Ms. Vogel, I also want to point out that you are appearing for a group that, until recently, has been unrepresented and yet is as much concerned with these priorities for human needs as any group of people in the United States.

I thank you both for coming here. I will appreciate any comments you have. You have pointed up some matters and concerns in the bill. Even in the bill I am cosponsoring you have given me some second thoughts this morning. We would be delighted to hear any further suggestions as this develops.

Mr. Lucy. Thank you.

MS. VOGEL. Thank you.

Senator METCALF. We will now go to our last witness, Dr. William Pyle.

The other two members of the panel, Mr. Barton and Mr. Weiner, may file their statements.

[The statement follows:]

STATEMENT OF WELDON V. BARTON, NATIONAL FARMERS UNION

Mr. Chairman, members of the committee I am Weldon V. Barton, Assistant Legislative Director, National Farmers Union. Farmers Union is affiliated with the Coalition for Human Needs and Budget Priorities, and I am pleased to appear today as a member of a panel representing the Coalition.

I want to endorse in the strongest possible terms the purpose for which the bills before the Subcommittee today (S. 1541; S. 1641 are designed: that is, to improve congressional controls over the budget. This is particularly needed at a time when the Executive seems determined to encroach upon the constitutional prerogatives of Congress.

In general, I think both bills would increase congressional coordination and control. Let me mention two areas with which I see problems with S.1641.

First, S. 1641 in some respects would appear to create new distortions of the budgetary process, that might hamper trade-offs and reordering of priorities to serve human needs. For example, the bill would apply ceilings to individual Appropriations Subcommittees and to specific programs. Would this inhibit, e.g., attempts to reduce the Defense appropriations bill and divert the savings too health, education or other programs in the Labor-HEW appropriations bill? Would it hamper efforts to close loopholes in tax laws and divert the additional revenue to social programs?

Second, the Joint Study Committee on Budget Control took a position generally opposed to so-called "backdoor" spending devices (contracting and borrowing authority, mandatory spending, etc.), and S. 1641 moves in the direction of replacing such devices with annual appropriations. However, these devices, in some instances, are designed and intended by Congress to guarantee special emphasis and a measure of continuity to desired social programs: housing, revenue sharing, etc.

Furthermore, contracting authority and other such devices can help to protect programs to which Congress has assigned a high priority from impoundments or termination by the Executive. In this sense, it could be counterproductive to concentrate in the appropriations process more of Congress's power over spending obligations. A case can be made and has been made that the fragmentation of Congress's authority into numerous power centers and devices is the best hope for protection of congressional influence against encroachment by the Executive. Generally speaking, I want to inject a note of caution that S. 1641 appears to give too much emphasis to purity and consistency of form, at the risk of being counterproductive to strengthening congressional control and giving priority to programs for people. S. 1641 represents, I think, an attempt to do in Congress something that the Executive failed to accomplish under the rubric of "PlanningProgramming-Budgeting" (PPB) during the 1960's: that is, to establish a tightlyknit system for setting policy priorities through central budgetary processes,1

Allen Schick, "A Death in the Bureaucracy: The Demise of Federal PPB," Public Administration Review (March-April 1973), pp. 146-156.

Perhaps Congress will succeed in doing so; I certainly hope that you do. But in the meantime, I hope that the movement in Congress for more systematie budgeting will not divert attention from other-and in some senses more easily attainable-approaches for increasing the ability of Congress to stand up to the

Executive.

Let me conclude by calling your attention to one such approach: the General Accounting Office, Congressional Research Service and other units that analyze and investigate specific issues and programs from Congress's perspective-not the Executive's-should be strengthened in every possible way.

Senator METCALF. Dr. William Pyle is director of the human resources accounting program, the University of Michigan.

STATEMENT OF DR. WILLIAM PYLE, DIRECTOR, HUMAN RESOURCES ACCOUNTING PROGRAM, GRADUATE SCHOOL OF BUSINESS ADMINISTRATION AND INSTITUTE FOR SOCIAL RESEARCH, UNIVERSITY OF MICHIGAN, ANN ARBOR, MICH.1

Mr. PYLE. Mr. Chairman, I appreciate your kind invitation to discuss possible applications of investment/effectiveness measurements for planning and evaluating major program legislation. In my prepared testimony, I have addressed the following topics:

I. The reasons for investment/effectiveness measurements.

II. The general objectives of our research program at the University of Michigan.

III. A general description of the investment/effectiveness approach. IV. Procedures for implementing the investment/effectiveness approach.

V. How investment/effectiveness procedures can be applied in planning and evaluating major program legislation.

I would like to present the highlights of the first four sections so more time can be spent discussing ways in which investment/effectiveness measurements can be applied in planning and evaluating major program legislation.

For this reason, I would like to request that my prepared statement be included in the record of these hearings.

Senator METCALF. Your statement will be incorporated into the record. You may summarize. Please proceed.

Mr. PYLE. The University of Michigan has established a human resource accounting-HRA-program. This program is jointly sponsored by our graduate school of business administration and the Institute for Social Research.

The specific objective of the HRA program is to develop and apply investment/effectiveness measurements to facilitate the planning and evaluation of human resources programs in organizations and society. Example of programs at societal level include education programs. training programs, health care programs, and community developments programs. Most of our work to date, however, has been in the private sector in terms of evaluating the investment/effectiveness of recruitment programs, training programs, on the job learning programs, and related human resource programs.

I would now like to present a brief overview of the investment effectiveness measurement approach. In doing so, I would like to refer to figure 1 which is in the prepared testimony. Figure 1 summarizes

This testimony reflects the personal views of William Pyle and should not be construed as an official policy statement of the University of Michigan.

the approach used to measure the investment/effectiveness of human resource programs.

There are three basic types of information which we gather to assess the overall investment/effectiveness of a program. The first involves an audit of what the Government or an organization invests in the program. By this I mean a careful and thorough identification of all direct and indirect costs associated with the program. The second measure assesses the program's service life or its useful life. To summarize, first, you measure what is invested in the program and, second, you determine the service life of the program.

Finally, and most important, after having identified the investment in the program and its useful life, we are interested in ascertaining the performance impact of the program in relation to the stated objectives

of the program.

I would now like to review each of the three audits. Investment information normally is found in conventional accounting and financial records. One of the most significant investments we have identified. is the learning time for people who are involved in establishing the program. There also are learning time costs for people who are the beneficiaries of the program.

Turning now to indicators

Senator METCALF. May I break in?

Mr. PYLE. Yes, sir.

Senator METCALF. This is an area which is a little new to me. Show me how to apply your measurements to the REA program, the rural electrification program, which was a program established back in Franklin D. Roosevelt's administration. It has been eliminated by this administration, illegally eliminated perhaps, because of impoundment, legal or not.

Mr. PYLE. I will do my very best on it, sir.

Senator METCALF. Would that be out of order?

Mr. PYLE. Not at all. I think the REA program would make a very good illustration of how these three types of measurements could give the Congress an on-line measure of the investment/effectiveness of any type of program.

Senator METCALF. I am thinking especially of the investment. because of 2 percent money involved as against the Congress borrowing money at sometimes over 4 percent and sometimes over 6 percent. Mr. PYLE. In terms of the REA program, Senator, I would suggest that the expenditures for that program be carefully identified in terms of all of direct and indirect costs. There is in addition what we would refer to as an opportunity cost based on the fact that you are lending money at a lower rate than is currently available in the marketplace, especially in view of the fact that interest rates have been rising in recent years.

I am assuming now we have a fairly good accounting of what the Government has invested in that program.

Now turning from the investment side of the equation to an assessment of the performance impact of that program, we look at two factors. First of all, the REA program's service life. Here I would first want to examine the original legislation to determine the stated objectives of REA. I am not familiar in detail with these objectives, but I do believe the basic legislative objective simply relates to extension of electrical services into rural areas.

In any type of program, in order to determine its investment effectiveness, I would want to determine the way in which it has affected the intended beneficiaries of the program. With respect to REA, we could employ surveys to determine how the program has impacted their lives.

There also may be performance measures related to economic growth rates in rural areas and so forth. I would track all such performance indicators.

Senator METCALF. Let us say the original purpose was to benefit the farm community that was not served by any sort of electrica! energy distribution. Then in the course of the distribution we served the farm communities and gave them electricity, but we also served, let us say, summer homes for some of the most affluent citizens in the urban community, and let us say we served golf courses. Do we say here is an asset, here is a debit, here is a plus and here is a minus, in REA evaluation?

Mr. PYLE. Senator, I would like to emphasize that in any type of program evaluation, it is essential for program goals to be clearly stated in the original legislation so that actual performance can be evaluated against those goals. To the degree that the original goals are not clearly stated all future measurements, by definition, will be inconclusive.

If the basic goal of the legislation was to provide benefits to people in rural areas, an agrarian community, for example, we could measure actual performance against that goal. It may well be that certain subsidiary benefits have accrued which were not envisioned in the original legislation.

I think these should be recognized but they should be separately identified as subsidiary benefits that were not recognized or anticipated in the original legislation.

Senator METCALF. They were sort of added to the goal that we originally attempted and originally achieved.

Mr. PYLE. Yes, sir.

Senator METCALF. So it wouldn't be a minus but it would be an additional little bonus that we picked up along the way.

Mr. PYLE. That is right. We would determine the investment/effectiveness of the program by assessing the investment, the useful life of the program and then its performance impact in relation to the original legislative goals. In the case of the REA, we could examine economic growth rates and assess the impact on the quality of life in rural communities through regular survey audits.

In determining the investment/effectiveness of a program both positive and negative impacts should be recognized. I would like to emphasize that where program objectives are not clearly stated in major program legislation one has to be extremely careful because this situation places the evaluator or program administrator in a position to set the program's performance criteria. With this latitude, a program administrator can determine in advance whether the program will appear to be "effective" or "ineffective" or whatever he may desire to communicate.

Senator METCALF. That is just what we have done in the Congress. We haven't been quite specific and careful enough and we have given the President and the Office of Management and Budget an opportunity to evaluate on the basis of their own terms, rather than on

the basis of more specific and more definite legislation. Don't you think that that is true in many cases?

Mr. PYLE. Yes, I do. In fact, some of my specific comments will address that point.

Since most of this is in the prepared statement, I would be very pleased to just carry forward with your point.

In the first place, I would suggest, when the Congress is considering draft legislation, that a fast reaction staff capability be created to assist congressional members and committees in drafting legislative goals in such a way that subsequent evaluations can determine the degree to which legislative intent is being carried out. I am not a student of political science, but from a layman's view of the Congress it is my impression that the review of draft legislation is often accompanied by considerable pressure and time constraints. For this reason, I would recommend that a regular staff group be created to work informally with Congressmen and committees while legislation is in the draft stage. This group could supply informal guidance on the extent to which legislative goals can be formulated in ways to facilitate subsequent evaluation. A clear "yardstick" should be written into all major program legislation. I cannot emphasize that too strongly.

Senator METCALF. This would be especially in the authorizing legislation, is that true?

Mr. PYLE. Yes.

Senator METCALF. There would be the statement of goals, the ultimate objective, the amount of money we want to pay for it. The limitation on the appropriation should all be much more precise. There have been times that we have been able to formulate them in some of our authorizations.

Mr. PYLE. To the degree possible, I would recommend that the legislation include not only a clear statement of the goals, but also language stating how the investment/effectiveness of legislation is going to be determined in terms of the monetary investment, the program's service life, and its performance inpact. Here I think it is important to focus our assessments on the intended beneficiaries of the program, that is the individuals, the groups, and the communities affected by the legislation.

Major program legislation, when feasible, should also contain provisions for pilot testing, as proposed by Senator Brock in S. 40. This is especially important where the legislation involves public services.

I would suggest that this new staff agency be responsible directly to the Congress. Its first function would be to work informally with Congressmen and committees to develop legislative performance goals that would facilitate program evaluation so Congressmen can be assured that the will of Congress is being carried out. Second, they would work with Congressmen and committees to help them specify evaluation procedures for determining actual program performance in relation to legislative goals.

That new agency also could make recommendations to Congressmen and committees as to the feasibility of pilot testing, including the environmental conditions which would be suitable for pilot testing and the measurement procedures to be employed for evaluating the pilot test.