National Education Improvement Act of 1963—Continued 1 Does not include the cost of permanent provisions of Public Laws 815 and 874. Adults 25 years and over who have completed less than 8 grades of school' 1 Source: Department of Commerce, Bureau of the Census, PC(1) C and PC(1) B, 1960 Census. * Percentages were computed by the Office of Education. STATEMENT BY THE INVESTMENT BANKERS ASSOCIATION OF AMERICA RE: H.R. 3000, PROPOSED NATIONAL EDUCATION IMPROVEMENT ACT OF 1963 This statement is directed to only two parts of the proposed act: IV (A) which would authorize $1.5 billion in Federal grants over the next 4 years for teachers' salaries or 50 percent of the cost of construction of elementary and secondary school facilities. II (A) which would authorize $1 billion in low interest rate Federal loans over the next 3 fiscal years for academic facilities for higher education (colleges and universities), requiring that at least one-fourth of the cost of the construction be financed from non-Federal sources. In considering whether it would be desirable to adopt these two proposals, we have started with three basic assumptions: (a) American education at the elementary, secondary, and college levels should be of the highest quality, provided with the necessary facilities and salaries to attract and hold competent teachers. (b) The construction of new facilities in recent years, current financing for additional facilities and the levels of teachers' salaries should be considered objectively to determine whether there is any real need for Federal assistance. Such objective consideration requires recognition of the probability that individuals, institutions, and organizations who would receive the proposed Federal financial assistance might be expected to contend that there is a serious crisis which can be met only by such Federal assistance. (c) Any proposal for a new program of Federal financial assistance should be evaluated against the background of the present Federal budget situation, recognizing that every additional Federal commitment will serve to aggravate the problems of balancing the Federal budget and managing the Federal debt. (1) PROPOSED FEDERAL GRANTS FOR TEACHERS' SALARIES AND CLASSROOM CONSTRUCTION IN ELEMENTARY AND SECONDARY SCHOOLS Part A of title IV of H.R. 3000 would authorize: $400 million for 1946, $500 million for 1965, $400 million for 1966, $200 million for 1967, for Federal grants (aggregating $1.5 billion over the 4 years) to States "to assist their local educational agencies to make salary increases necessary for the recruitment and retention of qualified career elementary and secondary school classroom teachers, to construct urgently needed elementary and secondary school facilities, and to undertake special projects and programs directed toward improving educational quality and opportunity." Funds would be allotted among the States under a formula based on population and per capita income in each State. A State educational agency would be permitted to use the amounts allotted to it, pursuant to an approved State plan, for any or all of the following purposes: (a) To pay to a local educational agency a percentage of an increase in salaries of certified classroom teachers having 10 or more years of service. (b) To pay to a local educational agency a percentage of an increase in salaries of classroom teachers who have at least a bachelor's degree from an institution of higher education and whose salaries are substantially below the average entrance salaries in the State for such teachers. (c) To pay to a local educational agency a percentage of an increase in the salaries of teachers if the average salary paid by the local educational agency for all such teachers in its employ is substantially below the average salary paid in the State for such teachers and the ability of such agency to finance an increase is substantially below the average ability of local educational agencies in the State to finanace an increase in the salaries of such teachers. (d) To pay not more than 50 percent of the cost of construction of an elementary and secondary school facility which is urgently needed to relieve or prevent double shifts, serious overcrowding, or school housing conditions which are unsafe or otherwise seriously harmful to health. (e) To pay part of the cost of pilot, demonstration, or experimental projects or programs, to be conducted by local educational agencies or by public or nonprofit private agencies, designed to improve educational quality or opportunity in public elementary and secondary education. (f) To pay part of the cost of developing a State plan which will entitle it to receive an allotment of Federal funds under the program. This proposed $1.5 billion in grants from the Federal Government would be divided among all of the States so that every State would receive some of the funds regardless of their actual needs. Thus, five of the large wealthy States would receive over $113 million (over 28 percent) of the $400 million proposed for the first year. Federal funds allocated to a State under the proposal could be used to finance construction of classrooms which would otherwise be financed by the local municipality without Federal assistance. Any municipality planning to build new classrooms (and well able to finance them without Federal help) might meet the requirement that the facility is urgently needed to relieve or prevent double shifts, serious overcrowding, etc. Similarly, Federal funds allocated to a State under the proposal could be used to increase teachers' salaries in wealthy States, regardless of the fact that the lowest teachers' salaries in that State were much higher than teachers' salaries in other States. (a) Classroom construction The U.S. Department of Health, Education, and Welfare prepares annual tabulations of the number of additional classrooms reported to be needed in each State. These estimates of needed classrooms are generally accepted as the most accurate available but they represent maximum estimates of need. The estimates of classrooms needed to accommodate pupils in excess of normal capacity are inflated in many cases because the classrooms reported to be needed are under construction and almost completed. For example the figures for the fall of 1960 for a junior high school in Montgomery County, Md., showed 2,180 students on double session in that school because a new high school scheduled for opening in September 1960 was not completed on schedule, so that 740 pupils scheduled to attend the new high school were put on double sessions with 1,440 pupils in the junior high school until the new school was completed in December 1960. This situation undoubtedly occurs in many communities throughout the country with the result that reports show large numbers of students in classrooms in excess of normal capacity simply because schools which had been financed and scheduled for opening were not completed by the scheduled date. The estimates of classrooms needed to replace unsatisfactory facilities also are probably maximum figures. In some States there are arbitrary standards which provide that after a school building has been in use for a specified number of years it automatically is classified as "obsolete." In this connection, it might be observed that age alone does not make a classroom unsatisfactory. Many of our finest institutions of higher learning, both in this country and abroad, take great pride in classrooms that have been in use for over 100 years. In 1955 the Department estimated that about 300,000 additional classrooms were needed (and certain advocates of Federal aid then placed the estimate much higher). In January of this year the Department reported that the estimates of additional instruction rooms needed had been reduced as of the fall of 1962 to the lowest number in recent years, 60,655 to accommodate excess enrollment and 60,580 to replace unsatisfactory facilities. The number of new elementary and secondary school classrooms completed during each of the last 5 school years was as follows: It is estimated that close to 70,000 additional classrooms will be completed in the school year 1962-63, and this is supported by a continuing high level of sales of new issues of municipal bonds to finance such construction. The bonds to finance construction of school facilities normally are sold by local governments in advance of the construction. For many years advocates of Federal aid have claimed that local governments had reached their capacity to finance additional facilities and that proposed issues of school bonds were being rejected at bond elections; but the record shows that local governments have continued to finance additional classrooms at record levels. In 1961 the amount of new issues of school bonds sold for public elementary and secondary schools reached a record high, aggregating over $2.5 billion. The amount of such sales in 1962 was a close second to the 1961 record, aggregating over $2.44 billion. The amount of school bonds sold in each State in 1962 is listed in appendix A. The sale of new issues of school bonds is continuing at a high level in 1963, as evidenced by the preliminary tabulation in appendix B of issues sold in January 1963, aggregating over $212 million. In view of this record of classroom construction without the proposed Federal financial assistance and the continuing financing for such construction, we believe that the proposed program of Federal financial assistance for classroom construction is unnecessary and undesirable. (b) Teachers' salaries In general, average teachers' salaries in 1960-61 were up 72 percent from 1950-51 as compared with an increase of only 57 percent for all workers. The striking gains which have been made in classroom teachers' salaries is evidenced by the following figures from "Estimates of School Statistics, 196263," published by the National Education Association: The percent of classroom teachers paid below $3,500 dropped from 62 percent in 1952-53 to 4.6 percent in 1962–63. The percent of classroom teachers paid $4,500 and over increased from 13 percent in 1952–53 to 76.5 percent in 1962–63. The estimated average annual salaries of all elementary and secondary school classroom teachers in the four States with the lowest averages in 1960-61 has increased in 1962-63 by the following amounts: Mississippi Kentucky South Carolina____ $380 801 276 443 Thus, it is apparent that even in the States where the average salary of teachers is the lowest, substantial improvements are being made in salaries without the proposed Federal financial assistance. (2) FEDERAL LOANS FOR HIGHER EDUCATION ACADEMIC FACILITIES Part A of title II of H.R. 3000 would authorize an aggregate of $1 billion in Federal loans for the 3 fiscal years 1964, 1965, and 1966, for academic facilities to public and nonprofit private institutions of higher education (with maturities up to 50 years) requiring that (1) at least one-fourth of the cost of the construction be financed from non-Federal sources, and (2) the applicant is unable to obtain the amount of such loan "from other sources upon terms and conditions equally as favorable" as the terms and conditions applicable to loans under this program. The interest charged on such loans would be not less than one-fourth of 1 percent above the average annual interest rate on all interest-bearing obligations of the United States forming a part of the public debt as computed at the end of the fiscal year next preceding the approval of the application for such loan, adjusted to the nearest one-eighth of 1 percent. The interest rate under the formula in the bill would be 31⁄2 percent, so that if a college or university could not obtain financing for an academic facility from other sources at 32 percent the Federal Government would loan the money at that rate. The interest rate for long-term loans to colleges and universities under the formula in the proposed act is much lower than the interest rate which the Federal Government has to pay to borrow money for such maturities. On February 8, 1963, the quotations on U.S. Treasury bonds showed a yield of 4.02 percent on the 4/4s maturing in 1987; 4 percent on the 4s maturing 1988, and 3.95 percent on the 31⁄2s maturing 1998. When interest rates are at these levels, where U.S. Government bonds representing the prime credit yield about 4 percent in the 25- to 35-year-maturity range, it is apparent that all private and most publicly controlled colleges and universities with excellent credit would have to pay more than 32 percent to obtain financing for similar maturities in |