 8
Housing Certificate Program, the Housing Payment Certificate Program currently being
proposed provides for increases in the tenant subsidy to reflect changes in tenants' incomes
and rent levels. By allowing PHA's who actually administer the program and are more
familiar with rental housing market conditions to determine these subsidy adjustments,
Housing Payment Certificate Program costs would be better targeted
EFFECTS OF THE PROPOSED CHANGE
•
The Administration's 1984 budget provides funds for 80,000 incremental Housing Payment
Certificates (i.e., new households served) and 26,000 Section 8 Existing Housing Program
units that will be converted to the Housing Payment Certificate Program when HUD's current
commitments with the PHA's expire. In addition, 94,000 Section 8 Existing Housing Program
units will be converted when current subsidy recipients leave the program. These Housing
Payment Certificates will be funded within HUD's current Section 8 Existing Housing Program
contract with the PHA.
•
The initial Housing Payment Certificate subsidy would be approximately equal to the benefit
currently received by households now entering the Section 8 Existing Housing Program
However, the budget authority per unit per year needed to fund one Housing Payment
Certificate for five years would be considerably lower than the budget authority to fund a
Section 8 Existing Housing unit for 15 years. This is because the Section 8 Existing Housing
Program unit needs a much larger amount of budget authority set-aside to fund inflation
adjustments over the additional 10-year subsidy term. (Section 8 Existing Housing Program
needs $3,943 of budget authority per unit per year under Current Services versus $2,000 per
unit per year under the Housing Payment Certificate Program.)
•
These reforms to the susidized housing programs will contribute to reducing the average
1988 outlay per subsidized housing unit from $2,768 under Current Services to $2,430 per
unit under the proposed budget. The cumulative 1984 - 1988 outlay savings from this reform
totals $2.5 billion.
1982 AND 1983 CHANGES
•
The 1981 Omnibus Reconciliation Act authorized the Administration's proposal to increase —
from 25% to 30% of income - the rents charged to tenants in HUD subsidized housing.
•
The 1982 Congressional supplemental appropriation provided that funds previously
appropriated for other purposes be used to convert units under the Rent Supplemental and
Rental Housing Assistance programs to the Section 8 program. This conversion was necessary
in order to ensure that adequate long-term funding existed for current subsidy recipients.
The Administration's 1984 budget defers $3,081 billion of 1983 budget authority in order to
ensure that adequate funding is available to complete the conversion of these units to
Section 8.
•
The 1983 Congressional budget was consistent with the Administration's proposal that,
except for elderly housing, no newly constructed rental housing be funded.
47
PUBLIC HOUSING REFORM PROPOSALS
AGENCY:
Department of Housing and Urban Development
Funding
Functional Code: 604
($ in millions)
1982
1983
1984
1985
1986
1987
1988
Public Housing Operating Subsidies
Budget Authority
1,491
Outlays
1,008
1,351
1,582
1,552
1,516
1,714
1,634
1,836
1,775
1,961
1,898
2,093
2,027
1,800
2,589
2,625
2,756
2,894
129
3,038
260
3,190
398
3,291
1,008
3,940
1,582
4,177
1,516
4,470
1,634
4,730
1,904
4,999
2,158
5,283
2,422
Public Housing Operating Subsidies
Budget Authority
1,491
Outlays
1,008
1,282
1,551
1,637
1,520
1,525
1,581
1,481
1,503
1,470
1,475
1,550
1,511
1,800
2,589
1,400
1,000
700
129
350
199
249
3,291
1,008
3,871
1,551
3,037
1,520
2,525
1,581
2,181
1,632
1,820
1,674
1,550
1,760
69
31
-84
-4
189
53
355
272
491
423
543
516
1,225
1,756
2,194
2,688
61
3,190
146
1,141
-4
1,945
53
2,549
272
3,179
484
3,733
632
CURRENT SERVICES
Public Housing Modernization!/
Budget Authority
Outlays
Total
Budget Authority
Outlays
REAGAN BUDGET
Public Housing Modernization!/
Budget Authority
Outlays
Total
Budget Authority
Outlays
PROPOSED SAVINGS
Public Housing Operating Subsidies
Budget Authority
Outlays
Public Housing Modernization!/
Budget Authority
Outlays
Total
Budget Authority
Outlays
1/
69
31
Outlays for modernization program from 1983 and subsequent year budget authority only.
PROGRAM DESCRIPTION
Public housing provides 1.2 million low-income households with housing which generally meets
minimum standards of quality with rents which are set on average at about 25 percent of income.
48
The Federal Government pays the full cost of the construction of public housing. In addition, since
1969, a separate operating subsidy program has made payments to public housing authorities to
supplement their rental and other income sources. Since 1976, these operating subsidies have been
based upon a formula which essentially adjusts 1975 operating costs for inflation and other factors.
Outlays for operating subsidies have grown rapidly, with the Federal Government now paying
roughly half the cost of operating public housing.
A separate public housing modernization program was initiated in the early 1970's. This program
provides funds for a wide range of capital investments, from routine replacement of appliances, to
major repairs and renovations of buildings.
PROPOSED CHANGE
A new operating subsidy formula is planned for 1984 which will base payments to housing
authorities upon the same rent levels used in the Section 8 rental housing assistance program. Unlike
the current formula, which covers only operating expenses, the new approach will include funding
for ongoing capital improvements now supported by the Modernization Program. A transition
program of modernization funding will continue, but the separate Modernization Program is
proposed to be phased out by 1988.
RATIONALE
•
Since 1970, the operating subsidy program has grown at a 37 percent compound annual rate
of growth. The present operating subsidy formula, which is based primarily upon historical
costs, has become outdated and difficult to administer. Operating cost increases have been
largely passed along to the Federal Government. On the other hand, private landlords in the
same rental markets have had to make energy conservation investments, find other methods
to offset operating cost increases, or shut down uneconomical apartment units.
Appropriations to cover Federal subsidies based upon the current formula have resulted in
wide swings between underfunding in one year and overfunding in the next year,
•
Moreover, modernization funds have been allocated almost entirely without reference to
operating cost savings which could be achieved. Indeed, there are incentives under the
current arrangement to allow excessive deterioration of facilities, rather than paying for
continued maintenance out of operating funds, in order to do periodic substantial
upgrading with modernization money. The availability of modernization funding - not
necessarily the optimum timing for replacement and renovation work -- has influenced when
capital improvements and repairs are undertaken.
•
The new market based operating subsidy program would address these shortcomings by:
determining operating subsidies based upon actual rental revenues available to private
landlords operating rental housing in the same market;
providing an objective standard to help public housing agencies (PHA's) determine those
projects whose continued operation is not the lowest cost means of providing housing
subsidies to low income households; and
promoting increased management flexibility for public housing agencies by allowing
Federal subsidy payments to be completely fungible between their application to pay for
operating costs or capital improvements.
EFFECTS OF THE PROPOSED CHANGE
The proposal would permit the upgrading and maintenance in good condition of all the Nation's
economically viable public housing stock. Adequate funding levels and appropriate economic
incentives would be provided to allow PHA's to manage their public housing units efficiently and
flexibly to provide good housing for over 1 million households. Use of a market-based standard will
also provide PHA's with funding levels that reflect the same kind of cost increases and adjustments
49
made by private landlords supplying rental housing in the same rental markets. To the extent that
the use of these reforms cause some high-cost public housing projects - which cannot be operated as
efficiently as private rental housing in their markets - to be identified, it may be necessary for
Federal and local officials to evaluate alternative future uses of the buildings and land involved. Any
tenants in projects being withdrawn from use as public housing will be given Section 8 Housing
Payment Certificates.
1982 AND 1983 CHANGES
•
Tenant rents have begun to be increased and are scheduled to reach 30 percent of adjusted
income by 1986.
•
Modernization funding of $1.8 billion in 1982 and nearly $2.6 billion in 1983 will be used
first, to meet health and safety requirements; second, to address energy conservation needs;
and third, to bring most projects up to minimum standards prior to the introduction of the
new subsidy system.
50
HEALTH POLICY
51
HEALTH POLICY
GROWTH IN HEALTH C O S T S - A MAJOR NATIONAL PROBLEM
The growth in health care costs over the last several decades has been explosive. Between 1960 and
1980, total public and private spending for health increased from $27 billion to $244 billion.
Spending as a share of GNP grew from 5.3% to 9.5%. The Federal share grew from $3 billion to $71
billion during that period-an increase of over 2,000%. In just the last year, community hospital
expenditures increased over 19% while GNP rose only 5.6%.
Normal market forces in the health care industry have failed to restrain these out-of-control cost
increases. The dominant mode of financing and purchasing health care services--both public and
private-insulates participants in the medical market from the cost consequences of their decisions:
•
institutional providers have traditionally been paid for whatever they charge or reimbursed
for whatever costs they incur;
•
individuals with substantial insurance coverage feel no economic constraints on the quantity
and quality of services demanded;
•
physicians - faced with the choice of ordering services that might help, add to income, and
cost the patient little or nothing - have few incentives to restrain service use; and
•
hospitals or other institutional providers, reimbursed largely on a cost or cost-plus basis, are
restrained only by their inability to maximize the use of their facilities.
These factors result in service upgrading, increased volume, and cost expansion.
THE FEDERAL SHARE OF HEALTH COSTS - MEDICARE AND MEDICAID
The unrestrained inflation in health care costs burdens not only the national economy, but also the
Federal budget. Medicare and Medicaid-the two largest Federal health programs- are key elements
of the social contract. In 1984, these programs will be the main funding source for the health care of
almost 50 million poor, disabled, and aged people-almost one in every five Americans.
As a result of the excessive inflation in health care costs and fundamental flaws in program design,
Medicare/Medicaid have become major contributors to the budget's structural deficit. Between 1967
and 1982, the two programs grew from $3.9 billion to $64 billion. By 1986, if no changes are made,
the two programs will cost more than $100 billion annually. Baseline spending for 1984 to 1988 will
be almost one half trillion dollars without reforms. As a share of the budget, the two programs grew
from 3.9% in 1967 to over 8.8% in 1982. In 1984, even if all the Administration's proposals are
adopted, Medicare and Medicaid will account for almost 20% of total 1984 budget growth. Equally
serious, the Medicare Hospital Insurance Trust Fund will be bankrupt by 1987 unless the President's
proposals are adopted.
Medicare and Medicaid are very large purchasers of health care services. Together, they pay more
than a third of all hospital expenditures and almost one quarter of physician expenditures. Medicare
and Medicaid are not only victims of excessive health care cost increases, they are major contributors
to market failure in the health industry. Key structural defects in the design of the two programs
contribute to excessive inflation rates and budget costs. These defects include:
•
Hospital reimbursement methods. Before 1983, Medicare and Medicaid traditionally paid
whatever costs hospitals incurred. Hospitals had no incentives under such a cost plus
reimbursement system to hold down costs or limit Medicare admissions. For this reason, the
growth in Medicare hospital costs has exceeded, by large amounts, inflation in the general
economy. In 1982, Medicare Hospital Insurance costs grew 1 9 % - a rate almost 3-1/2 times as
fast as GNP. Overall, even in constant dollars, the cost of a day in the hospital almost
53
quadrupled between 1955 and 1980, from $80 to $310.
By contrast, alternative
reimbursement systems can reduce hospital costs. When New York instituted such a system
in the mid-1970s, the rate of growth in hospital cost per admission fell to 30% below the
national average from 1975 to 1980.
The Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA) provided new incentives for
hsopital efficiency, but the TEFRA reforms expire in 1985. Moreover, the TEFRA reforms
maintain a reimbursement system based on cost. Hence, the full market efficiencies inherent
in a price system cannot be realized.
•
Cost-sharing provisions. Studies have shown that patient cost-sharing can provide more
economical and efficient use of services. Studies have demonstrated that free care, i.e., first
dollar health insurance coverage leads to significantly higher overall health expenditures,
more frequent office visits, and higher hospital use. In one study, modest cost-sharing
resulted in a 20 percent reduction in total health costs and a one-third reduction in hospital
costs.
Medicare and Medicaid, however, offer few incentives for beneficiaries to use the medical
care system efficiently or only when needed.
— Other than a modest inpatient hospital deductible, Medicare cost-sharing for hospital
stays does not apply until after the 60th day.
— The Medicare patient usually pays nothing other than a deductible equal to the average
cost of a day of hospitalization. Thus, neither the physician nor the patient have an
incentive to limit hospital stays to the minimum necessary. Cost-sharing after the 60th
day does little to affect the average hospital stay, which is under 11 days.
— Until recently, Medicaid care was almost always provided at no cost to the recipient.
•
Poor Insurance Protection. At the same time, Medicare does not protect the incomes of those
aged patients with very long, costly illnesses. After the 60th day of care in a spell of illness,
beneficiaries must pay 25% of the inpatient hospital deductible for 30 days. The hospital
deductible will be about $350 in 1984; thus, beneficiaries would have to pay about $88 per
day for days 61-90. For subsequent days, beneficiaries would have to pay 50% ($175) per day
until they exhaust their 60 lifetime reserve days, at which point they would be liable for
whatever the hospital charges. A beneficiary with a 150-day stay, thus, would be liable for
over $13,000 if he had not previously used any of his reserve days and for over $24,000 if he
had no reserve days left.
•
Lack of Competition. Medicare is a program that controls health insurance for 30 million
elderly Americans. Beneficiaries are unable to use their entitlement to buy alternative types
of health insurance coverage that best meets their needs. Private insurers can not compete
by offering more cost-effective coverage.
•
Responsibility for Program Costs. Federal taxes for Medicare hospital costs are collected from
the working population, not the aged. In addition, the Federal Government subsidizes 75%
of the aged's use of physician services-a proportion that will grow under current law. Thus,
an ever larger share of program costs are shifted from beneficiaries to the taxpayer and the
Federal Government, even though beneficiaries were originally supposed to pay 50% of
premiums for physician services to Medicare beneficiaries.
TAX SUBSIDIES
The structural defects of the two major financing programs are not the only way in which Federal
policy has promoted market failure in the health care industry. Federal tax policy also contributes to
inflationary tendencies in the private health sector.
54
Under Federal tax law, contributions by employers for health insurance are tax-free to employers.
This subsidy distorts private decisions in favor of health insurance over wages or other forms of
compensation. Thus, expensive health insurance policies, e.g., low cost-sharing, first dollar coverage,
are encouraged by current tax policies. Between 1955 and 1980, the share of health care costs paid
by third parties grew from under 42% to over 67%. First dollar coverage, without cost-sharing,
fosters the use of "free" health services and provides no incentives to moderate the excessive growth
in the cost of medical care. Overall, Federal tax subsidies pay for almost $30 billion of private health
insurance coverage.
SOLVING THE PROBLEM
In his 1984 budget proposals, the President is recommending the first set of comprehensive reforms
to address these problems since the institution of Medicare and Medicaid. The major elements are:
•
Medicare hospital reimbursement will be improved to establish additional incentives for
hospitals to provide care efficiently. Five year savings of $20 billion are anticipated.
•
A one-year freeze on Medicare physician reimbursement rates and a one-year elimination of
hospital reimbursement increases over inflation will hold down the costs to patients. This
proposal will save $6 billion over five years.
•
Additional Medicare hospital cost sharing will increase cost consciousness on the part of
physicians and patients for short hospital stays and will help pay for increased protection for
the aged who must undergo long and catastrophically expensive hospital stays. Under the
President's proposal, the cost to the patient of a five month extended illness would be
reduced from $13,475 to $1,530. About 150,000 beneficiaries annually would benefit from
this proposal.
•
States will be required to impose modest copayments on all Medicaid services except nursing
home care.
•
A voluntary Medicare voucher will be established to promote competition among private
insurers in the provision of cost-effective coverage. This voucher will allow beneficiaries to
choose health insurance plans that best meet their needs at prices they are willing to pay.
•
Between 1985 and 1988, the share of the Medicare Supplementary Medical Insurance (SMI)
program paid by beneficiaries will be increased from 25% to 35% to reduce the subsidy that
beneficiaries get from general revenues.
•
Tax subsidies will be limited to employer premium contributions of $175 monthly for a family
plan and $70 monthly for an individual plan. The portion of premium contribution above
these levels will be taxed on the same basis as other income, allowing employers and workers
to make an unbiased choice between higher wages and additional coverage. The levels of
tax-free premium contributions allowed under the President's proposal will still permit
adequate coverage, but will make the tax law neutral between wages and increased health
insurance.
55
MEDICARE: OVERVIEW
AGENCY:
Department of Health & Human Servives
Funding
CURRENT SERVICES
Budget Authority
Outlays
REAGAN BUDGET
Budget Authority
Outlays
PROPOSED SAVINGSV
Outlays
Offsetting Receipts
DETAILS OF SAVINGS
Medicare hospitalization
catastrophic protection
Reimbursement freeze and limit
Medicare SMI Premium
Hospital reimbursement reform!/
Other Medicare
V
Functional Code: 550
($ in millions)!/
1982
1983
1984
1985
1986
1987
1988
51,382
46,568
42,868
53,005
60,988
61,534
68,524
70,640
78,744
79,201
87,839 96,902
90,151 101,985
51,382
46,568
42,865
53,031
61,486
59,829
67,877
67,548
77,221
74,515
85,135
83,351
92,830
93,059
-19
(-119)
1,640
(-151)
2,912
(245)
4,383
(1,292)
6,243
(2,610)
8,321
(4,202)
100
-119
--
663
780
-151
(1,450)
348
1,164
1,070
245
(2,620)
433
1,327
1,200
1,292
(3,980)
564
1,499
1,410
2,610
(5,280)
724
1,682
1,550
4,202
(6,870)
887
Medicare offsetting receipts and collections subtracted. Budget authority in 1983 reflects interfund loans of $12.4
billion to OASI.
Savings shown are net of Medicaid impact; hence savings in Medicare will not equal the difference between current
services and the Reagan Budget.
Savings are the same as TEFRA reform during 1986 through 1988 and are thus included in current services.
2/
3/
The Medicare program finances medical care for Americans over 65 and for the disabled. The
program is funded by payroll tax contributions, general revenues, and beneficiary premiums. The
growth in Medicare hospital expenditures far exceeds growth in payroll tax receipts. As a result, the
Hospital Insurance Trust Fund faces bankruptcy in 1987 unless Congress acts to place it on a firm
financial footing. Currently, Medicare covers 29 million people.
The Administration's 1984 budget proposals for Medicare are designed to reduce the explosive
of growth in program costs, increase the financial stability of the Hospital Insurance Trust Fund,
improve the social insurance against catastrophic hospital costs that can bankrupt the aged
disabled. The rapid inflation in Medicare costs has been a major cause of the structural deficit
has contributed to excessive inflation in health care costs generally.
rate
and
and
and
Major Medicare reforms include:
•
better catastrophic hospital costs protection for retirees and the disabled in conjunction with
a more effective cost-sharing structure;
•
a one-year freeze on Medicare physician reimbursement rates and hospital reimbursement
increases above inflation;
•
a voluntary Medicare voucher;
•
a temporary freeze on SMI beneficiary premiums followed by a gradual increase in the share
of program costs financed by premiums; and
•
changes in hospital reimbursement to moderate cost increases.
These reforms will improve beneficiary insurance protection against catastrophic hospital costs,
reduce the rate of inflation in Medicare costs, and save $23.5 billion during the 1984-1988 period.
56
MEDICARE: CATASTROPHIC HOSPITAL COSTS
PROTECTION AND COST SHARING
AGENCY:
Department of Health and Human Services
Functional Code: 550
Funding
PROPOSED SAVINGS*
Outlays
*
($ in millions)
1982
1983
1984
1985
1986
1987
1988
-
-
663
1,164
1,327
1,499
1,682
Medicare savings shown are net of Medicaid costs.
PROGRAM DESCRIPTION, PROPOSED CHANGE AND RATIONALE
Medicare beneficiaries now run the risk of high out-of-pocket payments for long stays in the hospital
due to severe illnesses. In 1984, a continuous five-month hospital stay will cost the Medicare
beneficiary $13,475. Just one extra month would cost an estimated $10,000 more.
The Administration proposal would protect the elderly from the risk of these catastrophic hospital
costs. Under this proposal, beneficiaries with a continuous five-month hospital stay in calendar year
1984 will incur maximum out-of-pocket expenditures of $1,530 - $1 1,945 less than under current
law. In addition, the Administration is proposing to reduce the maximum out-of-pocket skilled
nursing care costs for the elderly under Medicare by $2,100 for each spell of illness: from $3,500 to
$1,400. The catastrophic hospital costs proposal will protect about 150,000 Medicare beneficiaries.
To finance this additional protection and to encourage cost consciousness about hospital stays
generally, the Administration proposes:
•
modest coinsurance of 8% of the hospital deductible ($28 in 1984) for the 2nd through 15th
day and 5% of the hospital deductible ($17.50 in 1984) for the 16th through 60th day of a
spell of illness. Medicare beneficiaries would no longer be threatened by large copayments
of 25% of the hospital deductible ($87.50 in 1984) for the 61st through 90th day and 50% of
the deductible ($175 in 1984) for the 91st through 150th day, along with 100% of the
hospital charges for all days after the 150th day of care;
•
to limit the beneficiary's liability to 60 days of cost-sharing per calendar year compared to the
unlimited liability under current law;
•
to limit to two the inpatient hospital deductibles that beneficiaries can be charged for in a
year; and
•
to reduce the skilled nursing facility copayment for the 21st through 100th days from 12.5%
to 5% of the inpatient hospital deductible in each spell of illness.
The example below shows a comparison between current law and the proposed catastrophic plan:
Number of Days in Hospital
75
90
150
1984 Current Law Costs
$1,663
$2,975
$13,475
$23,975*
1984 Catastrophic Hospital Costs
Protection
$1,530
$1,530
$1,530
$1,530
* Assumes cost per day in hospital of $350.
57
180
EFFECTS OF THE PROPOSED CHANGE
The proposal would:
•
guarantee financial protection for hospital costs and ski I led nursing care costs for the
severely ill;
•
create incentives for more cost-effective use of hospital services by physicians and
beneficiaries as a result of modest cost-sharing payments;
•
create a reasonable basis for beneficiaries to use skilled nursing care where appropriate since
their copayment amount in the nursing home would be reduced to a level equal to or below
the copayment for hospital care;
•
create incentives for physicians to perform medical procedures in a non-hospital setting
which would be less costly to the beneficiary, such as an ambulatory surgical center; and
•
spread costs of catastrophic hospital protection among an estimated 7.5 million people.
58
MEDICARE: PHYSICIAN PAYMENT FREEZE AND
HOSPITAL REIMBURSEMENT LIMIT
AGENCY:
Department of Health and Human Services
Funding
($ in millions)
1982
PROPOSED SAVINGS
Outlays
Hospital
Physician
Functional Code: 550
1983
1984
1985
1986
1987
1988
100
(--)
(100)
780
(80)
(700)
1,070
1,200
(170)
(200)
(900) (1,000)
1,410
(210)
(1,200)
1,550
(250)
(1,300)
PROGRAM DESCRIPTION AND PROPOSED CHANGE
Physician charges paid by Medicare would stay at the 1983 rates during 1984. Hospital payments per
admission would increase only by the hospital market basket index -- a measure of the costs of goods
and services that hospitals purchase - in FY 84.
RATIONALE
This physician freeze and tightened hospital limits would hold health care providers to a one-year
delay in reimbursement increases to help stem spiraling health care costs. This is consistent with
sacrifices asked of Federal workers, the military, Federal retirees, and Social Security beneficiaries.
EFFECTS OF THE PROPOSED CHANGE
Limiting hospital reimbursement to the market basket index for hospitals would allow full passthrough of average price increases in the goods and services hospitals purchase in order to operate.
Increases beyond inflation would not be allowed in 1984. The physician reduction would be only
3.3% of Supplementary Medical Insurance (SMI) current services expenditures in 1984.
1982 AND 1983 CHANGES
Under the Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA), a major reform of the current
Medicare hospital reimbursement system was enacted. Hospitals with rates of cost increase of more
than the market basket plus 1%, or with high costs relative to other hospitals, will experience
reimbursement reductions. At the same time, hospitals that control their cost increases effectively
can receive reimbursement bonuses.
59
MEDICARE:
SUPPLEMENTARY MEDICAL INSURANCE-PREMIUMS AND DEDUCTIBLES
AGENCY:
Department of Health and Human Services
Funding
Functional Code: 550
($ in millions)
1982
PROPOSED SAVINGS*
Premiums (Offsetting receipts)
Deductible (Outlays)
1983
1984
1985
1986
1987
1988
-119
-151
46
245
119
1,292
198
2,610
287
4,202
381
* Medicare savings shown are net of Medicaid costs
PROGRAM DESCRIPTION AND PROPOSED CHANGE
Premium: Supplementary Medical Insurance (SMI) enrollees pay a monthly premium (now $12.20)
to cover insurance for physician services. The premium is set each year; the premium level is tied to
program costs. Under current law, premiums change each July 1. This proposal will delay the next
SMI premium increase from July 1, 1983, to January 1, 1984. On January 1, 1985, the SMI premium
will be raised from the current level of 25% of program costs to 27 5%; it will grow annually until it
reaches 35% of program costs on January 1, 1988.
Deductible: Under current law, and despite large increases in physician costs, the SMI deductible the amount that beneficiaries must pay before Medicare begins to pay for services-has changed only
twice since Medicare began. The deductible is now $75. The proposal would index the SMI
deductible to the Medicare economic index (MEI). The MEI measures price increases for physician
services. Indexing the deductible by this measure will keep the economic value of the deductible
constant.
RATIONALE
Premium:
•
The proposal would insure that beneficiaries would not pay additional premium costs while
Social Security benefits are frozen.
•
When the SMI program began, beneficiary premiums were supposed to finance 50% of SMI
program costs; the remaining 50% was financed by general revenues. This was the case from
1966 to 1971. From 1972 to 1982, however, the SMI premium increase was limited by the rate
of increase of social security benefits and fell to under 25% of program costs. Currently, SMI
premiums are scheduled to cover 25% of program costs through 1985, when they would
once again be linked to social security benefits. In view of the economic difficulties
confronting the working population, this proposal would shift more of SMI financing to
those who choose SMI rather than have the taxpayer bear an increasing burden for SMI; this
is consistent with the original program design.
Deductible:
SMI's deductible has increased only twice since Medicare began: from $50 in 1966 to
$60 in 1973 and to $75 in 1982. Had it been indexed to the CPI, it would now be over $100. Without
indexing, the deductible^ economic value will continue to erode.
60
EFFECTS OF THE PROPOSED CHANGE
Premiums: Premium amounts under current and proposed law are:
Current Law (July 1)
Proposed Premiums (January 1):
With Other Medicare Proposals
Without Other Medicare proposals
Deductible:
12 20
1983
1984
1985
1986
1987
1988
$12 20
$13 50
$15 90
$16.70
$17 40
$18 20
12.20
14.80
14.20
18.60
17 80
22 80
21 70
27 60
26.30
33 30
31 60
Under this proposal, the deductible willI be:
1984
1985
1986
1987
1988
$80
$85
$90
$95
$100
1982 AND 1983 CHANGES
The Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA) provided that premiums be set to cover
25% of program costs in 1984 and 1985. Hence the premium proposal will maintain the TEFRA level
for 1985. The Omnibus Budget Reconciliation Act of 1981 (OBRA) increased the SMI deductible from
$60 to $75, effective January 1, 1982.
61
MEDICARE: VOLUNTARY VOUCHERS
AGENCY:
Department of Health & Human Services
Functional Code: 551
Funding
($ in millions)
1982
1983
PROPOSED INCREASES
Outlays
1984
1985
1986
1987
1988
50
50
50
50
50
PROGRAM DESCRIPTION AND PROPOSED CHANGE
Medicare is a $66.5 billion program that controls health insurance for 29 million elderly Americans.
Beneficiaries are, however, unable to use their entitlement to buy alternative types of health
insurance coverage that best meets their needs; because of this, private insurers do not compete by
offering more cost-effective coverage.
This proposal would establish a voluntary Medicare voucher that beneficiaries could use to purchase
insurance in the private market if they believed alternative coverage to Medicare would be more
advantageous. No beneficiary would be required to take the voucher, and Medicare would always
be available for those who become dissatisfied with their private coverage. The voucher would be
priced at 95% of Medicare's average adjusted per capita cost (AAPCC). The AAPCC would be
adjusted to reflect Medicare's cost fairly by taking into account such factors as age, sex, health status,
and area health care costs.
RATIONALE
The Medicare program would be opened to competition. Beneficiaries would be able to choose the
mode of delivery or benefit package that meets their needs most effectively. The proposal would
also stimulate competition in the medical marketplace and encourage private sector development of
cost-effective systems of care.
EFFECTS OF THE PROPOSED CHANGE
The number of beneficiaries that will choose vouchers or how quickly the private market will offer
alternative benefit packages is not known. Nevertheless, the voucher proposal will create an
opportunity for some 30 million Medicare beneficiaries to shop for alternative benefit packages.
Even if only a small percentage chooses to exercise the voucher option, it could become an important
stimulus to private sector innovation in health insurance coverage The proposal is an important part
of the overall Administration strategy to improve market forces in Medicare and the general health
care system.
1982 AND 1983 CHANGES
The Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA) established a similar voluntary voucher,
but it was restricted to health maintenance organizations and other pre-payment plans and imposed
excessively rigid requirements on the benefits that such plans could offer.
62
MEDICARE: FIRST FULL MONTH OF ELIGIBILITY
AGENCY:
Department of Health & Human Services
Funding
($ in millions)
1982
1983
PROPOSED SAVINGS*
Outlays
*
Functional Code: 550
1984
1985
1986
1987
1988
201
248
286
329
367
Medicare savings shown are net of Medicaid costs.
PROGRAM DESCRIPTION AND PROPOSED CHANGE
Individuals would become eligible for Medicare coverage at the beginning of the first full month in
which they are 65. Under current law, eligibility begins on the first day of the month in which the
65th birthday occurs.
RATIONALE
•
The proposal would make initial eligibility requirements for Medicare benefits consistent
with the initial eligibility requirements at the time individuals qualify for Social Security
benefits.
•
Most group plans extend coverage until Medicare coverage begins. Hence, beneficiaries
would not lose needed health insurance coverage.
EFFECTS OF THE PROPOSED CHANGE
Roughly 30 million Medicare beneficiaries will have full coverage in 1984. About 2 million new
beneficiaries will be affected.
63
MEDICARE: ELIMINATE PSRO, PRO, AND
MANDATORY UTILIZATION REVIEW FUNDING
AGENCY:
Department of Health and Human Services
Funding
Functional Code: 550
($ in millions)
1982
1983
PROPOSED SAVINGS
Outlays
1984
1985
1986
1987
1988
58
60
62
64
66
PROGRAM DESCRIPTION
The Professional Standards Review Organization (PSRO) program has traditionally funded physiciansponsored organizations to review the quality of medical care and length of hospital stays of
Medicare beneficiaries. In 1984, this activity would continue under a new program title - Peer
Review Organizations (PROs) -- with the same basic review responsibilities as the current program.
The Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA) has, however, changed Medicare so that
there is no longer a need for traditional peer review.
PROPOSED CHANGE
The Administration is proposing legislation to eliminate PSROs, PROs and mandatory utilization
review by hospitals and skilled nursing facilities. Voluntary utilization review will continue to be
reimbursed to the extent that the costs of such review are reasonable.
RATIONALE
TEFRA established Medicare reimbursement limits for each hospital. These limits give hospitals the
incentive to reduce length-of-stay, which is the primary review function of PSROs. Thus, the need for
PSROs/PROs is diminished. Moreover, the Administration's new prospective payment system for
hospitals will pay a fixed amount for each admission. As a result, length of stay reviews are
unnecessary since payment levels will be independent of hospital lengths-of-stay.
EFFECTS OF THE PROPOSED CHANGE
Quality of care will be maintained through accreditation standards and HHS's quality control system
In addition, market-oriented payment systems, along with HHS's admissions monitoring system, will
provide a more effective basis for controlling unnecessary hospital use than the current burdensome
regulatory review process.
1982 AND 1983 CHANGES
In 1982, Congress provided the Secretary of HHS with the authority to refuse to renew agreements
with PSROs found to be ineffective and inefficient. In 1983, Congress established the peer review
organization program (PROs), which consolidated the 143 existing PSROs into 52 PROs, at least one
PRO per State. These PROs would be established in 1984 and would have the same basic function as
current PSROs. Also, TEFRA gave Medicare contractors additional authority to perform utilization
review.
64
MEDICAID
AGENCY:
Department of Health and Human Services
Funding
Functional Code: 550
($ in millions)*
1982
1983
1984
1985
1986
1987
1988
CURRENT SERVICES
Budget Authority
Outlays
18,014
17,391
14,795
19,333
21,038
21,092
23,990
23,990
26,068
26,068
28,546
28,546
31,242
31,242
REAGAN BUDGET
Budget Authority
Outlays
18,014
17,391
14,795
19,326
20,738
20,799
23,132
23,132
25,346
25,346
27,835
27,835
30,556
30,556
249
249
795
795
719
719
788
788
856
856
249
249
270
270
278
278
289
289
299
299
525
525
441
441
499
499
557
557
PROPOSED SAVINGS
Budget Authority
Outlays
DETAILS OF SAVINGS
Mandatory copayment
Budget Authority
Outlays
OBRA extension
Budget Authority
Outlays
*
Medicaid savings numbers do not include impact of AFDC and other proposals; hence savings totals will not equal the
difference between current services and the Budget. Excludes Federal program administration costs.
PROGRAM DESCRIPTION
The Medicaid program makes grants to States to assist them in financing medical care of low-income
families and individuals. States receive open-ended matching payments for their expenditures, with
the Federal matching rate ranging from 50 to 78% of the cost of the program. Currently, Medicaid
provides benefits for 22 million people.
PROPOSED CHANGE
•
Mandatory cost sharing by Medicaid recipients. Under the Tax Equity and Fiscal
Responsibility Act of 1982 (TEFRA), States may require that Medicaid recipients share in the
cost of services they receive. This proposal would expand the present copayment provisions
passed by Congress in 1982 by requiring States to impose small copayments. Such
copayments would be $1.00 and $1.50 for physician visits and $1.00 and $2.00 for each day in
the hospital. The lower copayments would apply to who were also receiving cash welfare
payments. Medicaid nursing home patients would be exempted from mandatory
copayments because they typically have incurred large out-of-pocket costs before entering
nursing homes or gaining Medicaid eligibility.
•
Extension of the Omnibus Budget Reconciliation Act (OBRA) Targets and Penalities. The
Omnibus Budget Reconciliation Act of 1981 (OBRA) established targets for State Medicaid
spending and imposed penalties on excessive State spending of up to 3%, 4%, and 4.5% of
Federal payments in fiscal years 1982, 1983 and 1984, respectively. Reductions of one
percentage point in the penalty would be made for (1) a hospital cost review program, (2) an
unemployment rate of 150% or more of the national average, and (3) fraud and abuse
recoveries of one percent of Federal payments to the State.
http://fraser.stlouisfed.org/380-900 0
Federal Reserve Bank of St. Louis
65
- 83 - 5 : OL 3
RATIONALE
MANDATORY
COPAYMENTS
Nominal copayments can help deter unnecessary use of medical services, and reduce State Medicaid
expenditures, without deterring use of necessary health care services. A nominal copayment will
encourage beneficiaries to stop and think before using services.
OBRA EXTENSION
Extension of OBRA provisions would encourage States to continue efforts to reduce expenditures
and implement program efficiencies.
EFFECTS OF THE PROPOSED CHANGE
Mandatory copayments and extension of OBRA provisions will result in lower total costs.
1982 AND 1983 CHANGES
MANDATORY
COPAYMENTS
As described above, under the Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA), States were
allowed to impose nominal copayments on all but (1) services to children under 18; (2) pregnancy,
family planning, and emergency services; and (3) services in nursing homes or to categorically needy
persons in HMOs.
OBRA EXTENSION
As described above, OBRA established target amounts for Medicaid cost increases to encourage
States to limit the program's explosive growth. Federal matching funds are reduced for States whose
spending exceeds targets established by Congress.
66
CAP TAX SUBSIDY FOR PRIVATE HEALTH INSURANCE PREMIUMS
AGENCY:
Functional Code: 550
Department of Health and Human Services
Funding
($ in millions)
1982
1983
PROPOSED SAVINGS
Receipts
1984
1985
1986
1987
1988
2,283
4,408
6,026
7,990
10,729
PROGRAM DESCRIPTION AND PROPOSED CHANGE
Current tax law exempts from income tax the amounts employers contribute to health insurance
premiums for their employees. The Administration proposes to limit tax subsidies for employer
health insurance premium contributions. The subsidy would be limited to the portion of premiums
under $175 monthly for a family plan and $70 monthly for an individual plan. These levels permit
adequate coverage, but make the tax law neutral between wages and increased health insurance in
excess of those levels. Between 1955 and 1980, the share of health care costs paid by third parties
grew from under 42% to over 67%. Overall, Federal tax subsidies pay for almost $30 billion of
private insurance coverage.
RATIONALE
The current law tax subsidy distorts private decisions in favor of health insurance over wages or other
forms of compensation and gives an inequitable, disproportionate subsidy to high-income workers.
The subsidy makes an untaxed dollar of health insurance coverage more valuable than a taxed dollar
of wages. For this reason, expensive health insurance policies, e.g., low cost-sharing, first dollar
coverage, are encouraged. Moreover, first dollar coverage without cost-sharing fosters the use of
"free" health services and provides no incentives to moderate the excessive growth in the cost of
medical care. In addition to undesirable health policy effects, the tax subsidy favors workers with
higher incomes.
EFFECTS OF THE PROPOSED CHANGE
This proposal will encourage development and purchase of more cost-effective health insurance
plans. Thus, it will reduce the rate of health care cost inflation. Approximately 18% of workers (30%
of those with health insurance) will have employer contributions above the cap in 1984. Tax
expenditure savings will total $31 billion during the 1984-88 period.
67
OTHER NON-DEFENSE SPENDING
69
CHAPTER 3
OTHER NON-DEFENSE SPENDING
INFRASTRUCTURE/PUBLIC WORKS
The Administration is taking actions to build an environment for stronger economic growth with
initiatives that will restore, improve and expand the Nation's infrastructure. These actions will assure
that scarce public resources are used as effectively as possible, that those directly benefitting from an
improved infrastructure contribute their fair share of the costs, and that the resources used by
inefficient programs are reallocated to better meet our national needs.
•
Significant increases in Federal funding will provide for completion and rehabilitation of the
interstate highways, as well as for repair of primary system roads and for bridge
rehabilitation. In addition, the Federalism initiative will contain a Transportation Block
Grant, consolidating programs for which State and local governments are principally
responsible.
•
For mass transit, there will be increased funding for rehabilitation of existing bus and rail
systems, rolling stock purchases, and other capital assistance. Newly enacted formulas will
target more funds to those communities with greatest need, and UMTA will ensure that
discretionary funds are distributed to best meet current capital needs. Operating assistance
will decline in order to encourage a greater reliance by localities on user fees to fund needs
and priorities.
•
The Administration is proposing major increases to fund aviation infrastucture, including
state-of-the-art surveillance, navigation, and communications facilities and airport
development. These capital improvements will be fully funded by increased user fees,
including a higher passenger ticket tax, increased general aviation fuel taxes, and other
aviation excise taxes. Without these increased fees, the necessary upgrading and expansion
of the system would not be possible.
•
The Administration will reintroduce Enterprise Zone legislation designed to stimulate private
sector productivity, job creation, and investment in distressed areas by reducing tax and
regulatory burdens.
•
Increased expenditures for Corps of Engineers, waterways and port facilities, including locks,
dams, and channels will be recovered by increased user fees. The current practice subsidizes
not only domestic shippers but also foreign navigation, creates an excessive demand for
waterway and port facilities, and results in an inefficient use of scarce federal resources.
Improvements to our national infrastructure will also result from other measures the Administration
is taking. These include spending, tax and regulatory reforms that lower interest rates and reduce
the borrowing costs of States and localities; that lower inflation rates and stimulate investment by
reducing the uncertainty about future costs; and that encourage new technological innovation and
increase the Nation's productivity.
EDUCATION, TRAINING, AND EMPLOYMENT SERVICES
The Federal role in meeting education and training needs should be limited to those specific areas
where a demonstrated Federal responsibility exists. Historically, the responsibility for meeting most
of these needs has rested with State and local governments and the private sector. The 1984 Budget
requests $18.5 billlion for education, training and employment programs, compared to $19.0 billion
in 1983. (This includes $912 million in funding for later transmittal to finance training and
employment programs on a calendar year basis).
71
EDUCATION
The Budget would provide$13.1 billion for education activities. This includes:
•
$4.6 billion for student aid;
•
$4.6 billion for elementary, secondary and vocational education programs; and
•
$2.1 billion for handicapped education and vocational rehabilitation services.
The request is $1.0 billion below the 1983 enacted level (adjusted for a technical reestimate affecting
1983 costs of the Guaranteed Student Loan Program).
The request preserves funding at approximately current levels for nearly all major student aid and
State grant programs. Major initiatives include:
•
Legislation to restructure student aid, within current resource levels, to ensure that families
and students pay their fair share of education costs. Also proposed is a tax incentive to
encourage savings for education.
•
To ensure choice of education alternatives, legislation for tuition tax credits for all parents
and for a voucher option for compensatory education for the educationally disadvantaged.
The budget also includes $50 million in budget authority for the Department of Education and $20
million in budget authority for the National Science Foundation for the training of new and existing
teachers to help in improving the teaching of science and mathematics in secondary schools.
Significant reductions are proposed for vocational education because the Federal incentive to States
is no longer needed to encourage States to create large, responsive vocational education systems.
The systems are in place; further Federal funding should provide limited flexible resources to help
States meet local needs. Other reductions are proposed for smaller grants and categorical programs
because these are of lower priority or duplicate other services.
TRAINING AND EMPLOYMENT SERVICES
Federal financing of training and employment programs is intended to enhance individuals7 longterm employment and earning prospects and to improve the operation of the labor market. The
1984 Budget provides $5.4 billion for these activities
Training and employment activities are financed through grants to States for training, summer
youth employment programs, assistance to dislocated workers, and the Employment Service; and
through various national programs, including the Job Corps. Legislation enacted in 1982 will
enhance the operation of our Federal system in this area by providing States with more flexibility in
the use of grants for training and the Employment Service.
•
Block grants to States are provided under the new Job Training Partnership Act of I982 (JTPA)
which consolidated several categorical grants of Federal assistance to States for training into
a block grant. This grant provides the States with the discretion to use these resources to
address their most pressing training and employment problems. It is expected that the $1.9
billion in budget authority requested for I984 will support 406,000 years of service, compared
to 303,000 to be served under the replaced programs in I983.
•
The summer youth employment program is continued by the new Job Training Partnership
Act. Estimated outlays of $638 million in 1984 will provide approximately 718,000 summer
jobs, about the same as in 1983. Legislation is proposed to reduce the minimum wage for
youth during the summer months to enable employers to afford to hire unskilled youth.
Such youth will then be able to obtain invaluable work experience.
72
•
Assistance to dislocated workers will be provided under the JTPA which authorizes this new
program of grants to States to help them assist unemployed workers who are unlikely to
return to their previous jobs or occupations. Proposed budget authority of $240 million in
1984 will provide assistance to approximately 96,000 workers.
•
National training and employment service programs include:
—
The Job Corps -- a residential training program for disadvantaged youth that will
provide about 40,000 years of service in 1984.
—
The Administration is proposing a mandatory community work experience program
that will provide work experience for AFDC recipients that is more useful than what is
now provided under WIN. Therefore, the Work Incentive (WIN) program is not funded
in the 1984 Budget. The program has not been demonstrated to be cost-effective. In
addition, training will continue to be available under the JTPA which requires that
AFDC recipients be provided service on an equitable basis.
—
Special programs for, among others
• Veterans
• Native Americans
• Migrant and seasonal farm workers.
•
Federal-State employment services have new flexibility under the JTPA, which revised the
Wagner-Peyser Act, to plan and operate basic employment services. The revisions permit
greater coordination by the States between the employment service and Federal training
activities. Estimated outlays of $886 million in 1984 will provide the same overall level of
employment services as are financed in 1983.
SPECIAL ASSISTANCE
The Federal Government provides assistance to particular groups of people and for certain kinds of
activities. Some of this assistance is quite properly the province of the Federal Government, some
would be more appropriately administered by State and local governments, and some is not
appropriate to any level of government and should be left to the private sector.
The President's 1984 Budget proposes a number of significant changes in many of the special
assistance programs. For example:
Indians The President's budget contains $2.3 billion in assistance for Indians. Major changes include:
•
Replacement of the current Indian housing activities scattered among Interior, HHS, and
HUD with two alternatives approaches to be administered by HUD: (1) a $76 million housing
grant program: and (2) a $75 million Community Development Block Grant program which
allows new housing construction as an eligible activity.
•
Permitting federally recognized Indian tribes to receive direct funding under the Title XX
Social Services Block Grant.
•
Permitting federally recognized Indian tribes to be funded directly under the Science and
Mathematics Teachers Development Act.
•
As a supplement to appropriations, expanding third-party reimbursements (through, for
example, health insurance plans) for services offered by the Indian Health Service.
73
Veterans The 1984 Budget proposes the following changes in veterans programs:
•
$714 million increase in budget authority and 2,300 higher full time equivalent employment
over 1983 for medical care and construction. These increases reaffirm the Administration's
commitment to quality care for the Nation's Veterans.
•
Veterans pensions will be covered under the six-month delay in cost-of-living adjustments
recommended by the bipartisan National Commission on Social Security Reform.
•
Provide, beginning in April 1985, annual cost-of-living increases on a graduated scale,
aligned with the degree of disability.
Minorities Major changes in programs aimed at providing assistance for minorities include:
•
The Minority Business Development Agency management and technical assistance program
will continue to focus attention on the development of private sector market opportunities
for minority businesses. Beginning in 1984, $6 million (10%) of MBDA's program level will be
financed through private sector cost sharing, which will increase gradually to 25% by 1987.
•
The number of and average amount of grants to historically Black colleges (HBC's) would
increase from the level to be financed from the 1983 appropriation, allowing faster progress
by more of these institutions toward self-sufficiency.
•
Funding for civil rights activities will increase by $68 million over 1982 outlays. Outlays for
principal civil rights agencies will be increased or maintained at current levels.
Chapter 6, Federalism, provides information on assistance programs that should be administered on
the State and local levels.
Private Sector Responsibilities
The 1984 budget also proposes reductions in or elimination of
assistance that is unwarrented because it is a private sector responsibility. For example:
•
The Legal Services Corporation would not be authorized. The States should be given the
flexibility and discretion to use block grant funds and private attorneys should fulfill their
ethical obligations to serve the poor.
•
Postal subsidies would be reduced. Although there are grounds for complete elimination of
the subsidy, it has been decided to maintain the subsidy at the $400 million level because the
Administration recognizes the substantial role played by churches and charitable institutions
in contributing to volunteer fund raising efforts.
•
Federal funding for public broadcasting would be reduced 14% over the next 3 years,
requiring the public broadcasting industry to more aggressively seek funding from other
sources—from individuals, corporations, and other non-Federal organizations.
SCIENCE AND TECHNOLOGY
The Federal Government invests in scientific research and technology development to meet direct
Federal needs such as Defense and to assist in meeting national needs such as support for basic
research. Total Federal funding for R&D, including R&D facilities, is proposed at $47 billion in 1984,
an increase of 17% above the 1983 level.
The increase in the 1984 budget for research and development reflects the Administration's policy to
exercise greater selectivity in funding R&D, based upon excellence, pertinence to national needs, and
the appropriateness of Federal involvement. Thus, the Budget provides:
74
•
A major (29%) increase across all R&D programs of the Department of Defense.
•
A significant (10%) increase, through programs of the National Science Foundation (NSF) and
other agencies, in support of basic research, with emphasis on the physical sciences and
engineering. Advances in these fields are key to future national defense and the long-term
competitiveness of the U.S. economy, particularly in high technology industries.
The 1984 Budget, in keeping with Administration policy, also proposes continued reductions in
Federal subsidization of near-term civilian R&D and demonstration programs (e.g., in non-nuclear
energy technologies). For such programs the private sector, not the Federal Government, has the
expertise and capability to select and fund the advancement of technologies that can be successfully
brought into the market place.
The Administration will seek, in 1984, to make more effective use of increased research funds,
particularly in the basic sciences, by:
•
Directing most of the additional basic research funds to universities to increase the
production of new knowledge as well as the training of new scientists and engineers.
•
Attracting the highest caliber scientists and engineers, particularly young faculty members,
into research and encouraging and supporting them in their careers. These efforts will assist
in ensuring a high quality scientific workforce to meet the needs of the Nation both in the
near- and long-term;
•
Encouraging greater and more creative interaction among university, Government and
industry scientists to bring the Nation's best scientific expertise together in addressing the
most challenging scientific and technical problems and opportunities to advance scientific
and industrial growth; and
•
Upgrading the scientific instrumentation of universities to enhance productivity and
excellence in both research and the training of scientists and engineers.
The budget also includes support for new or enhanced programs in the NSF and the Department of
Education to encourage national efforts to improve the teaching of science and mathematics in
secondary schools. The Federal funding will help catalyze efforts by the State and local governments
and the private sector to reverse the decline in science and mathematics education and assure that
the Nation's future workforce will possess the science and mathematics competence necessary in an
increasingly technological society.
ONGOING FUNCTIONS OF GOVERNMENT
These general government functions comprise those basic operations that can or should best be
performed by government. They include:
•
Federal responsibility for protection of life and property - particularly in the context of
criminal interstate or multijurisdictional actions.
Although public safety is primaily a local responsibility in our federalist sysem, the Federal
Government enforces a broad range of laws that are best handled on a national basis
because of their multijurisdictional or unique nature.
75
Fighting drug trafficking is a top Administration priority. The Administration is increasing
resources for both Federal law enforcement agencies and for the Federal prison system.
Furthermore, direct financial assistance will be provided to State and local governments
for effective projects to improve their criminal justice activities.
•
—
The budgets for the FBI, DEA, Immigration and Naturalization Service, U.S. Customs
Service, BATF and the criminal investigative arm of IRS are increasing by $228 million,
an 11% increase over 1983.
—
Work on three new correctional facilities is planned.
—
$90 million will be provided for the criminal justice assistance program.
Collection of Federal revenues through an efficient and fair tax administration system.
In order to assure that all taxpayers pay their fair share, IRS will be devoting significant
resources during 1983 and 1984 to the improvement of tax enforcement.
New administrative provisions of the Tax Equity and Fiscal Responsibility Act should also
increase IRS ability to assure compliance.
—
As a result there will be additional receipts of $9 billion in 1984 and over $50 billion
through 1988 from increased compliance alone.
—
The provisions for withholding on dividends and interest income will contribute a
significant portion of this receipts increase, $6 billion in 1984 and $26 billion through
1988.
In 1984, IRS will further seek to assure equity by targeting assistance to those taxpayers
who need it most and must depend on the IRS for help - the elderly, the handicapped, low
income, and non-English speaking persons.
•
Prudent management of Federal and national assets and holdings, including disposal of
surplus Federal property and the efficient utilization and costing of Federal office space.
The Administration will continue in the effort to improve management of real property
holdings by identifying and disposing of properties that are in excess of the Federal
Government's needs.
—
In the category of acquired lands GSA will conduct targetted surveys of high value
sites that may be excess to agency operational needs.
—
Public lands will be identified for disposal using criteria established by the Federal
Land Policy and Management Act.
The budget presumes that space rental charges (SLUC) will rise to reflect true commercial
equivalent rates. This will force agencies to recognize that space is not a free good and
will provide dollar incentives for improved space utilization.
76
INFRASTRUCTURE/PUBLIC WORKS
77
HIGHWAYS
AGENCY:
Department of Transportation
Functional Code: 401
Funding
($ in millions)
1982
1983
1984
1985
1986
1987
1988
CURRENT SERVICES
Budget Authority
Obligations
Outlays
8,765
8,533
7,988
13,207
13,531
8,852
13,840
13,517
12,370
14,579
14,319
13,074
15,360
15,220
13,724
16,235
16,086
14,579
17,160
17,003
15,464
REAGAN BUDGET
Budget Authority
Obligations
Outlays
8,765
8,533
7,988
13,184
13,046
8,817
13,932
13,449
12,041
14,672
14,279
12,887
15,433
14,694
13,563
15,374
14,635
14,048
15,375
14,636
14,238
---
-23
-485
-35
+92
-68
-329
+93
-40
-187
+73
-526
-161
-861
-1,451
-531
-1,785
-2,367
-1,226
PROPOSED CHANGES
Budget Authority
Obligations
Outlays
NOTE:
Increases in Reagan Budget over Current Services for 1984-1986 represent initiation of new Motor Carrier Safety
Grant program and transfer of Appalachian Development Highway System funding to the highway budget.
PROGRAM DESCRIPTION
The highway programs provide grants to the States for the Federal share of costs to construct or
rehabilitate highways included in these highway systems: Interstate, primary, secondary, and urban.
Funds also are provided for rehabilitation or replacement of bridges, for highway safety projects,
and for a number of small, separate categorical programs which provide special purpose grants. The
Surface Transportation Assistance Act of 1982 significantly increased revenue available to support
the Federal highway program. This additional revenue has allowed a major expansion of highway
funding in 1983 and 1984, over 1982 levels.
PROPOSED CHANGE
The Administration's budget implements the recently enacted Surface Transportation Assistance Act
of 1982. Major increases in funding are provided to upgrade and maintain highway systems which
provide the greatest benefit to the Nation as a whole because they carry the majority of interstate
traffic:
•
Funding for interstate completion and rehabilitation will increase by 64% over 1982 levels
and 8% over 1983 levels.
•
Interstate rehabilitation funding will show the biggest percentage increase (i.e., 200% over
1982 and 23% over 1983) reflecting the priority given to preserving this system.
•
Primary system and bridge rehabilitation programs will increase by 56% over 1982 and 9%
over 1983 levels.
•
Highway programs primarily benefitting States and localities will be funded at about the
1982 and 1983 levels.
•
The 1987-88 reductions from current services reflect the fact that the authorizations in the
Surface Transportation Assistance Act terminate in 1986. While Administration projections
79
basically freeze the 1987-88 budget authority at 1986 levels, the current services estimates
increase with inflation.
Overlaying the proposed changes is the Administration's Federalism Initiatives which will include a
Transportation Block Grant incorporating a number of highway programs of primary interest to
State and local governments.
RATIONALE
The Budget proposals reflect the Administration's thrust to preserve the Nation's basic highway
infrastructure while focusing Federal funding on the highest Federal interest programs.
•
The Interstate highway system will be funded at a level leading to rapid completion of the
system by the early 1990's. Deterioration of the Interstate highway network will be stopped
and existing decay will be overcome.
•
Rehabilitation of the aging primary highway system, which carries half of all interstate
traffic, will receive a high priority as will the repair or replacement of unsafe highway
bridges.
•
Highway systems that carry basically State and local traffic are of lower priority in terms of a
national highway program. While continuing to receive Federal funding, the total
infrastructure needs of these systems must be addressed at the State and local level where
the real need and priority can best be determined.
EFFECTS OF THE PROPOSED CHANGE
Deterioration of the Nation's highway infrastructure will be abated, providing a safe, efficient
network for the movement of people and commerce. In particular, the aging interstate system will
be repaired and rehabilitated and bridges will be brought up to higher standards.
1982 AND 1983 CHANGES
The Surface Transportation Assistance Act of 1982 initiated expansion of Federal funding for
highway infrastructure. The Act also increased the Federal gas tax from
to 91 per gallon effective
April 1, 1983.
80
TRANSIT
AGENCY:
Department of Transportation
Functional Code: 401
Funding
($ in millions)
1982
1983
1984
1985
1986
1987
1988
CURRENT SERVICES
Budget Authority
Outlays
3,532
3,864
4,345
3,873
5,043
4,234
5,122
4,410
5,358
4,754
5,661
5,129
5,982
5,460
REAGAN BUDGET
Budget Authority
Outlays
3,532
3,864
4,345
3,873
3,915
3,730
3,437
3,690
3,447
3,522
3,452
3,588
3,442
3,564
1,128
504
1,686
721
1,911
1,233
2,210
1,541
2,540
1,896
PROPOSED SAVINGS
Budget Authority
Outlays
PROGRAM DESCRIPTION
The Federal Government provides grant assistance for mass transit through a variety of formula and
discretionary grant programs. Funds are provided to grant recipients for capital and operating
assistance, planning activities, demonstration of innovative management techniques and advanced
technologies, managerial training, and university research.
The Surface Transportation Assistance Act of 1982 restructured the transit program, creating a new
formula grant to be distributed to urban and rural areas starting in 1983. In 1983, the grant can be
used for capital assistance only; in 1984, for both capital and operating assistance. The Act also set
aside one cent of the five cent per gallon motor fuels tax increase for transit use. In 1983, these
funds are for the new formula grant. In 1984, and future years, they are to be used for the existing
discretionary grant program for capital projects only.
PROPOSED CHANGE
•
Capital assistance obligations increase 22% between 1982 and 1983 and 34% between 1982
and 1984. Operating obligations subsidies would drop to 53% of 1982 levels by 1984 and be
eliminated in 1985.
•
Capital assistance will be available for rehabilitation of existing transit systems, new system
construction (to a limited degree), and bus facilities and rolling stock.
•
The formula grant program provides proportionately greater assistance to urbanized areas
with large, complex transit systems. These are the systems where problems associated with
aging infrastructure are greatest. Discretionary grants will also be targeted by UMTA toward
those cities with the greatest infrastructure needs.
•
The programs funded by new motor fuels taxes will be capped at approximately the levels of
receipts estimated by Treasury from those taxes.
RATIONALE
•
The Administration proposes a major increase in capital funding because it recognizes the
value of mass transportation to the Nation's cities and intends to meet current transit capital
needs.
81
380-900 0 - 83 - 6 : QL 3
•
UMTA estimates transit capital needs to be $50 billion over the next ten years (includes
Federal and non-Federal funding). In order to meet critical rail needs - mainly in the
Northeast and North Central parts of the Country - and the capital needs of the hundreds of
cities providing bus service, the Administration's proposed funding levels are necessary.
•
Federal operating subsidies should be reduced because: these funds have supported
marginally effective transit services that would not have been provided if Federal assistance
did not exist; operating subsidies have permitted fares to remain artificially low; regulations
attached to Federal assistance increase transit costs; and productivity has declined during the
existence of Federal operating subsidies.
Federal operating subsidies have also reduced funds available for transit capital needs.
EFFECTS OF THE PROPOSED CHANGE
•
Cities with aging fixed rail systems will particularly benefit, as funds are directed toward their
long deferred capital needs. The average age of the nation's bus fleet will remain 8 to 9
years and bus facilities will be rehabilitated and constructed as the need arises.
•
As Federal operating assistance is reduced, State and local funding will increase and
inefficient service will be eliminated. Federal dollars will be redirected to meet transit needs.
1982 AND 1983 CHANGES
•
Operating subsidies were cut marginally, 8% from 1981 to 1982 and 17% from 1982 to 1983.
•
Capital funding dropped 12% from 1981 to 1982 with a large increase in 1983.
•
Transit assistance was reconfigured significantly by the Surface Transportation Assistance Act
of 1982, as indicated above.
82
MODERNIZATION OF THE AVIATION INFRASTRUCTURE:
AIRPORT IMPROVEMENT PROGRAM AND FAA CAPITAL PLANT
AGENCY:
Department of Transportation
Functional Code: 402
Funding
($ in millions)
1982
1983
1984
1985
1986
1987
1988
CURRENT SERVICES
Budget Authority
Program Level
Outlays
818
663
720
1546
1143
910
1778
1340
1291
1808
1484
1335
1875
1590
1456
1912
1678
1572
2008
1762
1664
REAGAN BUDGET
Budget Authority
Program Level
Outlays
818
663
720
1546
1143
910
2280
1789
1442
2663
1995
1719
2609
2253
1952
2374
2430
2177
2698
2578
2400
502
449
151
855
511
384
734
663
496
462
752
605
690
816
736
PROPOSED INCREASES
Budget Authority
Program Level
Outlays
PROGRAM DESCRIPTION
The primary mission of the Federal Aviation Administration (FAA) is to ensure the safe and efficient
movement of air traffic. Adequate airport capacity as well as state-of-the-art surveillance, navigation
and communications facilities are essential.
To provide the necessary aviation infrastructure to meet forecasted demand, the FAA administers
airport improvement grants and programs for engineering, development and procurement of
facilities and equipment.
PROPOSED CHANGE
•
For engineering, development and procurement of facilities and equipment, the budget
requests $1.3 billion, a 72% increase over 1983 and 64% increase over the 1984 current
services level.
•
For airport improvement grants, the 1984 budget includes obligations of $700 million. This
represents a healthy increase over the 1982 and 1983 obligation limitations as well as an
increase over the 1984 current services level.
RATIONALE
•
Upgrading and expanding the aviation infrastructure is essential to meet forecasted demand
through the year 2000.
•
FAA workload indicators, such as services provided to general aviation pilots or number of
aircraft handled by air traffic controllers, are projected to increase anywhere from 60% to
80% during 1981-2000.
•
The $1.3 billion to modernize the FAA capital plant includes the fully authorized level for the
engineering and development activities and the procurement funds necessary to place under
contract all programs which will be ready during 1984.
83
•
The $700 million obligation level for airport improvement grants will fund safety-related
work, reconstruction and improvement of existing facilities, and expansion needed to
resolve critical capacity problems.
EFFECTS OF THE PROPOSED CHANGE
The 1984 budget request will allow the FAA capital modernization program to continue on schedule.
1982 AND 1983 CHANGE
The Airport and Airway Improvement Act of 1982 was signed into law on September 3, 1982, as part
of the Tax Equity and Fiscal Responsibility Act. The Act increased the passenger ticket tax to 8% and
the general aviation gasoline tax to $.12 per gallon, established a $.14 per gallon tax on general
aviation jet fuel and reinstated other aviation user fees to the 1980 levels.
These increased user fees will pay 100% of the costs associated with airport improvement grants and
the modernization of the FAA capital plant as well as cover a portion of the FAA's costs to operate
and maintain the National Airspace System. Without the increased user fees, the necessary
upgrading and expansion of the aviation infrastructure would not be possible.
84
ECONOMIC DEVELOPMENT ADMINISTRATION
AGENCY:
Department of Commerce
Functional Code: 452
Funding
($ in millions)
1982
1983*
1984
1985
1986
1987
1988
CURRENT SERVICES
Budget Authority
Outlays
224
453
192
349
238
269
252
297
265
267
279
255
294
272
REAGAN BUDGET
Budget Authority
Outlays
224
453
34
325
18
181
9
134
7
59
5
19
5
8
158
24
220
88
243
163
258
208
274
236
289
264
PROPOSED SAVINGS
Budget Authority
Outlays
^President's budget indudes a 1983 supplemental to transfer $158M in budget authority to the Small Business
Administration (SBA) for increased guaranteed loan defaults.
PROGRAM DESCRIPTION
The Economic Development Administration (EDA) provides grants, loans, and loan guarantees to
assist economically distressed areas and to help localities adjust to economic disruptions such as
those caused by the closing of a major company or government installation. The annual EDA
funding level for economic development assistance was about $500 million up to 1981.
PROPOSED CHANGE
•
As part of its policy of placing greater emphasis on the private sector and transferring
primary responsibility for administering community and economic development assistance
to States and local governments, the Administration proposed, in March 1981, termination
of EDA at the end of 1981. Funds were made available in 1982 to provide for a more gradual
phase out of EDA programs and for a longer adjustment period prior to termination.
•
The Administration now proposes to terminate EDA as soon as possible in 1983. In 1983,
funding will be provided for close-out costs. EDA has exhausted all eligible projects in the
pipeline for 1982. No program funds have been requested in 1984.
RATIONALE
•
Economic expansion and job creation will be stimulated through the President's overall
economic recovery program, which includes general tax, spending, and regulatory reduction
measures. Furthermore, States and their localities will continue to receive Federal assistance
for economic development through block grant programs that distribute Federal funds more
efficiently and provide for more local discretion.
•
There is little evidence that EDA public works projects help the unemployed: public works
projects employ relatively few people; those who get jobs are mainly skilled construction
workers-not the average unemployed worker; and public works implementation is too long
term to help in the worst of a downturn.
85
•
The original purpose of EDA was to provide special financial assistance to those few
economically distressed areas of the country that were by-passed by general prosperity. The
program has evolved to the point where over 80% of the nation qualifies as a distressed
area. The legislative proposal pending in the Congress to narrow the eligible areas would
still provide EDA funds to 60% of the counties in the U.S.A.
•
There is little evidence that the expenditures from these programs have induced
development and infrastructure in distressed areas that would not have occurred either
there or elsewhere without this investment. In fact, State and local government may actually
lessen and delay overall expenditures for public works projects in hopes of Federal funding.
•
There is no evidence that the programs being terminated have created new jobs nationwide.
Rather, such programs appear to encourage potential growth in some areas at the expense
of other areas. Similarly, the Government does not create net new jobs in the economy by
moving productive resources from the private sector to the public sector.
EFFECTS OF THE PROPOSED CHANGE
•
Because EDA programs often substitute Federal resources for expenditures that would have
been made for infrastructure, including industrial parks, water and sewer systems etc., by the
private sector or the local public sector in distressed areas or elsewhere, the impact overall of
terminating the programs will be insignificant.
•
Funds for State and local community and economic development programs will continue to
be available in 1984 through the Urban Development Action Grant program ($0.5 billion
program level) and the flexible Community Development Block Grant program ($3.6 billion
program level) which distributes Federal funds more efficiently than EDA.
Likewise,
specialized assistance for rural areas will continue to be available through the Farmers Home
Administration.
•
Job creation and revitalization of highly distressed urban areas will be stimulated by the
President's urban enterprise zone initiative which is based on a reduction of tax and
regulatory burdens.
86
ENTERPRISE ZONES
AGENCY:
Functional Code:451
Department of Housing and Urban Development
Funding
($ in millions)
1982
1983
1984
1985
1986
1987
1988
REAGAN BUDGET
Tax Incentives
85
400
765
1,060
1,140
PROPOSED CHANGES
Tax Incentives
85
400
765
1,060
1,140
CURRENT SERVICES
Tax Incentives
PROGRAM DESCRIPTION
Enterprise Zones is an experimental, free-market approach for dealing with distressed areas. It has
two purposes: to create jobs in depressed areas, especially for disadvantaged workers, and to
redevelop and revitalize the areas themselves. This represents a new approach to the problems of
distressed areas, relying primarily on market processes rather than direct Federal subsidies and
central planning.
It would do this by:
•
Providing tax relief at the Federal, State, and local levels.
•
Reducing unnecessary red tape at the Federal, State, and local levels.
•
Improving local public services, possibly through experimentation with the privatization of
some public services.
•
Involving private, local, and neighborhood organizations in the program.
Through a competitive process and based on applications from States and local governments, the
Secretary of the Department of Housing and Urban Development would select 75 enterprise zones
(25 per year for three years) in areas of poverty, unemployment, and general distress. In evaluating
applications, the Secretary would consider State and local contributions in the areas of tax and
regulatory relief and the provision of public services. Once designated, Federal tax incentives
relating to investment, payroll, employee income, and capital gains would be applicable to activity
within the zones.
PROPOSED CHANGE
Enterprise Zone legislation was first proposed by the Administration in 1982. The Senate Finance
Committee approved legislation, but the House failed to act. The proposal will be reintroduced in
1983.
RATIONALE
Past Federal efforts to revitalize distressed areas and provide employment for the disadvantaged and
unemployed, though well intentioned, have been far too costly and prescriptive and have not
resulted in significant success, especially in highly distressed areas. One major reason for this lack of
success has been that these federally financed and administered programs often ignored, and at
times worked against, the productivity, job creation, and investment powers of our Nation's
strongest economic force, the private sector. Because of our past failures, it is now quite clear that
87
the only way to succeed is to work with the private sector, States, and local governments. By
providing free-market incentives for new investment, jobs, and better public services in distressed
areas, Enterprise Zones will promote their revitalization.
EFFECTS OF THE PROPOSED CHANGE
In the 75 zones to be selected over a three year period, increased economic activity, new jobs
(particularly for the disadvantaged), and investment are anticipated as a result of reducing business
tax and regulatory burdens, increasing public services, and providing incentives for increased
employment.
88
CORPS OF ENGINEERS WATERWAY AND PORT
USER FEES
AGENCY:
Corps of Engineers-Civil/TV A
Functional Code: 301
Funding
($ in millions)
1982
1983
1984
1985
1986
1987
1988
1180
1180
1070
1070
1090
1090
1160
1160
1120
1120
1090
1090
1100
1100
OFFSETTING RECEIPTS
Current Law
Policy Increase
30
--
36
--
47
440
52
460
65
545
72
570
80
595
PERCENT RECOVERED
Current Law
Policy Increase
3
--
3
--
4
40
4
40
6
49
7
52
7
54
PROGRAM LEVEL
Budget Authority
Outlays
PROGRAM DESCRIPTION
Locks, dams, and channels are constructed and maintained by the Corps of Engineers and Tennessee
Valley Authority for barge traffic on the inland waterways. The Corps dredges harbor channels and
constructs and maintains other facilities for ocean-going and Great Lakes traffic.
Construction and upkeep of both inland and deep draft waterways have traditionally been provided
at almost no cost to commercial users. A fuel tax on inland waterways is being phased in but it will
recover less than a third of the cost of maintaining the inland system.
PROPOSED CHANGE
The Administration proposes to recover new construction, and operation and maintenance costs
from the users of most navigation facilities.
RATIONALE
•
The U.S. trade positon can be improved by making the port system more efficient. Better and
more efficient harbors translate into stable jobs in our coal fields, railroads, trucking industry
and ports.
•
Ports in the U.S. are a big business. Foreign payments for U.S. port expenses (does not
include Federal dredging) were $4.6 billion in 1979, and the value of marine terminal
facilities is currently in excess of $40 billion.
•
People and firms who benefit from the use of these Federally-constructed commercial
facilities should share in the cost.
•
Federal deep draft dredging and operation of the inland waterway system is a $700 million
per year subsidy to the users of the harbors and waterway system.
•
15 percent of intercity tonnage travels on the inland waterway system, while rail, its principal
competitor, carries 35 percent and pays all its expenses.
89
EFFECTS OF THE PROPOSED CHANGE
•
Funds from user fees will be used to improve and restore these important parts of the
nation's infrastructure.
•
Traffic on some waterway and harbors may be diverted to other modes of transportation or
to other harbors. However, it is unlikely that total economic activity will be affected. Total
transportation system efficiency will be improved.
90
EDUCATION, TRAINING AND EMPLOYMENT SERVICES
91
HELPING WORKERS FIND JOBS
AGENCY:
Department of Labor
Functional Code: 504 and 603
Funding
($ in millions)
1982
1983
1984
1985
1986
1987
1988
CURRENT SERVICES
Budget Authority
Outlays
Tax Expenditures
3,741
4,924
505
7,113
7,005
530
4,899
4,758
710
5,162
5,114
530
5,430
5,380
195
5,703
5,652
35
5,992
5,938
5
REAGAN BUDGET
Budget Authority
Outlays
Tax Expenditures
3,741
4,924
505
8,878
8,778
715
4,442
4,394
1,350
4,494
4,499
800
4,548
4,549
260
4,603
4,603
75
4,661
4,661
30
+ 1,765
+ 1,773
185
-457
-364
640
-668
-615
270
-886
-831
65
-1,100
-1,049
40
-1,331
-1,277
25
PROPOSED CHANGES
Budget Authority
Outlays
Tax Expenditures
PROGRAM DESCRIPTION
Workers may receive Federal assistance to help prepare them for work and to help them find jobs
through training and employment programs, existing tax credits for hiring the disadvantaged,
proposed tax credits for employers hiring the long-term unemployed, and the Employment Service.
The Federal Government's principal training and employment programs are authorized by the Job
Training Partnership Act (JTPA) of 1982. JTPA grants are allocated to States which then designate
service delivery areas of over 200,000 population, or combinations of such areas, to run local
programs. Grants to States are used to provide various types of training, counseling, and other
supportive services to unemployed and economically disadvantaged individuals. A temporary
program of Federal Supplemental Compensation provides additional weeks of unemployment
benefits to those who have used up all their weeks of benefits but have not yet found work.
Allocations to States finance a network of local employment service offices which help workers find
jobs.
PROPOSED CHANGE
1984 will be the first year of full implementation of the Job Training Partnership Act (JTPA), which
replaces the Comprehensive Employment and Training Act (CETA) programs. Reforms included in
JTPA assure that disadvantaged youth and adults will be trained for jobs. The program of block
grants to States for training, to be funded in 1984 at $1.9 billion, provides for reforms that would:
•
vest in the States the principal responsibility for job training programs;
•
assure business a major role in the development of job training programs through local
private industry councils which will provide policy guidance and oversee local programs;
•
require that 70% of resources be spent on training (only 18% of CETA grant resources were
spent on training);
•
limit to 30% the amount that could be spent for stipends, other support services, and
administration; and
•
prohibit public service employment.
93
In addition, a new JTPA program of job search, job training, and relocation assistance for
experienced workers who lose their jobs due to plant closings, technological changes, or other
structural causes will be expanded almost ten fold in 1984 to $240 million to help more than 100,000
workers. The residential Job Corps program will be continued at its 1983 level of $586 million, and
the Summer Youth Employment program will provide about the same number of jobs as in 1983.
The Administration proposes legislation to establish a differential minimum wage for youth under
the age of 22 for jobs from May 1 to September 30. This youth opportunity wage will be $2.50 per
hour, 25% below the regular minimum wage of $3 35. Of course, this wage is only a minimum, and
it is expected that youth who already have skills and experience will be paid more.
Under legislation proposed by the President, unemployed workers eligible for Federal Supplemental
Compensation could get instead vouchers which would entitle an employer hiring them to a tax
credit. This incentive to hire the long-term unemployed, part of the President's proposed FY 1983
extension and modification of the Federal Supplemental Compensation program, would be
available until March 31, 1984.
A separate legislative proposal would permit States to use a portion of their unemployment
insurance tax receipts for training, job search, and relocation for unemployed workers. The number
of workers assisted and the outlays under this program will depend on State actions.
In 1984, States will have greater flexibility in planning and using Federal allotments for basic
employment services under amendments included in the JTPA. The 1984 budget request for the
Employment Service is the same as the 1983 appropriation, adjusted for expected cost increases.
RATIONALE
•
The private sector accounts for eight of every ten jobs. The best way to assure that training
will be for jobs that exist is to have business in a pivotal role in the development of training
programs.
•
The training block grant will place responsibility for training and employment programs at
the State level which already has the responsibility for related programs such as vocational
and adult education and the Employment Service.
•
Stipends accounted for over 40 percent of CETA spending. These monies, which were paid
for participation in training programs, can duplicate or supplant regular income
maintenance programs. In addition, they can induce people to enter training programs for
short-term income gains rather than for long-term improvements in employment and
earnings. Placing limitations on the use of stipends assures that most of the resources will be
spent for training and for those who are most serious about improving their employability.
•
Many inexperienced youth do not have the skills to produce enough of value to make it
worthwhile for employers to pay them the current minimum wage. This is especially true for
summer jobs, since employers cannot expect to benefit from a youth's productivity
improvement resulting from that work experience. Thus these youth are denied the
opportunity to gain work skills and experience during summer months that they could use to
demonstrate their qualifications to potential permanent employers. This proposal for a
summer youth employment differential in the minimum wage would help many to find their
first job and gain valuable work experience.
•
Tax credits encourage employers to hire the disadvantaged and long-term unemployed
workers.
•
States should be given the flexibility to use some of their unemployment insurance receipts
for retraining, job search, and relocation, if they wish to do so.
94
EFFECTS OF THE PROPOSED CHANGE
•
The most effective program approaches (on-the-job training and classroom training) will be
stressed in Federal technical assistance to States, while the least effective approaches, such as
public sector work experience and subsidized jobs, will be de-emphasized.
•
The budget authority requested in 1984 will finance 406,000 years of service in the block
grant to States for training, a one-third increase over 1983.
•
The summer youth employment program will be maintained at historical levels providing
718,000 youth with summer work opportunities that will help them when they seek full-time
jobs.
•
An expanded program of job search, relocation assistance, and training for workers who lose
jobs because of plant closings, changes in technology, or other reasons will assist more than
100,000 people. This is four to five times the number of dislocated workers ever helped
before.
•
The residential Job Corps program will train over 80,000 severely disadvantaged youth, more
than were served in 1980 and the same as in 1983.
•
At least 200,000 additional youth would find summer employment in the private sector due
to the youth differential minimum wage.
•
Some 700,000 long-term unemployed workers in 1983-4 will benefit from the tax credit to
employers hiring the long-term unemployed.
•
States would be able to augment their resources for training and relocation programs for
unemployed workers by using some of their unemployment tax receipts.
•
States will have more flexibility in planning and operating basic employment services
financed with Federal funds.
95
STUDENT FINANCIAL AID
AGENCY:
Functional Code: 502
Education Activities
Funding
($ in millions)
1982
1983
1984
1985
1986
1987
1988
CURRENT SERVICES
Budget Authority
Outlays
6,643
5,755
5,768*
5,919
5,963
5,875
6,259
6,167
6,413
6,222
6,682
6,479
6,983
6,765
REAGAN BUDGET
Budget Authority
Outlays
6,643
5,755
5,768*
5,919
5,615
5,476
5,607
5,788
5,599
5,601
5,615
5,611
5,654
5,644
-348
-399
13
-652
-379
69
-814
-621
161
-1,067
-868
268
-1,329
-1,121
392
PROPOSED CHANGES
Budget Authority
Outlays
Tax Incentives
*Adjustedf due to a technical reestimate, downward by $900 million in funds not needed to operate the Guaranteed Student
Loan program in 1983. This reestimate has no effect on outlays or program activity.
PROGRAM DESCRIPTION
Student financial aid includes funds appropriated under the Student Financial Assistance and
Guaranteed Student Loan accounts and the new tax benefits to be provided by the Education
Savings Account (see below).
•
Student Financial Assistance provides grants, direct loans and work study to students with
demonstrated need either directly or through participating postsecondary institutions.
•
The Guaranteed Student Loan program provides guarantees and interest subsidies to
lending institutions to encourage the availability of capital to eligible students and parents.
PROPOSED CHANGE
•
Student Financial Assistance Legislation will be proposed that will require every student to
contribute (with summer earnings, work study funds, savings or other aid) to the cost of
education before receiving a Federal grant. Current Pell Grants would be restructured into
Self-help Grants. The Work Study program would be increased by almost 60 percent. No
new funding would be provided for Supplemental Educational Opportunity Grants, State
Student Incentive Grants and capital contributions to National Direct Student Loans.
•
Guaranteed Student Loans Legislation will be proposed that would expand the coverage of
the need analysis to all applicants (currently limited to those with adjusted gross incomes
above $30,000) to ensure that Federal subsidies do not go to those who do not need them.
The origination fee charged graduate and professional students would be increased from 5
to 10 percent as their higher expected incomes will allow them to pay more toward the
interest costs of their subsidized loans. Advances (loans) to guarantee agencies for their
reserve funds, that are no longer necessary, would be recalled.
•
Educational Savings Accounts Legislation will be proposed that would provide tax exempt
status to earnings on funds deposited in special accounts and used for postsecondary
educational costs.
96
RATIONALE
•
The 1984 budget would restore the primary roles of the family and the student in meeting
the responsibility for postsecondary educational costs.
•
Between 1972 and 1982, Federal support for student assistance programs increased by $5.6
billion. This expansion in funding has, unfortunately, been accompanied by a major shift in
the traditional responsibility for financing college costs from students and families to the
Federal Government.
•
Recent analyses indicate that, as the proportion of Federal funds assisting students in
meeting educational costs has increased, parental contributions have declined -- despite
concurrent increases in parental disposable income. (Between 1970 and 1980, for example,
average student charges at public universities, as a percent of median family income,
declined by over 2 percent.)
•
At many schools, average student contributions represent only a small share of education
costs and do not begin to reflect actual student earning capacities. Excessive reliance on
federally supported student financial assistance abuses the spirit of student aid as a
supplement, not a replacement, for other sources of college financing and ignores the fact
that students are the principal beneficiaries of their education.
•
To correct these problems, the Administration is proposing that postsecondary students
contribute to their own education costs before Federal grant assistance is provided, and that
families contribute more and make additional use of savings for postsecondary education
costs.
EFFECTS OF THE PROPOSED CHANGE
Budget authority of $5.6 billion is requested, of which $2.7 billion is for Self-help Grants, $850 million
is for Work Study, and $2.0 billion is for the cost of the Guaranteed Student Loan program.
•
Self-help grants After taking into account the family contribution, the student would be
required to provide $800 or 40%, whichever is greater, to educational costs before becoming
eligible for a Self-help Grant. The grant would be increased from the present Pell Grant
maximum of $1,800 to a Self-help Grant maximum of $3,000. This will provide 2.1 million
students with awards averaging $1,300.
•
Work Study Funding would be increased by almost 60% to $850 million. This will furnish 1.2
million students with job opportunities, providing an average of $800, to meet their self-help
contribution requirement. The additional funding would expand student employment on
campuses, in State and local governments, and in the private non-profit sector.
•
Over $550 million will be available on-campus for relending in the Direct Loan program as a
result of repayments to institution based loan funds and which can be used to meet self-help
requirements.
•
Guaranteed Student Loans Over 2.7 million loans to students and parents, totalling over $7.1
billion, would be insured and subsidized and available to meet self-help requirements.
•
Education Savings Account Would provide $13 million in tax exemptions on interest and
dividends for the $550 million that is estimated to be deposited in these special accounts in
the first year, with substantially greater amounts being deposited in each succeeding year.
1982 AND 1983 CHANGE
1982 Guaranteed Student Loans A five percent origination fee was imposed on student loans and a
need analysis was required for all student applicants with adjusted gross family incomes of $30,000
or more.
97
TUITION TAX CREDIT
AGENCY:
Education/Treasury
Functional Code: 501
Funding
($ in millions)
1982
1983
REAGAN BUDGET
Tax Incentives
1984
1985
1986
1987
1988
245
526
753
779
763
PROGRAM DESCRIPTION/PROPOSED CHANGE
Under the proposed tuition tax credit program, to begin in 1983, parents could receive a tax credit
for up to 50 percent of tuition costs paid to private, nonprofit elementary and secondary schools.
The program would be phased in over three years, with the maximum allowable credit per child
equal to $100 in 1983, $200 in 1984, and $300 in 1985 and beyond.
A full credit would be available to those families with adjusted gross incomes of $40,000 or less. The
allowable credit would be scaled downward for families with adjusted gross incomes between
$40,000 and $60,000, and would phase out entirely at $60,000. Credits would not be allowed for
tuition payments to schools that follow a racially discriminatory policy.
RATIONALE
The tuition tax credit program will expand educational opportunity and choice for all Americans and
foster diversity in educational approaches. The availability of alternatives to public education allows
parents to select the type of schooling that will best meet the needs of their children. The rising cost
of education has put the opportunity to select private education beyond the reach of a growing
number of families. As a matter of equity, a tax relief measure is necessary to assure that lower and
middle income families, like the more affluent, can continue to make choices about their children's
education.
Some opponents of tuition tax credits argue that they will benefit the wealthy, erode the tax base,
undermine the public school system and the traditional separation between church and State, and
benefit segregated schools. To the contrary:
•
The primary beneficiaries will be working lower and middle income families who can least
afford to pay for private education.
•
The tax revenues lost per child are small compared to the cost of educating a child at a public
school. While the maximum tax credit per child is only $300, the average annual per pupil
cost in public schools exceeds $2,200.
•
The availability of educational alternatives leads to competition and innovation which can
strengthen public education.
•
Aid for children attending private schools, including church-related schools, is a well
established concept in Federal education policy. The Elementary and Secondary Education
Act of 1965, and subsequent amendments, have affirmed the Federal commitment to
providing students enrolled in private schools with their fair share of Federal aid.
•
Strong nondiscrimination provisions in the Administration's proposed bill will assure that no
credits are allowed for payments to schools that discriminate on the basis of race.
Providing tuition tax credits to individuals is an administratively simple way to broaden educational
opportunity while minimizing intrusion into State or local education systems or the lives of
individuals and families.
98
EFFECTS OFTHEPROPOSED CHANGE
It is anticipated that approximately 2,372,000 families will take advantage of the new tax credit. The
cost in lost revenues, (i.e., taxes not collected) is estimated to be about $245 million in 1984, $526
million in 1985, and $753 million in 1986.
99
SCIENCE AND MATHEMATICS EDUCATION
AGENCY:
Education/National Science Foundation
Functional Code: 502/250
Funding
($ in millions)
1982
1983
1984
1985
1986
1987
1988
BUDGET AUTHORITY
Education
National Science Foundation
15
50
20
50
20
50
20
50
20
20
OUTLAYS
Education
National Science Foundation
8
6
16
40
19
50
20
50
20
45
20
PROGRAM DESCRIPTION
Beginning in 1983, joint efforts by NSF and State or local governments or the private sector will
provide in-service training for science and mathematics secondary school teachers. The focus will be
on upgrading the subject-matter competence of existing teachers. In addition, NSF will fund and
administer, with the assistance of the Education Department, a program that gives Presidential
teaching awards to outstanding secondary mathematics and science teachers.
The Education Department has no current programs in this area.
PROPOSED CHANGE
The Education Department will initiate a four-year $50 million per year program of block grants to
States to assist in training additional science and mathematics teachers. States would provide one
year scholarships to persons holding college degrees to enable them to return to school to become
qualified to teach science or mathematics at the secondary school level.
Funding for NSF's programs will increase by $5 million in 1984 to a total of $20 million.
RATIONALE
•
In order to assist the economic growth of our increasingly technological society, the Nation's
future workforce will require better high school training in science and mathematics. Over
the years, the quality of this training has declined-principally due to the shortage of
qualified science and mathematics teachers. School systems are beginning to address this
problem, but more needs to be done and more rapidly.
•
A primary goal of the programs being proposed in the budgets of the Department of
Education and NSF is to help alleviate this shortage by increasing the incentives for
individuals to enter and stay in teaching careers in mathematics and science. The program
will also encourage excellence in science and mathematics teaching through the training of
new and existing teachers and providing recognition to outstanding teachers.
•
All sectors, including State and local governments and the private sector, need to participate
in any successful program to solve this problem. Experience from previous NSF science
education programs indicates that fragmented efforts by the Federal Government alone are
largely ineffective. Therefore, the Federal Government will play a largely catalytic role by
combining Federal, State, and private industry efforts through programs designed to assist in
alleviating this problem.
100
EFFECTS OF THE PROPOSED CHANGE
The number of participants in the State block grant training program will depend on how State
authorities choose to use their grant funds. The program could train as many as 10,000 people in its
first year. NSF's in-service training program would provide subject-matter training for approximately
10,000 current science and mathematics teachers each year. About 100 outstanding teachers would
be honored annually under the Presidential awards program.
The Presidential leadership and attention to this problem will encourage industry and State and local
governments to increase further their own efforts to solve this problem.
HEAD START
AGENCY:
Department of Health and Human Services
Funding
Functional Code: 506
($ in millions)
1983
1984
1985
1986
1987
1988
984
905 .
989
995
1,048
1,016
1,111
1,078
1,175
1,142
1,242
1,208
1,312
1,276
(USDA FUNDS)
Budget Authority
Outlays
(72)
(72)
(76)
(76)
(78)
(78)
(81)
(81)
(85)
(85)
(90)
(90)
(94)
(94)
REAGAN BUDGET
Budget Authority
Outlays
984
905
989
995
1,051
974
1,051
1,050
1,051
1,051
1,051
1,051
1,051
1,051
+3
-42
-60
-28
-124
-91
-157
-157
-261
-225
CURRENT SERVICES HHS
and USDA
Budget Authority
Outlays
1982
PROPOSED CHANGES
Budget Authority
Outlays
PROGRAM DESCRIPTION
Head Start finances comprehensive education, health, nutrition and social services for low-income
children and their families. In FY83, grants to 1200 grantees in 2000 communities provide services to
395,800 preschoolers, at least 10% of whom are handicapped and 90% of whom are from families
with incomes below the poverty line. The program emphasizes children's cognitive, emotional and
physical development to enable them to reach their highest potential in their present enviornment
and beyond into school and community life. Head Start stresses the role of parents and family in
their children's development.
Like other child care programs, Head Start projects are eligible for reimbursement from the
Department of Agriculture's Child Care Feeding program.
PROPOSED CHANGE
The President's 1984 budget requests $1,051 billion for Head Start - an increase of $62 million over
the comparable figure for 1983. This increase will allow Head Start to serve 424,900 children, 29,100
more than in 1983. Funding increases will be directed to: (1) existing projects that have proven costeffective while maintaining program quality, and (2) projects testing new or innovative approaches,
such as employer-based centers and cooperative agreements with private non-profit child care
centers. In addition to $62 million in expansion funds, $18 million will be redirected from research
and evaluation to cost-of-living increases for existing projects.
The budget proposes that beginning in 1984, Head Start projects will receive all funding directly
from HHS, rather than being required to apply separately to USDA for nutrition funding. Head
Start's budget has been increased by $76 million, the amount of funding received by Head Start
centers from USDA in FY83.
Finally, beginning in 1983, Head Start will strengthen its relationship with State governments by
integrating them into the training and technical assistance network.
102
RATIONALE
•
The budget increase will allow Head Start to serve close to 20% of all children from families
living below the poverty line. These children will receive services that promote economic
self-sufficiency and family responsibility for their children's development.
•
The budget increase is supplemented by redirecting research and evaluation funds which are
no longer necessary for a mature demonstration program and should be used for direct
services to needy children.
•
Consolidating USDA funding into the Head Start grant award will vastly simplify financial
management for local projects, who must now deal with separate requirements and
reporting forms. Projects will have more flexibility to use funds in a way that best meets their
children's needs.
•
Involving State governments in Head Start technical assistance will improve the delivery of
social services, for which State governments have primary responsibility. State governments
also have a primary role in determining the use of the resources within the public school
systems into which Head Start children move, and can make sure that these children's
developmental gains are maintained.
EFFECTS OF THE PROPOSED CHANGE
•
An additional 29,100 children will receive Head Start services that promote self-sufficiency
and parental and community involvement. These children will be served by almost 80,000
paid staff and close to half a million volunteers. Head Start will serve 43,000 handicapped
children.
•
Head Start projects will become more cost-efficient while maintaining program quality, by
having more flexibiity and control over nutrition funds.
•
HHS will continue to implement a Cost Management System developed in fiscal year 1983
which analyzes grantee costs and identifies cost saving opportunities. Cost control will
remain a priority for Head Start in order to serve the maximum number of children possible.
•
Head Start's linkages to State governments, which play a strong role in educational and
social services, will be strengthened.
103
SERVICES FOR GROUPS WITH SPECIAL EDUCATIONAL NEEDS
AGENCY:
Education Activities
Functional Code: 501 and 506
Funding
($ in millions)
1982
1983
1984
1985
1986
1987
1988
CURRENT SERVICES
Budget Authority
Outlays
5,062
4,875
5,315
5,197
5,642
5,373
5,976
5,683
6,320
5,988
6,679
6,331
7,055
6,692
REAGAN BUDGET
Budget Authority
Outlays
5,062
4,875
5,181
5,190
5,161
5,188
5,159
5,187
5,152
5,158
5,152
5,153
5,152
5,152
134
7
481
185
817
496
1,167
830
1,528
1,178
1,903
1,540
PROPOSED SAVINGS
Budget Authority
Outlays
PROGRAM DESCRIPTION
Chapter 1 of the Education Consolidation and Improvement Act of 1981 (ECIA) (I984 BA: $3 billion)
provides funds to State and local education agencies to finance supplemental compensatory services
for the educationally disadvantaged. Chapter 1 replaced Title I of the Elementary and Secondary
Education Act, which provided similar services. Almost 14,000 school districts receive funds under
the basic Chapter 1 program. In addition, funds are used by State agencies to support compensatory
programs for migrant children, for handicapped children, for neglected or delinquent children, and
for administrative expenses.
The Education for the Handicapped (EHA) programs (1984 BA: $1.1 billion) help States provide a free
appropriate public education to all handicapped children. In 1984 EHA grants will defray about 8%
of the average excess educational costs of some 4.1 million handicapped children. A variety of
national discretionary activities support research, demonstration, and dissemination of innovative
educational practices as well as training for those preparing to become special education teachers.
The Vocational Rehabilitation programs (1984 BA: $1 billion) provide grants to State agencies to
assist physically and mentally handicapped individuals become gainfully employed and live more
independently. Education, training, medical and other services are provided, with statutory priority
to the severely disabled. This activity also funds research and training in the rehabilitation field, and
discretionary rehabilitation projects serving special target groups.
PROPOSED CHANGE
•
The Budget proposes a shift of Chapter 1 funding toward basic aid to local school districts
and away from the more costly State agency programs. Proposed legislation would give
State and local educational agencies the option of providing compensatory education
services through a voucher mechanism.
•
Overall budget authority for Education of the Handicapped remains equal to the 1983 level.
Within the total, resources are shifted toward the basic State grant program and away from
Federal discretionary activities.
104
•
Proposed reauthorizing legislation will make changes in the Vocational Rehabilitation State
grant program to encourage States to improve their performance in rehabilitating the
severely handicapped. Beginning in 1985, up to one-third of State grant funds would be
allocated to States based on their success at rehabilitating the severely disabled into suitable,
preferably paid, employment. Changes to take effect in 1984 will simplify administration of
the program and increase State discretion in service delivery. Overall funding would be
maintained at the 1983 level.
RATIONALE
•
The Chapter 1 program is the most efficient mechanism for distributing Federal resources to
the population of educationally disadvantaged children. The addition of authority for States
and school districts to convert the funds into educational vouchers will enhance competition
in the delivery of educational services and give parents more control in the education of their
children.
•
In order to prevent a decline in the Federal share of excess educational costs for the special
education services handicapped children receive from local school districts, monies are
shifted from federally run discretionary programs, which at times duplicate State
responsibilities, to the State grant program.
•
Vocational Rehabilitation State grant funds are now allocated based on State population
and per capita income. Program performance can be improved by giving States more
discretion in determining how services are delivered, while at the same time distributing
Federal funds in part on the basis of positive outcomes - i.e., successful rehabilitations of the
severely disabled.
EFFECTS OF THE PROPOSED CHANGE
•
The number of school districts receiving Chapter 1 funds will remain stable; the amount of
Federal support for their compensatory education activities will rise by $167 million or about
6.5%. This increase will be offset by decreases in the State agency programs, which will be
targeted more closely on children most in need of assistance.
•
In Education for the Handicapped, the shift in resources will allow the Federal share of
average excess educational costs to be maintained at about 8%. States are projected to serve
40,000 more handicapped children in 1984 than 1983. Reductions in discretionary programs
will have limited impact on national service priorities.
•
By increasing State flexibility in administering the Vocational Rehabilitation State Grant
program, and in 1985, including program success as a criterion for fund allocation, the rate of
success at rehabilitating the severely handicapped is expected to increase.
1982 AND 1983 CHANGES
Chapter 1, which became effective on July 1, 1982, represents a streamlining and simplifying of the
old Title I program of assistance for the education of disadvantaged children. At the same time,
States and localities have been given greater discretion over the development and implementation
of compensatory activities.
105
SPECIAL ASSISTANCE
107
FUNDING FOR INDIAN PROGRAMS -- GOVERNMENT-WIDE
AGENCY:
Government-wide
Functional Codes: 300, 450, 500, 550
600, 800, and 850
Funding
REAGAN BUDGET
Budget Authority
Outlays
($ in millions)
1982
1983
1984
2,820
2,368
2,673
2,385
2,320
2,619
PROGRAM DESCRIPTION
There are a large number of special programs for Indians and for Federally recognized Indian tribes,
principally in the Departments of the Interior, Housing and Urban Development, Health and Human
Services, Education, and Agriculture. These special programs fund a wide variety of services,
including health and hospital care, housing, welfare, nutrition, education, social services, community
and economic development, law enforcement, natural resource management, and tribal
government. Funding for these programs is in addition to the proceeds from miscellaneous trust
funds held by the Federal Government for the Indian people and benefits Indians receive from
Federal programs such as social security and food stamps.
PROPOSED CHANGE
The major changes in Indian programs in the 1984 budget include the following:
•
Replacement of the current Indian housing activities scattered among Interior, HHS, and
HUD with two alternative funding approaches to be administered by HUD: (1) a $76 million
housing grant program; and (2) a $75 million Community Development Block Grant program
which allows new housing construction as an eligible activity;
•
Proposal of legislation permitting Federally recognized Indian tribes to receive direct
funding under the Title XX Social Services Block Grant (SSBG);
•
Proposal that Federally recognized Indian tribes be funded directly under the Science and
Mathematics Teacher Development Act, consistent with administration policy supporting
government to government relationships with Indian tribes;
•
As a supplement to appropriations, expansion of third-party reimbursements (through, for
example, health insurance plans) for services offered by the Indian Health Service;
•
Termination of the special Indian Education Programs in the Department of Education;
•
Transferring to the State of Alaska 10 Bureau of Indian Affairs funded Alaska day schools in
June 1983 and the remaining 10 in June 1984;
•
Closure of four BIA boarding schools in June 1983 (Mt. Edgecumbe (AK), Intermountain (UT),
Concho (OK), Wahpeton (ND)); and
•
Administration of funding from the HHS Native Americans program for Federally recognized
tribes through Interior's Bureau of Indian Affairs, while funds to entities other than Federally
recognized tribes will be phased out over three years.
109
RATIONALE
•
The de'ivery of Indian housing and related infrastructure has not been effectively
coordinated among the various departments. The current HUD Indian housing program
produces housing that is overly costly and not culturally appropriate for the Indians served.
The current housing delivery system, which is based on the public housing authority model,
does not work well in Indian reservations. The proposed programs will provide culturally
relevant housing at lower cost through tribal governments rather than special housing
authorities and will alleviate the need for extensive interagency coordination to ensure that
new homes have water, sewer and other infrastructural necessities.
•
The proposals for direct funding under the Title XX S5BG and the Science and Mathematics
Teacher Development Act are designed to strengthen tribal self-government and the
government-to-government relationship between Indian tribes and the Federal
Government.
•
The expansion of third party reimbursements (e.g., from private health insurers, medicare,
medicaid, and Indians with the ability to pay) for health services for Indians will enhance the
resources available to continue the traditional Federal role in providing health care to Indian
people. This proposal will result in increased IHS flexibility to maintain existing health
services levels despite the increasing costs of medical care.
•
Education Department programs for federally-recognized Indians are neither necessary nor
appropriated in light of current BIA services in this area (especially Johnson O'Malley
assistance) as well as other Federal and state education programs for which Indian students
and adults are eligible. Special programs for other Indians are also inappropriate in light of
their eligibility for the wide variety of Federal, state, and local education programs for which
all disadvantaged Americans are eligible. BIA and Impact Aid, plus other programs, will
provide $456 million in BA for Indian education in 1984.
•
The transfer of the BIA-operated day schools in Alaska is part of a continuing effort to
establish a single system of education in Alaska for all children. While Federal funding is
reduced, educational services for Alaska natives will be maintained or enhanced.
•
The closure of four of BIA's boarding schools is recommended because: the schools are
excessively costly to maintain and operate (over $15,000 per pupil at Mt. Edgecumbe); other
BIA boarding schools, the Alaska boarding home program, and Alaska public schools have
sufficient capacity to accommodate all the Mt. Edgecumbe and Intermountain students; and
the Concho and Wahpeton boarding school children should be encouraged to live with their
families or in their home communities and attend existing BIA day schools.
•
The change in the HHS Native Americans program removes duplication in the administration
of programs for Federally recognized tribes and focuses Federal Indian assistance on those
tribes recognized as eligible for a special governmental relationship with the U.S.
EFFECTS OF THE PROPOSED CHANGE
•
Generally, services to the Federally recognized tribes should be enhanced. Federal outlays
will increase by 10% over 1983, and additional non-Federal funds will be attracted to Indian
activities, while less of the total will go to non-Federally recognized tribes.
•
The change in the HUD Indian housing programs should permit construction of more units in
1984 than Congress provided in 1983, but at lower cost. The housing under the two new
programs will be better tailored to Indian cultural needs, delivered through tribal
governments, and include funds for necessary infrastructure such as water and sewer, thus
avoiding interdepartmental coordination problems.
110
•
Tribal governments should be strengthened through the opportunity to run their own Title
XX SSBG program, receive direct funding through the Science and Mathematics Teacher
Development Act, and through other initiatives to improve their capacities and develop
tribal economies.
•
Expansion of third party reimbursements for Indian health services will result in an additional
$60 million being available for health services in addition to the $653 million requested for
IHS clinical services. Such additional support would strengthen efforts to improve the health
status of Indian people.
•
Unnecessary duplication will be avoided by the changes in Indian education programs.
Additional education funds will be available for many school districts serving Indian children
on or near reservations because Impact Aid funding for children whose parents live and work
on Federal property (including Indian reservations) is being increased.
•
Federal funding for Indian tribes will be more efficiently managed by having BIA administer
Administration on Native Americans (ANA) funds. Federally recognized tribes, with whom
the Federal government has a government to government relationship, will continue to
receive funds from ANA as well as from BIA's Small Tribes Initiative and Tribal Government
Services program. Non-Federally recognized tribes who have received ANA transitional
assistance may apply to BIA for Federal recognition.
1982 AND 1983 CHANGES
Seventeen day schools in Alaska were transferred to the State of Alaska in FY 1982.
111
INDIAN HOUSING AND COMMUNITY DEVELOPMENT PROGRAMS
AGENCY:
Department of Housing and Urban Development
Funding
Functional Code: 604 and 451
($ in millions)
1982
1983
1984
1985
1986
1987
1988
494
--
362
--
380
--
399
--
419
13
440
26
462
39
30
29
31
30
33
30
35
33
37
34
39
35
41
36
---
---
76
40
76
43
76
45
76
48
76
50
30
29
31
30
75
31
75
50
75
70
75
75
75
75
Indian Housing Grants
Budget Authority
Outlays
--
---
-304
+40
-323
+43
-343
+32
-364
+22
-386
+ 11
Indian CDBG Grants
Budget Authority
Outlays
---
---
+42
+1
+40
+17
+38
+36
+36
+40
+34
+39
CURRENT SERVICES
Indian Housing Set-aside,
HUD Public Housing
Budget Authority
Outlays!/
Indian CDBG Grants
Budget Authority
Outlays (est.)
REAGAN BUDGET
Indian Housing Grants
Budget Authority
Outlays
Indian CDBG Grants
Budget Authority
Outlays
PROPOSED CHANGES
V
Outlays shown are for 1984 and subsequent year budget authority only; outlays from 1983 and prior commitments will
continue at $225-250 million over the years shown.
PROGRAM DESCRIPTION
HUD provides funding for the construction of housing in Indian areas using the public housing
delivery mechanism. This arrangement involves the use of HUD construction standards and the
creation of Indian housing authorities - separate from tribal governments - to administer the
program. Related water and sewer facility construction is handled by the Department of Health and
Human Services' Indian Health Service and roads are funded by the Interior Department's Bureau of
Indian Affairs (BIA). The BIA also operates a separate housing repair program for Indians. The HUD
program has built 46,000 houses with another 14,000 in process and commitments for 2,000 more
units are planned in 1983. Despite intense efforts to reduce costs, new units currently cost an
estimated $71,400 to build.
Indian tribes also receive categorical assistance under the Community Development Block Grant
program to support various economic and community development activities, including construction
of water and sewer facilities and roads. However, new housing construction is not presently an
eligible activity.
112
PROPOSED CHANGE
•
A new Indian Housing Grants program would replace the current public housing for Indians
to provide federally recognized tribes with assistance for the development of housing and
related infrastructure. The new Indian Housing program entails the use of housing grants in
order to write down the cost of housing construction and support the building of water and
sewer facilities. The FHA mortgage insurance program would be modified to ensure interim
and permanent financing without jeopardizing the trust and status of the Indian land.
Rental assistance also would be provided over the 15-year term of the underlying mortgage
for those very low income families unable to afford the cost of housing provided under the
program.
•
New housing construction would be added to the range of activities funded by the CDBG
program for Indians (as well as other recipients). The precise activities undertaken would be
at the discretion of recipient tribes. Funds may be used by them to complement the
assistance provided by the Indian Housing Grants, including housing rehabilitation and
construction.
•
Both programs are being proposed for 1984. The Indian Housing Grants program would
coordinate the now separate efforts of the Departments of Housing and Urban
Development, Health and Human Services, and Interior in one program. It is anticipated that
less costly housing - averaging $30,000 - $40,000 per unit and another $7,500 per unit for
related water and sewer facilities -- can be built with fewer Federal standards imposed. The
Indian Community Development Grants program represents a $44 million expansion of the
current categorical assistance provided by the Community Development Block Grant
program.
RATIONALE
The Federal Government has a role to help federally recognized Indian tribes due to the special and
historic relationships between the Government and these tribes and the trustee responsibilities of
the Government. The trust status of Indian lands makes it difficult to rely upon the private market to
supply housing on Indian reservations. In recognition of this special relationship and the unique
problems facing tribes, these two programs are being proposed in an effort to help federally
recognized Indian tribes better address their housing, community development, and economic
needs, while acknowledging the important cultural traditions of Native Americans.
EFFECTS OF THE PROPOSED CHANGE
It is estimated that the Indian Housing Grants program will fund 1,500 housing units annually.
Additional units may be provided through the Indian Community Development Block Grant program
if tribes elect to use these flexible funds for housing construction and rehabilitation.
380-900 0 - 83 - 8 : QL 3
113
INDIAN HEALTH SERVICE
AGENCY:
Department of Health and Human Services
Funding
Functional Code: 550
($ in millions)
1982
1983
1984
1985
1986
1987
1988
CURRENT SERVICES
Budget Authority
Outlays
676
654
688
727
699
746
740
740
783
783
828
828
874
874
REAGAN BUDGET
Budget Authority
Outlays
676
654
688
727
653
703
653
670
653
659
653
655
653
654
46
43
87
70
130
124
175
173
221
220
PROPOSED SAVINGS
Budget Authority
Outlays
PROGRAM DESCRIPTION
The Indian Health Service (IHS) provides directly, or through contracts with tribes and private health
organizations, a range of health care services to Indians and Alaska natives. In 1982, the IHS service
population consisted of approximately 900,000 persons (64% of the total Indian population in the
United States). Health care is provided free of charge to all Indians who request service and are
members of federally recognized tribes, regardless of ability to pay or the availability of employer or
other (workmen's compensation, automobile indemnity, etc.) health insurance coverage.
PROPOSED CHANGE
IHS will embark upon an expanded program of collecting for services from insurance and other
sources, as a supplement to the appropriations request of $653 million. Currently, IHS only collects a
modest amount ($20 million) from Medicare and Medicaid. The proposal would result in expanded
Medicare and Medicaid collections ($40 million) and initiate charges to Indians and collect from
those who could afford to pay for services, as well as from insurers (such as employers) who cover
Indians and their families, e.g., FEHB program, ($30 million). Indians will be served by IHS regardless
of their ability to pay.
RATIONALE
This proposed change enhances the resources available to maintain the traditional Federal role in
delivering health care to the Indians. In addition to the annual appropriations request, however, this
proposal will result in increased IHS flexibility to maintain existing health services levels despite the
increasing costs of medical care. It is appropriate to use third party coverage as an untapped source
of additional revenue to the extent that Indians have their own health insurance coverage and other
resources.
EFFECTS OF THE PROPOSED CHANGE
In 1984, in addition to $653 million requested for free IHS clinical services, up to an additional $60
million could be collected and would be available during the year for health services. Such additional
support would strengthen efforts to improve the health status of Indians, while assuring that thirdparty payors equitably reimburse for required health services.
114
NATIVE AMERICANS PROGRAMS
AGENCY:
Functional Code: 506
Department of Health and Human Services
Funding
($ in millions)
1982
1983
1984
1985
1986
1987
1988
CURRENT SERVICES
Budget Authority
Outlays
28
32
28
28
30
29
32
30
33
32
35
34
37
36
REAGAN BUDGET
Budget Authority
Outlays
28
32
28
28
22
26
19
15
21
18
15
15
15
15
8
3
13
9
18
20
19
22
PROPOSED SAVINGS
Budget Authority
Outlays
14
21
PROGRAM DESCRIPTION
The Administration on Native Americans (ANA) funds social and economic development projects for
Indian tribes. The purpose of the program is to stengthen tribal government, to encourage the
development of local economic activities that provide jobs, and to reduce dependency on welfare
while promoting self-sufficiency.
In fiscal year 1983, ANA will make grants to 88 federally-recognized Indian tribes and Alaska Native
groups. In addition, ANA gives transitional assistance to 27 tribes who have not been recognized as
having a special relationship with the Federal Government. Finally, ANA makes grants to projects
assisting urban and rural Indians, Native Hawaiians and national advocacy organizations.
PROPOSED CHANGE
Beginning in the Spring of 1983, Native Americans program funds for federally-recognized tribes
and Alaska Natives will be administered by the Bureau of Indian Affairs in the Department of
Interior. HHS will retain legislative authority for the program, but will work with Interior to
determine program rules and requirements. Financial operations will be handled by BIA in order to
improve coordination of Federal assistance to Indian tribes.
The FY 1984 budget proposes a three-year phaseout of assistance to non-recognized groups, special
urban and rural projects, Native Hawaiians and national groups. Funding for these groups would be
reduced by one-third each year in fiscal years 1984, 1985 and 1986.
RATIONALE
•
As the locus of Federal Indian program activity, BIA will be able to coordinate a
comprehensive program for Indian development and to eliminate program duplication.
Having ANA funds flow through BIA helps achieve the Administration's goals of selfdetermination for Indian tribes.
•
Federally-recognized tribes are those with which the Federal government has a unique
political relationship, based on historical treaty rights and obligations. These tribes have met
stringent sociological and anthropological tests documenting this relationship. By definition,
nonrecognized groups have no continuing claim on special Federal resources, yet they
consumed more than 40% of ANA's budget in FY 1982.
115
•
Federal funds for Indians should be under tribal control and not pass through service
organizations and advocacy groups who cannot best determine tribes' individual needs.
•
ANA's location in HHS is largely a matter of historical accident dating from the
dismantlement of the Office of Economic Opportunity in the early 1970's. This has cut off
ANA and its grantees from other Federal Indian programs.
EFFECTS OF THE PROPOSED CHANGE
•
Federal funding for Indian tribes will be more efficiently managed by having BIA be the
central funding source for these programs.
•
Federally recognized tribes with the greatest need to develop core governmental capacities
will continue to receive funds from ANA as well as from BIA's Small Tribes Initiative and
Tribal Governmental Services program. A total of $83 million for these programs is requested
in the FY 1984 budget.
•
Those non-federally recognized tribes who have received ANA transitional assistance may
apply to BIA for Federal recognition of their government-to-government relationship. If
approved, they will qualify for all Federal Indian programs, for which a total of $2.3 billion is
requested in the President's FY 1984 budget.
116
VETERANS PENSIONS
AGENCY:
Functional Code: 701
Veterans Administration
Funding
($ in millions)
1982
1983
1984
1985
1986
1987
1988
CURRENT SERVICES
Budget Authority
Outlays
4,048
3,879
3,827
3,954
3,950
3,940
3,967
3,957
4,090
4,079
4,258
4,247
4,421
4,408
REAGAN BUDGET
Budget Authority
Outlays
4,048
3,879
3,827
3,907
3,837
3,873
3,818
3,807
3,917
3,905
4,037
4,025
4,155
4,142
46
113
68
150
150
173
173
221
221
266
266
PROPOSED SAVINGS
Budget Authority
Outlays
PROGRAM DESCRIPTION
A pension to provide income for basic needs is paid to needy wartime service veterans who have
become disabled subsequent to their military service or who are age 65 or older. Financially needy
survivors may also qualify for benefits. Eligibility is based on active duty service during a designated
war period, disabilities considered permanent and total (presumed at age 65), and countable income
below a given level. Benefit levels are based on countable income, family size, and whether the
beneficiary is a veteran or a survivor.
There are three pension programs: Old Law (Pub. 2, 73rd), Prior Law (P.L. 86-211) and Improved Law
(P.L. 95-588). Under the Improved Law, the only one of the three pension programs available for new
accessions, virtually all family income is counted in determining eligibility and benefit level.
Payments are computed by subtracting total family income from specified income standards. Under
this law benefit payments as well as income standards are automatically adjusted each year by the
same percentage and on the same effective date as Consumer Price Index (CPI) adjustments for Social
Security in order to prevent pension payments from being reduced solely as a result of Social Security
increases. This program benefits 550,000 veterans and survivors, 30% of all pension cases, and
accounts for 61 % of all pension benefits paid.
Benefit levels under the other two pension programs are not adjusted to reflect CPI changes.
However, in the Prior Law program income standards are adjusted upwards in the same manner as
the Improved Law program to prevent the Social Security cost-of-living adjustment (COLA) increase
from removing pensioners from eligibility.
The number of pension beneficiaries is expected to decrease from 1,835,000 in 1982 to 1,735,000 in
1983 and 1,660,000 in 1984 as World War I and World War II veterans and, in particular, survivor
populations decrease.
PROPOSED CHANGE
The budget proposes a six-month delay in cost-of-living adjustments from June to December of each
year for the Social Security program. This proposal results in an identical COLA delay for veterans
pensions, since cost-of-living adjustments for these programs are linked by law. The next COLA
effective in December 1983 (reflected in January 1984 checks) is estimated to be 5.1%.
117
RATIONALE
The six-month delay is consistent with Administration policy toward most income support programs.
This policy is intended to achieve budgetary restraint in the most equitable way by restraining the
growth of these programs while minimizing the effects of such restraint on beneficiaries.
EFFECTS OF THE PROPOSED CHANGE
Since the computation of income eligibility under both the Prior Law and Improved Law programs is
tied to changes in Social Security benefits, and since the link in COLA's between pensions and Social
Security is maintained in the President's proposal, the veterans pension caseload will not be reduced.
On the other hand, if veterans pensions were "delinked" from Social Security and benefits paid
without delay, many veteran pensioners would be dropped from the rolls each time an out-of-phase
Social Security COLA took effect, because increases in Social Security income due to COLA's without a
corresponding increase in the veterans pension income standard would place many pensioners
above the income eligibility standard.
1982 AND 1983 CHANGES
The Budget Reconciliation Act of 1982 embodied several changes effective in either 1982 or 1983 to
tighten pension benefit programs. This Act requires that benefit payments be rounded down to the
nearest dollar, discontinues entitlement for a dependency allowance at the end of the month (rather
than the end of the year) in which dependency ceases, and defers commencement of benefit
payments until the first full month of entitlement. The expected savings in FY 1983 are $42 million.
118
HOSPITAL AND MEDICAL CARE FOR VETERANS1/
AGENCY:
Veterans Administration
Functional Code: 703
Funding
($ in millions)
1982
1983
1984
1985
1986
1987
1988
CURRENT SERVICES
Budget Authority
Outlays
7,802
7,517
8,472
8,290
8,868
8,908
9,258
9,324
9,600
9,588
9,975
9,873
10,358
10,227
REAGAN BUDGET
Budget Authority
Outlays
7,802
7,517
8,474
8,292
9,188
8,900
9,564
9,341
10,014
9,656
10,424
10,067
10,862
10,441
2
2
320
8
306
17
414
68
449
194
504
214
PROPOSED INCREASES
Budget Authority
Outlays
1/
Includes construction of medical facilities.
PROGRAM DESCRIPTION
The Veterans Administration (VA) provides hospital and medical care to veterans by operating a
nationwide medical care system consisting of 172 hospitals, 226 outpatient clinics, 101 nursing
homes and 16 domiciliary facilities, and by conducting a construction program which maintains the
physical plant. In 1982 this system treated nearly 1.4 million patients, provided 18.2 million
outpatient visits, and obligated $416 million to improve and modernize VA facilities.
PROPOSED CHANGE
•
The 1984 medical care and construction budget request is $714 milllion higher in budget
authority and 2,300 higher in full-time equivalent employment than 1983.
•
Over $300 million of the $714 million increase is in major and minor construction programs.
These budget authority levels are, respectively, 66% and 37% higher than 1983 levels.
RATIONALE
These increases in funding reaffirm the Administration's commitment to quality care for the Nation's
veterans.
EFFECTS OF THE PROPOSED CHANGE
•
All of the staffing and nearly $400 million of the above funding increase will result in
immediate improvements in the care and treatment of veterans. These increases will ensure
continued quality care for veterans while providing nearly $40 million in program
improvements and allowing the activation of new and modernized medical facilities.
•
The demand for medical care will be met with nearly 5,000 more patients treated and
230,000 more outpatient visits accommodated than in 1982.
•
Program improvements include development of decentralized ADP information systems in
60 hospitals, conversion of over 12,000 inpatient beds in 25 hospitals from a ward stock
medication distribution system to a unit dose system, activation of two spinal cord injury
home care units, development of an additional Geriatric Research, Education and Clinical
Center, and initiation of three projects developing automated electrocardiography, supply
and equipment systems. These improvements are expected to enhance the quality of care,
offer an alternative to inpatient care and shorten the average length of inpatient hospital
stay.
119
•
In 1984, construction work on major projects (those costing $2 million or more) will be
undertaken at 35 medical centers. The two largest projects are the construction of a
replacement hospital at Minneapolis, MN and modernization of the medical facility at Biloxi,
MS. The funding increases will permit a greater effort to correct space and functional
deficiencies, replace or modernize outmoded facilities, and provide other facility
improvements
120
VETERANS DISABILITY COMPENSATION
AGENCY:
Veterans Administration
Functional Code: 701
Funding
($ in millions)
1982
1983
1984
1985
1986
1987
1988
CURRENT SERVICES
Budget Authority
Outlays
9,590
9,276
9,463
9,687
10,331
10,290
10,961
10,915
11,448
11,403
11,986
11,942
12,527
12,471
REAGAN BUDGET
Budget Authority
Outlays
9,590
9,276
9,463
9,687
10,094
10,053
10,669
10,632
11,071
11,036
11,499
11,463
11,942
11,905
---
--
237
237
292
283
377
367
487
479
585
566
PROPOSED SAVINGS
Budget Authority
Outlays
PROGRAM DESCRIPTION
A monthly benefit is paid to veterans and their survivors based on disabilities incurred in or
aggravated by active military service, death while on active duty, or death resulting from serviceconnected disabilities. The disability benefit is intended to indemnify the veteran for serviceconnected injury or illness and to provide an income supplement that approximates the average loss
of income that the veteran is expected to experience because of the disability. Beneficiaries are
rated 10% to 100%o disabled on the basis of average earnings impairment for any particular
disability, with benefit payments ranging from $62 to $1,213 per month on that basis. The total
number of beneficiaries is expected to decline from 2,629,000 in 1982 to 2,616,000 in 1983 to
2,612,000 in 1984 largely because older compensation beneficiaries, largely veterans of World War II,
are dying faster than new cases are entering the compensation rolls.
PROPOSED CHANGE
•
Provide a 5.1% cost-of-living adjustment (COLA) in benefits, effective April 1, 1984, reflecting
a 6-month delay from the present practice of providing COLA's each October.
•
Provide, beginning in April, 1985, annual cost-of-living increases on a graduated scale,
aligned with the degree of disability so that those rated at higher disability levels would
receive a proportionally larger annual COLA than those with less severe impairments. COLA's
would be provided according to the following schedule:
Percent of COLA to be
provided
Percent of rated disability
•
100
100
60-90
40-50
10-30
85
60
45
Allowances paid to compensate beneficiaries for dependents and to provide clothing
allowances to qualified veterans will continue to reflect 100% of the cost-of-living increases.
121
RATIONALE
•
The FY 1984 COLA delay is consistent with the current Government initiative to delay
increases or freeze spending in most income support programs across-the- board.
•
Providing COLA increases on a graduated scale would restore the emphasis of this program
to its intended objective: aiding those veterans in need whose service-related disabilities
clearly and substantially restrict their employment opportunities. Those with less severe
impairments would still receive annual cost- of-living adjustments, but on a prorated basis.
•
Rather than penalizing one group of veterans, the graduated payments proposal would
provide a reasonable increase to all disabled veterans in accordance with level of need for
additional compensation. Those veterans rated 100% disabled would receive a 100% COLA
completely offsetting the increase in the Consumer Price Index each year. Those rated 0-30%
disabled would receive only 45% of the COLA since this group is more likely to be working
and receiving full COLA's in that capacity.
EFFECTS OF THE PROPOSED CHANGE
•
Neither of the proposals would reduce the number of veterans or survivors receiving
compensation benefits.
•
The moderation of benefits in the graduated payments proposal would be modest for any
individual veteran, from $1 per month for those 10% disabled to $4 per month for those 90%
disabled. However, because of the large number of beneficiaries, savings would be
substantial -- $2.3 billion over 5 years.
1982 AND 1983 CHANGES
The Budget Reconciliation Act of 1982 restricted payments of compensation benefits to the first full
month of entitlement and discontinued entitlement for dependency allowances at the end of the
month (rather than end-of-year) in which dependency ceases. These changes will cause a $25.2
million reduction in 1983 obligations.
122
MINORITY BUSINESS ASSISTANCE
AGENCY:
Functional Code: 376
Department of Commerce
Small Business Administration
Funding*
($ in millions)
1982
CURRENT SERVICES
Budget Authority
Outlays
108
REAGAN BUDGET
Budget Authority
Outlays
108
101
101
1984
1985
1986
1987
1988
141**
139
145
142
150
148
154
152
159
160
163
141**
139
137
140
136
137
135
136
134
135
135
135
8
2
14
19
11
16
25
25
28
26
102
491
593
104
491
595
106
491
597
108
491
599
109
491
600
1983
PROPOSED SAVINGS
Budget Authority
Outlays
PROGRAM LEVEL
Non-Credit Assistance
Credit Assistance
TOTAL Program Level
*
**
81
238
319
101
491
592
161
Budget authority and outlay figures do not include the cost of defaulted guaranteed loans.
Includes $12 million carryover from FY 1982
PROGRAM DESCRIPTION
Management, technical, and procurement assistance (i.e., non-credit assistance) is provided to
minority-owned firms by the Department of Commerce's Minority Business Development Agency
(MBDA) and the Small Business Administration (SBA):
•
MBDA contracts with public and private organizations to provide management and technical
assistance to minority firms.
•
The SBA provides non-credit assistance by establishing minority procurement goals for
Federal agencies, awarding non-competitive 8(a) contracts and Business Development
Expense (BDE) grants to minority firms, and providing management and technical assistance
through private contractors.
•
Credit assistance is provided through SBA's direct and guaranteed business loans and its
Minority Enterprise Small Business Investment Company (MESBIC) program. MESBIC's are
privately-owned companies, which are licensed, regulated, and supported financially by SBA,
to provide equity financing or long-term loans to small minority firms.
PROPOSED POLICY
•
MBDA's management and technical assistance program will continue to focus attention on
the development of private sector market opportunities for minority businesses. Beginning
in 1984, $6 million (10%) of MBDA's program level will be financed through private sector
cost-sharing, which will increase gradually to 25 percent by 1987.
123
•
SBA will continue to have the lead responsibility for ensuring that minority firms have equal
access to procurement opportunities in the Federal sector. SBA will also continue to allocate
a greater proportion of its resources to management and technical assistance for minority
firms.
•
Guaranteed loans would be used in lieu of direct loans to provide credit assistance to
minority firms.
RATIONALE
The planned minority business assistance implements the commitment the President made in his
December 17, 1982, Minority Business Enterprise Statement to help minority Americans achieve
fuller participation in the market economy.
EFFECTS OF THE PROPOSED POLICY
•
Approximately $0.5 billion in credit assistance and $100 million in management and technical
assistance will continue to be made available annually to promote minority business
development.
•
MBDA will continue to promote market opportunities for minority business in the private
sector by financing 100 Business Development Centers (BDC's). The Centers are designed to
assist minority businesses to develop marketing strategies, package loan applications, and
enter into joint ventures.
•
SBA will focus its efforts on improving the ability of minority firms to compete for Federal
procurement opportunities and, thereby, ultimately for private contracts. SBA will also
continue to attempt to increase the number of Federal contracts awarded to minority firms.
•
The continued use of guaranteed loans, rather than direct loans, for minority firms will
eliminate a tendency to depend on Federal subsidies for survival; will mitigate - over time ~
the perception of financial institutions that minority firms are higher credit risks; and will
foster the development of sound relationships between minority firms and private financial
institutions.
124
TITLE III ASSISTANCE TO HISTORICALLY BLACK COLLEGES (HBC's)
AGENCY:
Education Activities
Functional Code: 502
Funding
($ in millions)
1982
CURRENT SERVICES
Budget Authority
Outlays
REAGAN BUDGET
Budget Authority
Outlays
PROPOSED CHANGES
Budget Authority
Outlays
1/
2/
1983
1984
1985
1986
1987
1988
40.51/
34.3
41.4
40.7
43.5
42.0
45.5
45.0
47.6
45.4
49.7
47.3
51.9
49.4
40.5]/
43.02/
34.3
45.7
45.7
45.7
45.7
45.7
40.8
43.2
46.9
45.9
45.7
45.7
+ 1.5
+ 0.1
+2.3
+1.3
+0.2
+1.9
-1.8
+0.5
-4.0
-1.5
-6.2
-3.6
Excludes reappropriation (continuation of availability) of $8.1 million of unspent funds already accounted for in this
amount.
Includes proposed supplemental of $1.5 million.
PROGRAM DESCRIPTION
Title III of the Higher Education Act authorizes three grant programs for schools with limited
financial resources and large percentages of low-income students. The grants are designed to make
such institutions more self-sufficient by improving academic quality, program and financial
administration, and student service capacity. In the past, HBC's have received about 15% of all grants
representing about 30-35% of all funds. In 1982 they received 75 grants.
PROPOSED CHANGE
Even though the total Title III appropriation is proposed to stay at the same level in 1984 as
requested in 1983, appropriations language is proposed to ensure that HBC's receive in 1984 what is
proposed for 1983 plus adjustments for inflation. The resulting appropriation of $45.7 million is 41%
above funds obligated for HBC grants in 1982.
RATIONALE
The President made clear by issuing E.O. 12320 on September 15, 1981 ("Historically Black Colleges
and Universities") that a major component of the Administration's effort to ensure equal access to
higher education for minority and disadvantaged students would be increased participation by
HBC's in Federal programs. These institutions are a major educational resource of the nation's black
community, awarding over half of all bachelor's degrees awarded to black students in America. Later
Presidential directives stated that agencies should attempt to preserve or increase relative funding
for HBC's in the face of overall funding restraint. The 1984 Budget proposes, through appropriations
language, exactly such an increase in the share received by HBC's of a total Title III appropriation
held level from 1983 to 1984.
EFFECTS OF THE PROPOSED CHANGE
Both the number and average amount of grants to HBC's would increase from the level to be
financed from the 1983 appropriation, allowing faster progress by more of these institutions toward
self-sufficiency.
125
HOWARD UNIVERSITY
AGENCY:
Education Activities
Functional Code: 502
Funding
($ in millions)
1982
1983
1984
1985
1986
1987
1988
CURRENT SERVICES
Budget Authority
Outlays
145.2
146.2
145.2
166.2
152.9
158.6
160.4
160.1
167.9
167.6
175.5
175.2
183.4
183.1
REAGAN BUDGET
Budget Authority
Outlays
145.2
146.2
145.2
166.2
159.7
164.4
158.2
159.1
158.2
158.2
158.2
158.2
158.2
158.2
+ 6.8
+ 5.7
-2.2
-1.0
-9.6
-9.3
-17.3
-16.9
-25.1
-24.8
PROPOSED CHANGES
Budget Authority
Outlays
PROGRAM DESCRIPTION
The Federal Government provides a substantial portion of both the operating and capital costs of
Howard University, one of the nation's preeminent primarily minority institutions of higher
education. The school provides about 10,000 students with high quality undergraduate and
graduate education in 17 schools and colleges. It also operates a 500-bed teaching hospital which
annually has about 14,000 admissions and about 150,000 out-patient visits.
PROPOSED CHANGE
The 1984 Budget provides:
•
Substantial increases in operating support, up 10.6% from 1983 and 24.2% from 1982.
•
Continued support of Howard University Hospital at the $22.1 million level agreed to by
Howard and the Federal Government in 1977.
•
$1.5 million for repair of the Medical Building and continuation of the Freedmen's Hospital
renovation project. This meets a one-time funding need of the university; no construction
funds are requested in 1985 and beyond.
RATIONALE
Here, as in other areas of support for higher education, the Administration is strongly committed to
providing equal access for minority and disadvantaged students. Increased levels of support for
Howard will help assure that access by providing needed support to a major educational resource for
minorities, particularly black students.
EFFECTS OF THE PROPOSED CHANGE
1984 enrollment will grow to about 10,050, some 2% above 1983 and 4% above 1982. Most of the
$13 million increase in operating support will be used for faculty and staff pay increases required to
maintain competitiveness with similar institutions. About 30% will be used for improvements
designed to eliminate accreditation problems in several of the schools. The construction funds will
permit emergency repairs and additional renovation of the Freedmen's Hospital.
126
FEDERAL CIVIL RIGHTS ACTIVITIES *j
Outlays
($ in millions)
1980
1981
1982
1983
1984
512.6
544.3
564.2
607.3
632.2
14.5
16.7
17.2
18.6
20.6
130.8
134.2
137.6
147.0
153.0
18.4
21.7
24.6
34.1
30.4
Office for Civil Rights
Health and Human Services
Education Activities U
Total
58.8
19.3
44.1
63.4
19.1
41.8
60.9
19.6
44.3
63.9
19.6
42.7
62.3
Department of Labor/Office
of Federal Contract
Compliance Programs
50.6
48.1
42.5
43.8
47.4
Commission on Civil Rights
11.5
11.7
11.9
12.0
12.2
Federal civil rights
activities (total) 1/
Major civil rights programs:
Department of Justice/Civil
Rights Division
Equal Employment Opportunity
Commission
Department of Housing and
Urban Development/Office
of Fair Housing and
Equal Opportunity
1/ Includes, in addition to outlays by Executive departments and agencies, expenditures by the Legislative Branch and U.S.
Postal Service to implement Federal internal EEO requirements. These figures reflect the most current information available,
and include some updates and corrections to figures published in Special Analysis J.
2/ These offices were one until 1980, and reliable data for that year is available only on a total basis. Education activities will
be proposed for reassignment to appropriate executive departments and agencies pursuant to reorganization legislation to
be submitted at a later date.
PROGRAM DESCRIPTION
The Federal Government enforces or implements approximately 130 Federal statutes designed to
protect individuals against violations of their civil rights based on race, sex, color, religion, national
origin, age or handicap. These statutes are in addition to basic constitutional guarantees and
Executive orders. The Federal guarantees are designed to assure equal employment opportunity
(within the Federal Government itself, as well as among State, local, and private employers); fair
housing; equal credit; nondiscrimination in federally assisted programs and activities; and basic
constitutional rights. Federal civil rights activities include agency efforts to implement these
guarantees. They also include monitoring and research activities, such as those performed by the U.S.
Commission on Civil Rights.
*
More detailed information regarding outlays and accomplishments is provided in Special Analysis J, Civil Rights
Activities, Budget of the United States Government, 1984.
127
PROPOSED CHANGE
The proposed 1984 Budget provides for an estimated increase of $68 million over actual 1982 outlays
for these activities. Outlays for most principal Federal civil rights agencies will be increased or
maintained at current levels.
RATIONALE
Spending levels for all civil rights activities reflect the administration's commitment to maintaining
and expanding protections for the civil rights of individuals, while realizing personnel and other
economies available through management and program reforms, increased efficiency, and
enhanced involvement of State and local governments in protecting individual civil rights.
EFFECTS OF PROPOSED CHANGE
The 1984 budget provides outlays sufficient to maintain and enhance the effectiveness of Federal
civil rights enforcement efforts. Considered individually, outlays for each of the major Federal civil
rights programs will exceed 1982 levels. In the only major civil rights activities for which proposed
1984 outlays do not exceed estimated outlays for 1983:
—
The Department of Education's Office for Civil Rights has substantially increased the
efficiency of its complaint processing, its primary enforcement function (reducing its
complaint backlog, for example, by 27% in 1982). Coupled with a downward trend in
complaints filed with the Office, these improvements will enable the Office to maintain
current protections against discrimination in education activities while realizing the
modest dollar savings proposed for 1984.
—
The Department of Housing and Urban Development's Office of Fair Housing and Equal
Opportunity's (FHEO) 1983 outlays include substantial "seed money" for developing the
capabilities of State and local agencies to process fair housing complaints now handled
by FHEO and for the development of Community Housing Resource Boards to involve
the private sector in preventing and eliminating discriminatory housing practices. 1984
outlays reflect savings achieved through increased State and local processing of
complaints now processed by FHEO, as well as the completion of most of the costly
"start-up" activities.
1982 AND 1983 CHANGES
•
The administration continued its efforts to refocus Federal enforcement on protecting the
civil rights of individuals. These efforts included:
—
Continued refinement of the Department of Justice's new approach to remedying
employment discrimination. This involves, in place of the quotas of the past,
requirements that employers guilty of discrimination institute specific programs
assuring that members of previously excluded groups are considered for employment
opportunities, and that they use genuinely nondiscriminatory procedures in selecting
from the resulting pool of eligibles.
—
A wide range of appellate and other litigation by the Department of Justice designed to
reassert Title Vll's basic requirement that employment decisions be based on
individuals' abilities and characteristics, not on presumptions based solely on their race,
sex, color, national origin, or religion. The Department filed a brief with the Supreme
Court defending Boston firefighters against layoffs based on race, and another
challenging the practice of many pension plans of setting contribution or periodic
benefit levels solely on the basis of sex. In response to the protests of female, Hispanic,
and white male police officers who may be denied promotions they have earned solely
because of their race, the Department has intervened in a Circuit Court case involving
128
the New Orleans Police Department. And the Department obtained a Supreme Court
decision establishing, once and for all, that persons employed by subsidiaries of foreign
corporations are protected by statutes prohibiting employment discrimination.
—
Continued opposition to discrimination against individuals in other significant areas,
including a Presidential Task Force's firm rejection of suggestions that quotas be
imposed to limit the participation of blacks in the armed services; the Administration's
continued opposition to the assignment of students on the basis of race and national
origin, either through de jure segregation or forced busing; and a proposed
amendment to the Age Discrimination in Employment Act designed to ban mandatory
retirement based solely on age.
—
Continued improvements in EEOC's activities on behalf of victims of discrimination. For
example, EEOC complaint processing and legal enforcement resulted in the recovery of
$134.6 million in backpay for identified victims of discrimination in 1982 (compared to
$77.6 million in 1980).
•
The Administration initiated management improvements in civil rights activities throughout
the Federal Government. For example, actions to correct long-standing financial and
personnel management problems at the EEOC were initiated in 1982, and will be continued
through 1983.
•
The Administration continued efforts to utilize the capabilities of State and local governments in assuring nondiscrimination. For example, during 1982, the EEOC provided over
$17.5 million in grants to State and local nondiscrimination agencies, and deferred 38,800
charges of employment discrimination to these agencies for processing. During 1982, HUD's
FHEO referred 56.7% of the Fair housing complaints it received to State and local agencies
for processing (compared with only 13% in 1980).
•
The President announced his support for extending the Congressional authorization of the
U.S. Commission on Civil Rights (due to expire this year) in his State of the Union Message.
This is but one indication of the importance to this Administration of the Commission's
mandate to assure that the laws protecting individuals against discrimination are faithfully
executed.
129
380-900 0 - 83 - 9 : QL 3
LEGAL SERVICES CORPORATION
AGENCY:
Legal Services Corporation
Functional Code:751and803
Funding
($ in millions)
1982
1983
1984
1985
1986
1987
1988
CURRENT SERVICES
Budget Authority
Outlays
241
259
241
242
256
256
272
272
288
288
304
304
322
322
REAGAN BUDGET
Budget Authority
Outlays
241
259
241
242
21
272
272
288
288
304
304
322
322
PROPOSED SAVINGS
Budget Authority
Outlays
256
235
PROGRAM DESCRIPTION
The Legal Services Corporation (LSC) funds State and local agencies that give free civil legal
assistance to the poor. LSC is a private non-profit corporation that acts independently of related
Federal social and community services programs. Grantees are involved both in cases for individual
clients and in broader "law reform" activities.
PROPOSED CHANGE
The Administration proposes that the corporation not be reauthorized and that no further separate
Federal funding be provided. LSC funding already enacted by Congress would be used for
responsibilities in existing cases, separation costs of Corporation and grantee staff, and related closeout functions.
RATIONALE
The Legal Services Corporation has operated since 1980 without an authorization approved by
Congress, due to differences over the proper Federal role, funding mechanism, and administrative
structure for legal services. The Administration proposes adopting a different approach: giving
States flexibility and discretion to use block grants funds for legal services activities, and relying on
private attorneys to fulfill their ethical obligations to serve the poor.
The Administration's $2.5 billion Social Services Block Grant includes adequate authority to fund
whatever legal services activities States may wish to provide for their citizens. These sources of funds
will give more flexibility to States, and permit the services to be more responsive to the direct needs
of their citizens, than the current Legal Services Corporation.
The American Bar Association (ABA) Code of Professional Responsibility states:
"The basic responsibility for providing legal services for those unable to pay ultimately rests
upon the individual lawyer, and personal involvement in the problems of the disadvantaged
can be one of the most rewarding experiences in the life of a lawyer. Every lawyer,
regardless of professional prominence or professional workload, should find time to
participate in serving the disadvantaged."
130
The nearly 600,000 attorneys nationwide can be a significant resource for legal services for the poor.
The Administration believes private bar members can and should do more to fulfill their obligations
through pro bono services. Private bar activities for the poor have increased modestly over the past
two years, in response to the Administration's call for greater involvement, and trims enacted in the
LSC budget. However, much more can be done. For example, 40 hours/year per attorney in donoted
services would provide more legal aid resources than the entire quarter-billion dollar Federal LSC
program.
In addition, the Federal Government should no longer subsidize the private bar in the fulfillment of
its ethical responsibilities to the poor. Revenues received by private law firms alone exceed $25
billion per year. Significant legal services for the poor can also be made available through modest
fee assessments and service requirements of State and local bar associations, and through inclusion
of service requirements in law school curriculum.
Restrictions on advertising, competition, and other barriers to normal market forces for legal services
have been substantially reduced over the last few years. This will increase the availability of low-cost
private legal services, particularly in "routine" cases such as divorce. Cases involving family law
(primarily divorces), consumer finance problems, landlord/tenant relations, and wills and estates areas which are handled on a regular basis by a large number of private attorneys - comprise over
50% of all LSC-funded casework.
Most legal services are now delivered by LSC grantees, operating as staff attorney offices directly
handling individual cases. A major Congressionally-mandated study concluded that other legal
service delivery systems which make greater use of the private bar are viable - "judicare" (operating
in conjunction with staff attorneys) and contracts with law firms. States could use Social Services
Block Grant funds to finance such legal services if they so choose.
EFFECTS OF PROPOSED CHANGE
With the use of Social Services Block Grant funds, State priority setting and control over resources
will be enhanced, overhead will be decreased and coordination among different social services at
the local level will be improved. Increased pro bono services will give the poor greater access to the
legal system and will help fulfill private ethical obligations. Participating in a variety of direct legal
matters with low-income clients will also be a useful professional experience for young attorneys
competing in tight job market. Direct assistance to eligible individual clients could be maintained or
increased above the current level. States will decide how the Social Services Block Grant funds may
be best used in serving the legal needs of the poor, including, for example, coordinating and
supporting pro bono work by private attorneys.
1982 AND 1983 CHANGES
In each of the last two budgets, the President has proposed eliminating separate LSC funding.
Congress has reduced the LSC budget by 25% and imposed tougher restrictions on LSC and grantee
activities, but the structure of independent, federally funded legal aid programs in every county in
the nation remains largely intact. Efforts to increase private attorney involvement in legal services
for the poor have increased, but remain at a relatively low level overall.
131
OLDER AMERICANS PROGRAMS
AGENCY:
Department of Health and Human Services
Department of Labor
Department of Agriculture
Funding
Functional Code:751and803
($ in millions)
1982
1983
1984
1985
1986
1987
1988
CURRENT SERVICES
Budget Authority
Outlays
1,006
988
1,054
1,041
1,105
1,091
1,156
1,141
1,210
1,195
1,264
1,249
1,322
1,296
REAGAN BUDGET
Budget Authority
Outlays
1,006
988
1,054
1,041
998
1,108
998
999
998
998
998
998
998
998
-107
+ 17
-158
-142
-212
-197
-266
-251
-324
-298
PROPOSED CHANGES
Budget Authority
Outlays
PROGRAM DESCRIPTION
Older Americans programs fund nutrition, social and other services designed to promote economic
well-being and independence for the elderly. They include: Administration on Aging programs
under Title III of the Older Americans Act administered by the Department of Health and Human
Services, the Elderly Feeding Program administered by the Department of Agriculture, and the
Senior Community Service Employment Program administered by the Department of Labor.
The Administration on Aging (AoA) in HHS makes grants to 57 State and, through them, to 670 Area
Agencies on Aging. These agencies deliver a range of social services to over 9 million older Americans
including transportation, information and referral, legal services and homemaker/home health
services. AoA also funds congregate and home-delivered meals. In FY 1983, 191 million meals were
served to over 3 million people. All persons over age 60 are eligible for AoA programs, regardless of
income. AoA also makes grants to Indian tribes and conducts research, training, and evaluations.
Under USDA's Elderly Feeding Program, nutrition projects are entitled to reimbusement in cash or
commodities for each meal they serve, subject to an overall annual funding level. In FY83, 92% of
these funds were paid to States in cash.
The Senior Community Service Employment Program (SCSEP) makes grants to national contractors
and State Agencies on Aging to subsidize part-time jobs for low-income persons aged 55 or over. In
FY83, 54,200 persons hold subsidized community jobs as day care aides, conservation workers,legal
aides,nutrition workers, or home-health care aides. National contractors receive 78% of all funds for
this program.
PROPOSED CHANGE
The Administration proposes to consolidate into AoA's existing Title III program those Older
Americans programs currently administered by other Federal agencies.The FY84 budget requests
$998 million for Older Americans programs. This funding level will maintain the level of services and
meals provided in FY83.
Legislation will be proposed to reform and transfer the Elderly Feeding program from USDA to HHS,
which administers all other nutrition activities under Title III of the Older Americans Act.
132
Second, the legislation will broaden AoA's Title III authority to allow continuation of subsidized
employment for older persons out of an expanded Title III grant to State and area agencies on
Aging. The FY84 budget requests no separate funding for SCSEP.
Reductions are proposed for State administrative activities and research, training and evaluations to
preserve funding for activities which directly serve the elderly.
RATIONALE
•
Expanding the range of services funded by AoA programs will enhance the ability of State
and Area Agencies on Aging to promote economic independence and well-being for the
elderly. These agencies are by law the principal coordinators of services to the elderly, and
their ability to serve this role will be strengthened if they no longer have to deal with three
separate Federal agencies in order to assist the elderly.
•
Consolidating two Federal programs into AoA further extends the flexibility already
available to States to transfer funds among AoA's categorical programs. The budget
proposal will give State and Area Agencies more control over resources and will strengthen
their ability to design effective programs.
•
AoA administration of senior employment would enhance coordination of programs now
assisting the elderly. Almost half the jobs currently subsidized involve service to the elderly.
In addition, State and local resources will be maximized since no more than 8.5% of AoA
funds can be spent on administration, compared to 15% for SCSEP.
•
Similarly, consolidating Elderly Feeding into AoA programs will reduce wasteful and
duplicative overhead. Most meal programs already choose to receive cash, and States will be
free to continue purchasing commodities from USDA should they wish to do so.
•
The FY84 budget request is sufficient to maintain the number of meals served and the level
of other services provided at or above their FY83 levels. As the General Accounting Office has
pointed out, considerable savings can be achieved by improving the management of AoA
programs, without affecting program quality. Further, service levels can be maintained by
encouraging voluntary contributions. In 1983, for example, an average contribution of less
than 60tf per meal generated $118 million for Area Agencies to redirect toward the neediest
older Americans.
•
Reductions in administrative and discretionary activities restrain growth in Federal spending
while preserving funding for direct services to older Americans.
EFFECTS OF PROPOSED CHANGE
•
Over 11,000 paid staff at the State and local level will serve an even stronger role in planning
and delivering services to older American.
•
Service levels will be maintained. 191 million meals will be served in congregate settings or
home-delivered. Nine million people will receive supportive social services. Employment
opportunities will be promoted for older Americans.
•
Grants to 83 Indian tribes will support meals and services for 15,000 older Indians.
133
ACTION
AGENCY:
ACTION
(Domestic Volunteer Programs)
Functional Code:751and803
Funding
($ in millions)
1982
1983
1984
1985
1986
1987
1988
CURRENT SERVICES
Budget Authority
Outlays
132
135
129
132
130
130
134
133
139
137
143
141
147
146
REAGAN BUDGET
Budget Authority
Outlays
132
135
129
132
110
1 13
110
110
110
1 10
1 10
110
110
110
20
25
22
29
27
33
32
37
36
PROPOSED SAVINGS
Budget Authority
Outlays
16
PROGRAM DESCRIPTION
ACTION provides financial support for volunteers under four major programs. Three are for older
Americans: the Foster Grandparents program, which provides stipends to low-income elderly
working 20 hours a week in various settings with children who have handicaps or other special
needs; the Senior Companion program, which provides stipends to low-income elderly working 20
hours a week to help prevent the institutionalization of the chronically homebound elderly; and the
Retired Senior Volunteer Program (RSVP), which pays project costs and incidental expenses for the
elderly volunteering to provide various services to their communities. The fourth program is the
Volunteers in Service to America (VISTA), which provides expenses, stipends, and allowances to fulltime volunteers serving in a variety of community-based organizations. In addition, ACTION provides
seed-money assistance to encourage volunteer activities.
PROPOSED CHANGE
The 1984 budget request would complete the phase out of the VISTA program started in the 1981
Reconciliation Act. It would also substantially reduce the portion of the ACTION budget devoted to
Federal employment and administrative expenses.
RATIONALE
The VISTA program is both more expensive and less effective than the older American volunteer
programs.
In 1982, almost 21% of ACTION'S budget went for program support, an extremely high proportion.
EFFECTS OF THE PROPOSED CHANGE
The 1,750 VISTA volunteer service years provided in 1983, an insignificant portion of nationwide
voluntary service, would no longer take Federal funding.
The portion of ACTION'S budget devoted to program support would be reduced to 16.5%; FTE
would decline from 490 in 1983 to 375 in 1984.
1982 AND 1983 CHANGES
In 1982, the number of VISTA volunteer years was reduced to 2,227 from the 4,208 financed in 1981.
This total was reduced to 1,750 in 1983.
134
REFUGEE AND ENTRANT ASSISTANCE
AGENCY:
Functional Code:751and803
Department of Health and Human Services
Funding
($ in millions)
1982
1983
1984
1985
1986
1987
1988
CURRENT SERVICES
Budget Authority
Outlays
689
1,011
579
632
485
521
355
366
288
299
246
254
200
225
REAGAN BUDGET
Budget Authority
Outlays
689
1,011
579
632
485
521
355
366
288
299
246
254
220
225
PROPOSED CHANGE
Budget Authority
Outlays
PROGRAM DESCRIPTION
With Federal financial support, States administer programs of cash, medical, and other assistance to
refugees and entrants for up to three years after their arrival in the U.S. Other refugee and entrant
assistance activities include matching grants to voluntary agencies for Soviet refugee resettlement
and public health grants. U.S. refugee admissions and entrant flows have decreased dramatically
from a high of 210,000 in 1980 to 90,000 anticipated in 1983. Outlays for refugee and entrant
assistance are expected to decline in 1984 and in the future due to reduced flows from Indochina and
elsewhere. In recent years, the refugee assistance program has experienced welfare dependency
rates as high as 80%.
PROPOSED CHANGE
Consolidate Federal funding in a single per capita grant to State for all assistance to refugees and
entrants who are not categorically eligible for AFDC, Medicaid, or General Assistance. Those who
are eligible for regular Federal or State welfare programs would not be affected, and Federal
reimbursement of these programs would continue.
RATIONALE
States and voluntary agencies directly administer refugee and entrant assistance. The per capita
grant for assistance to non-categorically eligible refugees and entrants would give States and
localities greater flexibility and discretion needed to reduce high welfare dependency and special
refugee/entrant adjustment problems. The complete discretion States would have under the per
capita grant program recognizes the wide variations in assistance programs and economic conditions
in each State. States could continue the existing programs "as is", or finance a new mix of exemplary
services designed to meet the needs of newly arriving refugees given particular conditions in the
State. Most of the current Federal constraints on State and local activities and services would be
eliminated.
EFFECTS OF THE PROPOSED CHANGE
There would be no funding reduction from current estimates of refugee and entrant assistance costs
under the per capita grant for FY84.
States would receive formula grants based on the state refugee and entrant population, currently
the basis for distributing social services funds.
135
1982 AND 1983 CHANGES
The Refugee Assistance Amendments of 1982 strengthened work requirements for refugees and
entrants on public assistance and prohibited aid to refugees and entrants who are full time students.
Beginning in FY82, the Office of Refugee Resettlement implemented new cash and medical
assistance regulations limiting Federal reimbursement of such aid to refugees and entrants not
categorically eligible for AFDC, Medicaid and General Assistance to 18 months after arrival in the
U.S., after which refugees and entrants would be eligible for public assistance as other Americans
are.
136
FARM PROGRAMS
AGENCY:
Functional Code: 351
Department of Agriculture
Funding
($ in millions)
1982
1983
1984
1985
1986
1987
1988
CURRENT SERVICES
Budget Authority
Outlays
16,063
11,652
17,858
18,859
10,491
12,394
11,000
13,700
12,400
13,400
13,400
14,600
12,100
12,500
REAGAN BUDGET
Budget Authority
Outlays
16,063
11,652
15,186
18,255
10,418
9,255
6,800
7,700
5,400
6,600
6,200
7,000
6,300
7,200
2,672
604
73
3,138
4,200
6,000
7,000
6,800
7,200
7,600
5,800
5,300
PROPOSED SAVINGS
Budget Authority
Outlays
PROGRAM DESCRIPTION
The Commodity Credit Corporation (CCC) finances price support, export credit and related programs
to mitigate the adverse effects of price fluctuations on farmers and help ensure a vital U.S. farm
economy. Price support is provided through loans, purchases and direct payments.
PROPOSED CHANGE-- beginning in FY 1983
•
Payment-in-Kind (PIK) -- In return for reducing their production, farmers of wheat, corn,
sorghum, cotton, and rice would receive, at no cost to them, some of the surplus
commodities now pledged as collateral for Federal price support loans or owned by CCC (the
corresponding loans would be forgiven).
•
Freeze of target prices -- Target prices for wheat, feed grains, cotton, and rice would be
frozen at current (1983 crop) levels.
•
Increased exports -- Enhanced promotion and credit programs should help increase the
amount of farm exports for cash and credit (described in further detail in a separate fact
sheet).
•
Increased donations -- Surplus commodities held by CCC would be made available for
donation through international humanitarian organizations.
•
Honey price support-- The honey price support program would be changed from mandatory
to discretionary.
•
ELS cotton price support ~ The extra-long staple cotton support formula would be modified
and the acreage allotments and quotas would be eliminated.
The PIK and export initiatives are being implemented now under current authorities. Legislation is
being proposed for the other above program changes.
RATIONALE
•
The President's farm program is designed to protect formers' income while simultaneously
reducing excess inventories and excess production, and enhancing farm product demand, to
correct the current agricultural supply/demand imbalance.
137
•
During the past two years, good weather has resulted in unexpected increases in farm crop
production. This increased supply, coupled with lower demand than anticipated, has reduced
prices and created large surpluses.
•
As price support programs automatically cushion the adverse effects of low prices and excess
supplies, CCC budget outlays have increased to record highs of $11.7 billion in 1982 and over
$18 billion in 1983. This occurred because the Agriculture and Food Act of 1981 built in high
and increasing guaranteed target prices based on previously expected inflation in costs and
market prices. However, actual farm costs declined, farm prices remained low and supply and
demand remained out of balance.
•
•
—
The 1981 Farm Program has built in 22-33% cumulative increases in target prices over
the 1981-85 crop year period.
—
Costs of production are expected to increase a total of only 13%) to 15% over the same
period.
—
Current target prices generally cover these increased costs.
Unless changed now, these excessively high target prices will continue to provide an
incentive for overproduction; maintaining large surplus stocks, low farm corp prices and high
Government costs.
—
A freeze of target prices would more than cover current and projected increases in farm
production costs and provide substantial savings to the American taxpayer.
—
This proposed freeze is consistent with other inflation-related program proposals,
including a freeze in cost-of-living adjustments and freezes of many discretionary
Federal programs Government-wide.
This new comprehensive program should be less costly to the general taxpayer and less of a
restriction on farm producers than any other course available to us.
EFFECTS OF THE PROPOSED CHANGE
Surplus grain stocks, which have been overhanging the market and depressing prices, are expected
to be reduced by one-third from current services levels by crop year 1984.
Outlay savings under the President's farm program can be divided as follows:
($ in millions)
PIK and other reforms
Target price freeze
Total savings
1983
1984
1985
1986
1987
1988
604
2,588
550
3,138
4,100
1,900
6,000
3,500
3,300
6,800
3,300
4,300
7,600
300
5,000
5,300
-
604
1982 AND 1983 CHANGES
As part of the Reconciliation Act of 1982, Congress approved the Administration's proposal to reduce
dairy program costs and enacted a new dairy assessment program which is expected to help bring
dairy production more in line with demand and reduce dairy outlays in 1984 and thereafter from
levels of $2.2-3.2 billion a year to about $600 million a year. The President's budget assumes
continuation of this program.
138
SOIL AND WATER CONSERVATION
AGENCY:
Department of Agriculture
Functional Code: 301, 302 and 304
Funding
($ in millions)
1982
1983
1984
1985
1986
1987
1988
CURRENT SERVICES
Budget Authority
Outlays
798
809
8051/
8161/
840
876
864
870
887
890
910
913
935
929
REAGAN BUDGET
Budget Authority
Outlays
798
809
7301/
7802/
544
7112/
549
589
549
581
549
579
549
565
296
165
315
281
338
309
361
334
386
364
PROPOSED SAVINGS
Budget Authority
Outlays
1/
?/
2/
753/
363/
Appropriation
Net of proposed rescissions.
Amount proposed for rescissions.
PROGRAM DESCRIPTION
The Soil Conservation Service (SCS) provides soil and water conservation technical assistance to
landowners, conducts soil surveys, and collects national information on soil and water related
conservation problems. It also assists sponsors of small water resource projects in planning and
implementing works of improvement in small watersheds primarily to reduce flood damage in rural
areas and small communities.
The Agricultural Stabilization and Conservation Service (ASCS) administers the Agricultural
Conservation Program (ACP), a program of financial assistance to cost share with landowners the
cost for installing soil and water conservation practices on private lands.
PROPOSED CHANGE
•
The FY 1984 Budget for SCS is $475 million, a net decrease of $44 million from the FY 1983
appropriation (net of proposed rescissions).
Changes from FY 1983
Conservation Operations
+ $5.3 million
Reflects increase in operating costs and targeting of conservation technical assistance,
partially offset by decreases in inventory and monitoring and resource appraisal and
program development.
Water Resource Programs
-$23.4 million
Reflects reduction in number of new starts for river basin surveys, a no new planning
starts policy, and a no new project construction starts policy for small watershed and
flood prevention projects
Great Plains Conservation Program
Reflects reduction in number of new contracts.
Resource Conservation and Development program
Reflects proposed termination of RC&D program in FY 1983.
139
-$5.8 million
-$20.1 million
•
The FY 1984 Budget for conservation cost-share programs of the ASCS provide $69 million for
FY 1984, a net decrease of $143 million from FY 1983.
—
Agricultural Conservation Program, Emergency Conservation
Program, Water Bank Program, Forestry Incentives Program
-$155.3 million
The objective of these cost-share programs are combined in a single consolidated ACP.
—
Colorado River Salinity Control
New on-farm salinity control program is proposed.
+ $12.6 million
RATIONALE
•
Funding for discretionary programs must be carefully controlled if the economic recovery is
to be sustained. Accordingly, for these discretionary programs, Federal assistance is proposed
for funding critical needs, and selective reductions are proposed for relatively lower priority
situations.
•
Total funding for soil and water conservation activities in FY 1984 is consistent with priorities
established in the Secretary's program for USDA soil and water conservation under RCA for:
—
Targeting Federal technical assistance to geographical areas where there is a
concentration of critical problems affecting soil productivity.
—
Assigning highest priority to reducing soil erosion and water conservation.
—
Placing a greater reliance on State and local governments for solutions to resource
problems.
•
Investments in planning and developing water resource projects were deferrable and their
benefits mainly local in nature.
•
A substantial portion of water resource projects provide recreation enhancement or offer
the potential for increased crop production through flood protection for agriculture lands.
These are of lower priority in this budget and fiscal situation.
•
Reviews of RC&D programs conducted since 1975 by SCS, USDA and by the GAO have been
unable to demonstrate significant measurable program effectiveness. Moreover, the local
resource and economic development objectives of RC&D projects primarily are more
appropriate as objectives for State and local governments.
•
The decrease and consolidation of ACP from the FY 1983 appropriations for the ASCS and for
the Great Plains Conservation Program of SCS are both proposed for the following reasons:
—
This Administration's PIK program is designed to substantially increase the acreage of
land taken out of production. The lands set aside are likely to be the most erosionprone land, thereby substantially reducing the need for Federal cost share assistance for
reducing soil erosion on cropland.
—
Reductions in these cost-share programs can be more readily made than in other
conservation programs involving RIF's of trained personnel.
—
The consolidated ACP would allow State and county offices greater flexibility to make
tradeoffs between conservation programs in targeting Federal funds ($56 million) to
their most critical conservation needs. This should contribute to a more cost-effective
use of available funds.
EFFECTS OF THE PROPOSED CHANGE
•
Technical assistance will be targeted to 282 additional counties in FY 1984. A total of 806
counties in 44 States will receive $26.3 million.
140
•
No new planning and no new project construction starts are proposed for the Watershed and
Flood Prevention programs in FY 1984. Available funds are concentrated in completing work
already underway.
•
RC&D would be terminated in FY 1983 and no funding sought for FY 1984.
•
The proposed Colorado River Salinity Control Program will provide cost-sharing and technical
assistance to reduce salt loading in the Colorado River Basin through improved on-farm
water management, and to improve water quality for downstream users in the U.S. and
Mexico.
•
Proposed reduction for the Great Plains Conservation Program in FY 1984 would come
entirely from new cost-share agreements. An estimated 300 new contracts on 625K acres
would be signed in FY 1984 and commitments to present cooperators would be honored.
1982 AND 1983 CHANGES
•
Allocations for the FY 1983 ACP program have been announced and include targeting of $19
million to the critical areas jointly identified by ASCS and SCS.
•
Targeting of technical assistance to critical soil and water resource problem areas was
provided in FY 1982 at $6.6 million in 205 counties, growing to $12.5 million in 524 counties
in FY 1983.
141
EXPORT CREDITS AND GUARANTEES
AGENCY:
Export-Import Bank
Functional Code: 155
Funding
($ in millions)
1982
1983
1984
1985
1986
1987
1988
CURRENT SERVICES
Direct Loans
Guaranteed Loans
Outlays
3,516
5,832
1,173
3,830
8,000
1,192
4,030
8,420
1,460
4,230
8,840
956
4,430
9,250
782
4,625
9,660
527
4,835
10,095
578
REAGAN BUDGET
Direct Loans
Guaranteed Loans
Outlays
3,516
5,832
1,173
3,830
8,000
1,192
3,830
10,000
1,433
3,830
10,000
853
3,830
10,000
566
3,830
10,000
190
3,830
10,000
116
-200
-400
+ 1,580 +1,160
-27
-103
-600
+750
-216
-795
340
-337
-1,005
-95
-462
PROPOSED CHANGES
Direct Loans
Guaranteed Loans
Outlays
PROGRAM DESCRIPTION
The Export-Import Bank provides credit support for the sale of American goods and services overseas
in the form of long-term direct loans and loan guarantees and insurance against defaults by foreign
purchasers. The programs enable U.S. exporters to obtain financing on terms competitive with those
offered foreign exporters by their governments or in areas where commercial lenders are either
unable or unwilling to extend credit without an Eximbank guarantee.
PROPOSED CHANGE
The Administration proposes to:
•
maintain direct lending at $3.83 billion in 1984; and
•
increase loan guarantees from $5.8 billion in 1982 to $10 billion by 1984.
In addition, the President will seek a supplemental authorization for direct loan obligations of up to
$2.67 billion for 1984 if necessary to meet subsidized foreign officially supported competition.
RATIONALE
The Administration's proposals are designed to respond to market conditions and to counter foreign
trade-distorting practices:
•
In the past eighteen months, the Administration has successfully negotiated major increases
in minimum interest rates on export credits, and market interest rates have declined.
•
As a result, the majority of official export credit financing provided by the United States and
other OECD countries is now offered at or above market rates. Loan guarantees can provide
export financing at competitive rates.
•
If, however, market conditions became unfavorable, foreign export subsidies could again
become a problem. In this situation, increased direct lending may be justified if it is explicitly
temporary, serves the strategic purpose of increasing the cost of interventionist policies by
foreign governments, and convinces them to reduce their trade distortions.
142
•
The Administration remains opposed to export credit subsidies because they are a form of
protection which hurts the country which adopts them as well as those which respond to
them. Nonetheless, the possibility of providing subsidies is held open, in order to serve the
strategic objective of reducing foreign trade barriers.
EFFECTS OF THE PROPOSED CHANGE
The Bank's programs supported export financing that covered 2.6% of U.S. merchandise exports in
1982 and are forecast to support 3.7% of exports in 1984 if proposed authority is fully utilized.
1982 AND 1983 CHANGES
•
The Bank's programs are now competitive with most foreign official export credit programs.
Interest rates are at the minimum rates permitted under international agreements but above
its cost of funds in the majority of cases.
•
The Bank's programs are now better targeted with resources focused on meeting foreign
financing and supplementing private capital.
143
URBAN DEVELOPMENT ACTION GRANTS
AGENCY:
Department of Housing and Urban Development
Funding
($ in millions)
1982
CURRENT SERVICES
Budget Authority
Program Level
Outlays
REAGAN BUDGET
Budget Authority
Program Level
Outlays
474*
337
388
1983
1984
1985
1986
1987
1988
440
566
488
468
748
516
497
533
536
526
562
523
556
592
519
588
624
574
440
566
488
196
476
512
440
476
479
440
476
439
440
476
414
440
476
440
272
272
4
57
57
57
86
86
84
116
116
105
148
148
134
PROPOSED SAVINGS
Budget Authority
Program Level
Outlays
*
Functional Code:751and803
The 1982 budget authority figure includes a $39 million reappropriation.
PROGRAM DESCRIPTION
The Urban Development Action Grant (UDAG) program provides discretionary, competitive grants to
units of local government for use in conjunction with private funds to promote locally determined
and project-specific economic development. By law, at least 25% of these funds are earmarked for
small cities.
PROPOSED CHANGE
For 1984, the Administration is proposing budget authority of $196 million. This funding, coupled
with deferred funding from FY 1983 of $244 million, will maintain the level of UDAG funding
announcements at $440 million. In addition, an estimated $36 million in recaptured deobligations
will be available.
RATIONALE
In 1982 and 1983, the Congress provided direct appropriations of budgetary resources to maintain a
$440 million program level, excluding deobligations. By the end of 1982, a substantial amount of
previously appropriated resources remained unobligated. To avoid a wasteful and inefficient surge
in 1983 program activity, the Administration has deferred $244 million of the unobligated resources
carried over from 1982 to 1983. These resources will be used to fund 1984 activity.
EFFECTS OF PROPOSED CHANGE
The UDAG program will continue to assist communities in partnership with private businesses in
undertaking economic development projects in order to generate new jobs, increase tax bases, and
promote economic revitalization in distressed areas.
The action grants projects approved during 1982 are expected to create 54,000 jobs and raise $35
million in new tax revenues for the local governments involved. 1982 obligations will leverage $2.0
billion in private investment.
144
RENTAL REHABILITATION GRANTS
AGENCY:
Department of Housing and Urban Development
Funding
CURRENT SERVICES
Sec. 8 Mod. Rehab.
Budget Authority
Outlays
Rehabilitation Loan Fund
Budget Authority
Outlays
REAGAN BUDGET
Rental Rehabilitation Grants
Budget Authority
Outlays
Sec. 8 Mod. Rehab.
Budget Authority
Outlays
Functional Code: 451
($ in millions)
1982
1983
1984
1985
1986
1987
1988
---
1,080
107
1,134
195
1,190
272
1,250
336
1,325
403
1,378
472
--
1
43
-2
-2
-2
-2
--
--
150
-
150
75
150
150
150
150
150
150
435
44
107
178
217
222
226
230
-23
1
---
-1,080
--
-984
-60
-1,040
+22
-1,100
+38
-1,175
-25
-1,228
-90
Rehabilitation Loan Fund
Budget Authority
Outlays
PROPOSED CHANGES
Budget Authority
Outlays
PROGRAM DESCRIPTION
At present, two programs of the Federal Government subsidize the rehabilitation of rental
properties: the Section 8 Moderate Rehabilitation program and the Rehabilitation Loan Fund. In
addition, localities may use Community Development Block Grant funds to rehabilitate rental
properties.
PROPOSED CHANGE
The Administration proposes to terminate the Section 8 Moderate Rehabilitation program and the
Rehabilitation Loan Fund and substitute a new grant program for subsidizing the rehabilitation of
rental units. This program - Rental Rehabilitation Grants ~ would be linked with the Modified
Section 8 Housing Payment Certificate program. When a unit is rehabilitated under this program, it
will be made available to low-income tenants with housing payment certificates. The program will
provide grants to States and units of local government for up to half the cost of rehabilitating rental
properties. The Administration is proposing an authorization of $150 million for fiscal year 1984.
RATIONALE
The Administration proposes the replacement of the Section 8 Moderate Rehabilitation program
and the Rehabilitation Loan Fund with the new Rehabilitation Grant program because:
•
Up-front grants are more efficient subsidies than the present program.
380-900 0 - 83 - 10 : QL 3
145
•
Coupling Rehabilitation Grants with the Modified Section 8 Housing Payment Certificates
will assure that Federal rehabilitation efforts will primarily benefit low-income tenants.
EFFECTS OF THE PROPOSED CHANGE
At an anticipated average grant of $5,000 per unit, the new program would assist in the
rehabilitation of an estimated 30,000 rental units annually.
146
FEDERAL SUBSIDY FOR SAINT ELIZABETHS HOSPITAL
AGENCY:
Department of Health and Human Services
Funding
Functional Code: 550
($ in millions)
1982
1983
1984
1985
1986
1987
1988
CURRENT SERVICES
Budget Authority
Outlays
95
69
77
98
63
75
55
65
48
53
41
44
35
36
REAGAN BUDGET
Budget Authority
Outlays
95
69
77
98
63
75
55
65
48
53
41
44
35
36
PROGRAM DESCRIPTION
In 1855, Congress established a government hospital for the insane on the "Saint Elizabeths tract" in
southeast Washington to provide mental health services to residents of the District of Columbia and
certain Federal beneficiaries. Like the recently-repealed 1798 entitlement to free care for merchant
seamen, Saint Elizabeths Hospital (SEH) entitlements to federally subsidized care for District
residents are based on needs of an earlier era and on a Federal role established before District of
Columbia home rule.
SEH offers a full range of services to approximately 1,760 inpatients (about 90% are District
residents) and 1,800 outpatients. Programs are financed largely by Federal appropriations and by
modest reimbursements for services rendered to patient groups-primarily residents of the District of
Columbia.
The availability of beds at SEH and the willngness of the Federal Government to subsidize the cost of
care there have been incentives to inappropriate institutionalization of large numbers of District
residents. The U.S. District Court in the District of Columbia recognized this in 1975 and ordered the
Federal and District governments to provide mental health care in less restrictive settings for several
classes of SEH patients. Despite community outplacement of several hundred SEH patients since that
date, surveys of patient care needs indicate that up to 740 of the inpatients currently at SEH should
be in less restrictive community settings.
PROPOSED CHANGE
The FY 1984 budget proposes a continuation of the policy that the District of Columbia assume an
increasing share of the cost for the care of patients who are District residents.
RATIONALE
Approximately 90% of the patients at SEH are District residents. Contributions made by the District,
however, amounted to only 18% of the Hospital's operations in FY 1982 and 19% in FY 1983. In FY
1984, the District will be expected to make a larger contibution toward the operating costs of the
Hospital, with the 10 year goal of phasing over to the District the costs of care for its residents in
order to accomplish the following objectives:
•
accelerate implementation of the Dixon court order requirements;
•
transfer many District patients to more appropriate, less restrictive, and less expensive
environments;
147
•
reduce direct Federal subsidies and direct Federal services delivery for District residents
consistent with the more limited Federal support that residents of other States receive; and
•
increase District responsibility for and control over mental health services delivered to District
residents, consistent with home rule and federalism.
EFFECTS OF THE PROPOSED CHANGE
The SEH operating budget for FY 1984 will be funded by:
•
•
a direct Federal subsidy for District of Columbia patients of $63 million;
an estimated $40 million payment from the District of Columbia for SEH care provided
District residents;
•
an estimated $28 million reimbursement from Medicaid for care of Medicaid-eligible
patients at SEH; and
•
an estimated $12 million for reimbursements from Federal agencies whose beneficiaries
receive care; other third party reimbursements; and reimbursements from the National
Institute of Mental Health (NIMH) for services provided to the NIMH research facility on the
Saint Elizabeths grounds.
1982 AND 1983 CHANGES
The Joint Commission on Accreditation of Hospitals awarded the Hospital a two-year accreditation
status through calendar year 1983.
An expanded Medicare certification was obtained from the Health Care Financing Administration
and the Hospital has received Medicaid certification from the District of Columbia Government.
Medicare and Medicaid certification permits the Hospital to obtain all reimbursements for services
delivered to its Medicare and Medicaid eligible patients.
The Hospital continues to implement the Dixon Plan. During FY 1983, an additional 300 inpatients
are to be outplaced and 1,100 outpatients are to be transferred to community-based mental health
services, contingent upon the availability of adequate services and termination of the current court
ordered moratorium on outpatient transfers. Increased admissions, offset by additional outplacement, reduces the census to 1,760 at the end of FY 1983. The outpatient census is reduced from 1,850
in 1982 to 1,800 in 1983.
148
TERMINATION OF DISTRICT OF COLUMBIA GOVERNMENT REPAYABLE
ADVANCES AND CAPITAL BORROWING FROM THE U.S. TREASURY
AGENCY:
Functional Code: 850
Department of the Treasury
Funding
($ in millions)
1982
1983
1984
1985
1986
1987
1988
CURRENT SERVICES
Short-term (Borrowing Cost)
Capital Borrowing
12
10
10
10
10
10
10
145
145
145
145
145
145
145
REAGAN BUDGET
Short-term (Borrowing Cost)
Capital Borrowing
12
10
145
145
PROPOSED SAVINGS
Short-term (Borrowing Cost)
Capital Borrowing
115
10
30
10
145
10
145
10
145
10
145
PROGRAM DESCRIPTION
Traditionally, the District of Columbia Government has met short-term cash flow needs by obtaining
repayable interest-free advances from the U.S. Treasury. Generally, the City repays these short-term,
interest-free loans in the same year. The 1982 amount for short-term, interest-free advances was
$140 million.
The District of Columbia has financed all of its capital improvement projects by borrowing from the
U.S. Treasury at the prevailing Treasury rate. The payback period for each loan is 30 years in equal
annual payments. The loans outstanding as of September 30, 1982, totalled $1.7 billion. Because of
congressional concern about the District's financial position, the Congress has several times extended
this authority to continue borrowing from the Treasury for capital projects until it can enter the
bond market.
PROPOSED CHANGE
Beginning in 1984, the Administration will no longer make interest-free repayable advances to the
District for its cash flow needs. Under existing authority in the Home Rule Act, the District may issue
revenue anticipation notes to meet its operating cash needs. In exercising this authority, the District
will be meeting its cash needs in a manner similar to other municipalities.
Also beginning in 1984, the Administration proposes to provide authority for one year transitional
borrowing for capital projects in the amount of $115 million. This authority is intended to supplement the District's capital projects needs in that year as the City seeks to enter the tax exempt bond
market to finance capital projects.
RATIONALE
The Administration supports the efforts of the District of Columbia Government to enter the private
market. This would enhance the financial independence of the District, and would reduce the cost of
borrowing for the District Government. This action would be consistent with the policies of the
Administration to eliminate the Federal Government as an unnecessary financial intermediary and to
reduce Federal involvement in the affairs of local government.
149
EFFECTS OF THE PROPOSED CHANGE
•
The termination of interest-free repayable advances eliminates the implicit subsidy to the
District. The U.S. Treasury will no longer incur interest expenses as it borrows funds to make
interest-free loans to D.C.
•
It is more costly for the District to borrow from the U.S. Treasury than to finance capital
projects in the municipal bond market. If the District were in the tax exempt bond market, it
would save the City millions of dollars each year.
150
SUBSIDIES FOR NON-PROFIT MAILERS
AGENCY:
Functional Code: 372
U.S. Postal Service
Funding
($ in millions)
1982
1983
1984
1985
1986
1987
1988
CURRENT SERVICES
Budget Authority
Outlays
707
707
789
789
760
760
964
964
985
985
1,046
1,046
909
909
REAGAN BUDGET
Budget Authority
Outlays
707
707
789
789
400
400
400
400
400
400
400
400
400
400
360
360
564
564
585
585
646
646
509
509
PROPOSED SAVINGS
Budget Authority
Outlays
PROGRAM DESCRIPTION
The Postal Service provides mail service at reduced rates for certain classes of mail. These include
rural newspapers, non-profit organizations, classroom publications, and non-profit organizations.
This appropriation reimburses the Postal Service for revenue that it uses as a result of these lower
rates. Although these funds are appropriated to the Postal Service, they really represent a subsidy to
these nonprofit mailers. The subsidy enables these organizations to mail at rates that are lower than
their true cost to the Postal Service.
PROPOSED CHANGE
The Administration will submit legislation to reduce the subsidy by changing the method by which
the subsidy is allocated. This will result in lower cost to the Federal government.
RATIONALE
•
The Administration believes that clearly assignable costs-such as these mailing costs-should
be borne by those who incur them. This would argue for complete elimination of the subsidy.
Moreover, the subsidies have little programmatic merit. The Federal Government already
provides substantial subsidies to churches and charitable institutions through the existing tax
structure.
•
However, the Administration recognized the substantial role played by these organizations
in contributing to the volunteer fund-raising effort in this country. Therefore, it has been
decided to maintain the subsidy at the $400 million level.
EFFECTS OF THE PROPOSED CHANGE
•
Subsidized mailers will receive an added incentive to trim mailing lists. Mailers frequently
send more than one copy of a mailing to the same individual because it is cheaper to mail
duplicates than to canvass mailing lists for duplicate names.
•
Third-class, non-profit mailers represent approximately 70% of the total subsidized mail
volume. Currently, approximately one-half the total mailing costs of these mailers are paid
by the government. This proposal would reduce this to approximately one-fifth of these
costs.
151
PUBLIC BROADCASTING FUNDS
AGENCIES:
Corporation for Public Broadcasting
Functional Code: 503
National Telecommunications and Information Administration
(NTIA)
Funding
($ in millions)
1982
CURRENT SERVICES
Budget Authority
Outlays
REAGAN BUDGET
Budget Authority
Outlays
190
184
1983
1984
1985
1986
1987
1988
152
161
142
154
148
154
155
156
161
161
168
168
152
161
130
153
85
96
75
77
65
65
55
55
12
63
59
80
96
96
113
113
PROPOSED SAVINGS
Budget Authority
Outlays
1
79
PROGRAM DESCRIPTION
The Corporation for Public Broadcasting provides funds for production and p r o g r a m m i n g to the 230
radio and 170 television stations which comprise the public broadcasting network. NTIA, t h r o u g h its
Public Telecommunications Facilities Program (PTFP), provides grants for public broadcasting
facilities construction and the purchase of telecommunications equipment in areas of the country
not currently served by the public broadcasting industry.
PROPOSED CHANGE
The Administration proposes to terminate the PTFP in 1984. The CPB is funded t w o years in advance
and the Administration is proposing to rescind $45 million for 1985 (bringing the total CPB
appropriations to $85 million). Further reductions in funding are sought for 1986.
RATIONALE
There are several reasons why the Administration is seeking the proposed reductions in public
broadcasting funding.
•
The Administration has sought to induce private and user support of public services
whenever feasible and equitable. Public broadcasting is enjoyed by a sector of the
population which can provide significant financial support.
As data gathered from
independent surveys indicate, 4 1 % of the public television audience has family incomes
greater than $20,000. If each of these higher income viewers were to contribute just six or
seven dollars to public broadcasting, the need for Federal support of the CPB and PTFP w o u l d
be unnecessary. Similar support from public radio audiences would further assure public
broadcasting's independence from Federal support.
•
The Administration cannot now suppport extensive funding for programs w h i c h may be
desirable, but which are discretionary in nature. In an effort to lower the Federal deficit and
assist the American economic recovery in the most equitable way possible, many similar
programs have also been cut dramatically.
152
•
There are additional funds for public broadcasting targeted through other programs and
agencies. The Department of Education, as well as the National Endowment for the Arts and
the National Endowment for the Humanities, also provide funds for programming and
production. These funds are more specifically designed to further the missions commonly
ascribed to public broadcasting, such as education.
•
Other factors also have affected the Administration's position on this issue. Potential
changes in FCC rules and regulations would further allow the public broadcasting industry to
be independent of Federal support without compromising their requirement to serve the
public. For example, the FCC could issue rules allowing FM broadcasters (including public
radio) to more fully utilize a portion of their assigned spectrum, which frequently goes
unused. The telecommunications industry is also experiencing rapid technological advances
that should encourage the development of television services similar to those currently
supported by the CPB. Producers of public radio programming are developing plans to
become independent of all CPB support. These developments further support the
Administration's position on reduced CPB and PTFP funds.
EFFECTS OF PROPOSED CHANGE
This 14% reduction in public broadcasting funds over the next 3 years will require the public
broadcasting industry to more aggressively seek funding from other sources-from individuals,
corporations, and other non-Federal organizations. The beneficiaries of public broadcasting fundsviewers and listeners-should not experience any loss in services.
1982 AND 1983 CHANGES
Much has been done to slow the growth of Federal funding for public broadcasting for 1982 and
1983. The PTFP program has been reduced from $18 million in I982 to $15 million in 1983. However,
now that over 95% of the United States receives public broadcasting services, Federal expenditures
to expand public broadcasting coverage are unnecessary.
CPB appropriations have similarly been reduced in the last 2 years from $137 million for 1983 and
$130 million for 1984. The potential for private support of CPB has been largely untapped (only
about 10% of public broadcasting funding is provided through individual donations). More
aggressive fundraising from both individuals and corporations, as well as other financing
mechanisms such as limited advertising, are real and feasible alternatives to Federal financing at the
current levels.
153
NUCLEAR WASTE FUND
AGENCY:
Department of Energy
Functional Code: 270
Funding
($ in millions)
1982
1983
1984
1985
1986
1987
1988
179
189
217
214
307
277
325
323
379
370
450
437
468
466
OFFSETTING RECEIPTS
98
448
482
531
591
640
PERCENT RECOVERED (BA)
45
146
148
140
131
137
PROGRAM LEVEL
Budget Authority/Obligations
Outlays
* Fees exceed obligations in early years because major construction and operating costs for the geologic repository are not
incurred until the 1990's.
PROGRAM DESCRIPTION
In his policy statement (October 8, 1981) on nuclear power, the President said that the Government
had failed to meet its responsibility for nuclear waste disposal. He therefore directed that the
Federal Government work closely with industry and State governments to deploy swiftly the means
for storing and disposing of commercial nuclear waste.
On January 7, 1983, the President signed the Nuclear Waste Policy Act of 1982, Public Law 97-425.
The most significant provision of the new legislation is that the Government must start to take title
to and dispose of nuclear waste by January 1998.
The Act establishes the Nuclear Waste Fund to pay for activities undertaken by the Federal
Government related to the development, construction, and operation of a repository for high-level
radioactive waste from commercial nuclear power plants. The Fund is financed by fees paid by
nuclear utilities.
The nuclear waste program is now focusing on three media and four locales as primary candidates
for a respository: basalt flows underlying the Hanford Site in Washington, tuffs underlying Yucca
Mountain at the Nevada Test Site, salt domes in the Gulf Coast States and bedded salt formations in
Texas and Utah. In addition, the program will continue a nationwide screening of sites in other
geologic media, such as the granitic rocks of the Lake Superior and the Appalachian region.
Beginning in 1983, exploratory shafts will be sunk in basalt, tuff, and one of the salt sites.
Acceptable sites will then be examined further so that an application to license the waste repository
can be submitted to the Nuclear Regulatory Commission in 1988.
The President's recommendation of a repository site for a license application can be disapproved by
the host state. This disapproval can be overridden only by a joint resolution of Congress.
PROPOSED CHANGE
Fees from utilities will be deposited in a special fund in Treasury. These fees will be used to offset
appropriations made to support the waste disposal activities authorized by the Act. Unobligated
balances will remain in the fund until they are needed to pay for the major repository construction
that will begin in the 1990's.
154
For 1983, the Congress provided funds for the waste program, as in past years, from general
revenues. In accordance with the Nuclear Waste Policy Act, the budget for 1984 provides a single
account for Nuclear Waste activities in which appropriations are offset by fees collected from
utilities.
RATIONALE
It is appropriate to have those parties who benefit from the program -- nuclear utilities and their
customers ~ pay for the program.
With a steady source of funding and a means for resolving potential problems between state
governments and the Federal Government, it is now possible to assure that the Federal Government
will be able to provide for nuclear waste disposal by 1998.
EFFECTS OF THE PROPOSED CHANGE
Enactment of comprehensive waste management legislation has removed one of the major
uncertainties inhibiting the future development of nuclear power. The lack of waste disposal
capability will no longer be an issue in licensing new reactors.
The cost of nuclear-generated electricity will be increased by about two percent. The full cost of
waste disposal will no longer be subsidized by the taxpayer.
With a firm commitment on permanent capability from the Federal Government, utilities can plan
and finance their interim storage needs accordingly.
155
SCIENCE AND TECHNOLOGY
157
FEDERAL R&D PROGRAMS AND SUPPORT
FOR BASIC RESEARCH*
AGENCY:
Government-wide
Functional Code: 250 and others
Funding
($ in millions)
1982
FEDERAL R&D PROGRAMS (including facilities)
Department of Defense (DOD)
Non-DOD
Total Obligations
1983
1984
20,866
16,722
37,588
23,502
16,607
40,109
30,320
16,671
46,991
SUPPORT FOR CONDUCT OF BASIC RESEARCH (included above)
Agencies primarily supporting
physical and engineering sciences
(e.g. DOD, DOE, NASA, NSF)
3,017
3,347
3,864
Agencies primarily supporting life
and other sciences (e.g., NIH, USDA)
Total Obligations
2,678
6,025
2,755
6,619
2,422
5,439
PROGRAM DESCRIPTION
The Federal Government funds about half of the Nation's R&D effort, including about 70 percent of
all basic research. Six Federal departments and agencies (DOD, DOE, HHS, NASA, NSF, and
Agriculture) provide over 95 percent of the total Federal funds for R&D and for basic research.
About 65 percent or $30 billion, out of a total of $47 billion in Federal funds for R&D, is for DOD
programs. Within the overall total, Federal support of basic research is estimated to be $6.6 billion in
1984.
In addition to direct funding of R&D, the Administration encourages private investments in R&D
through tax incentives, patent policy, antitrust policy, and regulatory relief.
PROPOSED CHANGE
The 1984 Budget provides for major increases in Defense R&D and in Government-wide support of
basic research. Total Federal obligations for R&D programs, including R&D facilities, are expected to
be $47 billion in 1984, an increase of $7 billion or 17 percent above 1983. Within this overall
increase:
*
•
R&D programs of the Department of Defense would increase by 29 percent to cover a range
of programs from enhanced basic research to development of new and improved weapons
systems.
•
Federal support of basic research would increase by 10 percent, from $6.0 billion in 1983 to
$6.6 billion in 1984. Within this increase, an emphasis is placed on basic research in the
physical sciences and engineering. Funding in agencies primarily supporting such research
(e.g. DOD, DOE, NASA, and NSF) would increase by 15 percent.
Further details on these programs are provided in Special Analysis K: Research and Development included in the Special
Analyses volume of the 1984 Budget
159
•
Largely within the support for basic research, a.most $400 million would be available in 1984
for upgrading research instrumentation at universities under the proposed budgets for NSF,
the Departments of Energy and Defense, and other agencies.
•
Several major new initiatives are proposed in 1984, particularly in the general science
programs of the Department of Energy and in NASA. These include a new center for
materials research at the Lawrence Berkeley Laboratory, expansion of the National
Synchrotron Light Source at Brookhaven National Laboratory, a new colliding beam facility
at the Stanford Linear Accelerator Center, and a numerical aerodynamic simulation
capability at the NASA Ames Research Center.
•
Nearer term civilian technology development and demonstration programs (e.g., energy
technologies) will continue to be reduced with greater reliance placed on private sector
investments.
RATIONALE
The overall increase in R&D funding proposed for 1984 stems from recognition of the importance of
strengthening investments to meet key Federal responsibilities while avoiding unwarranted
subsidization of the private sector. In 1984:
•
Increases in Defense R&D are needed to strengthen the long-term research base relevant to
defense needs and provide for the development of new weapons to ensure a strong national
defense.
•
The significant increase in support of basic research, largely at academic institutions and
particularly in the physical and engineering sciences, reflects the Administration's view that
such support is vital to long-term economic growth, particularly in the high technology
industries. Basic research at academic institutions helps advance scientific knowledge and
contributes to the training of scientists and engineers-thus providing the foundation for
technological advancement of the Nation. The Federal Government supports basic research
not only to meet agency mission needs but also in the broad national interest because the
private sector does not have sufficient economic incentives to make adequate investments.
•
Support for upgrading research instrumentation at universities is important because
researchers need access to modern scientific instrumentation to advance the state of
scientific knowledge. Such support will help to increase the research productivity of the
Nation's scientific enterprise. In addition, it will also ensure that future scientists and
engineers are trained in the use of modern instruments and techniques.
•
The funding of major new initiatives in the current Department of Energy and NASA will
enhance the research productivity of the Nation's scientific community by providing it with
new and powerful tools for basic research and by encouraging greater and more creative
interaction among university, Government, and industry scientists.
•
Continued reductions in support of nearer term R&D and demonstration programs are
justified because the private sector, not the Federal Government, has the expertise and
capability to select and fund the advancement of technologies that can be successfully
brought into the marketplace. Tax incentives, reductions in the burden of regulations, and
other economic measures of the Administration are designed to encourage increased private
investment in R&D.
EFFECTS OF PROPOSED CHANGE
•
Federal investments in R&D will assure a stronger national defense.
•
Government-wide support of basic research would grow, in real terms, by over 4 percent in
1984 and would further strengthen the foundation for long-term technological
advancement and economic growth.
160
1982 AND 1983 CHANGES
In 1982 and 1983 Congress has sustained most of the reductions in nearer term R&D and
demonstration programs proposed by the Administration. This has allowed a refocusing of Federal
investments on long-term, high-payoff basic research ana technology development programs that
are appropriate Federal responsibilities.
In addition, Congress has also enacted the Administration's proposals for several tax incentives to
encourage greater private investments in R&D. In 1983 such private investments are expected to
increase by over 10 percent.
161
380-900 0 - 83 - 11 : QL 3
NATIONAL SCIENCE FOUNDATION
AGENCY:
National Science Foundation
Functional Code:751and803
Funding
($ in millions)
1982
1983
1984
1985
1986
1987
1988
CURRENT SERVICES
Budget Authority
Outlays
1006
1100
1099
1065
1154
1159
1208
1194
1262
1238
1317
1290
1373
1339
REAGAN BUDGET
Budget Authority
Outlays
1006
1100
1099
1065
1297
1231
1297
1320
1297
1339
1297
1348
1297
1301
+ 143
+ 72
+89
+126
+35
+ 101
-20
+ 58
-76
-38
PROPOSED CHANGES
Budget Authority
Outlays
PROGRAM DESCRIPTION
The National Science Foundation (NSF) primarily supports basic research in all fields of science and
engineering through research project grants, mostly to researchers in academic institutions. NSF also
suports major basic research centers and facilities, especially in ground-based astronomy and in the
atmospheric and ocean sciences. In addition, NSF supports programs in science and engineering
education.
PROPOSED CHANGE
The 1984 Budget proposes an increase of 18 percent over 1983 for NSF programs, from $1.1 billion to
$1.3 billion. The 1984 program includes:
•
An 18 percent increase in support for the conduct of basic research, with special emphasis on
physical sciences and engineering disciplines such as materials science; physics; mathematics;
and electrical, computer and chemical engineering. Included within this increase is an
initiative to encourage young scientists and engineers to undertake academic careers and to
provide them initial research support.
•
A 61 percent increase for upgrading research instrumentation at universities, to a total of
$180 million, included within increased support for the conduct of basic research.
•
A 23 percent increase, from $83 million in 1983 to $102 million in 1984, for the U S. Antarctic
program to improve logistics support for the research sponsored by NSF in the Antarctic.
•
Efforts begun in 1983 ($15 million) and enhanced in 1984 ($20 million) to improve the
teaching of science and mathematics in the Nation's secondary schools through teacher
training and Presidential awards to the best science and mathematics teachers in the Nation.
These programs, along with the science and mathematics education efforts of the
Department of Education, are further discussed under the heading "Science and
Mathematics Education" in the Education, Training and Employment Services section of this
volume.
162
RATIONALE
The major increase in NSF's budget, almost entirely for the support of basic research, reflects the
Administration's view that such support is vital to long-term economic growth, particularly in the
high-technology industries. NSF support of basic research, representing about 18 percent of the
total Federal support of basic research, is important to assist in balancing overall Federal support
across all scientific disciplines, particularly in the physical sciences and engineering.
In addition:
•
The significant increase for research instrumentation recognizes that researchers need access
to the latest scientific equipment to best ensure the continued advancement of scientific
knowledge. NSF's proposed 1984 funding for upgrading obsolete research instrumentation
at academic institutions, along with similar, though smaller, efforts by other agencies, would
help increase the productivity of the Nation's research enterprise.
•
The increase proposed for the Antarctic program, primarily for necessary aircraft overhauls
and the replacement of a repair facility for vehicles, is necessary for the safe and effective
conduct of scientific research and for the protection of U.S. interests in that region.
•
Although the primary responsibility for pre-college education rests with State and local
governments, the Federal Government can play an important catalytic role in assisting them
through a few well designed and leveraged efforts. The efforts to improve pre-college
science and mathematics teaching are important to help provide the Nation's future
workforce with the technical training needed for economic growth in an increasingly
technological society.
EFFECTS OF PROPOSED CHANGE
•
The sharp increase in the overall NSF budget would result in substantial growth in support of
research in relatively high priority fields, such as mathematical and physical sciences (22
percent over 1983), and engineering (22 percent over 1983).
•
The initiatives in science and engineering education help to focus national attention on the
need to alleviate the decline in the quality of pre-college education in science and
mathematics.
CHANGES IN 1982 AND 1983
The Congress approved deletion of many fragmented and ineffective science education programs
previously supported by NSF. The programs begun with additional funds appropriated by Congress
in 1983 ($15 million), provided the basis for a more focused and effective response to assist in
meeting an important national problem.
163
NATIONAL AERONAUTICS AND SPACE ADMINISTRATION
AGENCY:
National Aeronautics and Space Administration
Funding
Functional Code: 250, 402
($ in millions)
1982
1983
1984
1985
1986
1987
1988
CURRENT SERVICES
Budget Authority
Outlays
6,044
6,026
6,831
6,713
6,987
6,929
6,714
6,867
6,053
6,228
6,059
6,073
5,322
5,485
REAGAN BUDGET
Budget Authority
Outlays
6,044
6,026
6,831
6,713
7,098
6,973
6,967
6,957
6,335
6,444
6,273
6,263
5,443
5,654
111
44
253
90
282
216
214
190
121
169
PROPOSED INCREASES
Budget Authority
Outlays
PROGRAM DESCRIPTION
Programs of the National Aeronautics and Space Administration (NASA) consist primarily of space
transportation activities and R&D in space science and applications and in aeronautics.
Other NASA programs support satellite tracking and data acquisiton; NASA civil service and
administrative costs; construction of R&D facilities and maintenance of the NASA's physical plant;
and R&D on fundamental technology problems and opportunities common to a broad spectrum of
space programs.
PROPOSED CHANGE
The 1984 Budget for NASA provides for an overall increase of $267 million over the 1983 budget.
•
For Space Transportation, the budget provides increases for additional spare Shuttle
structural components. The budget also continues development of a new Centaur upper
stage booster for use with the Shuttle and initiates a tethered satellite program jointly with
the Government of Italy.
•
For Space Science, increases are proposed to initiate the Venus Radar Mapper project to
explore the Earth's sister planet, Venus; and a small new satellite to permit additional
investigations in ultra-violet astronomy. Continuing programs include the Space Telescope
and the Gamma Ray Observatory Mission, leading to launches in 1985 and 1988 respectively;
and the Galileo project to Jupiter to be launched in 1986.
•
For Space and Terrestrial Applications, the budget proposes a joint industry/Government
cost-shared development of an Advanced Communications Technology Satellite. Continuing
activities include completion of the last experimental LANDSAT satellite, completion and
launch of the Earth Radiation Budget Experiment, and continued development of new
instruments for future use in upper atmospheric research.
•
For Aeronautics Research and Technology, a vigorous NASA program is proposed with
significant increases for fundamental research in the aeronautical sciences and several areas
of aeronautical technology development. Examples of increased R&D activities include
advanced composite materials for large aircraft structures, a large computer-based
aerodynamic simulation capability, and advanced rotocraft technology.
164
•
For agency-wide supporting activities, increased funding is provided for Tracking and Data
Relay Satellite System lease payments and for facilities construction, primarily in support of
the space transportation and aeronautics programs and the general rehabilitation of the
agency's physical plant.
The following table summarizes the proposed 1984 Budget for NASA:
1982
Space Transportation
Space and Science
Space and Terrestrial Applications
Aeronautics R&T
Agency-wide supporting activities
Total NASA
3,056
572
332
265
1,819
6,044
Budget Authority
(S in Millions)
1983
3,598
683
360
280
1,910
6,831
1984
3,498
779
293
300
2,228
7,098
RATIONALE
•
For Space Transportation, the budget provides the funds needed to assure timely transition
to a fully operational, robust and cost-effective Shuttle system to meet planned user needs*
and reduce the lead time for any future additional orbiter procurements. The Centaur upper
stage development will provide increased capability to launch future planetary and DOD
missions.
•
For Space Science, the new Venus Radar Mapper and Extreme Ultraviolet Explorer projects
are being initiated to continue the preeminence of the United States in planetary
exploration and space-based astronomy.
•
For Space and Terrestrial Applications, the Budget will emphasize fundamental research and
development related to better understanding of the Earth, its dynamics, its resources, and its
environment. The advanced Communications Technology Satellite development project will
permit continued U.S. leadership in satellite communications technology, with Federal
funding limited to the longer-term, high-risk technology elements. The overall reduced
funding for space applications in 1984 reflects the completion of two ongoing projects,
LANDSAT and the ERBE, while the Advanced Communications Technology Satellite project is
still in the early, relatively lower cost phase of development.
•
For Aeronautics R&T, research would be increased significantly to help sustain the
knowledge base which underlies the long-term strength of the Nation in aviation
technology. Highest priority technology development efforts that are important for
national security and civil aviation but unlikely to be financed by industry would also be
supported.
•
For Agency-wide Supporting Activities, generic space research and technology would be
increased at a significant rate to assure a timely and growing flow of new knowledge and
technology to future space programs. Funding will increase for construction of new R&D
facilities and continued rehabilitation and maintenance of aging facilities. Personnel,
tracking and data acquisition functions and administrative costs are proposed at levels
necessary to support proposed and operational R&D programs.
165
EFFECTS OF THE PROPOSED CHANGE
•
The NASA budget for 1984 provides an increase of $267 million in budget authority over
1983, an increase of about 4 percent.
•
Within the moderate overall increase in funding proposed, significant program increases are
permitted in selected areas (noted above). This is made possible by the completion of several
major ongoing space science and applications programs and the transition of the Space
Shuttle program from the development and orbiter production phase to revenue generating
operations. Space Shuttle revenues, including prepayments for future flights, are estimated
to rise from $154 million in 1983 to about $265 million in 1984.
•
The overall effect of the proposed 1984 program for NASA is to sustain U.S. leadership in
aeronautics and space.
1982 and 1983 CHANGES
The 1984 Budget continues both the Centaur upper stage program and the Advanced
Communications Technology Satellite (ACTS) program added by Congress in 1982 and 1983, but with
the provision for significant cost sharing by industry in the ACTS program. The proposed 1984
"program for aeronautics R&T builds on Congressional funding add-ons in 1983 and the results of an
Administration study supporting the importance of aeronautics R&T to meet future national needs.
166
NATIONAL INSTITUTES OF HEALTH
AGENCY:
Functional Code:751and803
Department of Health and Human Services
Funding
($ in millions)
1982
1983
1984
1985
1986
1987
1988
CURRENT SERVICES
Budget Authority
Outlays
3,642
3,665
4,002
3,959
4,186
4,186
4,377
4,377
4,569
4,569
4,762
4,762
4,964
4,964
REAGAN BUDGET
Budget Authority
Outlays
3,642
3,665
4,002
3,959
4,077
4,032
4,059
4,059
4,059
4,059
4,059
4,059
4,059
4,059
109
154
318
318
510
510
703
703
905
905
PROPOSED SAVINGS
Budget Authority
Outlays
PROGRAM DESCRIPTION
Over the past 10 years, the taxpayer has spent over $26 billion through the National Institutes of
Health (NIH) for biomedical research and training programs. These funds have supported biomedical
and behavioral research at universities here and abroad, financed research in Federal laboratories,
and subsidized the training of researchers.
PROPOSED CHANGE
The 1984 request includes an increase of $75 million, or 2%, over 1983 and $435 million, or 12%,
over 1982. New and competing research awards are the highest priority and NIH will support the
maximum number of such grants within the $4.1 billion requested in 1984. To accomplish this, NIH
will achieve economies in lower priority areas, including research in its own Federal laboratories.
RATIONALE
NIH has grown by 330% over the past twelve years. This rate of growth is not sustainable
indefinitely by the Federal Government. Within the increases in 1984, however, research project
grants-funded at over $2 billion-will continue to receive the highest priority because they are the
primary means by which fundamental discoveries emerge. Thus, they are the key mechanism in
Federal support of biomedical research.
EFFECTS OF THE PROPOSED CHANGE
In 1984, the increase of $75 million will enable NIH to continue funding of $2 billion for highest
priority new and competing research project grants. This extensive level of support will remain the
principal source of funds for biomedical research conducted by individuals and institutions.
167
ENERGY RESEARCH AND DEVELOPMENT: REDUCTIONS
IN NON-NUCLEAR PROGRAMS
AGENCY:
Department of Energy
Functional Code: 270
Funding
($ in millions)
1982
1983
1984
1985
1986
1987
1988
CURRENT SERVICES
Budget Authority
Outlays
799
1,439
623
1,168
774
961
809
832
845
838
879
863
916
897
REAGAN BUDGET
Budget Authority
Outlays
799
1,439
1,168
293
697
348
448
358
379
366
370
379
377
481
264
461
384
487
459
513
493
537
520
623
PROPOSED SAVINGS
Budget Authority
Outlays
PROGRAM DESCRIPTION
The non-nuclear energy R&D programs (in the existing Department of Energy) support applied
research and development related to energy conservation technologies and to new energy
production technologies using fossil fuels and solar and other renewable energy resources.
PROPOSED CHANGE
The following table summarizes proposed funding for non-nuclear energy R&D by major program
category:
1982
Fossil Fuels
Solar and Other Renewables
Conservation
Total Non-Nuclear Energy R&D
416
258
125
799
Budget Authority
($ in Millions)
1983
1984
Program
Level in
1984*
94
101
98
293
138
101
98
337
218
252
153
623
* The program level includes new budget authority plus budget authority not used in prior years and available in
1984 It is a better indicator of program size than new budget authority alone
The 1984 budget reduction for these programs is based on the following policy:
•
Budget subsidies should be eliminated for development and demonstration of technologies
that private industry is already investing in or has the capability to invest in. Examples of such
activities include optimization of phosphoric acid fuel cells technology, continuation of
testing at coal gasification and liquefaction pilot plants, large scale demonstration of
photovoltaics technology, and development of large wind machines.
•
Federal support should continue and be increased for a balanced program of long-term
research focused on areas where the private sector has little incentive to invest because the
risks and payoffs are either too long range or uncertain or the benefits cannot be captured
by private investors - for example, research on coal chemistry and materials development.
168
•
To ease the transition to reductions under this policy, Federal support would continue for
selected projects nearing completion (such as the geothermal demonstration underway in
Heber, California) and for completion of test programs at selected existing facilities (such as
the solar thermal pilot plant at Barstow, California).
RATIONALE
•
•
The development of non-nuclear energy technologies can generally best be financed and
undertaken by private industry. The private sector has the resources and incentives to do it
well.
—
Private industry has a proven track record of pursuing R&D effectively and aggressivelyon computers and pharmaceuticals, for example- when market forces are allowed to
work and there is a reasonable prospect that the R&D investment will pay off. The same
is true for energy R&D.
—
In the past, Federal controls on oil markets inhibited energy-related investment,
including investment in energy R&D. As long as controls were in place, some
government subsidy in this area may have been justified. But with controls eliminated,
the original justification for these subsidies disappears.
—
Private sector investment in non-nuclear energy R&D is substantial. Business Week, for
example, reports that major energy companies spent $2 billion in 1981 for R&D.
The government can be most effective in this area if it concentrates its efforts on improving
the climate for industry investment and limits its financial support to activities that the
private sector is unlikely to invest in adequately because the risks and payoffs are either too
long term or uncertain or the benefits of the investment cannot be realized by any one firm.
—
This policy avoids squandering Federal resources on activities that the private sector can
undertake.
—
It avoids pursuing energy investments because they are politically popular - even
though they may have little prospects for competing successfully in the market.
—
It permits the government to increase its investment in basic and other long-term
research.
EFFECTS OF THE PROPOSED CHANGE
•
Adopting these proposed changes in Federal support for non-nuclear technology
development would save the taxpayer over $260 million in 1984 and over $2 billion through
1988 compared to current services estimates.
•
Federal activity in this area will be more appropriate, focused and cost effective.
•
The overall reduction in funding for non-nuclear energy R&D masks the fact that support for
long-term research is being increased. For example:
—
Outlays for basic research in support of non-nuclear energy technologies (funded in the
DOE Basic Energy Sciences Program) increase by 10 percent in 1984.
—
Outlays for basic and applied research in the solar energy program will increase by 21
percent in 1984. Outlays for basic and applied research in fossil energy in 1984 will be 66
percent higher than in 1982.
169
•
This policy is unlikely to affect adversely the development of promising new technologies to
produce and use energy more efficiently. In fact, the proposed policy is likely to increase
productive change in the economy.
—
For technologies that are particularly promising, private sector R&D spending has been,
and will likely remain, strong. For example, in solar photovoltaics, private R&D spending
has increased at an average of 35 percent per year between 1979-1982, and a recent
NSF survey indicated that it should continue to rise.
—
For technologies that are less promising there is likely to be a winnowing out process by
industry-- but this is an inevitable and useful development, preserving capital and other
resources for other more productive uses elsewhere in the economy.
1982 and 1983 CHANGES
In the 1982 and 1983 budgets, the Administration and Congress have generally agreed not to initiate
new large-scale demonstration projects that are inappropriate for government support and have
large funding requirements.
As a result of revised policy in this area, budget savings of $2.8 billion have resulted in 1981-1983
from the levels projected by the previous administration.
170
ONGOING FUNCTIONS OF GOVERNMENT
171
FEDERAL BUILDINGS FUND (SLUC)
AGENCY:
Functional Code:751and803
General Services Administration
Funding
($ in millions)
1982
1983
1984
1985
1986
1987
1988
CONGRESSIONAL FREEZE
SLUC Income
1,796
1,762
1,762
1,762
1,762
1,762
1,762
REAGAN BUDGET
SLUC Income
1,796
1,762
2,170
2,421
2,592
2,764
2,887
408
659
830
1,002
1,125
ADDITIONAL INCOME INTO FUND
SLUC Income
PROGRAM DESCRIPTION
The Federal Buildings Fund (FBF) was established in 1972.
The law authorizes and directs the Administrator of General Services to assess user charges for space
and associated services against Federal agencies occupying GSA controlled buildings. These charges,
called Standard Level User Charges (SLUC), approximate commercial charges for comparable space
and services found in the private sector.
The income derived from SLUC is deposited in the FBF and provides the source of funding for all
direct Public Buildings Service programs including the operation, maintenance, protection and repair
of GSA operated buildings; rental payments for leased buildings; purchase contract payments; and
the acquisition or construction of new buildings.
PROPOSED CHANGE
For fiscal year 1983, the Congress imposed a freeze on the rates that could be charged agencies
under the SLUC system. Specifically, rates could not exceed those charged in 1982.
The 1984 Reagan Budget reflects a return to the intent of the original Act by proposing increases in
square foot charges commensurate with commercial charges for comparable space and services.
RATIONALE
This change is necessary to ensure that agencies recognize that space charges are a true cost of
operation -- space is not a free good. Just as the process was beginning to take hold and agencies
started to recognize that space costs were a controllable item in the budget, the impetus for
improvement was eliminated through the congressionally imposed freeze which kept rates at
unrealistically low levels.
EFFECTS OF THE PROPOSED CHANGE
In addition to encouraging performance budgeting by providing dollar incentives for improved
space utilization, the SLUC/FBF process establishes a businesslike landlord/tenant relationship
between GSA and occupant agencies, enhances oversight of space-related activities, and improves
building operation services. If the existing freeze on SLUC charges were continued for any length of
time, the loss of SLUC income would not only jeopardize funding for new Federal construction and
major repairs, but also endanger the ability to pay landlords for leased space or carry out essential
maintenance and repairs on existing buildings.
Should the congressional freeze level be maintained in 1984, there would be no new construction
program ($133 million), no repair and alteration program ($200 million) -- work required to prevent
deterioration and damage to buildings -- and lower than required funding (of approximately $53
million) for other mandatory obligations such as rental payments to landlords.
173
PROPERTY SALES
AGENCY:
Department of Agriculture
Department of the Interior
General Services Administration
Functional Code:751and803
Funding
($ in millions)
1982
1984
1985
1986
1987
1988
Agriculture
200
200
200
200
200
Interior
300
300
300
300
300
887
480
440
240
240
1983
Gross Sales Revenues
General Services
Administration
105
643
PROGRAM DESCRIPTION
The Property Review Board was established in 1982 to oversee implementation
Administration's property sales initiative.
of
the
Goals of the initiative are:
•
To place unneeded Federal real property holdings in private ownership promoting higher
and better economic use and increasing the tax base.
•
To have GSA assist agencies in identifying and disposing of improved properties excess to
their needs.
•
Interior and Agriculture properties not meeting retention criteria will be sold to reduce
management costs, to contribute to reducing the national debt, and to stimulate local
economic development.
•
No wilderness, wilderness study areas, wildlife refuge system, national park system,
nationally significant environmental areas or other congressionally designated special areas
are to be sold.
•
Sales of public lands needed for community expansion will continue under existing laws.
•
Under existing laws, approximately 2.7 million acres have been previously identified as
suitable for sale by the Bureau of Land Management. Completion of local land use plans are
expected to identify an additional 1.8 million acres for disposal.
PROPOSED CHANGE
•
In Interior during FY 1984, the Bureau of Land Management will offer under existing laws
properties with an estimated fair market value of $300,000,000.
•
For Agriculture, legislation will be proposed for a limited sales authority which would allow
sales of isolated Federal tracts, boundary modifications, etc. for properties managed by the
Forest Service. Properties with an estimated fair market value of $200,000,000 are expected
to be sold in FY 84.
•
GSA program of identifying and disposing of improved properties excess to agencies' needs
will continue.
174
RATIONALE
There are several categories of real property holdings which should be disposed of from the Federal
inventory. These include:
•
Acquired properties excess to agency operational needs;
•
Lands which meet the criteria for disposal by the BLM as established in the Federal Land
Management and Policy Act of 1976;
•
Forest Service lands which are isolated, interspersed with private land holdings and are
consequently inefficient and uneconomic to manage; and
•
Forest Service lands which are no longer needed for the purpose acquired.
EFFECTS OF THE PROPOSED CHANGE
•
The proceeds of such sales will be deposited in a special account in the Treasury and used to
retire national debt, thus benefiting all Americans.
•
Disposal of unneeded and uneconomic tracts will improve the Federal government's ability
to manage the remaining lands effectively and efficiently, thereby benefiting local
governments, adjacent landowners and the general public who own the Federal lands.
175
RECREATION USER FEES
AGENCY:
Agriculture/Army/Interior
Functional Code: 300
Funding
CURRENT SERVICES RECEIPTS
Agriculture (Forest Svc)
Army (Corps of Engineers)
Interior
Offsetting Receipts
REAGAN BUDGET RECEIPTS
Agriculture
Army
Interior
Offsetting Receipts
($ in millions)
1982
1983
1984
1985
1986
1987
1988
11.2
8.0
18.3
10.8
9.0
19 2
11.7
10.0
20.0
12.5
11.0
21.0
13.3
12.0
22.0
14.2
13.0
23.0
16.1
14.0
24.0
37.5
39.0
41.7
44.5
47.3
50.2
54.1
11.2
8.0
18.3
10.8
9.0
19.2
36.7
26.0
52.0
37.5
27.0
54.0
38.3
28.0
55.0
39 2
29.0
56.0
41.1
30.0
57.0
37.5
39.0
114.7
118.5
121.3
124.2
128.1
73.0
74.0
74.0
74.0
74.0
PROPOSED SAVINGS (Increased Receipts)
Offsetting Receipts
PROGRAM DESCRIPTION
The Federal Government provides recreational facilities for the public, including picnic areas, trails,
campsites, visitor centers, exhibits, roads, boat ramps, lake and river access areas, swimming facilities,
marinas, concession operations, skiing sites, and wilderness areas.
At present, the law imposes major restrictions on the collection of recreation user fees, such as:
•
freezing National Park Service entrance fees at 1979 levels and sharply limiting the number
of units where fees can be charged (these fees have not been raised since early 1970's);
•
prohibiting any fees at about 80 percent of the recreation areas managed by the Army's
Corps of Engineers, which provide more than 400 million visitor-days of recreation annually;
and
•
prohibiting entrance fees to National Forests and collection of user fees at about 40 percent
of the Forest Service's campsites.
PROPOSED CHANGE
The Administration proposes to:
•
increase existing recreation use fees at Federal recreation areas;
•
expand the number of areas where fees are charged;
•
remove the prohibition on fees at most Corps of Engineers and National Forest facilities; and
•
provide that the fees collected will be used for operation and maintenance of the areas.
176
RATIONALE
The Administration believes that specific identifiable beneficiaries of Federal services should pay
more of the costs of the services. Many recreation fees have not been increased since the 1960's and
the fees now cover only about 4 percent of the costs of providing the recreation. As a result, the
general taxpayer is picking up an ever increasing portion of the costs of recreation, including the
variable costs associated with increased use (as opposed to the fixed costs of having the park or
wilderness set aside and maintained for the good of all). In addition, the low fees for camping and
other services often compete unfairly with services provided by private enterprise in the vicinity of
Federally-owned lands.
EFFECTS OF THE PROPOSED CHANGE
•
The proposed increase in fees would more than double revenues from Federal recreation
areas, lessening the subsidy from the general taxpayer to the user of public recreation sites.
•
Increased fees will be set so that citizens will not be prevented access to public recreation
sites or use of public facilities.
380-900 0 - 8 3 - 1 2
177
: QL 3
FEDERAL RECREATION LAND ACQUISITION
AGENCY:
Department of the Interior
Department of Agriculture
Functional Code:751and803
Funding
($ in millions)
1982
1983
1984
1985
1986
1987
1988
CURRENT SERVICES
Budget Authority
Outlays
172
136
182
193
189
191
196
149
202
145
210
169
216
175
REAGAN BUDGET
Budget Authority
Outlays
172
136
152
193
65
125
68
71
70
70
73
73
76
76
30
124
66
128
78
132
75
137
96
140
99
PROPOSED SAVINGS
Budget Authority
Outlays
PROGRAM DESCRIPTION
Using Land and Water Conservation Fund receipts, Interior's National Park Service, Fish and Wildlife
Service, and Bureau of Land Management, and Agriculture's Forest Service acquire land to create or
expand recreation areas (national parks, refuges, forests).
PROPOSED CHANGE
Federal recreation land acquisition would be limited to property subject to awards under
condemnation proceedings begun in prior administrations, emergency purchases to protect
endangered resources, and very high-priority conservation areas.
RATIONALE
•
Purchase of recreational land is postponable in times of budget stringency, without adverse
effect on jobs, the national economy or critical national needs.
•
The Federal Government already owns more than 760 million acres of land, more than onethird of the U.S. State and local governments hold 6 percent of total land in the U.S.
•
The large backlog of authorized Federal land acquisition (over $4 billion) includes many
parcels that have no unique, nationally significant features. Acquisition of such tracts
spreads Federal operational resources thin; dilutes the quality of the national park, refuge,
and forest systems; and reduces local decision-making over recreation resources that are
primarily local in use and service.
•
In 1982 the Administration announced a new land protection policy emphasizing (1)
alternatives to Federal cash purchases of fee simple title, such as easements, cooperative
agreements, and zoning controls, and (2) cooperation with landowners, State and local
governments, other Federal agencies, and the private sector to manage land for public use or
protect it for resource conservation. This policy is expected to reduce the need for 1984 and
out-year acquisition funding.
178
EFFECTS OF THE PROPOSED CHANGE
The request will fully fund those court awards anticipated in 1984 from pending condemnation
cases, except for the Redwoods National Park in California. If a final determination of value is made
on Redwoods, supplemental appropriations will be requested.
1982 and 1983 CHANGES
1982 and 1983 appropriations, while exceeding Administration requests and funding some
discretionary acquisitions which are postponable or unnecessary, are less than half the level of the
1977-1979 average of about $400 million annually.
179
LAW ENFORCEMENT CROSSCUT
AGENCY:
Functional Code: 751 and 803
Department of Justice
Department of Treasury
Funding
($ in millions)
1982
1983
1984
1985
1986
1987
1988
CURRENT SERVICES
Budget Authority
Outlays
2,504
2,399
2,875
2,837
2,955
2,892
2,998
2,913
3,054
2,960
3,101
3,004
3,189
3,090
REAGAN BUDGET
Budget Authority
Outlays
2,504
2,399
2,875
2,837
3,183
3,109
3,105
3,081
3,091
3,058
3,147
3,101
3,231
3,177
228
217
107
168
37
98
46
97
42
87
PROPOSED INCREASE
Budget Authority
Outlays
PROGRAM DESCRIPTION
Principal law enforcement agencies in the Departments of Justice and Treasury include the Federal
Bureau of Investigation, the Drug Enforcement Administration, the Immigration and Naturalization
Service, the U.S. Customs Service, the Secret Service, the Bureau of Alocohol, Tobacco, and Firearms,
and the criminal investigative arm of the Internal Revenue Service. These agencies' direct resources
are further augmented by reimbursement for their work performed in support of the organized
crime drug enforcement initiative.
Besides carrying out traditional law enforcement activities, these agencies perform other tasks such
as providing information to the executive branch relating to national security, maintaining a
national repository for fingerprint identification, controlling the manufacture of controlled
substances, processing naturalization and citizenship applications, controlling, regulating and
facilitating the movement of carriers, persons and commodities between the United States and other
nations, and ensuring that alcoholic beverages are properly produced and accurately described.
PROPOSED CHANGE
Increased law enforcement staff and equipment such as airplanes and radios would be provided for
the following purposes: (1) combating drug trafficking; (2) enhancing top priority investigations in
such areas as terrorism and foreign counterintelligence; (3) improving protective services for the
President; (4) expanding export control efforts; and (5) providing adequate law enforcement for the
1984 Olympics in Los Angeles. Also, major increases for ADP and telecommunications resources are
being requested for the Federal Bureau of Investigation and the Immigration and Naturalization
Service to improve management, investigative, and fingerprint processing capabilities.
RATIONALE
•
Reducing crime is a top Administrtion priority. Our domestic defense is as important as our
national defense. While crime control is primarily a state and local responsibility, the Federal
Government has an obvious role to play, especially in those areas that are best handled on a
national basis because of their multi-jurisdictional or unique nature.
180
•
After a two-year review of Federal resources available to fight crime, it became clear that
more efficient, effective Federal law enforcement is needed if the nation is to make a dent in
major criminal activities such as illegal drug trafficking and illegal exportation of high
technology.
EFFECTS OF THE PROPOSED CHANGE
Increased resources, including personnel, will result in major improvements in Federal law
enforcement efforts. Some positive effects are as follows:
•
The major initiative to combat drug trafficking by organized criminal enterprises will
continue.
•
The Federal Bureau of Investigation will purchase special radio equipment so that agents will
be able to communicate without being overheard by others. Increased resources will allow
the Bureau to fully automate management and investigative efforts in the northeastern
region.
•
The U.S. Customs Service will have better technology at its disposal to prevent illegal exports.
•
The Secret Service will have more agents to protect the President.
181
ORGANIZED CRIME DRUG ENFORCEMENT
AGENCY:
Department of Justice
Department of Treasury
Functional Code: 751 and 803
Funding
($ in millions)
1982
1983
1984
1985
1986
1987
1988
CURRENT SERVICES
Budget Authority
Outlays
FTE
128
104
805
132
1,431
1,566
113
117
1,566
115
113
1,566
117
113
1,566
1 19
115
1,566
REAGAN BUDGET
Budget Authority
Outlays
FTE
128
104
805
139
136
1,585
115
121
1,585
115
113
1,585
117
113
1,566
119
115
1,566
7
5
19
2
4
19
19
PROPOSED INCREASES
Budget Authority
Outlays
FTE
PROGRAM DESCRIPTION
In order to attack the problem of drug trafficking controlled by various organized criminal
enterprises, the Administration has established a new program initiative, which creates 12 regional
task forces involving not only the Federal Bureau of Investigation, the Drug Enforcement
Administration, and the U.S. Attorneys, but also the Internal Revenue Service, the U.S. Customs
Service, and the Bureau of Alcohol, Tobacco, and Firearms. These task forces, under the direct
control of the Attorney General, are designed to engage in long-term investigative cases targeted at
disrupting the operations and leadership of organized criminal enterprises engaged in drug
trafficking.
Other aspects of the organized crime drug enforcement initiative include funds to: (1) increase the
availability of local jail space to house Federal pretrial detainees; (2) increase Federal prison space to
accommodate the increasing prison population; and (3) purchase various equipment such as radios
and computers to enhance the efficiency of Federal law enforcement.
This program began in mid-year 1983- During this first year of operations, the Justice Department
reimbursed other agencies, such as the Internal Revenue Service, for their participation in the task
forces.
PROPOSED CHANGE
In 1984, increased funds will be available for personnel and related resources for the task forces
themselves and for more local jail improvement. Obligation of funds for one-time equipment
purchases and for Federal prison renovation will be accomplished by the end of 1984. A 3-year
Presidential Commission on Organized Crime is to be established to assess the nature and scope of
organized crime as it exists today. Agencies in the Treasury Department will receive their own direct
resources totaling $33 million for this program in 1984.
182
RATIONALE
Crime has become increasingly organized and sophisticated, especially in the area of trafficking in
illicit drugs. Because organized crime drug trafficking threatens our entire society, its demise has
become a top Administration priority. It is the Federal Government's role to enforce such laws as
those against drug trafficking because the problem not only crosses state boundaries, but also
involves foreign countries. Furthermore, fighting drug trafficking by organized criminal enterprises
involves investigative and prosecutorial efforts that are, generally, unique in nature. The regional
task forces will focus on prosecuting individuals who organize and finance illegal narcotics
trafficking. The objectives include seizure and forfeiture of assets of these individuals as well as their
long-term imprisonment.
EFFECTS OF THE PROPOSED CHANGE
The task forces will be fully operational throughout the country in 1984. The increase in resources
for local jail improvements will guarantee Federal Government needed bedspace in local jails. The
Presidential Commission will conduct nationwide and region-by-region assessments of the power
and influence of organized crime.
183
CRIMINAL JUSTICE ASSISTANCE
Agencies:
Department of Justice
Functional Code: 751
FUNDING:
($ in millions)
1982
1983
1984
1985
1986
1987
REAGAN BUDGET
Budget Authority
Outlays
92
36
92
92
2
58
2
2
PROPOSED INCREASES
Budget Authority
Outlays
92
36
92
92
2
58
2
2
1988
CURRENT SERVICES
Budget Authority
Outlays
PROGRAM DESCRIPTION
A new $92 million criminal justice assistance program is proposed. Of this amount, $72 million will
be in the form of formula grants to States to support programs of proven effectiveness such as career
criminal projects to apprehend and prosecute repeat offenders or community crime prevention
programs such as neighborhood watch projects. These formula grant funds will also be used to fund
innovative State and local projects. Formula grants will be awarded to States with each receiving a
base of $250,000 and the remainder allocated according to relative population. Federal monies will
be matched dollar-for-dollar. The remaining $18 million will fund discretionary grants for four
purposes: (1) training; (2) technical assistance; (3) national or multi-jurisdictional projects; and (4)
demonstration programs. Another $2 million is provided to cover administrative costs of the
program.
PROPOSED CHANGE
This program will differ from that of the former Law Enforcement Assistance Administration in that
resources will be targeted to assure that only successful, tried programs will be funded.
Furthermore, the 50-50 matched Federal and State or local funding will ensure State and local
commitment and maximize the impact of Federal assistance.
RATIONALE
The crime rate is a serious national issue. While recognizing that crime control is primarily a local
responsibility in our Federalist system, the Administration also recognizes that the Federal
Government must play a leadership role, not only in terms of Federal investigations and
prosecutions, but also in terms of direct assistance to State and local governments.
During the last 2 years, this Administration has closely examined the intergovernmental roles in the
criminal justice area. A result of this review has been a realization that reductions in this area were
too severe in previous years. It is as important to Americans as national defense that they feel safe in
their homes and on the streets. A targeted assistance program that helps fund proven, successful
programs will provide a positive role for the Federal Government, yet leave the implementation and
ultimate success of these programs were they belong-with State and local governments.
EFFECTS OF THE PROPOSED CHANGE
Establishing a new criminal justice program in which the Federal Government shares the cost, for a
limited time period, of successful, tested programs, will have a positive impact on local criminal
justice systems. Over the long-term, improvements in law enforcement, the judicial process, and the
correctional system should result.
184
PRISON CONSTRUCTION
AGENCY:
Department of Justice
Functional Code: 753
Funding
CURRENT SERVICES
Budget Authority
Outlays
REAGAN BUDGET
Budget Authority
Outlays
PROPOSED INCREASES
Budget Authority
Outlays
($ in millions)
1982
1983
1984
1985
1986
1987
1988
--
7
30
7
30
7
23
8
15
8
8
9
8
56
15
7
30
97
45
80
56
34
83
39
63
40
33
---
--
90
15
73
33
26
68
31
55
31
25
PROGRAM DESCRIPTION
The Federal Prison System (FPS) facilities development program plans, designs and constructs
correctional facilities that provide a safe, secure and humane environment for those persons charged
with or convicted of violating Federal law.
PROPOSED CHANGE
A increase is proposed in 1984 to fund several new construction projects.
RATIONALE
As increased investigative and prosecutorial efforts commence, additional physical capacity is
required to address both current FPS overcrowding (currently 21% over rated capacity with a
population of approximately 29,000 inmates) and the increased prisoner population to be generated
by the Organized Crime Drug Enforcement initiative. The FPS estimates that its population will be at
least 30,000 by the end of 1984 and that it will reach 31,300 by the end of 1987. FPS must project its
prison population several years forward since any new Federal facilities requested in this budget will
not become operational until 1987 at the earliest.
EFFECTS OF THE PROPOSED CHANGE
The $90 million increase proposed will fund the following projects: (1) construction of one 500-bed
prison in the northeastern United States; (2) planning and site acquisition funds for a second 500bed prison in the northeast; (3) construction of a 500-bed jail for pretrial detainees in Los Angeles;
(4) continued renovation of the Leavenworth penitentiary; and (5) various modernization and
rehabilitation projects.
Also, as part of the Organized Crime Drug Enforcement initiative, $6 million will be provided for an
additional 340 bedspaces at existing Federal facilities (780 bedspaces were funded in 1983). These
funds are not reflected in the above numbers since they are included in the Organized Crime Drug
Enforcement initiative.
185
TAX ADMINISTRATION
AGENCY:
Functional Code:751and803
Department of the Treasury
Internal Revenue Service
Funding
($ in billions)
1982
1983
1984
1985
1986
1987
1988
CURRENT SERVICES
Budget Authority
FTE
Receipts
2.7
83,756
3.0
91,239
2.1
3.2
91,239
2.4
3.3
91,239
2.4
3.3
91,239
1.3
3.4
91,239
.6
3.4
91,239
REAGAN BUDGET
Budget Authority
FTE
Receipts
2.7
83,756
3.0
91,239
4.5
3.3
92,548
11.1
3.4
92,548
10.5
3.5
92,548
11.2
3.6
92,548
11.5
3.6
92,548
11.8
2.4
.1
1,309
8.7
.1
1,309
8.1
.2
1,309
9.9
.2
1,309
10.9
.2
1,309
11.8
PROPOSED INCREASES
Budget Authority
FTE
Receipts
PROGRAM DESCRIPTION
The Internal Revenue Service (IRS) is a tax processing and enforcement agency, the primary mission
of which is enhancement of compliance with the tax laws.
PROPOSED CHANGE
The 1984 budget for IRS reflects an increase of $133 million and 1,309 full-time equivalent employees
over current services estimates. This increase is the net of increases for implementation of the Tax
Equity and Fiscal Responsibility Act of 1982 (TEFRA) and for projects to automate and modernize
antiquated operations, and a decrease related to a change of thrust in the taxpayer service program.
RATIONALE
In TEFRA, the Congress has provided the IRS with significant new compliance tools including:
withholding of tax on interest and dividend income, reporting on the sale of commodities and tip
income, and penalities for submitting or preparing false returns. In addition, provisions relating to
the statutory interest rate on underpayments and overpayments have been changed to better
conform to economic realities by requiring biannual adjustment and daily compounding and to limit
interest on overpayments claimed on late returns. Moreover, substantial workload has been
imposed by the comprehensive amendments to corporate and Keogh pension plans.
A second major thrust for the IRS is continuation of efforts to modernize tax processing and
operational systems. Over half the requested increases in this area are related to projects begun in
1983: replacement of antiquated tax processing systems, automation of procedures for collection of
delinquent accounts and audit of tax returns, and implementation of optical character recognition
for some documents. New projects focus on the development of innovative systems, including:
testing of laser optical technology for storage of returns, automation of support functions and major
redesign of the tax processing system.
The 1984 budget also reflects a change in delivery mechanisms for taxpayer service to better meet
taxpayer needs in a more cost-effective, less labor intensive manner.
186
EFFECTS OF THE PROPOSED CHANGE
•
The new administrative provisions of TEFRA should greatly aid the IRS in the accomplishment
of its mission. The improved voluntary compliance as a result of TEFRA is estimated to
generate almost $9 billion in additional receipts in 1984 and over $50 billion through 1988.
The provisions for withholding tax on dividend and interest income contribute a substantial
portion of this increase, $6 billion in 1984 and $26 billion through 1988.
•
The modernization efforts will permit the IRS to greatly streamline its operations by utilizing
updated data input, processing and operational technologies. The major benefits in outlays,
personnel and interest savings will not accrue for several years, however, due to system
design and acquisition costs and the fact that new and old systems will have to be run in
parallel for awhile.
•
The new thrust for taxpayer service will focus direct assistance efforts on those who need
help most - the elderly, handicapped, low-income and non-English speaking-through
neighborhood outreach programs, walk-in service and taxpayer education. The new
approach will ensure help for those who must depend on the IRS while eliminating
duplication of service available from the private sector.
1982 AND 1983 CHANGES
A key initiative in the 1983 Budget was the dedication of 5,225 full-time equivalent positions and
$154 million to improvement of tax enforcement by increasing emphasis on identification and
collection of unpaid taxes and by reducing backlogs in the appeals process. In 1984, this effort will
be maintained and further expanded. Overall, this increased emphasis on tax enforcement will
result, according to IRS estimates, in additional receipts of $2.1 billion in 1983 and $2.4 billion in
1984.
187
EPA OPERATING PROGRAM
AGENCY:
Environmental Protection Agency
Functional Code: 751 and 803
Funding
($ in millions)
1982
1983
1984
1985
1986
1987
1988
CURRENT SERVICES
Budget Authority
Outlays
1,086
1,248
1,040
1,103
1,080
1,092
1,119
1,103
1,158
1,116
1,198
1,165
1,240
1,207
REAGAN BUDGET
Budget Authority
Outlays
1,086
1,248
1,040
1,103
949
1,033
950
979
950
944
950
951
950
950
131
59
169
124
208
172
248
214
290
257
PROPOSED SAVINGS
Budget Authority
Outlays
PERSONNEL
(10,914) (10,225)
(9,741)
(9,741)
(9,741)
(9,741)
(9,741)
PROGRAM DESCRIPTION
EPA's operating program provides funding for research, regulation development, enforcement and
overhead activities; exclusive of Waste Treatment Grants and Superfund for which funding is at or
above 1983 levels. Funds pay for salaries, administrative expenses, contracts and grants to states and
universities to implement mandated responsibilities under eight major environmental statutes.
PROPOSED CHANGE
Reduces overall operating funds by $90 million (-9%) and 485 (-5%) staff years from 1983 levels.
However, EPA enforcement activities are increased by 13% to reflect the shift in the agency's mission
from regulatory development to compliance monitoring.
RATIONALE
State grant program reforms. EPA's significant administrative, oversight and procedural reforms
instituted last year will be continued and emphasized in 1984 for programs that have been
effectively operated by States for several years. Newer State programs are retained essentially at
1983 levels. The major reduction from 1983 (-$30 million) occurs in the water pollution control
program to eliminate the obvious overlap between three separate grant programs now funding
state activities under the Clean Water Act. Even with the reduction, State water pollution control
agencies will receive $140 million, more than double the grant level for other state environmental
agencies. Other state funding reductions reflect reduced Federal oversight requirements, reduced
Federal payments for State overhead activities and the increased availability and use of permit fees
by States.
Reduced Federal subsidies of pollution control technology development. Development of pollution
abatement technologies is not an appropriate Federal role given the incentives for private industry
to develop and sell new, more efficient or less costly control technologies. For example, since 1977
EPA has funded research on new treatment processes for municipal wastetreatment plants despite
incentives and protections built into the law for firms willing to incur the risks of developing new
techniques. These and similar projects will be phased out in the '84 Budget.
188
Reductions in programs that have achieved their regulatory objectives. By 1984 EPA's responsibilities
for developing and promulgating regulations under several environmental statutes will be nearly
completed, including the issuance of the final round of industrial wastewater discharge limitations
and the completion of all significant regulations for the disposal of hazardous wastes. Accordingly,
these regulatory efforts and the research activities that supported them are being reduced while
enforcement and implementation activities increase.
EFFECTS OF PROPOSED CHANGE
The reductions in staffing and funding will not affect any of the substantive pollution control efforts
at the State or Federal levels. All statutory or court ordered requirements will be met, and all high
priority non-regulatory activities such as research on groundwater, ocean disposal and acid rain will
be carried out at or above 1983 levels.
189
STRATEGIC PETROLEUM RESERVE
AGENCY:
Functional Code: 851
Department oftheTreasury
Funding
($ in millions)
1982
1983
1984
1985
1986
1987
1988
CURRENT SERVICES
Budget Authority
Outlays
3,875
3,878
2,316
2,139
3,015
3,250
1,655
3,006
3,486
1,878
3,040
3,868
2,732
2,293
REAGAN BUDGET
Budget Authority
Outlays
3,875
3,878
2,316
2,055
742
2,094
1,565
1,567
1,610
1,560
1,673
1,644
1,739
1,705
84
2,273
1,156
90
1,439
1,876
318
1,367
2,224
993
588
PROPOSED SAVINGS
Budget Authority
Outlays
PROGRAM DESCRIPTION
The Strategic Petroleum Reserve (SPR) is the oil stockpile which the Federal Government is
accumulating to help deal with disruptions in world oil markets.
•
The SPR is one important part of an overall strategy designed to protect U.S. energy security.
The nation's first line of defense for dealing with an import interruption is to rely on market
forces to allocate available oil-from domestic production, remaining imports and private
inventories. The SPR provides an additional source of supply to augment market forces and
reduce the economic impact of the interruption.
•
The SPR now contains some 300 million barrels of oil-the equivalent of over 70 days worth of
U.S. oil imports and 170 days of imports from OPEC countries.
•
The SPR is currently growing at an average rate of 220,000 barrels per day (B/D) toward its
long-term goal of 750 million barrels (MB).
PROPOSED CHANGE
The Current Services budget assumes that the SPR will be filled at a rate of 220,000 B/D until 500 MB
are stored and, thereafter, at a rate sufficient to fill available permanent storage facilities as they are
developed. The 750 MB Reserve would be completed in 1989.
The 1984 budget proposes a fill rate of 145,000 B/D in 1984, with a budget planning assumption of
100,000 B/D thereafter.
The 1984 budget continues to provide for the 750 MB reserve. The revised schedule calls for
completing 600 MB of storage facilities, plus land acquisition, design and initial construction of the
remaining 150 MB, with the final development schedule to be determined within the next year.
RATIONALE
•
Key aspects of the world oil market have changed dramatically for the better since the SPR
was first established.
190
•
•
—
In 1977, the initial plan for a 500 MB SPR was based on projected 1985 import levels of
7.3 to 10.4 M B/D, with some DOE forecasts as high as 11 M B/D. In 1982, actual net
imports were only 4 M B/D, and DOE currently projects 1985 imports at only
approximately 6 M B/D, a reduction of as much as 45 percent from the earlier forecasts.
—
When world oil markets were disrupted in 1973 and again in 1979, there was very little
spare production capacity in major oil producing countries. The most recent CIA data
show that oil producing countries in the free world have at least 10 million B/D of excess
current capacity. This greatly reduces the prospect of a shortage from a disruption
involving one or two producers.
—
The OPEC share of U.S. oil imports has declined over the past decade, from a peak of 70
percent to 43 percent today. The share of Arab OPEC imports has declined from 37
percent to only 18 percent.
—
The decline in the volume of Arab OPEC imports has been even more startling: from a
1978-79 peak of 3 million B/D to about 900,000 B/D during 1982.
The United States and its allies are better prepared today to deal effectively with disruptions
in oil supplies. The progress is significant and permanent.
—
Current SPR stocks are nearly three times as large as they were two years ago, providing
70 days of 1982 net oil imports; almost 5 months worth of protection should half of U.S.
imports be interrupted; and the equivalent of 11 months of U.S. oil imports from Arab
OPEC sources. In addition, the private sector has safety stocks which are available for
use during a supply distribution.
—
Counterproductive controls on U.S. oil markets have been abolished. These controls
amplified past supply disruptions in the U.S. As the experience of other countries clearly
demonstrates, elimination of controls should make any subsequent disruption less
difficult for the American people to deal with.
—
Through the International Energy Program (IEP), our allies now have significant energy
emergency preparedness capablities. For example, oil stockpiles worldwide are over 4
billion barrels. Of this amount, our allies currently have over 1.5 billion barrels,
including about 120 million barrels of government-owned stocks.
The policy pursued by the Administration and proposed in the budget compares favorably
with an alternative presented in the Energy Emergency Preparedness Act (EEPA). At the
same time, the 1984 budget policy on SPR fill allows significant budget savings.
The EEPA calls for an SPR fill rate of 300,000 B/D, unless the President finds that this is not in the
national interest, in which case the rate is 220,000 B/D or the highest practicable fill rate
achievable subject to the availability of funds. The actual fill rate is to be determined each year
based on the funding provided in the annual appropriation act.
Fill rate (B/D)
EEPA (220,000)
Budget
Difference
Cumulative fill (MMB)
EEPA (220,000)
Budget
Difference
—
FY 1983
FY 1984
FY 1985
FY 1986
220,000
220,000
220,000
145,000
75,000
168,000
100,000
68,000
124,000
100,000
24,000
438
411
27
500
448
52
545
484
61
—
358
358
—
The difference in cumulative fill for the two policies in 1984 will be only 27 MB or 7
percent.
191
—
Measured in terms of the 6 MB/D of imports now projected for 1985 by DOE, the
220,000 B/D fill rate provides 83 days of coverage. The fill rate proposed in the budget
provides 75 days of coverage ~ a difference of only 8 days.
—
As recently as 1980, DOE was projecting 1985 imports of 8.3 MB/D. The 220,000 B/D fill
rate would have provided only 60 days of protection by 1985 based on that import level.
But, even with the lower fill rate provided in the budget, we now expect 75 days of
coverage-25 percent more protection than we expected to have in 1980.
—
The EEPA was based on the assumption that DOE should buy more oil now because oil
prices were projected to increase by 7 percent per year. Yet many analysts now expect
oil prices to stay flat or fall in the next few years-indicating that there is no financial
advantage to buying SPR oil early. For example, buying additional oil today at $33 per
barrel with borrowed money costs the Treasury the same amount of money as buying a
barrel in 1985 for $39.
—
Buying oil at or above the 220,000 B/D rate requires the use of temporary storage which
would cost an additional $1 to $5 per barrel per year, create added administrative
complexity, and pose greater security risks.
—
The proposed SPR policy reduces Federal outlays by an average of $1.3 billion per year
in 1984 and 1985. Though most of these outlays are off-budget, they affect Federal
borrowing and economic activity the same as on-budget spending.
EFFECTS OF THE PROPOSED CHANGE
•
The SPR will continue to be developed at a reasonable rate.
•
U.S. energy security will remain above the levels expected when the SPR originally got
underway and as recently as two years ago.
•
Federal outlays and borrowing requirements will be reduced by $2.6 billion over the next
two years.
1982 AND 1983 CHANGES
The Administration has taken major steps to accelerate the SPR and improve our emergency
preparedness.
•
The SPR fill rate for 1981-1983 will average 242,000 B/D -three times higher than the 77,000
B/D average over the four years of the previous Administration.
•
The SPR will have tripled in size, from just over 100 MB at the start of 1981 to 358 MB at the
end of 1983.
•
Nearly $10 billion will have been spent on this program during a period of tight restraint on
the budget~$3.8 billion in 1981, $3.9 billion in 1982, and $2.1 billion in 1983.
192
OUTER CONTINENTAL SHELF OIL AND GAS LEASING
AGENCY:
Department of the Interior
Functional Code: 950
Funding
($ in millions)
1982
1983
1984
1985
1986
1987
1988
7,861
18,000
18,000
18,000
19,500
21,000
N/A
Receipts
6,250
11,793
11,895
12,200
13,400
14,400
15,100
CHANGE
Receipts
-1,611
-6,207
-6,105
-5,800
-6,100
-6,600
NA
1983 BUDGET
Receipts
CURRENT SERVICES AND
1984 BUDGET
PROGRAM DESCRIPTION
The budget proposed implementation of the final 5-year OCS oil and gas program approved by
Secretary Watt on July 21, 1982.
This schedule assumes sales as follows:
Number of sales
1983
1984
1985
1986
10
7
9
8
Thru June
1987
6
PROPOSED 1983 AND 1984 CHANGES
The Department will consider entire planning areas for potential lease offering. Under the 5-year
program nearly the entire OCS will be considered for leasing. During this consideration,
environmental, coastal zone, oil and gas reserve, and other values will be carefully balanced. Only a
small portion of the considered areas is expected to be leased. Receipt estimates are based on
estimates of potentially recoverable oil and gas in the lease areas, value to extracting companies,
and royalties on oil extracted.
RATIONALE
The program changes in the 5-year OCS oil and gas program are designed to achieve early
exploration of OCS areas with oil and gas promise while protecting OCS values other than oil and gas
resources.
The changes in budget receipts estimates compared with those in the 1983 budget are a result of
events occurring since the publication of that budget, including further increases in offshore
development costs; softening of world oil prices; and delays in litigation about the distribution of
receipts held in escrow pursuant to section 8(g) of the OCS Lands Act pending determination of
amounts, if any, owed to adjacent states.
193
380-900 0 - 83 - 13 : QL 3
NATIONAL SECURITY
195
CHAPTER 4
NATIONAL SECURITY
One of the most important tasks of the Federal government - perhaps the most important - is to
protect national interests and security. This is an expensive task; however, the failure to do so would
be even more expensive and wholly unacceptable. It is often forgotten that our military strength
prevents war and avoids the horrendous cost of human lives and resources associated with war.
There is no greater objective than to assure our nation's security and to preserve peace. The ability of
the United States to grow and prosper depends on the foundation of a strong defense to protect
national interests. In turn, a healthy economy will support the defense expenditures that are
required to maintain the nation's security. These objectives are mutually supportive.
Since the 1970's the United States has allowed its military power to decline relative to its expanding
national interests and the growth in military power of the Soviet Union. From 1970 to 1981 U.S.
defense spending declined nearly 20% in real terms, whereas non-defense expenditures almost
doubled in real terms. During this same period Soviet spending estimated in U.S. dollars increased
35% in real terms, to a level in 1981 45% higher than U.S. spending. As a consequence, the United
States has been living off the defense investment of the 1950's and early 1960's when defense
expenditures averaged about 9% of the GNP. By 1978 defense spending had declined to 5% of the
GNP.
President Reagan's defense program will reverse this unfavorable trend. It will prevent further
erosion in military power relative to that of the Soviet Union. The 1984-1988 program will continue
improvements needed to deter or, if necessary, respond to conventional and nuclear war. Such
improvements will ensure the best prospect of deterring any challenge to national interests which
could lead to military conflict.
NATIONAL SECURITY OBJECTIVES
The highest-priority national security objectives of the United States are:
•
To deter military attack by the USSR and its all ies against the United States, its allies, and
other friendly countries, and to deter or counter use of Soviet military power to coerce or
intimidate our friends and allies.
•
To maintain access to critical resources and protect U.S. economic interests and U.S. citizens
abroad.
•
In the event of an attack, to deny the enemy his objectives and bring a rapid end to the
conflict on terms favorable to our interests.
•
To inhibit further expansion of Soviet control and military presence, and to induce the Soviet
Union to withdraw from those countries where it has imposed and maintains its presence
and control by force of arms.
•
To promote meaningful and verifiable mutual reductions in nuclear and conventional forces
through negotiations and to discourage further proliferation of nuclear weapons
throughout the world.
Our aim is to secure the strength needed to deter or, if necessary, defend against, nuclear and
conventional attack, as well as to discourage coercive use of Soviet military power. A sustained
commitment to redress any significant imbalance will not only strengthen our deterrent capabilities
but also will improve prospects for agreements on arms control and reductions.
197
THREATS TO U.S. SECURITY OBJECTIVES
Our defense posture, particularly over the last decade, has taken insufficient account of the increases
in Soviet military capability and their willingness to use force or the threat of force to further their
foreign policy goals. Soviet increases included strategic nuclear, non-strategic nuclear, and general
purpose forces.
•
The shifting military balance against the Free World has allowed the Soviet Union to
threaten to outflank our traditional alliances. Soviet military capability is augmented by
their Warsaw Pact allies and client-states around the world, including Cuba, Libya, Vietnam
and North Korea.
•
The cumulative effect of the Soviet buildup has permitted them to shift from a defensive
orientation to one capable of projecting power in remote areas and mounting roughly
concurrent offensives in multiple theaters.
•
Despite the scope and nature of these threats, U.S. military capability was allowed to decline
relative to that of the Soviet Union.
•
Defense investment and Force comparisons illustrate the need to continue our revitalization
efforts:
—
Defense Spending
> During the decade of the seventies, Soviet defense spending averaged over 13% of
GNP compared to less than 6% for the U.S.
—
Defense Investment
> In 1981, U.S defense investment (procurement, R&D, military construction) was
about $75 billion (in 1984 dollars) compared to a dollar estimate of Soviet defense
investment of over $120 billion or over 50% greater. Most notably, the Soviets have
invested three times more than we did in strategic nuclear forces.
> Total defense investment for NATO and Japan was about $115 billion as compared to
over $130 billion in 1984 dollars for the Warsaw Pact-about 90% of which was direct
Soviet contributions and, hence, under direct Soviet control.
> During the last decade (1972-1981), the dollar value of Soviet defense investment
exceeded U.S. investment by almost a half trillion dollars (in 1984 dollars). Over the
last decade Warsaw Pact defense investments were over $185 billion more than
NATO and Japan.
—
Weapon Systems Production
> Since 1974, production of major weapon systems by the U.S. has lagged that of the
Soviet Union; overall NATO production has also lagged that of the Warsaw Pact,
except with respect to general purpose naval forces.
PRODUCTION OF SELECTED WEAPONS (1974-1982)
US
ICBMs
Tanks
Tactical Combat
Aircraft
General Purpose
Warships
USSR
USSR to
US Ratio
NATO
Warsaw
Pact
Warsaw
Pact to
NATO
Ratio
346
6,400
2,035
17,350
5.9:1
2.7:1
346
9,000
2,035
20.800
5.9:1
2.3:1
3,050
6,100
2:1
5,700
6,900
1.2:1
99
146
1.5:1
211
156
.7:1
198
Existing Force Balance
> The Soviets now have a significant advantage in numbers of deployed strategic
weapons systems.
Strategic Forces (1 January 1983)
US
1921
1593
(1049)
(544)
328
Delivery Vehicles
Missiles
ICBMs
SLBMs
Bombers
USSR
2598
2348
(1398)
(950)
250
• The Soviets enjoy a current monopoly in deployed longer range intermediate range
nuclear forces (LRINF).
Longer Range Intermediate Range Nuclear Forces (LRINF)
US
LRINF Warheads
0
USSR
More than 1200
> The Soviets continue to maintain their very large advantage in conventional forces.
Selected Conventional Forces (Deployed)
Tanks
Interceptor/Aircraft
Submarines
3 to 1 Warsaw Pact Advantage
2.5 to 1 Warsaw Pact Advantage
1.3 to 1 Warsaw Pact Advantage
THREATS TO FRIENDLY COUNTRIES
The massive Soviet military buildup of the past decade has lead to growing adventurism world-wide
by the Soviet Union and its client states. Most menacing is the Soviet invasion of Afghanistan in
1979, marking the first time that regular Soviet forces were engaged in combat outside the
communist bloc since World War II. More commonly, the Soviet Union has employed third world
clients to threaten United States allies and other friendly nations. The list of such threats has grown
long:
•
Thailand is confronted with Vietnamese forces which have invaded Kampuchea and reached
the Thai border.
•
In Africa, neighboring countries to Libya face a continuing threat from that country, as
demonstrated by that country's recent abortive incursion in Chad.
•
The peaceful states of southern Africa confront the presence of Cuban troops in Angola.
•
The countries of the Caribbean Basin are faced with subversion from Cuba.
•
Among the longer standing threats are those of Syria in the Middle East and of North Korea
to South Korea.
U.S DEFENSE STRATEGY
U.S. strategy is guided by three primary principles:
•
Its objective is to deter war
•
It is defensive
•
If deterrence fails, we seek to restore peace on favorable terms after a conventional attack.
199
The following policies underlie U.S. strategy:
•
We are part of, and contribute to, a collective defense posture that incorporates the
strengths of our allies.
•
We maintain forward deployments that, combined with the forces of our allies, provide the
first line of conventional defense in Western Europe, Japan, and Korea. Rapid deployment
forces will augment those forward deployed in event of crisis or war, as well as to respond to
threats in other areas.
•
We seek a flexible force structure that builds upon our alliance commitments and forward
deployments and provides us a variety of response options.
•
The defensive orientation of our strategy imposes several requirements on our military
posture: our forces must be maintained in a high state of readiness, our tactical warning and
command, control and communications capabilities must be flexible and enduring; and our
reserve forces must have the capability to mobilize rapidly.
•
For deterrence to be effective:
•
—
our forces must show that they could survive a first strike;
—
our threatened response to an attack must be credible; and
—
the boundary between peace and aggression must be clearly defined.
To restore the peace, should deterrence fail, we seek to limit:
—
the scope of the conflict to the theater in which the attack occurred;
—
the duration of the conflict; and
—
the intensity of the conflict.
NATIONAL SECURITY RESPONSES
•
Because of our defensive orientation we must keep our forces in a high state of readiness,
maintain the ability to detect warning of attack and improve our ability both to respond
appropriately to ambiguous indications and to mobilize reserve forces rapidly.
•
Programs to improve our conventional force combat capabilities emphasize readiness first,
then sustainability, modernization and force expansion.
•
Should a conventional attack occur, we would try to limit the scope of conflict by defeating
the attack in the theater in which it occurred. Given the Soviets' ability to conduct campaigns
on several fronts, however, our planning must recognize that war could spread to other
regions. We would seek to deny the enemy his political and military goals and to
counterattack with sufficient strength to terminate hostilities at the lowest possible level of
damage to the United States and its allies. We should not allow the Soviets to perceive that a
conflict could be won simply by outlasting us.
•
Countries of the third world which are prepared to resist direct and indirect Soviet
aggression must receive financial support from the United States to cushion the effect on
their economies of necessary increases in their military spending. These countries, among
the hardest hit by the current world economic disruption, must also be provided with
economic assistance which is immediately helpful to them as well as aid for their longer term
development activities.
200
•
At the same time, because of a major campaign by the Soviet Union to spread lies and half
truths about United States policy and our democratic free enterprise system, these third
world countries and our industrialized allies must be given a better understanding of the
principles for which the United States stands and of the benefits to us and to them of our
way of life.
•
Security assistance is provided to friends and allies to enhance their ability to defend
themselves and to increase the effectiveness of the mutual U.S. and allied military response.
•
Current forces to carry out these objectives include:
—
29 Army and Marine Corps Divisions (19 active and 10 reserve), supplemented by
separate non-divisional brigades and regiments;
—
A deployable battle force of some 506 ships, including 34 ballistic missile submarines
and 13 aircraft carriers; and
—
38 wings of Air Force tactical aircraft, 15 Navy wings, and 4 Marine Corps wings.
STATUS AND ACCOMPLISHMENTS TO DATE
The Reagan Administration has dramatically increased force readiness and sustainability.
•
•
Personnel readiness
—
100% of manpower recruiting goals are now being met.
—
86% of enlistees are now high school graduates, up from 68%two years ago.
—
Career re-enlistment is at 82%, an increase of 15% over two years ago.
Conventional force readiness
—
The average flight training of Air Force crews has been increased by more than 50%
from 1978 to an average of about 20 hours per month.
—
The combat readiness of our naval ships increased 79% since 1981 on the average,
based on number of ships now " fully" or "substantially" combat ready,
—
The readiness of naval tactical air forces has increased 330% since 1981.
—
Programs funded to date will provide a 25% increase in available war reserves for
combat sustainability over the 1981 level.
The Administration has placed a high priority on modernizing our strategic nuclear forces to reduce
existing imbalances.
•
A commitment has been made to procure 100 B-1B bombers, with ten aircraft funded in the
FY 1984 request.
•
Pursuit of research and development for an Advanced Technology (Stealth) bomber is
continuing.
•
A program to re-engine over 300 KC-135 strategic tanker aircraft to improve the range and
efficiency of our tanker force is well underway
•
Deployment of air launched cruise missiles on our B-52 force is continuing
•
Development of the Peacekeeper land-based intercontential ballistic missile is continuing
with an initial operational capability planned for late 1986.
•
Commitment to develop the TRIDENT II submarine-launched ballistic missile has been made.
201
•
Construction and deployment of our new OHIO class TRIDENT submarines is continuing with
the first boat deployed in October 1981 and the eleventh funded in the FY 1984 budget
request.
Substantial resource have been committed to improving our mobility forces.
•
A commitment to an enhanced airlift program consisting of 50 C-5B Starlifter aircraft for
"outsize" equipment and 44 KC-10 cargo-tanker aircraft for "oversize" equipment has been
made.
•
Our airlift capability will be doubled by the early 1990s.
•
For sealift, 17 maritime prepositioning ships have now been deployed with 13 more ships to
be added for rapid deployment and prepositioning.
•
Our overall capability to deploy forces will be increased through our airlift, sealift, and
prepositioning initiatives by about 70% by the end of the decade.
Conventional forces procurement has been increased to modernize and sustain current force levels.
•
Tactical aircraft procurement for the past two years has averaged 320 aircraft, roughly 400
are needed to sustain current force levels at an average age of 10 years.
•
Overdue modernization of land forces has been accelerated with procurement of 1,575 tanks
and 1,958 combat vehicles over the past two years.
Finally, within available resources the Administration is striving to expand force structure to reduce
the imbalance between existing forces and those required to carry-out national security objectives
•
The Army will activate two additional Special forces battalions and an additional group
headquarters in 1984.
•
By the end of 1983 our naval force level should exceed 500 ships compared to 479 at the end
of 1980 and on the way to 600 ships by 1990.
•
Our tactical air forces will expand over the period of the President's FY 1984 Five-Year
Defense Plan from 26 to 28 active Air Force Wings and from 12 to 14 Naval Carrier Air Wings
Budget Authority for security assistance programs will increase to a requested $4.7 billion in 1984 up
from $3.5 billion in 1980. Guaranteed loans will grow to $4.4 billion during the same period an
increase of 7.5% from 1980.
DEFENSE SAVINGS
•
The Administration's FY 1984 budget for the Department of Defense is $273.4 billion in
Budget Authority, a reduction of $11.3 billion from the level planned last year for 1984 and a
reduction of $15.5 billion from the original plan of March 1981.
•
Since last year the President's planned defense program has now been reduced by over $74
billion.
—
$19.1 billion with Congressional actions for FY 1983.
—
$55 billion with the President's revised 1984-88 program.
•
Actual defense spending (outlays) for 1984 of $238.6 billion is $8.4 billion less than the
spending level planned a year ago, and $11.2 billion less than the original March plan.
•
The originally planned increase in defense spending over the last Carter five-year defense
plan for 1982-1986 has now been reduced by more than one-half, from $116 billion to $50
billion.
202
•
For the period FY 1981-1988, the Department of Defense projects savings of about $30 billion
from acquisition efficiencies and other management improvements.
•
These savings would come from initiatives such as multi-year procurement of weapon
systems or system components to allow economic quantity buys, and reductions in
administrative travel, consulting, management support and other areas.
203
STRATEGIC FORCES
AGENCY:
Department oftheTreasury
Functional Code: 851
Funding
REAGAN BUDGET
Budget Authority
1/
($ in billions)
1982
1983
1984
1985
19861'
19.9
26.5
37.4
45.3
45.3
Indudes research, development, procurement, and operations costs.
PROGRAM DESCRIPTION
Strategic forces are deployed to deter a nuclear attack against the United States or its allies, and to
prevent coercion by the Soviet Union. U.S. offensive forces, known collectively as the TRIAD, include
land-based intercontinental ballistic missiles (ICBMs), submarine-launched ballistic missiles (SLBMs)
and bombers. Air- and sea- launched cruise missiles are being added to these forces. Defensive
forces include warning, surveillance, and communications systems, and interceptor aircraft.
PROPOSED POLICY
The 1984 budget continues the President's strategic modernization program which consists of the
following elements:
•
Acquisition of the new B-1B bomber ($6.9 billion) to replace the aging B-52 and research and
development for an advanced technology (Stealth) bomber.
•
Development and production of new, larger and more accurate Peacekeeper (MX) missiles
($6.6 billion), for deployment in a survivable basing mode.
•
Deployment of the new Trident submarine and the Trident I missile and the development of
a new submarine-launched ballistic missile (Trident II) with improved range, accuracy and
payload. ($3.9 billion).
•
Deployment of air-launched cruise missiles (ALCM) on B-52 aircraft, and sea-launched cruise
missiles (SLCM) on attack submarines.
•
Improvements in strategic defenses, including air defense interceptors, development of an
anti-satellite system, and an aggressive research program for ballistic missile defenses.
•
Improvements to command, control and communications systems, including upgrades to
radars and satellites that warn of nuclear attacks.
•
In support of the strategic modernization programs, the FY 1984 budget includes $6.8 billion
in the Department of Energy for nuclear weapons R&D, testing, and production, special
nuclear material production, and other defense-related activities. The budget also includes
increased funding, to a level of $254 million, for a more effective civil defense program. This
program is funded by the Federal Emergency Management Agency as a part of a national
integrated emergency management system.
RATIONALE
Existing strategic weapons systems were, for the most part, introduced over 20 years ago and no
longer incorporate current technology. Modernization of these forces would be necessary even if
the threat had remained unchanged. The threat, however, has grown significantly.
The Soviet Union now has more ICBMs (1,398 vs. 1,052) and SLBMs (950 vs. 544) than the U.S. and our
lead in warheads is narrowing. The Soviets are also expected to begin deployment of a new bomber.
204
Soviet deployment of more effective forces threatens to weaken our retaliatory capabilities by
increasing the vulnerability of our ICBM's, decreasing the penetration capability of our bombers, and
reducing the reliability of our command, control and warning systems.
Past Administrations have allowed civil defense programs to decline. This Administration's program
will speed up efforts to provide for protection of the population.
EFFECTS OF THE PROPOSED POLICY
The Administration's strategic program will continue the reversal of the unfavorable trends in the
strategic balance favoring the Soviet Union, and will counter recent Soviet advances in missiles,
submarines and bombers.
Maintaining the strategic balance through the Administration's modernization program is necessary
to ensure that other nations realize that the cost of nuclear attacks on the United States or its Allies
far outweighs any conceivable gain.
Strategic modernization also provides an indispensable foundation for progress in Strategic Arms
Reduction Talks (START) and other arms control efforts by ensuring that the U.S. can negotiate from
a position of strength, and by increasing incentives for the Soviets to negotiate in good faith.
1982 and 1983 CHANGES
In support of the President's strategic program, the Congress has approved 1983 funding increases of
over $6.6 billion. Working with the Congress, the President has appointed a bipartisan Commission
on Strategic Forces to review our strategic modernization program with particular reference to
intercontinental ballistic missile basing alternatives.
205
CONVENTIONAL FORCES
AGENCY:
Department oftheTreasury
Funding
Functional Code: 851
($ in billions)
REAGAN BUDGET
Budget Authority
1982
1983
1984
1985
99.0
112.2
123.7
149.4
PROGRAM DESCRIPTION
This aggregation includes all active general purpose combat units and mobility (airlift and sealift)
forces. The costs include operations and maintenance, military pay, procurement of equipment and
supplies, military construction, and development of tactical systems.
The Reagan Administration is strengthening the United States military posture in order to offset the
growing strength of Soviet forces. Programs to improve our conventional force combat capabilities
emphasize readiness first, then sustainability,modernization and force expansion.
PROPOSED CHANGE
•
An increase of $11.5 billion over the 1983 level is proposed.
•
Readiness and Sustainability
•
—
A i r T o r c e fighter pilot flying hours will increase by about 5% per pilot and Navy ship
steaming hours will increase by 4%.
—
Backlogs of equipment and real property needing maintenance will be reduced.
—
Spare parts and munitions procurements for training and war reserves will be increased
by 27%.
—
Active duty military strengths will be increased.
Modernization and Force Structure
—
$12.7 billion is provided for ship construction, including 17 new ships.
—
$2.7 billion is included for airlift enhancements such as the C-5 and KC-10 aircraft and
the Civil Reserve Air Fleet.
—
$9.2 billion is included for tactical aircraft procurement (310 aircraft).
—
$2.8 billion is provided for armored vehicles production (1609 vehicles), including M-1
tanks, infantry fighting vehicles, and light armored vehicles.
—
$11.6 billion is provided for conventional munitions.
RATIONALE
•
Increases in operating funds and military personnel are required for improved force manning
and for increased training in support of new weapon systems.
—
Forward deployments must be maintained.
—
An active training program must be continued.
—
Total number of ships being operated is growing.
206
•
Additional equipment and supplies are needed for wartime support of our forces. Previous
Administrations have failed to provide enough spare parts and munitions to assure an
adequate capability to sustain combat.
•
U.S. maritime capability must be significantly enhanced to assure control of the seas. A Navy
battle force of 600 ships is required. Mobility forces must be improved to permit the rapid
deployment of combat forces to any area necessary to protect U.S. interests.
•
The Soviet Union has been producing large numbers of weapons. Proposed 1984
procurements narrow, but do not close the gap between U.S. and Soviet weapons
production.
EFFECTS OF PROPOSED CHANGE
The proposed program will continue the rebuilding of our defense posture that was begun in 1982.
•
•
With regard to readiness and sustainability:
—
Maintenance backlogs should decline.
—
Combat units will be better trained.
—
Logistics support for rapidly deployable forces will be increased to ease the difficulty of
operating in theaters such as Southwest Asia.
—
War reserve stocks will increase.
With regard to force structure and modernization:
—
The Navy will grow to 600 deployable battle force ships by the end of the decade.
> Carrier battle group levels will increase from 13 to 15 and four battleships will join
the force.
> Amphibious lift will be increased.
> Selected submarines and surface ships will be equipped with cruise missiles.
—
Our programmed increases in airlift, sealift and prepositioning of equipment and
supplies over the five-year period will give us approximately a 70% improvement in
deployment capability by the end of the decade.
—
Tactical aircraft and land combat forces will continue to be modernized at accelerated
rates.
1982 and 1983 CHANGES
•
•
Readiness
—
40% increase in active units rated either "fully" or "substantially" combat-ready.
—
50% decline in number of units rated "not ready."
Sustainability
—
•
1983 program will provide a 25% improvement in war reserves over the 1981 level.
Modernization and Force Stucture
—
Mobility Forces are becoming more capable.
> We have proceeded with procurement of an updated version of the C-5 cargo aircraft
and additional KC-10 tanker/cargo aircraft.
207
> Sealift is being improved by upgrading 5L-7 fast logistics ships to provide roll-on/rolloff capabilities and by the leasing of new ships for holding prepositioned combat
equipment and supplies.
—
The rebuilding of the Navy was started.
> The battleship U.S.S. New Jersey was reactivated.
> Refurbishment of a second battleship, U.S.S. Iowa, is underway,
t Two additional aircraft carriers are being constructed.
—
Tactical aircraft and land combat weapons production rates were increased to more
efficient levels which are also more consistent with requirements to sustain force levels.
208
SELECTED NATO RELATED PROGRAMS
AGENCY:
Department of Defense
Funding
REAGAN BUDGET
Budget Authority
Functional Code: 051
($ in millions)
1982
1983
1984
1,055
946
1,521
PROGRAM DESCRIPTION
In addition to planned improvements in the readiness, sustainability, and modernization of our
conventional forces -- much of which supports NATO defense -- the Administration is also pursuing
the following initiatives:
Host Nation Support Host countries will provide an increased share of logistic support for U.S.
forward deployed forces.
Prepositioning of Equipment Increases are planned in forward deployed equipment (including
tanks) to support troops that would be sent to NATO during mobilization.
Strengthening non-strategic nuclear forces The Administration plans to deploy new intermediate
range nuclear systems to balance large, recent Soviet deployments of similar systems.
PROPOSED CHANGE
•
The I984 budget continues Host Nation Support agreements with Germany, Belgium, the
Netherlands, Luxembourg, and the United Kingdom to provide additional wartime support
for U.S. forces. Germany has also agreed to organize new units with about 93,000 reservists
dedicated to providing logistics support to U.S. combat units.
•
Funding of $264 million has been requested in order to support two additional divisions with
prepositioned equipment.
•
Continued procurement of Ground Launched Cruise Missiles (GLCM), including the next
increment of I20 missiles in I984 ($801 million). Initial deployment to Europe is scheduled for
December I983.
•
Continued procurement of Pershing II ($456 million) missiles to support initial European
deployments also scheduled for December I983. Supplemental funding for I983 will be
requested following successful missile flight testing.
RATIONALE
The Soviet conventional buildup over the last decade requires improvements in NATO forces to
maintain a credible deterrent.
•
Host Nation Support agreements and prepositioning programs are cost-effective ways to
enhance our ability to reinforce units stationed in NATO without costly investments in airlift
andsealift forces.
•
In response to growing Soviet missile forces targeted on Europe, NATO decided in I979 to
modernize its theater based missile systems, while at the same time pursuing arms control
.negotiations. The I984 budget includes funds to implement this decision. Even after the
proposed deployments of GLCM and Pershing II, the number of NATO warheads (572) will be
less than the number of Soviet warheads already deployed (1200).
209
EFFECTS OFTHEPROPOSED CHANGE
Selected improvements to NATO forces, especially improvements to the theater missile forces, will
reverse the unfavorable trends in the NATO-Warsaw Pact balance.
Modernization efforts provide a necessary foundation for progress in arms control efforts by
ensuring that the U.S. can negotiate from a position of strength, and by increasing incentives for the
Soviets to negotiate in good faith.
210
GUARD AND RESERVE FORCES
AGENCY:
Department of Defense
Functional Code: 051
Funding
REAGAN BUDGET
Budget Authority ($ in billions)
Selected Reserve
End Strength (in thousands)
1982
1983
1984
1985
1986
10.4
11.4
11.6
13.2
14.5
964
1,002
1,030
1,068
1,098
PROGRAM DESCRIPTION
Guard and Reserve Forces are required to augment the Active Duty Force during mobilization as part
of the total force. Some Guardsmen and Reservists also perform peacetime missions. The primary
element of the reserve forces is the Selected Reserve-the part of our reserves that is organized and
trains as units. Other reserve members serve in the Individual Ready Reserve (IRR) which is made up
of individuals with prior military training who would be used to bring Active Force and Selected
Reserve units to full strength and to replace casualties suffered in the first few months of combat.
PROPOSED CHANGE
The budget provides for continued improvements in manning, training and equipping Guard and
Reserve Forces. Particular emphasis is placed on increasing full-time active duty support strength
levels. A comprehensive legislative package to improve IRR manning will be resubmitted to the
Congress. It includes extension of the Military Service Obligation (MSO) from six to a maximum of
eight years, which will begin to solve the shortfall problem in FY I990, and enlistment and
reenlistment incentives for joining or reenlisting in the IRR. These latter incentives are designed to
improve pretrained manpower strength until the strength increases from the proposed longerservice obligation are realized.
RATIONALE
These actions are being taken to:
•
Raise Reserve Force strength to a level closer to wartime requirements;
•
Improve their mobilization and deployment times;
•
Expand their inventory of modern weapons and equipment; and,
•
Improve the state of operational training in Reserve units.
EFFECTS OF THE PROPOSED CHANGE
These initiatives will raise Selected Reserve strength by 14% by the end of the planning period,
reduce the shortfall in pretrained individual manpower and significantly increase mobilization
readiness.
211
MILITARY PERSONNEL
AGENCY:
Department of Defense
Functional Code: 051
(in thousands)
End Strength
1982
1983
1984
1985
1986
1987
1988
2,109
2,127
2,165
2,213
2,254
2,276
2,308
PROGRAM DESCRIPTION
Military personnel provide the manpower for the active duty components of the Army, Navy, Marine
Corps and Air Force. In order to properly carry out their missions, the military services need an
appropriate mix of aptitudes,skill levels, and experience.
Efforts by this Administration to revitalize the all-volunteer force after serious manning difficulties
during the late I970's, have been remarkably successful. In FY 1981 and FY 1982 all services met or
exceeded their manning objectives, with successful recruitment and retention of high quality
personnel.
These achievements are attributed in part to substantial increases in military pay levels, special pay
and bonus programs and extended educational benefits implemented in I98I and I982.
PROPOSED CHANGE
The President proposes to increase military strength by 38,000 in I984.
RATIONALE
Manpower levels have been increased each year in response to additional force requirements and to
improve combat readiness. The higher force levels are a continuation of the Administration's efforts
to render our armed forces more capable of meeting national security commitments.
EFFECTS OF THE PROPOSED CHANGE
•
Additional military strength is required to properly man existing combat units, new ships,
aircraft and other weapon systems that will become a part of the military inventory in I984
and beyond. The increased manpower also permits needed improvements in military
training, logistics and intelligence activities.
•
The military services are expected to achieve these higher manning levels despite the
decision to provide no military pay raise in I984. Even with the pay freeze, the number of
experienced careerists is expected to grow 5% to 10% between I982 and I984. Recruit quality
should meet or exceed the standards mandated by the Congress. If additional measures are
necessary to fill critical manning needs, the budget includes a contingency fund beyond I984
for increased pay and benefits.
1982 and 1983 CHANGES
An average 14.3% military pay raise, along with substantial increases in other pay and benefits was
provided in FY 1982. These increases were substantially higher than average private sector pay raises
and led to significant improvements in recruiting and retention performance. The FY 1983 pay raise
was limited to 4% as part of a government-wide action jointly supported by the Administration and
Congress to reduce the Federal budget deficit and restore long term economic growth.
212
MILITARY RETIREMENT
AGENCY:
Department of Defense
Functional Code: 051
Funding
($ in millions)
1982
1983
1984
1985
1986
1987
1988
CURRENT SERVICES
Budget Authority
Outlays
14,986
14,938
16,155
16,130
17,088
17,052
18,080
18,044
19,306
19,267
20,440
20,400
21,601
21,560
REAGAN BUDGET
Budget Authority
Outlays
14,986
14,938
16,155
16,130
16,806
16,770
17,413
17,377
18,476
18,437
19,314
19,274
20,160
20,119
830
830
1,126
1,126
1,441
1,441
PROPOSED SAVINGS
Budget Authority
Outlays
282
282
667 .
667
PROGRAM DESCRIPTION
Military Retirement funding provides for the pay of all personnel on the military retired lists for the
Department of Defense. Included are payments to retired officers and enlisted personnel of the
Army, Navy, Marine Corps and Air Force, retainer pay of enlisted personnel of the Fleet Reserve of
the Navy and Marine Corps, and survivors' benefits.
PROPOSED CHANGE
No cost-of-living adjustment (COLA) is provided in 1984. Cost-of- living adjustments for 1983 and
1985 will be as specified in current law, including providing one-half of specified COLA percentage
increases to non-disability retirees under age 62. Proposed FY 84 legislation would make permanent
the current law provisions which allow one-half the full COLA for non-disability retirees. The
proposal would also round all benefit amounts to the next lower dollar.
RATIONALE
•
These changes will help bring military annuities more in line with inflation protection
provided to non-Federal retirees.
•
The limitations are consistent with those proposed for other Federal retirement programs.
EFFECTS OF THE PROPOSED CHANGE
•
There would be a modest impact on recruitment and re-enlistment.
•
The proposal would potentially increase lengths of service for senior personnel.
•
About 1.4 million military retirees would receive an average of $34 per month less by the end
of fiscal year 1984.
1982 and 1983 CHANGES
The Omnibus Budget Reconciliation Act of 1982 limited cost-of-living increases for non-disability
retirees under age 62 to one-half of assumed Consumer Price Index increases for 1983, 1984, and
1985.
213
INTERNATIONAL SECURITY ASSISTANCE
AGENCY:
Funds Appropriated to the President
Functional Code: 152
Funding
($ in millions)
1982
1983
1984
1985
1986
1987
1988
CURRENT SERVICES
Budget Authority
Guarantees
Total BA & Guarantees
Outlays
3,919
3,083
7,002
3,107
4,047
3,638
7,685
3,835
4,313
3,831
8,144
4,381
4,541
4,020
8.561
4,640
4,758
4,209
8,967
4,838
4,974
4,398
9,372
4,995
5,199
4,595
9,794
5,216
REAGAN BUDGET
Budget Authority
Guarantees
Total BA & Guarantees
Outlays
3,919
3,083
7,002
3,107
4,509
4,163
8,672
4,019
4,692
4,436
9,128
4,598
4,702
4.436
9,138
4,793
4,701
4,436
9,137
4,884
4,699
4,436
9,135
4,899
4,947
4,436
9,383
4,924
+ 462
+ 525
+ 987
+ 184
+379
+605
+984
+217
+ 161
+416
+ 577
+153
-57
+227
+170
+46
-275
+ 38
-237
-96
-252
-159
-411
-292
PROPOSED CHANGE
Budget Authority
Gurantees
Total BA & Guarantees
Outlays
PROGRAM DESCRIPTION
Through International Security Assistance programs, the United States helps other governments in
acquiring, training for, and using modern military equipment for their defense and provides aid to
support their economic stability.
PROPOSED CHANGE
•
Military financing programs contain an increased level of grant aid to meet the needs of
developing countries for concessional financing.
•
Contingency funds are provided to enable a rapid response to unforeseen situations
requiring economic aid.
•
The world-wide economic recession requires that the United States continue providing
economic assistance to help alleviate the severe problems facing many foreign countries.
RATIONALE
•
These programs are vital instruments of U.S. national security and foreign policy.
•
Since 1981, real program increases have been required:
to further the peace process in the Middle East, 50 percent of the total security assistance,
•
-
to secure base rights and facilities access agreements, 17 percent of total,
-
to support with military aid countries endangered by subversives sponsored by the
Soviets, Libyans, Cubans, and Vietnamese,
-
to provide economic aid to countries experiencing severe economic dislocation.
Security assistance is essential for the United States to actively support friends and allies
world-wide in the pursuit of mutual interests.
214
EFFECTS OF THE PROPOSED CHANGE
•
Grant aid will enable developing countries to meet national security requirements and ease
debt service repayments.
•
Economic support will provide needed external financing to help contain the economic
dislocation in developing countries.
•
Additional military aid will enhance the ability of friendly nations to defend their
sovereignty and thwart subversive activity.
1982 and 1983 CHANGES
•
Increased funding has been provided to secure base rights and facilities access.
•
Major programs in Central America and the Caribbean, Turkey, Pakistan, Tunisia, Morocco,
Sudan, Somalia and Kenya contribute to U.S. efforts to support key allies and ensure success
of vital foreign policy interests.
215
FOREIGN ECONOMIC AND FINANCIAL ASSISTANCE
AGENCY:
Functional Code: 051
Funds Appropriated to the President
Funding
($ in millions)
1982
1983
1984
1985
1986
1987
1988
CURRENT SERVICES
Budget Authority
Outlays
4,552
3,856
4.513
4,321
4,641
4,444
4,715
4,366
4,835
4,263
4,958
4,432
5,124
4,678
REAGAN BUDGET
Budget Authority
Outlays
4,552
3,856
4,755
4,335
4,868
4,487
4,451
4,377
4,335
4,248
4,258
4,351
4,257
4,445
+ 242
+ 14
+ 227
+43
-264
+ 11
-500
-15
-700
-81
-867
-233
PROPOSED CHANGES
Budget Authority
Outlays
PROGRAM DESCRIPTION
Foreign economic and financial assistance includes:
•
Contributions to support development lending by multilateral development banks.
•
Voluntary contributions to U.N. and other international development programs.
•
Development loans and grants administered by the Agency for International Development
(AID).
•
Food aid under the Public Law 480 program.
•
The provision of volunteers to promote development and mutual understanding through
the Peace Corps.
•
Refugee assistance, which provides humanitarian aid to refugees in foreign countries and
finances transportation and initial placement of refugees coming to the United States.
•
Other development assistance provided through the Inter-American Foundation, the Trade
and Development Program, and the narcotics control program of the Department of State.
PROPOSED CHANGE
For 1984, the Administration is proposing budget authority of $4.9 billion, an increase of $113
million, or 2.4%, above the amount requested for 1983 and $227 million, or 4.9%, above the 1984
current services estimate.
•
Increases are requested for AID bilateral programs, which contribute importantly to both
U.S. foreign policy and development goals, and for multilateral development banks,
primarily to complete the U.S. commitment to fund the Sixth Replenishment of the
International Development Association (IDA) by 1984.
•
Reductions from prior year levels will be sought for refugee assistance programs, since aid
and resettlement requirements are estimated to decline in 1984, and for international
organizations, which are judged of lower priority than other programs that address the same
goals.
216
•
P.L. 480, Peace Corps, and other programs in this category will be financed in 1984 at or near
the 1983 levels.
RATIONALE
The President's 1984 request for foreign economic and financial assistance reflects the importance
accorded by the Administration to promoting economic growth in developing countries. At the same
time, the Administration continues to emphasize free market solutions to the problems of
developing nations and has urged these countries to adopt free trade and other self-help policies
which will enable them to become economically self-reliant, and thus less dependent on U.S.
economic and financial assistance in the future.
EFFECTS OF THE PROPOSED CHANGE
Program increases proposed for the most important of the economic assistance programs will
promote a variety of U.S. foreign policy and development objectives:
•
Additional amounts for AID bilateral assistance programs will assist in encouraging the
adoption of appropriate economic policies in developing countries, in expanding the role of
the private sector in the development processes of these countries, in transferring a greater
amount of appropriate U.S. science and technology, and in building local institutions capable
of carrying out effective economic growth policies.
•
Contributions to multilateral banks in 1984 underscore the important role these institutions
play in promoting sound economic policies in recipient countries. The President's request also
will provide the amounts needed to comply with previous funding commitments agreed to
by the United States.
•
The P.L. 480 program, which will grow modestly in 1984, provides U.S. agricultural
commodities, especially those which are surplus to domestic requirements, to encourage
agricultural development and to satisfy humanitarian goals abroad.
1982 and 1983 CHANGES
The 1984 request for foreign economic and financial assistance is a continuation of policies adopted
in 1982 and 1983 to reorient U.S. economic assistance programs toward a more free-market
approach to international economic problems.
217
380-900 0 - 83 - 14
:
QL 3
FOREIGN INFORMATION AND EXCHANGE ACTIVITIES
AGENCY:
Board for International Broadcasting
United States Information Agency
Functional Code: 051
Funding
($ in millions)
1982
1983
1984
1985
1986
1987
1988
CURRENT SERVICES
Budget Authority
Outlays
583
571
652
640
688
688
824
732
756
791
783
828
828
820
REAGAN BUDGET
Budget Authority
Outlays
583
571
724
704
832
828
996
889
1,009
1,052
1,030
1,080
1,146
1,051
72
64
144
140
172
157
253
261
247
252
318
231
PROPOSED INCREASES
Budget Authority
Outlays
PROGRAM DESCRIPTION
International radio broadcasting, exchanges of persons, print and film media, and personal contacts
are used to increase foreign understanding of the American people, official U.S. policies, and the
advantages of democratic governments and open societies.
PROPOSED CHANGE
Strengthen foreign information and exchange activitives by providing:
•
$65 million for a "Project Democracy" to explain the advantages of democratic values, as the
President announced in his June 8, 1982, speech to the British Parliament.
•
$48 million to carry forward, a multiyear enhancement of the Voice of America broadcast
facilities, which are outdated and under-powered.
•
$10 million to support Radio Marti, a private radio organization that will broadcast Cuban
and worldwide developments to the Cuban people.
RATIONALE
•
An understanding of the United States and its policies by foreign peoples nd governments
often affects their actions.
•
Strenuous effort are underway abroad to challenge American intentions.
•
New efforts are needed to increase the ability of the United States to state and explain its
objectives and actions.
•
The success and attractiveness of our free political and economic systems provide an ideal
context from which effective information efforts can be mounted.
EFFECTS OF THE PROPOSED CHANGE
•
International radio broadcasting capabilities will be improved.
•
More and better contacts will be developed between American and foreign officials and
private citizens and institutions.
218
1982 AND 1983 CHANGES
•
Broadcast programming is being improved and expanded.
•
Initial planning for construction of more, high-powered broadcast transmitters is underway.
•
Supplemental 1983 budget requests totalling $82 million for these activities have been
transmitted to the Congress.
•
A new youth exchange effort has begun with private American sponsorship.
219
CREDIT
221
CHAPTER 5
CREDIT
During the last decade, the rapid growth of Federal credit assistance has had serious effects on the
Nation's financial markets. Federal intervention through direct and guaranteed lending preempts
capital that could be used more efficiently by unsubsidized, private borrowers; and since federally
assisted borrowers are frequently less productive than private borrowers, Federal credit activity
diminishes economic efficiency.
During the second half of the 1970's and the first years of the 1980's, the growth of Federal credit
activity has made the Federal Government a primary consumer of capital resources in the domestic
credit markets.
•
Previous to 1975, Federal and federally assisted borrowing, on average, absorbed less than
20% of available credit resources (this includes borrowing by the Government to finance the
budget deficit and off-budget spending, guaranteed borrowing and borrowing by
Government-sponsored enterprises).
•
Since 1975, large deficits and accelerated growth in credit programs have driven up the
absorption rate, reaching levels in the 1980's that have been experienced before only during
the recession and recovery period of 1975-1976 and the aftermath of World War II.
•
An absorption rate of 49% in 1982 reflects unprecedented demands of Federal and federally
assisted borrowing. (Table 1)
The Administration is committed to controlling the growth of Federal credit assistance, and upon
assuming office, took immediate steps to reverse previous growth trends. An interagency Cabinetlevel group was formed and undertook a comprehensive review of the Government's direct and
guaranteed loan programs in order to shape a consistent credit policy. For the first time, the credit
budget was used to impose systematic discipline and policy control over Federal credit.
Administration proposals for credit budget discipline have served to increase awareness of the
serious effects Federal credit activity has on the Nation's economy and credit markets.
THE SUPPLY OF FEDERAL CREDIT
A substantial portion of Federal and federally assisted borrowing results from lending activities that
supply credit to select borrowers. On- and off-budget agencies make direct loans, and they also
guarantee loans made by the private sector. In addition, Government-sponsored enterprises serve
credit markets in a variety of ways. Table 2 shows recent trends in the lending side of Federal credit
activity.
DIRECT LOANS
Agency loans to selected borrowers, through such programs as the Farmers Home Administration,
the Export-Import Bank, and the foreign military sales credit program, accounted for $23.4 billion in
direct loan outlays in 1982. However, of this total, $14.3 billion in direct loan outlays were excluded
by law from the budget totals.
Off-budget outlays mostly arise from the use of the Federal Financing Bank (FFB) as a source of
financing by other Federal agencies for direct and guaranteed loans. The FFB effectively converts
certain on-budget direct loans and guarantees into off-budget direct loans. This activity creates an
off-budget deficit that absorbs valuable savings and capital in the same way as the on-budget
deficit.
223
Table 1
BORROWING UNDER FEDERAL AUSPICES: ABSORPTION OF DOMESTIC CREDIT MARKET FUNDS
(fiscal years; in billions of dollars)
Five-Year Averages
19701974
19551959
19601964
19651969
35.5
50.8
80.6
148.7
2.1
4.0
4.5
4.3
6.4
5.1
0.4
0.7
Total funds raised under
Federal auspices
6.5
9.5
Federal absorption rates
18%
19%
Total funds raised in domestic
credit markets V
Federal borrowing
Net guaranteed loans
Net Government-Sponsored
Enterprise borrowing
19751979
1980
1981
1982
307.8
366.4
427.2
408.7
13.0
13.9
56.8
13.6
70.5
31.6
79.3
28.0
135.0
20.9
1.0
5.0
12.6
21.4
34.8
43.8
12.4
31.9
83.0
123.5
142.1
199.7
15%
21%
27%
V Funds raised by non-financial sectors, excluding equities.
Source: Federal Reserve Bulletin Flow of Fund accounts, adjusted during 1965-1969 for consistency with budget concepts.
34%
33%
49°/
Table 2
NET LENDING UNDER FEDERAL AUSPICES
(fiscal years; in billions of dollars)
Actual
1977
1978
1979
1980
1981
1982
2.6
9.0
8.6
11-2
6.0
13.6
9.5
14.7
5.2
20.9
9.1
14.3
GUARANTEED LOANS
13.5
13.4
25.2
31.6
28.0
20.9
GOVERNMENT-SPONSORED
ENTERPRISES
11.7
25.2
28.1
24.1
32.4
43.4
36.7
58.4
72.9
79.9
86.5
87.6
DIRECT LOANS
On-budget
Off-budget
TOTAL
GUARANTEED LOANS
Guaranteed loans, private loans for which the Government guarantees the repayment of principal
and interest, accounted for $20.9 billion in net credit market activity in 1982. Major guarantors of
privately issued loans are the Federal Housing Administration, the Veterans Administration
mortgage insurance, the Export-Import Bank and the Small Business Administration.
Guaranteed loans are not budget outlays, because no Federal funds are used except in case of
default. However, many of their effects are nevertheless similar to those of outlays. Guaranteed
loans effectively reallocate economic resources from market selected to federally selected uses.
Borrowing for guaranteed loans absorbs funds available to credit markets in a manner similar to
direct Federal borrowing.
GOVERNMENT-SPONSORED ENTERPRISES
Government-sponsored enterprises made $43.4 billion of net loans in 1982. Three enterprises
support housing - the Federal National Mortgage Association, the Federal Home Loan Banks, and
the Federal Home Loan Mortgage Corporation; one supports agriculture ~ the Farm Credit System,
and the Student Loan Marketing Association supports students and higher education. Most of these
enterprises provide liquidity to the markets they serve through secondary market operations.
Because of their private ownership, the Government-sponsored enterprises are not included in the
budget totals or controlled through the budget process. Nevertheless, Government sponsorship has
provided these enterprises with advantages in the securities markets that completely private
institutions do not have. This enables them to borrow at rates slightly higher than those of the
Treasury.
STEPS FOR CONTROL:THE CREDIT BUDGET
This Administration has worked closely with the Congress to strengthen the credit budget.
—
The credit budget covers all direct and guaranteed loans, making no distinction
between on- and off-budget entities. Government-sponsored enterprises are not
included because of their quasi-Federal status.
—
The credit budget focuses decisions on gross program levels at the point of legal
obligations, thereby facilitating control. In this way, the credit budget totals are based
on gross levels of credit activity, without offsets for repayments. By excluding
repayments, the credit budget measures the current level of new program activity.
225
—
The credit budget is based on direct loan obligations and guaranteed loan
commitments. Obligations for direct loans are contracts requiring that the Government
disburse a loan immediately or at some future time. Commitments for guaranteed
loans are agreements entered into by the Government to guarantee a loan when the
borrower or lender fulfills stipulated preconditions. Both obligations and commitments
define the point at which the Government becomes legally bound to extend credit.
Table 3
THE CREDIT BUDGET TOTALS U
(in billions of dollars)
Actual
Direct loan obligations
Guaranteed loan commitments
TOTAL
Estimate
1981
1982
1983
1984
53.5
76.5
47.6
53.7
49.1
102.7
38.8
98.7
130.0
101.3
151.8
137.6
lZ_The credit budget totals differ from totals shown in Table 2 because the credit budget is based on gross obligations and
commitments for credit, while Table 2 shows the net change in outstanding credit.
The Administration's 1984 Budget proposes reducing direct and guaranteed loan activity from
$151.8 billion in 1983 to $137.6 billion in 1984. Table 3 shows the trends in the credit budget totals
between 1981 and 1984. The significant increase between 1982 and 1983 is due to projected
improved economic conditions in 1983 that are estimated to result in increases in guaranteed loan
activity, particularly in the mortgage guarantee programs. The 9% decrease in credit budget totals
between 1983 and 1984 reflects the Administration's proposals to control Federal credit activity
through the credit budget framework.
Major programmatic proposals in the credit budget between 1983 and 1984 included in Table 4 are:
Federal Housing Administration. Guaranteed loan activity will decrease by $6.1 billion in 1984. For
1983, FHA received a supplemental appropriation in the Continuing Resolution of $6.1 billion due to
the expected surge in housing activity. The proposed decrease in 1984 brings the FHA program back
to an annual appropriation limitation of $39.8 billion.
Commodity Credit Corporation. Direct lending for commodity price support programs are estimated
to be reduced by $3.8 billion between 1983 and 1984. This decrease is a result of the proposed
payment-in-kind program. Guaranteed loan commitments are also estimated to decline between
1983 and 1984 by $1.8 billion. This reduction in 1984 offsets unusually high activity in 1983 due to a
special supplemental one time credit offer of $2 billion.
Farmers Home Administration.
The $3.5 billion decrease in Farmers Home Administration's direct
loan obligations below the 1983 level is due primarily to a reduction in the rural housing insurance
fund. This decrease in direct lending activity is part of the proposed rural housing block grant to the
States.
Export-Import Bank. The $2.0 billion proposed increase in guaranteed loan activity is the result of an
expanding market in exports.
Rural Electrification Administration. For 1984, REA guaranteed loans are proposed to be reduced by
$1.5 billion and direct loans are proposed to be reduced by $0.5 billion. These reductions are due to
an anticipated increase in supplemental financing from the National Rural Utility Cooperative
Finance Corporation and other private sources. In addition, lower demand in the electric market will
reduce the need for Federal assistance to REA borrowers.
226
Veterans Administration.
The veterans loan guarantee revolving fund is estimated to increase by
$1.2 billion for guaranteed loan commitments due primarily to reduced interest rates that are
expected to stimulate activity in the housing market.
Education Programs. Guaranteed loan commitments of the guaranteed student loan program are
expected to increase by $0.6 billion between 1983 and 1984 due to increasing tuition costs.
Table 4
MAJOR CHANGES IN CREDIT BUDGET TOTALS 1983-1984
(in billions of dollars)
Direct Loan
Obligations
Guaranteed Loan
Commitments
49.1
102.7
Credit budget totals, 1983
CHANGES:
International security assistance
CCC price supports and related
programs
Farmers Home Administration
Education programs
Federal Housing Administration
Government National Mortgage
Association
Veterans' housing programs
Export-Import Bank
Small Business Administration
Rural Electrification Administration
Other
0.3
-3.8
-3.5
-1.8
0.6
-6.1
-0.5
1.2
2.0
-0.2
-10.2
-1.5
U
-4.0
38.8
98.7
-0.5
-1.7
Total change
Credit budget totals, 1984
MEMORANDUM:
GNMA mortgage-backed securities
(secondary guarantees)
-96
227
FEDERAL HOUSING ADMINISTRATION
AGENCY:
Department of Housing and Urban Development
Funding
Functional Code: 051
($ in millions)
1982
1983
1984
1985
1986
1987
1988
CURRENT SERVICES
Commitment Lim.
Outlays
18,5761/
-236
45,900
-329
41,897
-1,528
51,447
-1,892
59,984
-2,243
66,708
-2,483
71,222
-2,683
REAGAN BUDGET
Commitment Lim.
Outlays
18,576 U
-236
45,900
-329
39,800
-1,546
39,800
-1,586
39,800
-1,622
39,800
-1,563
39,800
-1,516
2,097
19
11,647
-306
20,184
-621
26,908
-920
31,422
-1,167
PROPOSED CHANGES
Commitment Lim.
Outlays
1/ Commitments actually issued.
PROGRAM DESCRIPTION
The Federal Housing Administration (FHA) operates about 40 programs that provide insurance for
home and project mortgages and property-improvement and mobile-home loans. Since its inception
in 1934, FHA has insured mortgages and loans covering 17.6 million units with a value of $272 billion.
FHA currently insures 5 million home and multifamily mortgages with a value of $161 billion. In
fiscal year 1982, FHA insured 163,000 home mortgages with a value of $7.5 billion, 1,000 multifamily
mortgages covering 108,000 units with a value of $3.7 billion, and 244,000 property-improvement
and mobile- home loans with a value of $1.5 billion.
If the owner of a property with an FHA-insured mortgage defaults on the mortgage, FHA pays the
lender the outstanding balance of the defaulted mortgage and in return either acquires title to the
property or has the mortgage assigned to FHA. At the end of fiscal year 1982, FHA owned 48,857
units of acquired properties and held mortgages on properties containing an additional 235,312
units.
PROPOSED CHANGE
•
The Administration has proposed a limitation on the amount of mortgages and loans that
FHA can insure in 1984 of $39.8 billion. This proposal is identical to the limitation that was
enacted by the Congress for 1983 after excluding the supplemental limitation of $6.1 billion
that was requested by the Administration in order to provide sufficient commitment
authority to handle the extraordinary demand for FHA insurance that resulted from the
recent rapid decline in mortgage interest rates.
•
The Administration will also propose a number of legislative changes, including:
—
Authority to insure mortgages for the construction of shell homes and adjustable rate
and shared appreciation mortgages;
—
A more efficient method to settle FHA single-family insurance claims without
acquisition of properties or assignment of mortgages;
—
Deregulation of the maximum mortgage interest rate that may be charged on FHAinsured mortgages;
228
—
Changes to the Bankruptcy Code that would permit FHA to acquire defaulted
multifamily properties more expeditiously.
RATIONALE
•
Proposals to limit the growth in FHA credit are an integral component of the President's plan
to control the growth of Federal credit.
•
The legislative proposals that expand the types of mortgages that FHA can insure are
consistent with targeting of FHA insurance towards those groups not adequately served by
the private sector. FHA should provide mortgage insurance for only those segments of the
market not adequately served by the private sector. For example, some homebuyersparticularly first time homebuyers who are able to make only very low downpayments-may
be unable to obtain private mortgage insurance and thus require FHA mortgage insurance if
they are to be able to purchase a home.
•
The other proposals are consistent with operating FHA in an efficient, businesslike manner.
EFFECTS OF THE PROPOSED CHANGE
•
As a result of maintaining the 1983 commitment limitation (after exluding the one-time
supplemental) of $39.8 billion during a period of rapidly expanding housing credit activity,
FHA's share of the mortgage insurance market will decline and more homebuyers will use
lower cost private mortgage insurance. In 1982, private mortgage insurers insured more
mortgages than FHA and VA combined.
•
As a result of operating FHA in a more efficient and businesslike manner, net receipts to the
FHA are expected to increase from $329 million in 1983 to over $1.5 billion in 1984 and each
year thereafter.
1982 AND 1983 CHANGES
•
Beginning in 1983, a new method for collecting insurance premiums on insured single-family
mortgages is being implemented. Instead of paying monthly premiums for the life of the
mortgage, homebuyers with FHA-insured mortgages will either pay a lump sum at the
settlement or have the insurance added to the mortgage amount. Implementation of this
procedure is expected to increase net receipts by an estimated $289 million in 1983 and by
over$1 billion in 1984.
•
FHA will also implement in 1983 a program that will allow direct approval of insured singlefamily mortgages by approved mortgage lenders, thus expediting the insurance process and
reducing the FHA staff needed to process applications.
•
In 1982, FHA began to use a simplified foreclosure method enacted as part of the Omnibus
Budget Reconciliation Act of 1981. The use of this new method has helped shorten the long
periods that were required to complete foreclosures under certain State laws, thus
ameliorating problems of deterioration of the structures, substantial Federal management
and holding expenditures, vandalism, fires, and decline of the neighborhoods in which the
properti es are I ocated.
229
SMALL BUSINESS CREDIT ASSISTANCE
AGENCY:
Small Business Administration (SBA)
Functional Code: 376
Funding
($ in millions)
1982
1983
1984
1985
1986
1987
1988
CURRENT SERVICES
Budget Authority
Outlays
326
700
662
574
436
427
455
366
475
384
499
402
530
427
REAGAN BUDGET
Budget Authority
Outlays
326
700
517**
508
241
176
219
164
185
133
128
81
67
26
145
66
195
251
236
202
290
251
371
321
463
401
178
73
41
41
41
41
41
505
677
472
442
403
338
272
2,249
2,800
2,800
2,450
1,850
1,150
1,150
PROPOSED SAVINGS
Budget Authority
Outlays
REAGAN CREDIT LEVELS
New Dir. Loan Approvals
New Dir. Loan Oblig*.
Guar. Loan Commit
*This includes amounts for repurchases of defaulted SBA guaranteed loans.
**Includes $178 million transfer from Department of Commerce programs.
PROGRAM DESCRIPTION
The Small Business Administration (SBA) provides direct loans and guaranteed loans to small business
as follows:
—
Direct Loans
SBA provides subsidized (below the normal cost of borrowing from banks) loans to
small business to construct, expand, or convert facilities; to purchase equipment or
building materials; or to supply working capital. Except for a 3% interest rate on loans
to businesses that employ or are owned by handicapped individuals, interest rates on
direct loans were increased in 1981 to the Government's cost of borrowing money.
—
Guaranteed Loans
SBA supports a guaranteed business loan program which guarantees 90% of a loan and
100% guarantee of pollution control equipment loans to small business.
PROPOSED CHANGE
The Administration proposes to eliminate SBA direct loans beginning in 1984 (except for Minority
Enterprise Small Business Investment Companies) and to maintain guaranteed credit assistance at
the Administration's proposed 1983 levels. SBA guaranteed credit assistance would be gradually
phased down to $1.2 billion in 1987 with an emphasis on minority, handicapped, and first-time
borrowers. In addition, administrative actions will be taken to increase the private sector risk and to
recover loan servicing costs.
230
RATIONALE
•
The proposed change applies sound economic criteria to economic subsidy programs and
limits Federal Government involvement in the credit market.
•
As a group, the nation's 14 million small businesses will benefit more from the
Administration's efforts to stabilize financial markets, reduce interest rates, eliminate
burdensome regulations, and lower inflation than from Federal credit assistance. Less than
1 % of small businesses receive any type of financial assistance from SBA.
•
Subsidized direct loans are costly to the small business community:
—
They result in increased Federal borrowing and, thereby, reduce available private credit.
—
They create a competitive advantage for some small firms over others that are equally
deserving.
•
Since the vast majority of small businesses are obtaining financing without Federal
assistance, aid should be limited to those businesses for which a valid case can be made that
the market overestimates the risk of a project (e.g., first-time borrowers) or underestimates
its return in terms of achieving social objectives (e.g., counteracting discrimination or
generating greater economic independence for minority communities).
•
As interest rates decrease with economic recovery, the lower cost of borrowing should make
it easier for individuals to obtain credit assistance without Federal involvement.
EFFECTS OF THE PROPOSED CHANGE
•
The elimination of direct loans will have a negligible effect on small business. At the end of
1982, SBA had 38,041 direct loans outstanding in its portfolio. This means that less than 0.3%
of the 14 million small businesses identified by IRS received direct financial assistance from
SBA.
•
Maintenance of the 1983 proposed level of guaranteed business loans will not have a
significant adverse effect on small business. In 1982, SBA guaranteed 12,780 business loans
and had a total of 109,330 guaranteed loans outstanding in its portfolio. This means that
SBA provided guaranteed business loans to less than 1% of the 14 million small businesses
identified by IRS.
231
RURAL TELEPHONE BANK
AGENCY:
Department oftheTreasury
Functional Code: 851
Funding
($ in millions)
1982
1983
1984
1985
1986
1987
1988
CURRENT SERVICES
Appropriated Capital
Borrowings
Budget Authority
Lending Level
30
129
159
185
30
122
152
185
30
120
150
185
30
120
150
185
30
120
150
185
30
120
150
185
30
120
150
185
REAGAN BUDGET
Appropriated Capital
Borrowings
Budget Authority
Lending Level
30
129
159
185
7
145
152
185
150
150
185
150
150
185
150
150
185
150
150
185
150
150
185
-23
+ 23
-30
+30
-30
+30
-30
+30
-30
+30
-30
+30
PROPOSED CHANGES
Appropriated Capital
Borrowings
Budget Authority
Lending Level
PROGRAM DESCRIPTION
The Rural Telephone Bank provides direct loans to rural telephone companies and cooperatives at
subsidized interest rates for the operation and improvement of telephone services in rural areas.
PROPOSED CHANGE
•
The unobligated balance of the 1983 Federal capitalization appropriation ($23.4 million of
$30 million provided) would be rescinded.
•
The $30 million a year capitalization appropriation assumed in 1984 and outyear current
services would be eliminated.
•
The current lending level would be maintained.
RATIONALE
•
The Federal Government has already provided the $300 million in capital called for in the
original statute establishing the Bank. These funds only begin to be repaid starting in 1995.
•
Federal capitalization funds are provided to the Bank by law at a 2% interest rate. The
difference between the Treasury's cost of borrowing and the 2% rate is paid by the Federal
taxpayer. This is unjustified because adequate credit is available to the Bank at no cost to the
taxpayer through the following mechanisms.
—
The Bank has the authority to raise funds in private credit markets on the $300 million
capital base provided by the Federal Government.
—
The Bank is authorized to borrow without limitation from the Treasury at the Treasury's
cost-of-money interest rate, with 50-year repayment terms.
232
EFFECTS OF THE PROPOSED CHANGE
This proposal will not affect the Bank's lending levels, nor will it reduce the total budgetary
resources available to the Bank.
Even with this proposal, the Bank will continue to be heavily subsidized with taxpayer dollars and
rural telephone borrowers will continue to enjoy low-cost money. The Bank will be reducing its 1983
interest rate from 11.5% to 10.5% - well below the current private market rate of interest.
1982 AND 1983 CHANGES
In the Agriculture and Food Act of 1981, Congress authorized an additional $300 million of
capitalization for the Bank at 2% interest. Although it is authorized, the Administration believes the
original $300 million of capital plus the Bank's authority to borrow privately and from the Treasury
provides sufficient resources for the Bank's operations. Thus, the Administration does not intend to
utilize the new authorization of funds.
233
AGRICULTURAL EXPORT CREDIT
AGENCY:
Department of Agriculture
Functional Code: 351
Funding
($ in millions)
1982
1983
1984
1985
1986
1987
1988
CURRENT SERVICES
Direct Loans
Loan Guarantees
Total Assistance
-1,625
1,625
100
2,800
2,900*
100
2,800
2,900
100
2,800
2,900
100
2,800
2,900
100
2,800
2,900
100
2,800
2,900
REAGAN BUDGET
Direct Loans
Loan Guarantees
Total Assistance
1,625
1,625
100
2,800
2,900*
100
3,000
3,100
100
3,000
3,100
100
3,000
3,100
100
3,000
3,100
100
3,000
3,100
200
200
200
200
200
200
200
200
200
200
PROPOSED INCREASE
Direct Loans
Loan Guarantees
Total Assistance
-
-
* Does not include special one-time export credit packages totaling $2,250 million that are
independent of current services and policy.
PROGRAM DESCRIPTION
The Commodity Credit Corporation (CCC) provides export credit for agricultural products in the form
of direct loans and loan guarantees.
PROPOSED CHANGE
Export credit loan guarantees are increased by $200 million over current services.
The budget continues the Administration's 1983 export initiative: "blended" export credits; where
interest-free direct loans are "blended" with market-rate loan guarantees as a combination export
subsidy package.
EXPORT CREDIT ASSISTANCE IN PRESIDENT'S BUDGET
($ in millions)
BLENDED CREDITS
- Direct Loans
- Loan Guarantees
Total
REGULAR LOAN GUARANTEES
Total Assistance
1983 One-ti me Packages*
Revised 1983
1983
1984
1985
1986
1987
1988
100
400
500
100
400
500
100
400
500
100
400
500
100
400
500
100
400
500
2,400
2,900
2,600
3,100
2,600
3,100
2,600
3,100
2,600
3,100
2,600
3,100
+2,250
5,150
* $1 billion loan guarantees to Mexico and special blended credit package comprising $250 million direct loans and $1 billion
loan guarantees.
234
RATIONALE
The 1983 boost in export credit is intended to help the U.S. maintain and expand its agricultural
export markets in these times of low farm prices, excess supplies and foreign export subsidies.
Total agricultural exports were valued at $39.1 billion in 1982, while imports were $15.4 billion;
resulting in a positive agricultural trade balance of $23.7 billion. Federal export credit currently
affects only about 6% of total agricultural exports. Thus, stimulating normal commercial sales rather
than providing ever-increasing Federal credit involvement remains the key to long-term increases in
U.S. exports.
EFFECTS OF PROPOSED CHANGE
While the total volume of grains exported this year are estimated to be slightly less than last year's
record level, export volume is expected to again increase to new record levels over the next few
years. This would be in part a result of the current short-term boost in export credit which should in
turn help reinvigorate normal commercial trade for long-term export sales.
235
FEDERALISM
237
CHAPTER 6
FEDERALISM
One of the most important goals of Ronald Reagan's Presidency is to make government more
efficient and more responsive to its citizens by restoring an appropriate balance among Federal,
State and local governments. The President seeks to:
•
Restrain the unnecessary growth of the Federal Government while returning to State and
local governments authority for programs which can be accomplished at those levels.
•
Provide greater flexibility and responsibility to elected officials close to the people through
consolidation of numerous narrow and restrictive categorical programs into streamlined
grants to States and/or local governments.
•
Enhance State and local officials' ability to govern efficiently and responsively by reducing
the restrictive burden of unnecessary Federal regulations, while also encouraging their
increased involvement in Federal decision-making affecting States and localities.
BACKGOUND: AN INTERGOVERNMENTAL IMBALANCE
While State and local governments have a vital constitutional role in providing Government services,
the explosive growth of Federal domestic programs over the last two decades stifled State and local
creativity, usurped many of their responsibilities, and diverted inordinate attention by State and
local governments to activities in Washington.
•
Between 1960 and 1981, Federal outlays for grant-in-aid programs increased at an annual
rate of 13.0% - faster than the increase in the Federal budget (9.8%) or public sector
expenditures as a whole (10.0%).
•
During the same period, the number of narrowly focused categorical grant programs almost
tripled. The existence of more than 400 of these special purpose grants created tremendous
program and administrative waste and duplication at all levels of government, yet did not
ensure that priority State and local needs were addressed effectively.
•
These grant programs usually were accompanied by numerous regulations and restrictions
on the use of funds - an average of 300-500 mandates for a typical grant program. Meeting
these requirements imposed untold millions of "burden hours" of paperwork each year,
consuming personnel and fiscal resources which would have been better directed to meeting
program priorities. In addition, the restrictions too often forced Federally conceived
solutions to State and local problems upon the very officials who could best decide how to
deal with those problems.
ACCOMPLISHMENTS IN RESTORING A BALANCE
In the first two years of his Administration, the President has moved aggressively to fulfill his
commitment to Federalism.
BLOCK GRANTS—MORE FLEXIBLE AID TO STATES
Between 1980 and 1982, the number of grant programs has declined by 35 percent, from 428 in 1980
to 280 in 1982. As sought by the President, many categorical programs have been consolidated into
block grants to State and local governments:
239
•
The 1981 Omnibus Budget Reconciliation Act established nine block grants by consolidating
57 categorical programs in the areas of Maternal and Child Health Care; Preventive Health
and Health Services; Alcohol, Drug Abuse and Mental Health Services; Primary Care; Social
Services; Low Income Home Energy Assistance; Community Services; Community
Development for Small Cities; and Education. Eight of these block grants became effective in
1982; one is being implemented in 1983.
•
The 1982 Job Training Partnership Act, fully effective in October 1983, replaces three
Comprehensive Employment and Training Act programs with a block grant to the States to
provide job training for disadvantaged youths and adults.
These block grants significantly improve State and local program and administrative flexibility and
dramatically reduce Federal red tape. For example:
•
Only 20 pages of Federal regulations cover the nine block grants enacted in 1981, eliminating
647 pages previously in effect. Eleven pages of proposed regulations would implement
portions of the Job Training Partnership Act, a decrease from 238 pages which governed the
predecessor programs.
•
Paperwork associated with the 1981 block grants decreased by an estimated 5.4 million hours
in 1982. A total decrease of 5.9 million hours or 91 percent is expected through 1983.
One measure of the success of the block grants is their early acceptance by States. October 1981 was
the earliest possible date by which States could choose either to assume responsibility for four block
grants or let the Federal Government continue to run the programs. By that date, 90 percent of the
States and territories had accepted three of the four block grants and 75 percent had accepted the
fourth.
In addition, a 1982 General Accounting Office (GAO) report on the implementation of the block
grants found positive evidence of States' enthusiasm and competence:
•
States were effectively assuming the new programs with no major problems.
•
States were moving quickly to establish effective oversight mechanisms such as more
involvement by State legislatures and the public in decisionmaking and development of
responsible audit plans.
•
Examples of efficiencies due to the block grants were cited. One State found a reduction
from 22 to 3 days in time needed to prepare applications for two block grants compared to
predecessor programs. Another State anticipated a 10 percent reduction in report
preparation time for one block grant. A third State estimated reductions in administrative
costs of $5.2 million due to streamlined reporting requirements.
Early experience with the block grants underscores the administrative, fiscal and program
improvements possible and the significant capacity of States to administer major programs
effectively and accountably.
REGULATORY RELIEF
The President's Task Force on Regulatory Relief was established in January 1981 to review
regulations identified as burdensome, unnecessary or counterproductive. Of the more than 119
regulatory reviews targeted by the summer of 1982, 35 were related to State and local governments.
In addition, more than 15 other major regulatory reviews affecting State and local governments
were initiated independently by agencies.
During the past two years, 25 reviews were completed by the agencies or by the Task Force. Benefits
to States and localities resulting from the reviews include the following:
•
Initial savings of at least $4 to $6 billion to State and local governments, with savings of at
least $2 billion on an annual basis.
240
•
Major reductions in paperwork and red tape requirements, such as the elimination of 12
million hours of annual administrative work through simplified Department of Agriculture
cost accounting requirements for the national school lunch program.
•
Enhanced State flexibility in administering programs, such as through revisions in the
Medicaid program and revised rules for State highway repair work supported by the
Department of Transportation.
In 1983 and 1984, the Administration will continue to emphasize regulatory relief for States and
localities. Over 25 regulatory reviews now are underway.
MANAGEMENT IMPROVEMENTS
Many initiatives to sharpen management of Federal programs have benefited States and localities.
Examples include improved information systems providing timely data for States on discretionary
and formula grant amounts and distribution, streamlined audit systems and other financial
management and procurement enhancements.
Of particular importance in according States and localities an enhanced partnership with the Federal
Government is Executive Order 12372, "Intergovernmental Review of Federal Programs." This order
replaces a federally prescribed process of State and local review of Federal projects and direct
development activities with a simplified, flexible, and more responsive review system. The Executive
Order provides the opportunity for State and local elected officials to have a significant impact on
Federal program decisions affecting their jurisdictions. The order requires Federal agencies to use a
State-developed process for obtaining the views of State and local officials and to accommodate
those views when possible. Proposed regulations implementing the Executive Order were published
on January 24, 1983, by 27 agencies, a significant first for interagency cooperation.
Ongoing management improvements which will benefit States and localities include the following:
•
The Administration is working to simplify selected generally applicable "crosscutting"
requirements imposed on State and local governments as a condition of receipt of Federal
assistance. Legislation was introduced and management reforms instituted for several of the
60 crosscutting requirements.
•
A number of the Reform '88 and other initiatives to upgrade Federal program and agency
management also will have a positive effect on State and local governments. For example, as
part of one project reviewing the need for and determining the value of central
management agency regulations, the Office of Management and Budget is reviewing its 57
circulars, several of which affect States and localities, and will recommend rescinding,
revising or consolidating circulars where appropriate. Several Reform 88 and other
management initiatives are discussed in Chapter 8.
1984 PROPOSALS
In 1984, the President is proposing several budget initiatives to continue the restoration of an
intergovernmental balance, including additional consolidations of categorical programs and a
Federalism initiative.
BLOCK GRANTS AND PROGRAM CONSOLIDATIONS
Proposals in the following areas are designed to enhance recipient flexibility and responsiveness
through consolidation of narrow-purpose categorical programs:
•
An Indian Community Development proposal would create a more flexible means within the
existing Community Development Block Grant program to assist Indian tribes in addressing
their unique community development and housing needs. Budget authority of $75 million is
proposed for 1984- a $44 million increase from the 1983 level.
380-900 0 - 83 - 15 : QL 3
241
•
An Indian Housing proposal would consolidate programs administered by the Department of
Housing and Urban Development, the Bureau of Indian Affairs, and the Indian Health Service
that support housing construction on Indian reservations. Budget authority of $76 million is
requested for 1984, to support the construction of 1,500 housing units.
•
A General Nutrition Assistance proposal would combine school breakfast, child care feeding,
and summer feeding programs into one grant to States and give States more flexibility in
providing assistance for meals served outside a school lunch setting. Proposed budget
authority is $535 million in 1984.
•
An Older Americans proposal would consolidate programs authorized by the Older
Americans Act into grant programs administered by the Department of Health and Human
Services. The consolidation would include activities currently funded through the elderly
feeding program of the Department of Agriculture and the Department of Labor's
community service employment program. Budget authority proposed for 1984 is $998
million.
•
A Rural Housing proposal would consolidate subsidized direct lending programs for
homeownership, rental construction, repair, farm labor housing, and site preparations into a
block grant to States to provide housing assistance to very low-income households. Budget
authority of $850 million is proposed for 1984.
•
A Primary Care Services proposal would expand the Primary Care Block Grant, enacted in
1981, to include black lung clinics, migrant health, and family planning programs, and would
remove unnecessary restrictions and requirements. Budget authority for the proposal would
be $460 million in 1984.
The 1984 budget also includes the following proposals for previously enacted block grants to States
and for General Revenue Sharing:
•
The four health block grants which were enacted in 1981 would be continued in 1984 with
budget authority of $1.4 billion. The major change to these block grants would be the
expanded Primary Care Services proposal discussed above.
•
The Social Services Block Grant, enacted in 1981, would be continued in 1984 with an
increase in budget authority to $2.5 billion. Legislation will be proposed to give States the
flexibility to fund community services activities under this block grant and to make Indian
tribes eligible for direct funding.
•
In 1984, budget authority of $3 million is sought to close out the Community Services Block
Grant which was enacted in 1981. As noted above, States would be able to support
community services activities within the expanded Social Services Block Grant.
•
The 1981 Low Income Home Energy Assistance Block Grant would be funded in 1984 at a
reduced level of $1.3 billion in budget authority. Legislation is proposed to revise the
program to target funds to States with severe winter climates and large low-income
populations.
•
In 1984, the State Education Block Grant, enacted in 1981, is proposed to receive budget
authority of $451 million, continuing the program at its 1983 funding level.
•
The Community Development Block Grant program would be augmented in 1984 with
budget authority increased to $3.5 billion. As noted previously, an Indian Community
Development program is proposed to be created within this program in 1984. In addition,
legislation is proposed to require State administration in 1984 of the small cities portion of
this program, enacted as a block grant in 1981.
242
•
In 1984, budget authority of $1.9 billion is proposed for the first year of implementation of
the block grant to States portion of the Job Training Partnership Act, which was enacted in
1982. These funds would support more trainees than the predecessor programs.
•
Budget authority of $4.6 billion is proposed in 1984 for the General Revenue Sharing
program, continuing it at its 1983 funding level.
FEDERALISM INITIATIVE
In his January 1982 State of the Union address, President Reagan announced a $50 billion Federalism
initiative intended to reverse the flow of authority to Washington and away from States and
localities. The President's 1982 initiative proposed a conceptual framework for Federalism, designed
to yield a more rational sorting of responsibilities among levels of government and greater efficiency
in public program administration.
Throughout the past year, White House and Federal agency officials have met with representatives
from State and local governments to review and improve the original proposal. As a result of this
cooperative process, a revised Federalism proposal will be sent to Congress early in 1983. The revised
initiative would consolidate some 30 programs into four block grants:
•
A State Block Grant consolidating health, social services, education and community
development programs;
•
A Local Block Grant merging the entitlement portion of the Community Development Block
Grant program with General Revenue Sharing;
•
A Transportation Block Grant that would consolidate several highway programs; and
•
A Rural Housing Block Grant for low-income housing construction and repair (discussed
above).
Between 1984 and 1988, States and localities would assume responsibility for activities associated
with the programs in the State, Local and Transportation block grants at a pace of their own
choosing. In order to provide stable and predictable revenues during the transfer of responsibilities,
annual funding for the three block grants would be at the 1984 enacted levels for the consolidated
programs.
After the 1984-1988 transition period, block grant programs which could be funded if Federal
revenue sources were returned to the States would be discontinued. A Presidentially appointed
commission would be established to make recommendations on revenue return issues.
In order to promote their maximum effectiveness, several programs proposed for State assumption
in the Federalism Initiative also will be improved through program consolidations and other changes
which would be effective during the 1984-1988 period of transition to State control.
243
FEDERALISM INITIATIVE
AGENCY:
DOT, ED, EPA, HHS, HUD, Treasury, USDA
Funding
AUTHORITY LEVELS
*
Functional Codes: 300, 370, 400,
450, 500, 550,
600 and 850
($ in millions)
*
1982
1983
1984
1985
1986
1987
1988
21,600
22,200
21,400
21,400
21,400
21,400
21,400
These numbers contain funds for some Federal salaries and expenses, Indian tribes, territories, and activities of national
significance which would not be devolved to State and local governments.
PROGRAM DESCRIPTION
In order to more appropriately align responsibilities among the various levels of government and
promote more efficient and effective use of public funds, the Administration submitted a major
Federalism proposal to the Congress in February 1983.
Under the proposal, 34 broad-based and categorical grant programs would be consolidated into
four block grants.
•
State Block Grant. A grant to States combining 22 health, social services, education and
community development programs.
•
Local Block Grant. A grant to localities combining the General Revenue Sharing program and
the entitlement portion of the Community Development Block Grant.
•
Transportation Block Grant.
highway programs.
•
Rural Housing Block Grant. A grant to States for low-income housing construction and repair.
A ground transportation grant to States consolidating 6
The purposes of each block grant would be the purposes of the programs consolidated in the block
grant. (A list of programs proposed for inclusion in each is in the Appendix to this paper.)
For the five years from 1984 through 1988, annual funding for the State, Local and Transportation
block grants would be set at the sum of the 1984 enacted levels for the programs consolidated in
each block grant. Funding for the Rural Housing Block Grant would be set at $850 million a year.
•
The State Block Grant would be financed by Federal excise tax revenues on alcohol, tobacco
and telephones.
•
The Transportation Block Grant would be financed by Federal gas tax revenues.
During this five-year transition period, State and local governments would assume responsibility for
activities associated with the programs in the State, Local and Transportation block grant. They
would have discretion over the pace at which they assume these responsibilities. Allocations to each
State for the block grant programs would be based on formulas and historical allocations. For these
three block grants, thus, recipient governments could choose during the transition period to receive
funds either under authorities governing the individual programs or under more flexible block grant
authorities. The nature of the programs consolidated in the Rural Housing Block Grant would
preclude a transition period in which funds could be provided to the States under two authorities.
As a result, during the transition period States would be required to make a simple election to
receive Rural Housing Block Grant funds or forego participation in the program. This election could
be made prior to the beginning of any quarter in 1984 and before the beginning of the fiscal year in
1985 through 1988.
244
After 1988, the block grant programs that could be funded if commensurate Federal revenue sources
were returned to the States would be discontinued. A presidential commission would be appointed
to make recommendations on revenue return issues.
RATIONALE
This proposal is the culmination of a year-long effort to develop, in consultation with State and local
officials, a major initiative to sort out responsibilities within the intergovernmental system. It would
enhance State and local government officials' ability to deal with domestic needs that have
traditionally been their responsibility in ways which best meet the concerns of their citizens.
EFFECTS OF THE PROPOSED CHANGE
Stable and predictable funding levels for the programs in each block grant would be provided
through fiscal year 1988.
Dislocation would be minimized.
•
States and localities would have five years to assume full responsibility for programs in the
State, Local and Transportation block grants, allowing sufficient time for them to plan for
assumption of this responsibility.
•
Funds for programs for which a State or local government decided to take responsibility
could be spent only for the purposes of programs in the block grant.
•
In the State and Local Block Grants, funds available for each program for which a State or
local government decides to take full responsibility would be transferable among program
purposes within the same block grant at an increasing rate of 20/40/60/80/100 percent per
year. For example, during 1984 if a State or local government took full responsibility for a
program, 20 percent of the funds from that program could be spent on any program purpose
within the block grant; 80 percent would have to be spent on the purposes of the program
from which funds were received.
Protections would be provided for local governments, urban and rural areas, and minorities subject
to discrimination.
•
A mandatory passthrough requirement to local governments is included in the State Block
Grant proposal.
•
Rural areas are also protected in the State Block Grant proposal, which has a mandatory
passthrough requirement for such areas.
•
A mandatory pass through requirement to urban areas is included in the Transportation
Block Grant proposal.
•
Full civil rights protections against discrimination on the basis of race, color, national origin,
sex, handicap and age are included in all of the block grant proposals, modeled on provisions
now governing the block grants enacted in 1981.
Drastic reductions in Federal overhead and administrative/regulatory burdens on State and local
governments would be realized by the end of the transition period, as the programs consolidated in
the four block grants now involve:
•
2.5 million "burden hours" per year;
•
3.0 thousand Federal employees;
•
1.3 thousand pages or regulations; and
•
490 pages of law.
245
Significant strides would be taken toward remedying the fundamental problem of too many
complex grant-in-aid programs.
•
Thirty-four programs would be consolidated into four during the transition period.
•
After the transition period, the block grants which could be eliminated if revenue sources
were returned to the States would be discontinued, further simplifying the grant-in-aid
program and allowing States to set their own program priorities.
246
APPENDIX
PROGRAMS INCLUDED IN THE FEDERALISM INITIATIVE
State Block Grant
Rehabilitation Services
Vocational Education
Adult Education
State Education Block Grant (ECIA, Chapter 2)
WIN
Low-Income Home Energy Assistance
Social Services Block Grant
Community Services Block Grant
ADAMHA Block Grant
MCH Services Block Grant
Rural Water and Waste Disposal Grants (FmHA)
Water and Sewer Facility Loans (FmHA)
Community Facility Loans (FmHA)
CDBG-Non-Entitlement Portion
Grants for the Construction of Municipal Waste
Water Treatment Works (EPA)
Child Welfare Services
Child Welfare Training
Adoption Assistance
Foster Care
Preventive Health and Health Services Block Grant
Child Abuse State Grants
Runaway Youth
Federal-Local Block Grant
General Revenue Sharing
CDBG-Entitlement Portion
Transportation Block Grant
Urban System
Secondary System
Non-Primary Bridges
Highway Safety (FHWA 402 Grants)
Hazard Elimination
Rail-Highway Crossing
Rural Housing Block Grant
Rural Housing Insurance Fund
Very Low-Income Repair Grants
Mutual and Self-Help Grants
Rental Assistance Program
247
GENERAL REVENUE SHARING
AGENCY:
Department of the Treasury
Functional Code: 851
Funding
($ in millions)
1982
CURRENT SERVICES
Budget Authority
Outlays
REAGAN BUDGET
Budget Authority
Outlays
4,567
4,567
1983
1984
1985
1986
1987
1988
4,567
4,567
4,809
4,809
5,044
5,044
5,281
5,281
5,519
5,519
5,767
5,767
4,567
4,567
4,567
4,567
4,567
4,567
4,567
4,567
4,567
4,567
4,567
4,567
242
242
477
477
714
714
952
952
1,200
1,200
PROPOSED SAVINGS
Budget Authority
Outlays
PROGRAM DESCRIPTION
General Revenue Sharing provides general fiscal assistance to approximately 39,000 general purpose
local governments. These funds have few restrictions on their use. They are distributed by a formula
which takes into account population, income and tax effort.
PROPOSED CHANGE
The authorization for General Revenue Sharing expires in 1983. The Administration proposes
reauthorization of the program at the same level as it is presently authorized. General Revenue
Sharing funds along with the entitlement portion of Community Development Block Grants would
form a local fiscal assistance trust fund in the Federalism initiative.
RATIONALE
General Revenue Sharing has become an important source of Federal assistance for local
governments. The continuation of the program within the context of the Federalism initiative
permits local governments to decide on the most appropriate uses of Federal dollars.
EFFECT OF THE PROPOSED CHANGE
The reauthorization of the program will continue the program at present levels giving local
governments a known stable source of financing, thus permitting these localities to budget
resources with greater certainty to meet local needs.
248
COMMUNITY DEVELOPMENT GRANTS
AGENCY:
Department of Housing and Urban Development
Funding
($ in millions)
1982
CURRENT SERVICES
Budget Authority
Outlays
REAGAN BUDGET
Budget Authority
Outlays
Functional Code: 051
3,456
3,792
1983
1984
1985
1986
1987
1988
3,456
3,525
3,677
3,529
3,902
3,549
4,132
3,756
4,367
3,983
4,616
4,215
3,456
3,525
3,500
3,526
3,500
3,474
3,500
3,497
3,500
3,500
3,500
3,500
177
3
402
75
632
259
867
483
1,116
715
PROPOSED SAVINGS
Budget Authority
Outlays
PROGRAM DESCRIPTION
The Community Development Block Grant (CDBG) program provides entitlement grants to all large
cities and urban counties and discretionary grants, most often through States, to many small cities
and rural counties. The grants give the cities and counties funds for economic and community
development, principally to benefit low- and moderate-income people.
In 1982, $2.4 billion went to 732 large cities and urban counties while over $1 billion was distributed
under the "small cities" grants programs.
PROPOSED CHANGE
The 1984 budget request proposes to increase the CDBG program by $44 million in order to
accommodate a new $75 million program for Indian tribes. In addition, the Administration proposes
to allow new housing construction as an eligible activity under the program.
The Administration has also proposed to mandate that all States assume responsibility for the small
cities portion of the CDBG program beginning in FY 1984.
RATIONALE
•
The Administration is increasing funding to federally recognized Indian tribes under this
program in recognition of the unique problems facing Native Americans. (See fact sheet on
Indian Housing and Community Development Programs for further details.)
•
The Community Development Block Grant program is an Administration priority because it
follows the general policy of delegating governmental authority and discretion to the states
and local governments. The change allowing for new housing construction fulfills this goal
by giving the grant recipients even greater latitude in the use of CDBG funds in the
amelioration of local problems.
•
By the end of 1983, it is anticipated that all but two to five States will have agreed to
administer the small cities program. The Administration proposes to require these remaining
States' participation in order to avoid the expense of having the Federal government
maintain a separate program with so few recipients. This change will also complete the
249
devolution of decision-making authority consistent with the Administration's philosophy on
the role of the Federal government vis-a-vis the States.
EFFECTS OF PROPOSED CHANGE
Generally, the 1984 funding for Community Development assistance to state and local governments
will remain at previous years' levels. CDBG funds will continue to assist communities in undertaking
important development projects such as infrastructure improvement, rehabilitation and public
facility expansion.
PREVIOUS CHANGE
In 1981, the Reagan Administration requested, and Congress adopted, language allowing the States
to administer the "small cities" portion of the CDBG program. By the end of 1982, 37 states had
opted to take over these functions from the Federal Government.
250
RURAL HOUSING PROGRAMS FINANCED BYTHE
FARMERS HOME ADMINISTRATION
AGENCY:
Functional Code: 051
Department of Agriculture
Funding
($ in millions)
1982
1983
1984
1985
1986
1987
1988
CURRENT SERVICES
Budget Authority
Outlays
Loan Level
2003
1246
3454
1628
1608
3305
2105
2078
3490
2030
2257
3672
2487
2262
3855
2330
2320
4040
2583
2336
4234
REAGAN'BUDGET
Budget Authority
Outlays
Loan Level
2003
1246
3454
1628
1608
3305
5976
2711
300
4083
2206
300
2992
2715
300
2690
2480
300
2508
2270
300
+ 3871
+ 633
-3190
+ 2053
-51
-3372
+ 505
+453
-3555
+360
+160
-3740
-75
-66
-3934
PROPOSED CHANGES
Budget Authority
Outlays
Loan Level
Totals for 1984-1988 reflect an accounting change affecting the treatment of Certificates of Beneficial Ownership (CBO's) in
the Rural Housing Insurance Fund. Beginning in 1984, the sale of CBO's sold to the Federal Financing Bank will be treated as a
debt transaction, causing on-budget outlays to increase.
PROGRAM DESCRIPTION
The Farmers Home Administration's (FmHA) 6 categorical loan and 5 grant programs are available to
any rural community of 10,000 population or less and in communities of 10,000 to 20,000 outside an
SMSA. Loans may be subsidized down to a 1% interest rate to the borrower; the average rate to
borrowers for all loans made through the fund in 1982 was 3.6%. The Government absorbs the loss
between 3.6% and the cost of borrowing to the Treasury.
The Rural Housing Insurance Fund has $25 billion of loans outstanding which finance 1.3 million
housing units. The annual interest subsidy in 1983 is estimatd to be $221 million.
PROPOSED CHANGE
•
•
The 1984 budget consolidates FmHA's categorical lending and grant programs into a rural
housing block grant with the following features:
—
annual funding level of $850 million;
—
grant funds are allocated to States by a formula based on occupied substandard
housing units, rural population and low income households.
—
funds are administered by States for a wide variety of housing uses; and
—
funds are targeted to very low income families (80% of funds earmarked for
households with incomes below 50% of State median or national median, whichever is
greater).
Subsidized lending in 1984 is reduced $3 billion below the 1983 level of $3.3 billion. $300
million annually will continue to be available primarily to service the existing housing loan
portfolio.
251
•
As part of the block grant proposal, the 1984 budget proposes a financing change that will
shift outlays previously recorded in the off-budget Federal Financing Bank account into the
on-budget totals of the Rural Housing Insurance Fund. Specifically,
—
the sale of certificates of beneficial ownership (CBO's) to the Federal Financing Bank
(FFB) will be treated as a debt transaction (causing on-budget outlays to increase); and
—
repurchases of outstanding CBO's from the FFB will no longer be scored as outlays, but
will instead be treated as redemption of debt and be excluded from both on- and offbudget outlays. Of the $22 billion of such scheduled repurchases over time, $3.9 billion
come due in FY 1984.
RATIONALE
•
•
•
The shift from categorical lending programs to block grants:
—
provides States with the flexibility to tailor their rural housing programs to their special
needs and circumstances (e.g., emphasize rehabilitation over new construction);
—
eliminates a long-term Federal subsidy commitment by replacing future interest
subsidies with a block grant obligated in full in the budget year; and
—
will help very low income families who occupy substandard housing whose income is
too low to qualify for the current homeowneship program.
The decrease in subsidized lending is appropriate because:.
—
low income households will be assisted through the new block grant program; and
—
if there is a shortage of rural mortgage credit for other than low income families it will
be addressed by increasing the availability of Federal Housing Administration mortgage
insurance (FHA) and VA mortgage guarantees through Farmers Home Administration
county offices.
The financing change is appropriate because it shows a more accurate unified budget total,
and because of the shift in funding from primarily a credit revolving fund to a block grant
mechanism.
EFFECTS OF THE PROPOSED CHANGE
The program will assist more very low income families than the present program. Between 17,000
and 27,000 units will be assisted depending on unit cost of construction or rehabilitation. To the
extent that Federal mortgage assistance is needed for those with higher incomes previously served
by the program, FHA and VA mortgage guarantees will be available to qualified applicants.
252
HEALTH BLOCK GRANTS
AGENCY:
Functional Code: 051
Department of Health and Human Services
Funding
($ in millions)
1982
1983
1984
1985
1986
1987
1988
CURRENT SERVICES
Budget Authority
Outlays
884
663
1,196
1,119
1,196
1,196
1,269
1,269
1,344
1,344
1,420
1,420
1,501
1,501
REAGAN BUDGET
Budget Authority
Outlays
884
663
1,196
1,119
1,361
1,303
1,361
1,361
1,361
1,361
1,361
1,361
1,361
1,361
+ 165
+ 107
+92
+92
+ 17
+ 17
-59
-59
-140
-140
PROPOSED CHANGES
Budget Authority
Outlays
PROGRAM DESCRIPTION
The Omnibus Budget Reconciliation Act of 1981 consolidated 21 categorical health programs into
four block grants - maternal and child health; primary care; preventive health and health services;
and alcohol, drug abuse and mental health. These block grants allow States more flexibility and the
opportunity to be innovative in the use of grant funds to meet specific local needs; give States the
opportunity to coordinate and improve the effectiveness of services for their citizens; increase
accountability by officials closer to the public; and reduce the need for administrative overhead.
PROPOSED CHANGE
The President's 1984 Budget increases health block grants funding by $165 million. This results from
proposed legislation to consolidate narrow categorical programs for black lung clinics, migrant
health, and family planning with the primary care health block grant. Legislation will also be
proposed to amend existing statutes to remove unnecessary restrictions and requirements,
particularly those which might serve as a disincentive for State participation.
RATIONALE
This further consolidation of programs, coupled with administrative managment of the block grants
by a single Public Health Service agency (rather than three), and relaxation of requirements imposed
on the States, will enhance efforts begun in FY 1982 to allow States more opportunity and flexibility
in coordinating and improving the effectiveness of health services for their citizens. Fragmentation
of current primary care services programs will be reduced and individuals in need of health care will
be able to receive care within a comprehensive assistance system.
EFFECTS OF THE PROPOSED CHANGE
Expanding the primary care block grant to further consolidate health service delivery programs will
strengthen States' efforts to streamline program administration by deleting unnecessary Federal
regulatory, legal and reporting requirements; it will enhance the ability of States to target funds on
specific health problems; and it will permit States to integrate such activities with Medicaid.
1982 AND 1983 CHANGES
The authorization of health block grants by the Omnibus Budget Reconciliation Act (OBRA) of 1981
resulted in a major restructuring of Federal narrow categorical health services delivery programs. As
a result, the Federal role will be reduced, the States' role will be strengthened, and the effectiveness
of health service delivery will be improved.
253
SOCIAL AND COMMUNITY SERVICES BLOCK GRANTS
AGENCY:
Department of Health and Human Services
Funding
Functional Code: 051
($ in millions)
1982
1983
1984
1985
1986
1987
1988
CURRENT SERVICES
Budget Authority
Outlays
2,748
2,817
2,804
2,930
2,877
2,882
2,999
2,994
3,122
3,116
3,146
3,140
3,171
3,165
REAGAN BUDGET
Budget Authority
Outlays
2,748
2,817
2,804
2,930
2,503
2,599
2,600
2,600
2,700
2,700
2,700
2,700
2,700
2,700
374
283
399
394
422
416
446
440
471
465
PROPOSED SAVINGS
Budget Authority
Outlays
PROGRAM DESCRIPTION
The Social Services Block Grant (SSBG), authorized by the Omnibus Budget Reconciliation Act of
1981, consolidated the Title X X Social Services, State and Local Training, and Day Care programs.
SSBG gives States maximum flexibility to provide social services that reduce dependence on welfare
and increase self-sufficiency, minimize the need for institutional care, and protect persons who
require institutionalization. The broad array of services funded by the States includes day care, legal
services, foster care, child protection, homemaker services, meal preparation and delivery,
counselling and transportation.
The Community Services Block Grant (CSBG) replaced programs formerly administered by the
Community Services Administration as of October 1, 1981. The purpose of the block grant is to give
States flexibility to design programs that prevent or reduce poverty and encourage economic selfsufficiency. In fiscal year 1982, CSBG's first year, States were required to pass through 90% of their
block grant funds to grantees who had formerly received funds from the Community Services
Administration. This requirement has been extended by the Congress through fiscal year 1983 for
most States.
Under the Community Services Block Grant Act, up to 9% of CSBG funds may be reserved by the
Secretary of HHS for activities of national significance. These include community development, rural
housing and community facilities, assistance to migrants and seasonal farm workers, and
recreational activities for low-income youth.
PROPOSED CHANGE
The President's budget for fiscal year 1984 requests $2.5 billion for the Social Services Block Grant, a
$50 million increase over 1983 and the full amount authorized under law. The Administration will
propose legislation to give States flexibility to fund community services under the Social Services
Block Grant. No funding is requested for the Community Services Block Grant, except for $3 million
for program closeout.
In addition, the Administration will propose legislation allowing Indian tribes to receive SSBG funds
directly from HHS. Previously, tribes were requried to apply to States for SSBG funding.
254
RATIONALE
•
States should be given maximum flexibility to design social and economic programs that
encourage self-sufficiency and promote independence from public assistance. Both the Social
Bnd Community Services Block Grants are designed to provide individuals with the skills and
transitional support services necessary to achieve these goals. Having one centralized source
of funds for these purposes will most effectively enable State and local governments to
mobilize resources and plan their service delivery, since they have primary responsibility for
planning and delivering social services.
•
As a separate program, the Community Services Block Grant has been vulnerable to pressure
from special interest groups, resulting in the extension of protections that limit States' ability
to plan and administer service programs. States have more experience with the Social
Services Block Grant, and its predecessor, the Title XX program, and have in place
mechanisms for distributing funds among service needs and populations.
•
Indian tribes should have maximum control over resources in order to gain economic selfsufficiency.
Making tribes eligible for SSBG recognizes the unique government-togovernment relationship between Indian tribes and the Federal Government. Indian tribes
are already eligible for direct funding under five other block grants.
EFFECTS OF THE PROPOSED CHANGE
•
States and Indian tribes will have more control over resources and will be able to design
comprehensive programs to promote social and economic independence.
•
High-priority national activities will continue to be provided for by the Federal Government.
The FY84 budget requests $5.7 million for HHS' Office of the Assistant Secretary for Health
(OASH) to administer the National Youth Sports program, the same level as in FY83. OASH
currently is responsible for all other HHS programs that promote recreation and fitness.
255
LOW INCOME HOME ENERGY ASSISTANCE (LIHEA)
AGENCY:
Department of Health and Human Services
Funding
Functional Code: 051
($ in millions)
1982
1983
1984
1985
1986
1987
1988
CURRENT SERVICES
Budget Authority
Outlays
1,875
1,687
1,986
1,963
1,875
1,898
1,875
1,875
1,875
1,875
1,875
1,875
1,875
1,875
REAGAN BUDGET
Budget Authority
Outlays
1,875
1,687
1,986
1,963
1,300
1,398
1,300
1,351
1,300
1,300
1,300
1,300
1,300
1,300
575
492
575
539
575
575
575
575
575
575
PROPOSED SAVINGS
Budget Authority
Outlays
PROGRAM DESCRIPTION
States receiving Low Income Home Energy Assistance (LIHEA) block grants make payments to lowincome households for high heating costs. States can augment LIHEA by transferring funds from
other block grants.
PROPOSED CHANGE
Reestablish the intent of this program to moderate heating costs of low income families by revising
the grant formula to target funds to States with the most critical heating needs.
RATIONALE
Targeting of Low Income Home Energy Assistance funds is especially critical with continuing high
home heating costs. The current formula is based on 1975-80 data and does not reflect shifts in
poverty populations, and rising heating fuel prices (particulary natural gas prices). The new State
grant allocation formula would better target funds to States whose low income households have
high heating needs by revising fuel cost and poverty data used in the grant formula. Factors such as
severe winters and extreme heating fuel cost increases would receive greater consideration. Under
the new LIHEA formula, grants levels for States with severe winters and large poverty populations
would be the same or higher as in 1983.
EFFECTS OF PROPOSED CHANGE
Most northeast and northcentral states would be "held-harmless" under the proposed formula
revision.
The new formula would reflect the latest census data on low income households in cold states.
Limited Federal funds would flow more directly to households which were the originally intended
beneficiaries of the LIHEA program - poor families in cold states where fuel prices have increased
fastest.
256
FEDERAL PERSONNEL POLICY
257
380-900 0 - 83 - 16 : QL 3
CHAPTER 7
FEDERAL PERSONNEL POLICY
The Reagan Administration has targeted a number of areas of Federal personnel policy for change,
with the goals of introducing or enhancing positive incentives in the workplace and making
personnel practices more comparable to those in the private sector. These changes, building on the
reform efforts of the Pendleton Act of 1883 and the Civil Service Reform Act of 1978, will begin to
control spiralling Federal personnel costs more effectively.
The dramatic growth in Federal personnel expenditures over the past decade has forced the
Administration to scrutinize carefully several of the factors that drive up these costs and make
managing the Federal workforce difficult. Personnel expenditures are primarily salary, retirement,
and health insurance benefits. Other items, such as life insurance benefits, leave, and overtime
payments also add to overall personnel costs, but the overwhelming share of funding goes for pay,
retirement, and health benefits.
The proposed reforms for 1984 deal directly with controlling costs in each of the three major
expenditure areas. The Federal pay freeze in 1984 is a one-time action, while the changes proposed
for the Federal retirement and health benefit programs represent substantial, longer-term,
structural reforms. It should be noted that pay raise delays and even pay reductions have been
widespread in the private sector over the past 12 to 18 months. A freeze in Federal workers' salaries
is certainly appropriate to help reduce the budget and move the economy toward recovery.
The most critical Federal personnel policy reform included in the 1984 budget is a restructuring of
the civil service retirement system (CSRS). Pension policy experts have long recognized that the
benefits of this system are very generous when compared to systems offered by private employers or
by State and local governments. In general, the current system is too generous in the following ways:
•
It permits Federal employees to retire early (i.e., at age 55) without imposing an actuarial
adjustment that reflects the high cost of early retirement;
•
It permits cost-of-living adjustments on the whole pension, as opposed to adjustments on a
portion of the annuity;
•
It derives an increasingly large proportion (now about 80%) of its costs from the taxpayer 60% from the Treasury Department general fund and 20% from employing agencies; and
•
It does not receive sufficient financing support from other entities participating in the
system, such as the Postal Service and the District of Columbia.
In addition, the 1984 budget proposes changes to the Federal health benefit progam that would
create incentives for the selection of lower cost health insurance coverage and help reduce the overutilization of health care services. Finally, the Administration will improve position management
and classification practices, as weli as implement other reforms making Federal personnel
administration more effective and less cumbersome.
RETIREMENT
The cost to the Government of the civil service retirement system has risen from $2.8 billion in 1970
to $21.1 billion in 1983 - nearly an eight-fold increase. If no further attempts are made to reform
the system, we will spend $121 billion for civil service retirement between 1984-88.
259
•
The Federal employee retirement system is one of the most generous pension plans available
in the United States. Currently, employee contributions cover only 20% of the cost of the
System, the Federal agency as employer pays another 20%, and the remaining 60% is derived
from general Treasury funds.
•
The current Federal pension system accounts for too large a share of Federal payroll
compared to the private sector. The normal cost of the CSRS is about 35% of payroll. Of this
35%, employees now contribute 7%, the employing agency 7%, and the general fund the
remaining 21 %.
•
Office of Personnel Management (OPM) analysis has shown that it would cost the
Government approximately 17% of payroll -- including the employer share of Social Security
benefits -- to provide Federal workers with benefits comparable to those provided to private
sector workers.
To address these problems, the Administration proposes reform of the current CSRS, maintaining its
basic benefit structure but reducing individual benefit components. The object of these reductions is
to arrive at an overall program cost that can be maintained by equal contributions from the
employee and the employing agency -- a concept that has been a feature of civil service retirement
from its inception.
The Administration believes that 11% each would be an appropriate and affordable contribution
from agencies -- including the Postal Service and District of Columbia Government -- and employees.
This would be achieved by increases in contributions as follows:
1984 + 2%
Raise CSRS retirement contribution to 9%
1985 + 2%
Raise CSRS retirement contribution to 11%
Total + 4%
The Administration would reduce benefit levels to more closely approximate those found in private
sector plans by modifying two of the most costly features -- COLA and early retirement -- as described
in the civil service retirement fact sheet that follows.
In addition to these changes, the Administration proposes to return to the practice of basing annuity
calculations on the retiree's highest 5 years of salary, as opposed to the current highest 3 years. This
is the predominant practice in the private sector. Finally, if necessary to reduce the cost of CSRS to
22% of payroll, the percentage of average salary replaced by retirement benefits would be reduced.
The retirement benefits produced by a program with a 22% total normal cost of payroll would: (1)
be reasonably comparable with the average retirement benefit found in the non-Federal sector
(normal cost of 22.8% including employee social security contribution); and (2) provide an adequate
level of benefits for employees.
PAY
The budget makes clear that 1984 is a year of belt-tightening for all segments of the Federal
establishment. Part of this belt-tightening must be directed at the Federal civilian payroll which now
exeeds $50 billion annually. It is recognized that foregoing the October 1983 pay increase will be
difficult for some Federal employees. However, this is a burden being experienced by many workers
throughout the nation whose employers are in similar financial situations to that faced by the
Government. Importantly, the Administration has been successful in its efforts to reduce inflation.
Accordingly, during the one-year freeze, the purchasing power of employee's salaries will not be
260
eroded to an appreciable degree since longevity, within-grade and promotion increases should help
offset relatively small purchasing power losses due to inflation. Further, the budget anticipates that
future annual pay increases will exceed increases in cost-of-living, thereby replacing whatever
purchasing power is lost due to this freeze.
HEALTH BENEFITS REFORM
As part of the health care reform initiatives, the Administration is proposing a restructuring of the
Federal Employees Health Benefits Program (FEHBP). This is an area in which the Federal
Government itself has contributed to health care cost increases. The structure of the current
program does little to encourage cost control by either participating health insurance plans or
program enrollees.
•
Government contributions to the program are linked to the average of premiums for six of
the largest and most comprehensive plans in the program. This linkage means that premium
increases are passed on in large part to the Government. As a result, carriers have insufficient
incentives to control premium costs or to work with health care providers to hold down costs.
•
The Government contribution toward coverage under any plan may not exceed 75% of the
premium for the plan. This means that enrollees who choose the least costly plans are
actually penalized for doing so: the Government pays less for their health coverage than it
pays for those who choose more costly coverage.
•
Existing law limits the number of Government-wide plans participating in the program and
specifies certain types and levels of benefits to be provided. This limits the range of benefit
packages available to meet enrollee needs.
The Administration proposes restructuring of the program to enhance incentives for cost control.
•
The method for determining Government contributions would be changed. Government
contributions would be based on average contributions for self only and self and family
coverage in 1983, indexed in future years by the GNP deflator. Disproportionate premium
increases would no longer automatically result in large increases in Government
contributions. Enrollees would be encouraged to shop carefully among plans for desired
coverage at the least cost, and carriers would need to control costs in order to remain
competitive.
•
The current 75% cap on the Government's cost share would be repealed and rebates would
be provided to enrollees choosing plans that cost less than the Government contribution.
This would encourage, rather than penalize, enrollees choosing less costly plans and would
enhance incentives for carriers to control costs in order to remain competitive.
•
The only benefit required in all plans would be catastrophic protection to ensure that all
enrollees are protected against disastrously high medical expenses. Carriers would be
encouraged to provide a wide range of benefit packages tailored to enrollee needs.
In addition, the current FEHBP results in Federal subsidies to the Postal Service and the D.C.
Government. The employer share of premiums for annuitants of these entities is paid by the Office
of Personnel Management, not by the entities themselves. The Administration proposes eliminating
these subsidies and requiring that these organizations pay the employer share of premiums for their
annuitants.
261
MANAGING THE FEDERAL WORKFORCE
The Administration plans to improve position classification in the Federal Government by increasing
emphasis on adherence to existing classification standards and the need for improved position
management.
•
OMP's most recent classification study estimates that approximately 14.3 percent (188,000) of
the Government's 1,312,000 full-time permanent General Schedule positions are overgraded
and that about 1.5 percent (20,000) are undergraded. OPM estimates that these position
classification errors cost the taxpayer about $700 million a year.
•
A major cause of overgrading is poor position management within the agencies. Various
studies have concluded that agencies are not organizing their workforces in the most
efficient manner to accomplish their missions. Relative to private sector organizations, the
Federal Government staffs a disproportionate number of people at the higher pay grades.
Potential long-term savings from the correction of misclassification and improved position
management are estimated to be as much as one billion dollars per year.
262
CIVIL SERVICE RETIREMENT
Agencies:
Office of Personnel Management
Functional Code: 600
($ in billions)
FUNDING:
CURRENT SERVICES
Budget Authority
Outlays
REAGAN BUDGET
Budget Authority
Outlays
1982
1983
1984
1985
1986
1987
1988
31.5
19.5
34.6
21.1
35.7
22.8
37.6
24.6
39.6
26.8
41.8
29.1
44.2
31.5
31.5
19.5
34.6
21.1
37.2
22.4
42.3
23.5
43.9
25.3
45.9
26.9
47.9
28.5
+ 1.5
-.4
+4.7
-1.1
+4.3
-1.5
+4.2
-2.2
+3.8
-3.0
PROPOSED CHANGES
Budget Authority
Outlays
PROGRAM DESCRIPTION
Civil service retirement encompasses pensions paid to Federal civilian employees. Unlike plans
provided by private sector employers, it functions without social security benefits as a base because,
to date, Federal employees have not been covered by the social security system.
Civil service retirement benefits are paid to employees who meet eligibility requirements based on
age and years of service. Unreduced benefits are available as early as age 55 with 30 years of service.
The benefit calculation is based on the employee's years of service and high-three-year average
salary; the annuity benefits, once they become payable, are indexed to the Consumer Price Index
(CPI).
At the end of 1982, there were 1.8 million Federal retirees and survivors on the rolls and the average
pension for retired employees totaled $12,480 per year. Civil service retirement outlays increased
1,891% between 1960 and 1981, as compared to a 568% increase in total Federal budget outlays
during the same period. Government contributions have increased 2,351% in the 1960-81 period, as
contrasted to a 427% increase in employee contributions.
PROPOSED CHANGE
A comprehensive reform of civil service retirement is proposed:
•
Retirement would continue to be permitted as early as age 55, but benefits would be
reduced by an actuarial factor of 5 percent for each year that the employee is less than 65.
Employees aged 55 or over at enactment would not be affected. The change would be
phased in over a period of 10 years to give recognition for past, long-time contributions to
the retirement system. For those below age 55 at the date of enactment, a 1/2 of 1 percent
adjustment per year would be applied. For example, a employee who is 54 at date of
enactment, deciding to retire at 55, would be subject to at total reduction of only 5 percent.
•
In order to make the system self-supporting for future benefits earned, employee
contributions to the retirement system would be increased from the current level of 7
percent to 9 percent in 1984 and 11 percent in 1985. The matching employer contribution
would also increase to 9 percent and then 11 percent.
•
Cost-of-living adjustments to civil service retirement benefits would be frozen for 1984, as
part of a Government-wide policy on these adjustments. In 1985, the provision of the 1982
263
Omnibus Reconciliation Act regarding COLA's would apply. In 1986, there would be a
permanent change to provide one-half of the actual CPI increase to voluntary retirees under
age 62 and the full CPI increase to survivors and disability retirees.
•
After 1986, the benefit calculation would be based on the employee's high-five-year instead
of high-three-year average salary.
•
In addition, if necessary to reduce the cost of the system to 22 percent of payroll, in
conjunction with other enacted changes, the percentage of average salary replaced by
retirement benefits would be reduced.
Retirement benefits for new employees to be covered by social security:
•
In conjunction with the proposal to cover Federal employees hired after January 1, 1984
under the social security system, a new staff retirement plan will be proposed to supplement
the benefits provided by social security.
•
Its particular provisions, which are under development, would be modeled on typical private
sector practice and together with social security would generally be equivalent ito the
reformed civil service retirement system.
RATIONALE
•
Civil service retirement benefits have grown increasingly expensive, yet the percentage
contributions from employees and agencies have remained constant since 1969.
•
It would cost the Government approximately 17 percent of payroll to provide Federal
employees with benefits comparable to those provided to private sector employees. The
Federal Government currently contributes over 28 percent of payroll for new entrants, nearly
twice the private sector percentage.
•
The proposed reforms would bring costs more into line with those experienced by
progressive private sector companies. The Office of Personnel Management has estimated
that the total cost of such private sector retirement programs, including social security,
would be approximately 22% of payroll. This is the same cost it is estimated will be produced
by the proposed reforms in the civil service retirement system.
•
In keeping with tradition that retirement benefit costs are shared equally between employee
and agency, and in order to eliminate the Treasury subsidy, employee and agency retirement
contributions would be increased to 9% in 1984 and 11% in 1985.
EFFECTS OF THE PROPOSED CHANGE
•
The net effect of these reforms would be to bring the cost to the Government of retirement
benefits for its employees to levels comparable with those of private sector employers. This is
accomplished by restoring the practice of employees paying one-half of the cost and by
setting benefits at a level consistent with those of other employers.
•
The reduction for early retirement before age 65 would encourage more employees with
valuable experience and knowledge to extend their Government service. Those who wish to
retire early could still do so (as early as age 55), although the employee himself would bear
the extra cost of this early retirement. Such reductions are the rule in the staff plans of other
employers.
•
The return to use of a high-five-year instead of high-three-year average salary would follow
the predominant practice in private sector plans.
•
Adjusting annuities for voluntary retirees under age 62 by half of the CPI increase makes
permanent a three-year provision enacted by the 97th Congress. It would affect only
younger retirees, who often take non-Federal jobs after retirement from Federal service, and
264
would still be more generous than the large majority of private sector plans, where only 3%
have any guaranteed CPI adjustment.
•
The increased employee contribution would pay half the cost of the future retirement
benefits. For purposes of comparison, it should be noted that the employees' share of social
security has been subject to comparable increases, rising from 4.8% in 1969 to 7.05% in 1985,
a 47% increase.
265
ALLOWANCE FOR PAY INCREASES
AGENCY:
Civilian Employees, Government-wide
Functional Code: 751 and 803
Funding
($ in billions)
1982
1983
CURRENT LAW
Budget Authority
Outlays
1984
1985
1986
1987
1988
3.3
3.3
7.1
7.1
10.9
10.8
14.8
14.7
18.8
18.7
3.3
3.2
6.9
6.8
10.5
10.4
14.3
14.2
3.8
3.9
4.1
4.1
4.3
4.3
4.5
4.5
REAGAN BUDGET
Budget Authority
Outlays
PROPOSED SAVINGS
Budget Authority
Outlays
3.3
3.3
PROGRAM DESCRIPTION
Current law requires that pay for most white-collar Federal employees be adjusted to maintain
comparability with private sector pay rates for the same levels of work. However, if economic
conditions affecting the general welfare make a comparability adjustment inappropriate, the
President is authorized to recommend an alternative plan that becomes effective unless rejected by
the Congress.
PROPOSED CHANGE
•
The budget anticipates that there will not be an October 1983 pay increase for white-collar
Federal employees, but reserves the final decision until after Presidential review of the
recommendations of the President's Pay Agent, the Federal Employees Pay Council, and the
Advisory Committee on Federal Pay, and after a review of the economic conditions prevailing
at that time.
•
A parallel limitation is proposed on pay adjustments for blue-collar Federal employees.
•
The budget also anticipates that civilian employee pay increases for October 1984 and
beyond will match those granted to non-Federal employees during the previous year. In this
regard, the President's Pay Agent intends to continue reviewing, in consultation with the
Federal Employees Pay Council, methods of determining appropriate rates of pay for white
collar Federal employees.
RATIONALE
For a full and lasting economic recovery, budget deficits must be held to a minimum. This proposal
was made in the context of similar actions being proposed for other pay raises and cost-of-living
adjustments. Many private sector businesses have also found it necessary to scale back and/or defer
scheduled pay increases and, in some cases, even to reduce pay to adjust to economic conditions.
EFFECTS OF THE PROPOSED CHANGE
While there would be no increase in rates under the pay systems, employees would still be eligible
for any appropriate within-grade increases (which average about 3%), quality step increases, and
increases that accompany promotions.
266
FEDERAL EMPLOYEES HEALTH BENEFITS PROGRAM
AGENCY:
Functional Code: 051
Office of Personnel Management
Funding
($ in millions)
1982
CURRENT SERVICES
Government
contribution 1/
REAGAN BUDGET
Government
contribution 1/
2,314
1983
1984
1985
1986
1987
1988
3,009
3,688
4,477
5,246
5,965
6,648
3,009
3,082
3,258
3,464
3,639
3,815
606
1,219
1,782
2,326
2,833
PROPOSED SAVINGS
Government
contribution 1/
1/ Total of agency contributions for active employees and Government contribution for annuitants (excludes Postal Service
and District of Columbia contributions).
PROGRAM DESCRIPTION
The Federal Employees Health Benefits Program (FEHBP) is the only nationwide, multiple-choice
employer-provided health insurance program in existence. It covers over 10 million Federal, Postal
and District of Columbia employees and retirees and their dependents.
Over 130 plans currently participate in the program. Of these, 12 are open to all enroliees and seven
employee organization have membership requirements that limit participation. The remainder are
comprehensive medical plans (CMPs) serving particular geographic areas. They are open to enroliees
who live in the plan's service area. The Office of Personnel Management (OPM) and health insurers
annually negotiate plan benefits and premiums.
Employers and employees/retirees share premium costs. Employing agencies pay the employer share
for their employees, and OPM pays the employer share for retirees (including Postal Service and D.C.
Government retirees). By law, the Government contribution is based on the average of premiums
for six of the largest and most comprehensive plans in the program. However, the Government
contribution may not exceed 75% of the premium for any plan.
The combined effects of factors such as rapid inflation in health care costs and increases in utilization
of health care services have resulted in large increases in Government costs for the program-for
example, about 30% from 1982 to 1983.
PROPOSED CHANGE
•
Government contributions would no longer be based on plan premiums. Instead, they
would be based on average Government contributions in 1983 for self only and self and
family coverage and indexed in future years to the GNP deflator. This change will reduce the
rate of increase in Government costs.
•
The Postal Service and the D.C. Government would be required to pay the employer
contribution for their annuitants. Under existing law, they pay the employer share only for
their active employees.
267
•
The 75%"cap" on Government contributions to plan premiums would be eliminated.
Enrollees selecting plans that cost less than the Government contribution would receive
rebates.
•
Catastrophic protection would be the minimum benefit required in all participating plans.
There would be no further requirements on the types of benefits to be provided, and OPM
would not be authorized to negotiate benefit provisions. In addition, restrictions on the
number of Government-wide carriers would be removed.
RATIONALE
•
The proposed change in the method of determining Government contributions ensures that
the Government does not contribute to excessive use of health care services and health care
cost inflation. Under existing law, since Government contributions are tied to an average of
plan premiums, health insurers, particularly the largest carriers in the program, have
insufficient incentives to control costs or encourage health care providers to control costs.
Increased costs are simply passed on, in large part, to the Government. Eliminating the link
to plan premiums enhances cost control incentives by putting pressure on carriers to control
costs and premium increases in order to remain competitive.
•
Enrollee choice would be enhanced: carriers would be encouraged to provide a wider range
of benefit packages to meet enrollee needs.
•
Requiring the Postal Service and the D.C Government to pay the employer share of premiums
for their annuitants eliminates unintended Federal subsidies to those entities. When the
FEHBP was established in 1959, the Postal Service was a Federal agency. The Postal Service is
now a corporation responsible for the pay and benefits of its labor force. Federal subsidies
are inappropriate for this compensation-related expense.
•
The 75% cap currently limits Government contributions for 52 plans providing self only
coverage and for 15 plans providing self and family coverage. These plans include the Blue
Cross and Aetna low options, the Government Employees Hospital Association (GEHA)
Benefit Plan, two employee organization low option plans, one employee organization high
option plan (self only) and numerous CMPs. Enrollment in these plans is about 28% of all self
only enrollments and about 17% of all self and family enrollments. These enrollees are
actually penalized for choosing less costly plans: they receive a lower Government
contribution for their health insurance than do other participants. The proposed changes
ensure that enrollees are encouraged to, rather than penalized for, selecting less costly plans.
•
Eliminating the 75% "cap" and providing rebates corrects inequities under the current
program and encourages enrollees to shop carefully among plans for those that provide
desired coverage at the least cost. This also further enhances incentives for carriers to control
costs order to remain competitive.
•
The catastrophic protection requirement ensures that enrollees would be protected against
disastrously high medical expenses. Other types of benefits would not be required and OPM
would not negotiate benefit provisions.
EFFECTS OF THE PROPOSED CHANGE
By encouraging enrollees to shop carefully for desired coverage at least cost and by enhancing
incentives for carriers to control costs and premium increases, the proposed changes will enhance
competition in the program and result in long-term savings for both the Government and program
enrollees.
268
REFORM '88
AND OTHER MANAGEMENT INITIATIVES
269
CHAPTER 8
REFORM '88 AND OTHER MANAGEMENT INITIATIVES
One of the highest Administration priorities is significant and lasting improvement in the
management of the Federal Government. The Administration will maintain its efforts to reduce
fraud, waste, and abuse. At the same time, it will initiate or expand several activities to modernize
and restructure the management and administrative systems with which the Government operates.
RESTRUCTURING MANAGEMENT AND ADMINISTRATIVE SYSTEMS
A major effort was launched in 1982 to restructure management and administrative systems in the
Federal Government. This effort is called "Reform '88", since it is anticipated it will take at least six
years to complete. The program is being coordinated by the White House with oversight by the
Cabinet Council on Management and Administration.
During the balance of 1983 and in 1984, Reform '88 will concentrate its efforts on:
•
Reform of the Federal Government's financial management systems.
—
Government accounting principles and standards will be upgraded to reflect changing
needs and the best private sector practices. Departments and agencies will adopt and
implement the new principles and standards.
—
The Treasury Department's government-wide cash collection and payment systems will
be modernized.
—
Financial operations in the departments and agencies will be analyzed and improved to
correct recurring problems, particularly those related to fraud, waste, and abuse.
•
Implementation of the management systems improvements recommended by the President's
Private Sector Survey on Cost Control.
•
Monitoring of efforts to achieve management savings and improvements through the use of
an "on-line" communications system between the White House and the departments and
agencies.
REDUCING FRAUD, WASTE, AND ABUSE
In recent years, numerous instances of fraud, waste, and abuse of government resources and
mismanagement of government programs have been reported. To emphasize Administration
leadership and support for a government-wide anti-fraud and waste effort, the President
established in March 1981 the President's Council on Integrity and Efficiency. The Council is
composed of statutorily established Inspectors General and other key audit and investigative
officials. It seeks to enhance interagency efforts to reduce fraud and waste.
Past efforts of the Council and the individual Inspectors General have focused on the detection of
fraud, waste, and abuse. Future Council efforts will add a new dimension on the prevention of
fraud, waste, and abuse.
The Council efforts will complement the Administration's continued emphasis on internal controls as
a fundamental prevention technique. The Administration strongly supports the objectives of the
recently enacted Federal Managers' Financial Integrity Act, and will vigorously implement the Act by
having each department and agency:
•
Conduct evaluations to assess the vulnerability of their program and administrative
operations to fraud, waste, and abuse.
271
•
Take necessary corrective actions to improve internal controls and reduce the risk of fraud,
waste, and abuse.
•
Submit an annual report to the President and the Congress on how well the controls are
working.
OTHER MANAGEMENT INITIATIVES
Other management initiatives undertaken by the Administration will include:
•
Reform of the Federal procurement process. Federal procurement is a $160 billion-a-year
activity involving approximately one-fifth of the Federal budget, more than 130,000 Federal
employees, and over 20 million contracting actions a year. Proposed reforms include:
—
Increased emphasis on the need for a skilled and knowledgeable work force of career
professionals to operate and oversee the Government's procurement program.
—
New concepts of competition that will permit the Government to attract the innovation
and skills of the marketplace.
—
Simplification of the procurement process by means of a single, government-wide
procurement regulation.
•
A government-wide program to place limits on Federal imposition of paperwork burdens on
the public-an effort that has already produced significant results. This effort will reduce
Federal costs in collecting marginally useful information. More importantly, it will relieve
State and local governments, individuals, businesses, and other private institutions of the
costs of millions of hours devoted to filling out Federal forms.
•
Continuation of the Debt Collection Project to recover delinquent debts and improve the
administration of Federal credit programs.
•
Reduction in the size of the nondefense Federal civilian work force.
•
Reduction of the office space occupied by Executive Branch agencies to the minimum
necessary to carry out program operations.
272
REFORM OF FINANCIAL SYSTEMS
PROGRAM DESCRIPTION
Reform'88 will give top priority in 1983 and 1984 to reforming the Federal Government's accounting
and financial management systems and their links to budget formulation and execution. The effort
will have two basic thrusts; the first will focus on near-term cost reduction and systems upgrading
projects. The second will be aimed at longer-term structural changes based on the introduction of
proven techniques from the private sector and the use of more technologically advanced data
processing and telecommunications equipment.
PROGRAM EMPHASIS
•
Accounting Systems Reform. The Office of Management and Budget and the Treasury
Department will join with the General Accounting Office to define new accounting
principles and standards that reflect the changing needs of Federal budgeting and financial
operations and the best private sector practices. Major projects will be undertaken to revise
the accounting systems of all departments and agencies to conform to these principles and
standards. Agency financial management systems and controls will be revised so that they
properly control and account for receipts and expenditures, and supply reliable, consistent
financial information for budget and accounting reports.
•
Government-wide Cash Collection and Payment Systems Reform. The Treasury Department
maintains systems for the collection of Federal revenues, and for payments by the
Government to individuals, State and local governments, and private companies. Each year,
transactions are completed having a value in excess of $1.7 trillion. The Treasury Department
has instituted a major Reform '88 program to:
•
—
Improve its collections capabilities through the use of such techniques as direct bank
deposits of receipts by agencies, electronic funds transfers, and "same-day" depositing.
—
Improve its payments system through increased use of electronic funds transfers, letters
of credit, and other improved payment techniques.
—
Modernize its internal operations by upgrading obsolete computers and replacing
check printing equipment with less expensive electronic funds transfer technology.
—
Automate financial reporting from agencies and thereby reduce costs and errors.
Financial Operations and Controls in Government Agencies. The Federal Government carries
out its business through hundreds of contracts, block and categorical grants, and loan and
credit programs, as well as its own internal operations and administrative support activities.
Each of these activities requires its own financial management system and controls. The
President's Council on Integrity and Efficiency and the U.S. General Accounting Office have
identified in numerous audits and reports the need to undertake financial systems reform to
correct a wide range of recurring problems in agency operations. A number of specific
agency directed projects are planned for 1984 to identify flaws in operating financial systems
and develop controls and other improvements to reduce fraud, waste, and mismanagement.
RATIONALE
The backbone of most government activities are those systems that govern the formulation and
execution of the budget, the accounting for all financial transactions, and the management
planning and control of the myriad programs that generate those transactions. Each year,
transactions valued at close to two trillion dollars must pass through these systems. Involved are
273
380-900 0 - 83 - 17 : QL 3
more than 200,000 Federal employees working in more than 100 departments and agencies of the
Government. Reform of the Government's financial management systems can provide significant
savings and improvements in service. It also will provide a better linkage to and support for the
budget formulation and execution processes and improve the quality of financial data in the Federal
Government.
EFFECTS AND PROSPECTS
Completion of the financial systems reform will result in the following significant benefits:
•
Improved linkage of financial and budgeting systems.
•
A uniform, consistent, compatible, and reliable financial data base.
•
A fully automated system that incorporates the latest automatic data processing and
telecommunications developments.
•
Enhanced productivity, promptness, and cost-effectiveness in the various processing
organizations.
•
Tightened financial
mismanagement.
controls
and
an
attendant
274
reduction
in
fraud,
waste,
and
PRESIDENT'S COUNCIL ON INTEGRITY AND EFFICIENCY/INSPECTORS GENERAL
PROGRAM DESCRIPTION
Seventeen Offices of Inspector General have been established by statute in major departments and
agencies of the Executive Branch. The Inspectors General (IGs) are appointed by the President, and
report directly to the head of their respective department. Their objectives are to prevent and detect
fraud and abuse, and to promote economy, efficiency, and effectiveness in the programs of their
agencies.
To emphasize the Administration's leadership and support for the government-wide anti-fraud and
waste effort, President Reagan established the President's Council on Integrity and Efficiency in
March 1981. The Council enhances interagency efforts to reduce fraud and waste, encourages
coordination among the IGs, and gives the Inspectors General a direct link to the President. Through
the Council, the Inspectors General seek to identify opportunities for improving program operations
and administration across the Government by preventing waste and inefficiency.
The members of the Council include:
•
Statutorily mandated Inspectors General from major departments and agencies (Agriculture,
Commerce, Defense, Education, Energy, Health and Human Services, Housing and Urban
Development, Interior, Labor, State and Transportation as well as AID, EPA, GSA, NASA, SBA,
and VA).
•
Representatives from the Departments of Justice and Treasury, the Office of Management
and Budget, the Office of Personnel Management, and the Federal Bureau of Investigation.
PROPOSED CHANGE
The Administration has proposed a ten percent overall increase in full-time equivalent employment
from 1982 to 1984 for the Offices of Inspector General to assure the continued strength of the
program. This employment increase would be financed by a budget authority increase of fifteen
percent during the same period.
The focus of the Council activities in its third year will be to identify opportunities for expanding
prevention techniques such as computer matching and pre-screening of grants and contracts and for
developing new initiatives to prevent the wasteful drain of Federal resources. The opportunities
identified by the Council for upgrading and improving administrative systems will help to define
Reform '88 priorities.
Specifically, the Council will be undertaking such projects as the following:
•
Computer Matching, which will expand the use of computer matching as a fraud and abuse
prevention mechanism in Federal and State programs. The project will provide for the
exchange and dissemination of information on matching programs and on technical
capabilities and developments.
•
Fraudulent Use of Federal Identity Documents ,which will develop standards for the security
and use of Federally issued identity documents. This project will ensure that both issuing and
benefit agencies are aware of and take action to reduce the improper use of documents such
as the Social Security card.
•
Medical Provider Fraud, which will identify cases of fraud by providers of medical care and
related services and assure that information is shared among the Government agencies that
operate health programs.
275
•
Interdepartmental Committee to Combat Bid-rigging Fraud, which brings together the
Departments of Justice and Transportation to increase Federal and State coordination in bidrigging investigations.
This will be achieved by: devising and disseminating new
investigative techniques; targeting States for future investigations; and maximizing State
participation.
RATIONALE
The evidence of continued waste and mismanagement of Government programs and operations, as
uncovered by the Inspectors General, the General Accounting Office and others, demonstrates the
need for coordinated anti-fraud and waste activities through the President's Council on Integrity and
Efficiency. While the magnitude of the problem is extremely difficult to pinpoint, the Inspectors
General in the last eighteen months have identified, and management has agreed to, almost $17
billion in savings and improved use of funds.
Much of this work, however, has concentrated on after-the-fact detection of problems based on
traditional audits and investigations. The prevention of waste and mismanagement, through
improved design of program operations and administration and the use of modern technology such
as computer matching and pre-screening, offers promise of additional improvements in the
management of the Federal Government.
EFFECTS OF THE PROPOSED CHANGE
The changing emphasis to prevention activities in the Inspector General program and the President's
Council will provide support for the major administrative reforms undertaken in Reform '88. In
addition, the focus on prevention will buttress the Administration's commitment to improving
Government by stressing the importance of adequate controls in all program and administrative
operations.
276
INTERNAL CONTROLS
PROGRAM DESCRIPTION
Internal controls are those mechanisms and managerial techniques built into management and
administrative systems to safeguard resources, assure the reliability of financial and statistical
information, and assure adherence to applicable laws, regulations, and policies.
The Administration has long been committed to the improvement of internal control systems as a
fundamental means of reducing fraud, waste, and abuse in Government operations, and
strengthening management and administrative systems.
PROPOSED CHANGE
The Administration strongly supports the objectives of the Federal Managers' Financial Integrity Act,
which was signed into law by the President in September 1982. Vigorous implementation efforts
have begun and will continue in order to improve internal management practices and reduce the
risk of fraud, waste, and abuse.
Specifically, the Act requires that all department and agency heads:
•
Ensure that their internal accounting and administrative controls are established in
accordance with standards prescribed by the Comptroller General.
•
Conduct evaluations to assess the vulnerability of their organizations and systems to fraud,
waste, and abuse-and take corrective action.
•
Submit an annual report to the President and the Congress on how well the controls are
working.
The first agency reports to the President and the Congress on the results of internal control reviews
are due December 31, 1983. Using guidelines for the evaluation of internal control systems which
were issued by OMB in December 1982, each agency will review its systems of internal accounting
and administrative control and determine whether they comply with the requirements of the Act,
identify the material internal control weaknesses, if any, and provide plans for correcting the
weaknesses. OMB will monitor the process in the agencies and provide technical assistance as
needed.
Top managers will be rated on their effectiveness in maintaining internal control systems that
minimize the prospect for fraud, waste, and abuse in operations.
RATIONALE
Despite long-standing legislation that has required the head of each department and agency to
establish and maintain adequate systems of internal control, in recent years numerous instances of
fraud, waste, and abuse of government resources and mismanagement of government programs
have been reported. Upon analysis, those problems frequently were found to have resulted from
weaknesses in the design of internal controls or breakdowns in compliance with the installed
systems.
Through vigorous action by agency heads and managers to improve internal control systems, the
Federal Government will attack the problem of fraud, waste, and abuse at its source, by prevention,
rather than through the less cost-effective means of after-the-fact detection.
277
EFFECTS OF THE PROPOSED CHANGE
Implementation of the Federal Managers' Financial Integrity Act will:
•
Enable the agencies to detect and correct weaknesses in their internal control systems and
thereby safeguard funds, property, and other assets.
•
Provide the basis for developing internal controls and systems that are consistent with the
management and administrative improvements being developed under Reform '88.
278
FEDERAL PROCUREMENT REFORM
PROGRAM DESCRIPTION
Federal procurement is a $160 billion-a-year business involving approximately one-fifth of the
Federal budget, more than 130,000 employees, and over 20 million contracting actions annually.
The Administration is committed to fundamental reforms to (1) simplify the procurement process
and eliminate unnecessary regulations, (2) increase competition, (3) enhance the overall competence
of the Federal procurement work force, and (4) improve agency management of the procurement
function. Detailed proposals for making these and other improvements were included in the
Administration's proposal for a Uniform Federal Procurement System, submitted to the Congress in
February 1982. Those improvements of an administrative nature were encompassed in President
Reagan's Executive Order 12352 ("Federal Procurement Reforms") which established the
Administration's procurement reform agenda for 1983 and beyond.
PROPOSED CHANGE
The procurement reform program for 1984 will encompass both legislative and administrative
changes. Specifically, legislation will be supported to enhance competition by curtailing the number
of circumstances authorized for awarding contracts noncompetitively. Legislation also will be
proposed to (1) increase the small purchase ceiling for civil agencies to $25,000 and (2) reauthorize
the Office of Federal Procurement Policy (OFPP) so it can continue its leadership role in procurement
reform. Principal among the administrative reforms to be implemented are (1) adoption and
implementation of the single, simplified Federal Acquisition Regulation by all executive agencies, (2)
adoption by each agency of a detailed charter delineating the roles and responsibilities of its
Procurement Executive, and (3) improvement of the recruitment, selection, training, education,
appraisal, and classification of procurement personnel. Further guidance also will be furnished to
the agencies on reducing administrative costs and paperwork, simplifying small purchases,
establishing clear lines of contracting authority, creating effective career management programs,
and establishing procurement system standards and certification processes.
RATIONALE
The procurement process is a key component in the management of Federal programs, but it has
failed to reach its full potential for effectively and efficiently supporting agency requirements. Too
often, agency users do not receive the products and services they require when they need them and
at a reasonable price. Competition is curtailed by regulatory complexity, funding constraints,
restrictive specifications, lack of advance planning, and limited knowledge of the marketplace.
The problems of Federal procurement are further exacerbated by an outdated, fragmented
statutory base, over 800 sets of agency procurement regulations, a diffusion of responsibility, and
too few standards of performance. These factors, in turn, unnecessarily inhibit the work force and
erode the nation's industrial base by deterring potential suppliers from competing for Government
business, and causing existing suppliers to leave the Government market. An integrated series of
reforms — in law, in regulation, in procedure and in standards - is essential for correcting these
deficiencies.
EFFECTS OF THE PROPOSED CHANGE
The 1984 changes outlined above will have many salutary effects. Implementation of the Federal
Acquisition Regulation will eliminate 62% of existing primary procurement regulations (nearly 4,000
pages), with a consequent reduction in the administrative burdens which affect both Federal
procurement activities and private contractors. The curtailment of noncompetitive awards will
enable the Government to benefit from technical, management, and price competition available in
279
the marketplace, thereby saving millions of dollars. The proposed reforms will help to improve
Government/contractor relationships and enhance the overall efficiency and effectiveness of the
procurement process. Principal among these is the continuing effort to enhance the procurement
work force through such initiatives as developing realistic classification and qualification standards,
establishing model career programs in several agencies, establishing contracting officer qualification
standards, and developing new sources of training as well as new methods for recruiting and
selecting employees.
It is estimated that $2-9 billion will be saved annually once the full program of reforms is
implemented, a process expected to take 3 - 5 more years.
280
PAPERWORK REDUCTION
AGENCY:
Government-Wide
(Hours in millions)
Hours of burden
imposed on the public
Net Changes
1982
1983
1984
1,274
1,167
-108
1,129
-38
PROGRAM DESCRIPTION
The Administration's paperwork control program is designed to minimize reporting, recordkeeping,
and disclosure requirements imposed upon the public by the Federal Government.
In addition to an ongoing review of the individual paperwork requirements, each year the agencies
and the Office of Management and Budget determine paperwork "budget allowances" designed to
limit the "burden hours" required of the public for filling out Federal forms and keeping records.
Paperwork budget allowance levels are established on a cycle one year later than that of the
President's fiscal budget. The difference in timing results from the need to establish program
priorities through the budget process and then follow up with paperwork - information collection implementation strategies. Hence, the data in the tabulation shown above are the allowance levels
for 1982 and 1983, and the planning level for 1984.
PROPOSED CHANGE
During 1983, Federal agencies will take actions to reduce the paperwork burdens imposed on the
public by 127 million hours-a 10 percent reduction from the approximately 1.3 billion hours imposed
during 1982. This reduction will be partially offset by increased private use, beyond government
control, of some forms such as passport and other application forms, for a projected net reduction of
108 million hours by the end of the fiscal year. The 1983 reductions, combined with those achieved
earlier, will result in a 29 percent reduction in the Federal paperwork requirements known to exist in
1980, thus surpassing the 25 percent reduction goal established by the Paperwork Reduction Act of
1980 (PL. 96-511). Total paperwork reductions since the Reagan Administration took office in
January 1981 will exceed 300 million hours.
RATIONALE
The paperwork control program, which is a key element of the President's regulatory relief program,
is aimed at relieving individuals, businesses, and State and local governments from unnecessary
Federal paperwork requirements. With the resulting savings, time previously spent on unnecessary
paperwork will now be free for more productive purposes. For example, the over 100 million hour
burden reduction in 1983 represents a savings of over 50,000 work-years. Added to these savings in
the private and non-Federal sectors are the Federal budget savings associated with the collection of
fewer forms that require processing, analysis, and storage.
EFFECTS OF THE PROPOSED CHANGE
Almost all agencies will be reducing their paperwork burdens during 1983. The largest single
reduction will be made by the Department of Transportation's elimination of recordkeeping
requirements associated with the Highway Safety Program (-68 million hours).
281
Although the Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA) will result in significant
increases in tax reporting to increase collection of certain taxes that have been widely evaded in the
past, the Internal Revenue Service has undertaken an aggressive program to identify and eliminate
unnecessary current reporting requirements. As a result of this effort, total IRS reporting
requirements will actually decrease in 1983, in spite of the additional reporting under TEFRA.
1981 AND 1982 CHANGES
Major paperwork reductions that have already taken place include:
•
Reduction in recordkeeping requirements
Administration (NCUA) (-67 million hours).
•
Reduction in requirements for the Federal Communications Commission's (FCC) Radio Station
Log (-40 million hours).
•
Reduction in the Internal Revenue Service's Personal Income Tax Reporting (-31 million
hours).
•
Adoption of a common claim form for use by Medicare, Medicaid, and third-party payors (-10
million hours).
•
Reducing the Internal Revenue Service's (IRS) Wage and Tax Statement (-7 million hours).
•
Elimination of many of the Department of Health and Human Services's (HHS) categorical
grant reporting requirements (-5 million hours).
282
imposed
by the
National
Credit
Union
DEBT COLLECTION
AGENCY:
Government-Wide
($ in millions)
1983
1984
1985
1986
1987
1988
Agriculture
250
140
140
140
140
140
Commerce
25
61
61
61
61
61
Defense
85
100
100
100
100
100
225
225
225
225
225
225
Energy
63
57
57
57
57
57
HHS
80
200
200
200
200
200
HUD
125
150
150
150
150
150
Labor
20
10
10
10
10
10
DOT
17
9
9
9
9
9
VA
150
77
77
77
77
77
AID
35
39
39
39
39
39
SBA
120
175
175
175
175
175
1,660
2,040
2,315
2,315
2,315
2,315
2,855
3,283
3,558
3,558
3,558
3,558
EXPECTED SAVINGS
Distributed in Agency Accounts
Education
Tax Receipts*
Total Savings
*
These are savings that represent increased recoveries of delinquent taxes owed the Internal Revenue Service.
PROGRAM DESCRIPTION
An estimated $250 billion was owed to the Government on September 30, 1982. Of that amount,
approximately $180 billion was owed to 82 programs and activities in 16 agencies monitored by the
Administration's Debt Collection Project. Over $38 billion of the $180 billion was delinquent or in
default, and almost half of the delinquencies were more than six months past due. Almost $2 billion
in bad debts was written off in 1982, and it is estimated that an additional $2.5 billion will be written
off over the next 18 months.
The situation has resulted from the failure of agencies to pursue collection aggressively and a
general attitude among debtors that they do not have to repay their debts to the Government.
PROPOSED CHANGE
The President has committed the Administration to increase collections of delinquent debts,
including delinquent taxes owed the Internal Revenue Service, by $3.3 billion in 1984.
The program to reach this goal will focus on attacking the existing delinquency problems and
improving credit management and debt collection practices across the Government. Specifically, the
following initiatives will be undertaken:
•
Debt portfolio data bases will be automated to improve the reliability and timeliness of
receivables information.
283
•
Uniform aging requirements will be applied to ensure the proper management of debt
portfolios.
•
Uniform standards for writing off uncollectable debts will be established and enforced.
•
Agencies will prepare detailed plans that outline the specific steps to be taken to implement
the Debt Collection Act of 1982.
•
Debt servicing and collection functions will be automated, using the latest computer and
telecommunications technology.
•
Up-front risk analysis and credit scoring procedures will be used to ensure the integrity of the
credit extension process.
•
Examples of specific initiatives include the following:
—
The Internal Revenue Service, (IRS) is installing an automated collections system that
will select, sequence, schedule and control collections work for about $8 billion in
delinquent tax accounts. When implemented nationwide in 1984, the system will
increase the productivity of IRS collectors and reduce and prevent future delinquencies.
At a minimum, an additional $500 million in delinquent taxes will be collected annually.
—
Under new regulations for the Education Department's National Direct Student Loan
(NDSL) program, schools with default rates in excess of 25 percent will not be eligible to
receive new NDSL funds. Schools with default rates between 10 and 25 percent will
have their new loan funds reduced in proportion to their default rate. The regulations
will be a strong incentive for institutions to be more responsible in collecting
delinquent loans.
In addition, targets for increasing collections by $2.9 billion in 1983 and $3.3 billion in 1984 have
been assigned to 13 agencies. Under a Government-wide reporting system implemented in 1982,
the agencies will submit quarterly financial reports which will include information on:
•
total debt owed to the programs and activities;
•
the age and amount of delinquent debt;
•
the amount of interest assessed and collected on delinquent debts; and
•
the number and value of debt cases referred to GAO and Justice for collection.
The quarterly data will also be used to monitor the progress toward the collection targets which
have been assigned to the agencies.
RATIONALE
Allowing debts owed the Government to remain uncollected increases the cost of Government and is
inflationary. The situation contributes significantly to the burden on responsible, honest citizens
who pay their taxes and honor their obligations to the Government.
•
The interest alone on the $38 billion in delinquent debt is costing taxpayers about $14
million a day.
•
The Government incurs substantial operating costs every year in pursuing the collection of
delinquent debt.
•
During times of fiscal restraint, dollars of debt not repaid either must be replaced by
additional tax dollars or the program levels reduced accordingly.
•
When delinquent debts are not collected, debtors receive benefits to which they are not
entitled. Loan and benefit programs in effect become unauthorized giveaway programs.
284
•
A well-run and effective program provides incentives for debtors not to be delinquent in the
future and strengthens the taxpayers' confidence in their Government.
EFFECTS OF THE PROPOSED CHANGE
The President's program is the first concentrated effort to improve Federal credit management and
debt collection. The budget impact alone will be significant. The 1984 Budget includes $3.3 billion
in increased collections resulting from the measures being taken by the agencies. These collections
will generally be achieved using existing agency resources.
285
REDUCING FEDERAL EMPLOYMENT*
Executive Branch
Total Full-Time Equivalent Employment
(Excluding the Postal Service)
(In Thousands)
1982
Revised
Budget 17
TOTAL
Defense
Non-Defense
2,100.8
937.7
1,163.1
1982
Actual
1983
Estimate
1984
Estimate
1985
Estimate
2,075.8
978.1
1,097.7
2,070.4
968.8
2,077.9
989.9
1,101.6
1,088.0
2,075.8
992.0
1,083.8
\j As contained in the 1982 Revised Budget, transmitted to the Congress in March 1981.
PROGRAM DESCRIPTION
The Administration's goal since inauguration has been to reduce the size of the nondefense Federal
civilian workforce.
The 1984 Budget establishes full-time equivalent employment ceilings for each agency for fiscal
years 1983-85. These ceilings were determined during the budget review process and take into
account each agency's programmatic needs as well as opportunities for management efficiencies
PROPOSED CHANGE
From 1983 to 1984, a net decrease of 13,600 full-time equivalent workyears is planned for the
nondefense agencies.
RATIONALE AND EFFECTS
The following is a list of specific major proposed reductions from 1983 to 1984:
*
—
Department of Health and Human Services (-4,100) - Employment will be reduced by
eliminating excessive overhead staff; continuing the community services closeout;
decreasing regulatory requirements for health and social services programs; and
deregulating categorical grants and consolidating selected grant programs.
—
Department of Commerce (-2,280) - Decreases will result from completion of the
Economic and Agricultural Censuses, the termination of the Economic Development
Administration, and the phasedown or elimination of the National Oceanic and
Atmospheric Administration marine and atmospheric-related services and research
activities. A planned increase of about 100 workyears is intended to reduce backlogs in
the Patent and Trademark Office.
—
Department of Agriculture (-2,050) - Decreases amounting to nearly 1,900 workyears
are planned for the Forest Service for program reductions and expected increases in
management productivity. Most of the balance of the decrease occurs in the Soil
Conservation Service and Food and Nutrition Service with a partial offset by a small
increase for the Farmers Home Administration to meet debt management
requirements.
—
Department of Defense - Civil Functions (-1,629) - Reductions are due to declining
program levels resulting in cutbacks in real estate and construction management
personnel and the completion of 20-25 projects per year. Private sector dredging
capability is increasing, with correspondingly less need for dredges operated by Federal
employees.
For additional details, see Special Analysis I, "Special Analyses, Budget of the United States Government, Fiscal Year
1984."
286
—
Department of the Interior (-1,338) -- Decreases will occur due to Bureau of Indian
Affairs school closures and transfers, streamlined research and regulatory processes,
improved operational efficiencies, and less labor intensive methods of natural resource
management. These reductions are partially offset by increased staffing to operate and
maintain the national park system.
—
The Department of Housing and Urban Development (-1,247) - This decrease results
from both programmatic and administrative changes.
In the housing area,
modernization and operating subsidies have been combined with a simplified formula
mechanism. Both Section 8 and public housing construction have been largely
eliminated. In the community development area, programs have been combined and
simplified, with greater devolution of program administration and decisionmaking to
States and localities. Federal Housing Administration employment will decrease due to
privatization of loan processing. Finally, a greater reliance on ADP operations and
contractual services and a streamlining of administrative functions both at
headquarters and in the field will reduce administrative employment.
—
Tennessee Valley Authority (-1,052) - A slowdown in the growth of electricity demand
has forced TVA to cancel and/or defer construction on some nuclear generating units.
This will lead to reductions of on-site construction workers and associated personnel
such as engineers and administrative staff.
—
Energy Activities (-884) — Employment will continue to decline for energy overhead,
regulatory activities, and near-term research and development activities. This decline is
consistent with changes made in recent years to carry out the Administration's emphasis
on the importance of private sector initiatives to provide for our energy needs.
—
The Department of the Treasury (-737) -- Decreases will occur as a result of streamlining
various departmental functions. These will be partially offset by increases in the
Internal Revenue Service to administer provisions of the Tax Equity and Fiscal
Responsibility Act.
—
General Services Administration (-564) - Decreases will occur agency-wide due to
continuing management efficiencies.
—
Environmental Protection Agency (-477) - Reductions reflect increased operating
efficiencies, acclerated delegation of environmental programs to States and completed
regulatory activities. High priority enforcement and regulatory programs are fully
supported.
A portion of the decreases noted is offset by necessary increases in the Justice Department, State
Department, Veterans Administration, and the United States Information Agency.
REDUCTIONS ACHIEVED
Between January of 1981 and the end of
employees has declined by 91,278.
fiscal year 1982, the actual number of nondefense
287
SPACE MANAGEMENT
PROGRAM DESCRIPTION
The Administration is committed to fundamental management reforms to ensure more efficient use
of Federally owned and leased office and work space. These reforms, which will emphasize planning
rather than case-by-case management, will reduce costs and allow the redirection of resources to
essential Federal activities.
PROPOSED CHANGE
The Administration will propose specific management reforms, including:
•
Requiring agencies to develop an annual plan for the utilization of office and other work
space. A key element of the plan will be the description of the relationship between office
space and personnel levels.
•
Improving space inventory systems to ensure that excess or underutilized space is identified
and made available for other Federal uses or for disposal, either by non-renewal of leases or
by sale of Government-owned property through established excess property programs.
RATIONALE
The Federal Government currently maintains 3.2 billion square feet of work space, of which about
550 million square feet is office space. When valued at $ 10 a square foot/per year, this office space is
worth $5.5 billion annually. A substantial amount of Federal work space is underutilized or
unnecessary when viewed within the context of individual agency requirements or stringent space
planning standards. More efficient use of this space could provide significant savings.
EFFECTS OF THE PROPOSED CHANGE
•
Reduction of office and other work space requirements to that essential for known mission
requirements.
•
Reduced operating expenses.
•
Improved space inventory systems.
288
INDICES
289
380-900 0 - 83 - 18 : QL 3
Index of Fact Sheets By Function
PAGE
050
NATIONAL D E F E N S E
Strategic Forces
Conventional Forces
Selected NATO Related Programs
Guard and Reserve Forces
Military Personnel
Military Retirement
Allowance for Pay Increase
150
:
INTERNATIONAL A F F A I R S
Export Credits and Guarantees
International Security Assistance
Foreign Economic and Financial Assistance
Foreign Information and Exchange Activity
250
100
159
162
164
ENERGY
Nuclear Waste Fund
Energy Research and Development: Reductions
in Non-nuclear Programs
EPA Operating Program
Strategic Petroleum Reserves
300
142
214
216
218
G E N E R A L S C I E N C E , S P A C E , AND T E C H N O L O G Y
Science and Mathematics Education
Federal R&D Programs and Support
for Basic Research
National Science Foundation
National Aeronautics and Space Administration
270
204
206
209
211
212
213
266
154
168
188
190
NATURAL RESOURCES
Corps of Engineers Waterway and Port User Fee
Soil and Water Conservation
EPA Operating Program
Property Sales
Recreation User Fees
Federal Recreation Land Acquisition
Federalism Initiative
291
89
139
188
174
176
178
244
PAGE
350
AGRICULTURE
Farm Programs
Agricultural Export Credit
137
234
370 COMMERCE AND HOUSING CREDIT
Minority Business Assistance
Subsidies for Non-profit Mailers
Federal Housing Administration
Small Business Credit Assistance
Federalism Initiative
Rural Housing Programs Financed by the Farmers Home Administration
400
123
151
228
230
244
251
TRANSPORTATION
Highways
Transit.,
Modernization of the Aviation Infrastructure
National Aeronautics and Space Administration
Federalism Initiative
79
81
83
164
244
450 COMMUNITY AND REGIONAL DEVELOPMENT
Economic Development Administration
Enterprise Zones
Funding for Indian Programs - -Government-Wide
Indian Housing and Community Development Programs
Urban Development Action Grants
Rental Rehabilitation Grants
Rural Telephone Bank
Federalism Initiative
Community Development Block Grants
85
87
109
112
144
145
232
244
249
500 EDUCATION, TRAINING, EMPLOYMENT, AND SOCIAL SERVICES
Helping Workers Find Jobs
Student Financial Aid
Tuition Tax Credit
Science and Mathematics Education
Head Start
Services for Groups with Special Educational Needs
Funding for Indian Programs - Government-Wide
Native Americans Programs
Assistance to Historically Black Colleges
Howard University
Older Americans Prog rams
ACTION
Public Broadcasting Funds
Federalism Initiative
Social and Community Services Block Grants
292
93
96
98
100
102
104
109
115
125
126
132
134
152
244
254
PAGE
550 HEALTH
Medicare: Overview
Medicare: Catastrophic Hospital Costs Protection
and Cost Sharing
Medicare: Physician Payment Freeze and Hospital
Reimbursement Limit
Medicare: Supplementary Medical Insurance - Premiums and Deductibles
Medicare: Voluntary Vouchers
Medicare: First Full Month of Eligibility
Medicare: Eliminate PSRO, PRO, and Mandatory
Utilization Review Funding
Medicaid
Cap Tax Subsidy for Private Health Insurance Premiums
Funding for Indian Programs - Government-Wide
Indian Health Service
Federal Subsidy for Saint Elizabeths Hospital
National Institutes of Health
Federalism Initiative
Helath Block Grants
56
57
59
60
62
63
64
65
67
109
114
147
167
244
253
600 INCOME SECURITY
Social Security (Bipartisan Solution)
Railroad Retirement Board
Federal Windfall Subsidy
Aid to Families with Dependent Children
Child Support Enforcement
Food Stamps and Nutrition Assistance for Puerto Rico
Child Nutrition Programs
HUD Subsidized Housing Programs
Public Housing Reform Proposals
Helping Workers Find Jobs
Funding for Indian Programs- Government-Wide
Indian Housing and Community Development Programs
Refugee and Entrant Assistance
Federalism Initiative
Low-Income Home Energy Assistance (LIHEA)
Civil Service Retirement
18
20
22
36
39
41
43
45
48
93
109
112
135
244
256
263
700 VETERANS BENEFITS AND SERVICES
Veterans Pensions
Hospital and Medical Care for Veterans
Veterans Disability Compensation
293
117
119
121
PAGE
750 ADMINISTRATION OF JUSTICE
Legal Services Corporation
Law Enforcement Crosscut
Organized Crime Drug Enforcement
Criminal Justice Assistance
Prison Construction
130
180
182
184
185
800 GENERAL GOVERNMENT
Funding for Indian Programs - Government-Wide
Termination of DC Borrowing from Treasury
Federal Buildings Fund (SLUC)
Law Enforcement Crosscut
Organized Crime Drug Enforcement
Tax Administration
Federalism Initiative
General Revenue Sharing
109
149
173
180
182
186
244
248
900 ALLOWANCES
Allowances for Pay Increase
266
950 UNDISTRIBUTED OFFSETTING RECEIPTS
Property Sales
Outer Continental Shelf Oil and Gas Leasing
174
193
NO FUNCTIONAL CODE
Federal Civil Rights Activities
Reform of Financial Systems
President's Council on Integrity and Efficiency/Inspectors General
Internal Controls
Federal Procurement Reform
Paperwork Reduction
Debt Collection
Reducing Federal Employment....
Space Management
294
127
273
275
277
279
281
283
286
288
Index of Fact Sheets By Agency
PAGE
FUNDS APPROPRIATED TO THE PRESIDENT
Foreign Economic and Financial Assistance
International Security Assistance
216
214
DEPARTMENT OF AGRICULTURE
Agricultural Export Credit
Child Nutrition Programs
Farm Programs
;
Federal Recreation Land Acquisition
Federalism Initiative
Food Stamps and Nutrition Assistance for Puerto Rico
Older American Programs
Property Sales
Recreation User Fees
Rural Housing Programs Financed by the Farmers Home Administration
Rural Telephone Bank
Soil and Water Conservation
234
43
137
178
244
41
132
174
176
251
232
139
DEPARTMENT OF COMMERCE
Economic Development Administration
Minority Business Assistance
85
123
DEPARTMENT OF DEFENSE
Conventional Forces
Guard and Reserve Forces
Military Personnel
Military Retirement
Selected NATO Related Programs
Strateg ic Forces
206
211
212
213
209
204
DEPARTMENT OF EDUCATION
Assistance to Historically Black Colleges
Federalism Initiative
Howard University
Science and Mathematics Education
Services for Groups with Special Educational Needs
Student Financial Aid
Tuition Tax Credit
295
125
244
126
100
104
96
98
PAGE
DEPARTMENT OF ENERGY
Energy Research and Development: Reductions
in Non-nuclear Programs
Nuclear Waste Fund
Strategic Petroleum Reserve
168
154
190
DEPARTMENT OF HEALTH AND HUMAN SERVICES
Aid to Families with Dependent Children
Cap Tax Subsidy for Private Health Insurance Premiums
Child Support Enforcement
Federal Subsidy for Saint Elizabeths Hospital
Federalism Initiative
Head Start
Health Block Grants
Indian Health Service
Low-Income Home Energy Assistance (LIHEA)
Medicaid
Medicare: Catastrophic Hospital Costs Protection and Cost Sharing
Medicare: Eliminate PSRO, PRO, and Mandatory Utilization Review Funding
Medicare: First Full Month of Eligibility
Medicare: Overview
Medicare: Physician Payment Freeze and Hospital Reimbursement Limit
Medicare: Supplemental Medical Insurance - - Premiums and Deductibles
Medicare: Voluntary Vouchers
National Institutes of Health
Native Americans Programs
Older Americans Programs
Social and Community Services Block Grants
36
67
39
147
244
102
253
114
256
65
57
64
63
56
59
60
62
167
115
132
254
DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
Community Development Block Grants
Enterprise Zones
Federal Housing Administration
Federalism Initiative
HUD Subsidized Housing Programs
Indian Housing and Community Development Programs
Public Housing Reform Proposals
Rental Rehabilitation Grants
Urban Development Action Grants
296
249
87
228
244
45
112
48
145
144
PAGE
DEPARTMENT OF THE INTERIOR
Federal Recreation Land Acquisition
Outer Continental Shelf Oil and Gas Leasing
Property Sales
Recreation User Fees
178
193
174
176
DEPARTMENT OF J U S T I C E
Criminal Justice Assistance
Law Enforcement Crosscut
Organized Crime Drug Enforcement
Tax Administration
Tuition Tax Credit
ACTION
184
180
182
186
98
134
DEPARTMENT OF LABOR
Helping Workers Find Jobs
Older Americans Programs
93
132
DEPARTMENT OF TRANSPORTATION
Federalism Initiative
Highways
Modernization of the Aviation Infrastructure
Transit
244
79
83
81
DEPARTMENT OF THE TREASURY
Federalism Initiative
General Revenue Sharing
Law Enforcement Crosscut
Organized Crime Drug Enforcement
Tax Administration
Termination of D.C. Borrrowing from Treasury
Tuition Tax Credit
244
248
180
182
186
149
98
ACTION
ACTION
134
C O R P S OF ENGINEERS
Corps of Engineers Waterway and Port User Fees
297
89
PAGE
BOARD OF INTERNATIONAL BROADCASTING
Foreign Information and Exchange Activities
218
CORPORATION FOR PUBLIC BROADCASTING
Public Broadcasting Funds
152
ENVIRONMENTAL PROTECTION AGENCY
EPA Operating Program
Federalism Initiative
188
244
EXPORT-IMPORT BANK
Export Credits and Guarantees
142
GENERAL SERVICES ADMINISTRATION
Federal Buildings Fund (SLUC)
Property Sales
173
174
INTERNAL REVENUE SERVICE
Tax Administration
186
LEGAL SERVICES CORPORATION
Legal Services Corporation
130
NATIONAL AERONAUTICS AND SPACE ADMINISTRATION
National Aeronautics and Space Administration
.
164
NATIONAL SCIENCE FOUNDATION
National Science Foundation
Science and Mathematics Education
162
100
NATIONAL TELECOMMUNICATIONS AND INFORMATION ADMINISTRATION
Public Broadcasting Funds
152
OFFICE OF PERSONNEL MANAGEMENT
Civil Service Retirement
Federal Employes Health Benefit Program
263
267
298
PAGE
RAILROAD RETIREMENT BOARD
Federal Windfall Subsidy
Railroad Retirement Board
.
22
20
SMALL BUSINESS ADMINISTRATION
Minority Business Assistance
Small Business Credit Assistance
123
230
SOCIAL SECURITY ADMINISTRATION
Social Security (Bipartisan Solution)
18
U.S. INFORMATION AGENCY
Foreign Information and Exchange Activities
218
U.S. POSTAL SERVICE
Subsidies for Non-profit Mailers
151
VETERANS ADMINISTRATION
Hospital and Medical Care for Veterans
Veterans Disability Compensation
Veterans Pension
119
121
117
OTHER
Allowance for Pay Increase
Debt Collection
Federal Civil Rights Activities
Federal Procurement Reform
Federal R&D Programs and Support for Basic Research
Funding for Indian Programs - Government-Wide
Internal Controls
Paperwork Reduction
President's Council on Integrity and Efficiency/Inspectors General
Reducing Federal Employment
Reform of Financial Systems
Space Management
266
283
127
279
159
109
277
281
275
286
273
288
299
U.S. GOVERNMENT PRINTING OFFICE : 1983 0 - 380-900 : QL 3
@FedFRASER