What has been wrong with the present funding program for mass transportation grants where we forward fund each year? In this budget, for example, you ask $250 million for fiscal 1971. You have $175 million for fiscal year 1970 which was appropriated last year-in fiscal year 1969. Under this arrangement, haven't the cities been able to yardstick their programs and count on whatever agreements have been made with the Department to fulfill the Federal Government's obligation for projects you have approved? Mr. BAKER. The largest problem by far in terms of financing concerns new systems in the major metropolitan areas. Typically, these projects are active over a 10-year period and the related funding commitments usually extend 20 years or longer. In the cities of Los Angeles, Atlanta, and Seattle as recent examples the electorate simply failed to approve the necessary bond issues to finance the systems the cities were planning to build. Three issues appear to be involved here-first, the confidence of the electorate in the Federal Government's long-term commitment to funding this kind of program; second, whether local officials would feel sufficiently confident to go ahead and issue the necessary bonds in the absence of such a Federal commitment to the program; and, finally, whether the underwriting community would regard the bonds as sufficiently well supported obligations to issue them at reasonable rates of interest. If the city of Seattle, for example, proposed issuance of long-term, generalobligation bonds, there seems to be no question that they could have sold them. The issue was the interest rate. The Department and the Administration have thus concluded that some measure of long-term government commitment is necessary, and in order to get support from the electorate, as well as local officials, for this kind of funding pro gram. There is no question at all that some of what might be described as the intermediate or small programs, such as grants to cities for a few buses and other minor facilities, could be funded on a simple year-to-year basis. But major programs would constitute a significant part of the proposed $10.1 billion-in capital improvement grants— over a 12-year period; perhaps as much as $8.5 billion. These programs would involve refurbishment of existing system in places such as Boston, and installation of completely new systems in places such as Seattle. The bill the administration has proposed is designed to provide a reasonably long-term program initially covering the years 1971 through 1975. It would be reviewed annually, however, by the authorizing committees of Congress to determine what levels of contract authorizations should be provided for succeeding "add-on" years of the program. BOND ISSUE REJECTIONS Mr. BOLAND. Do you have any figures on the number of bond issues which have been rejected by the voting public in specific areas? I refer to mass transportation projects. Mr. BAKER. Not in detail, Mr. Chairman. I shall be glad to provide these to you. Of course, the major examples of immediate concern to us have been cited. Mr. BOLAND. From my reading of the press I would conclude that most areas have rejected bond issues because the taxpayers felt taxes were too high and the programs involved were not all that important to them, and not because they were skeptical about whether the Federal Government would enter into long-term contracts. Mr. BAKER. It is true that the only major system recently approved is the one in San Francisco. In that one case, which is exceptional, the electorate and the officials of the city became so concerned about the problem of urban transportation that they took the financial leap. Mr. BOLAND. Many communities have been turning down bond issues for schools and education. I think that is closer to the minds and hearts of people than transportation. Are there any questions on Mr. Prestemon's statement? CONSTRUCTION CUTBACKS Mr. McFALL. Didn't the President announce either yesterday or today some cutback in the construction of the highway program? Would you tell us something about this and how this will affect our deliberations in this budget? Mr. BAKER. I think it is correct that the newspapers reported a statement made by the Vice President yesterday at the Governor's Conference in Colorado to the effect that there would be cutbacks of perhaps 75 percent in federally supported construction programs. However, I do not believe this was meant to be an official public pronouncement. Mr. McFALL. Excuse me? Mr. BAKER. The reason I phrased it that way is that I do not believe the newspaper accounts reflect a final decision. In fact, as we understand the situation, from several thousand miles away, the timing and amount of such curtailments have not been finally determined. I am saying that we do not know what the President's final decision on this will be. Mr. MINSHALL. Have you made any sounding as to when we will come up with a final decision? Mr. BAKER. I think it would be surprising if we don't know this within a week or 10 days, something of this order. I think it is equally clear-I am presumptuous to put in that way— that we would be very surprised if the Federal highway program, which is about two-thirds of our total outlays, were not significantly affected by any curtailment that the President decides to make in construction programs. CLARIFICATION OF THE CONSTRUCTION CUTBACK Subsequent clarification obtained by the Department indicates that only direct Federal construction programs are included in the present cutback. Grant construction programs such as the Federal-aid highway program are not included in the construction cutback at this time. Mr. MINSHALL. In dollars, how much would the 75 percent affect your budget? Mr. PRESTEMON. The highway program, for example, is programed at a level of $1.2 billion in obligations per quarter. If a 75-percent cut is made, obligations-that is, project approvals-would be reduced to some $300 million per quarter. The actual impact on the estimates before you in fiscal year 1970, however, would be relatively small. Your action is on the expenditure side, in appropriating liquidating cash. Even a major cutback in that order of magnitude, if that is finally decided upon, would reduce liquidating cash appropriation requirements for fiscal year 1970 by certainly no more than $180 to $200 million out of $4 billion. Mr. McFALL. This is not unusual. The previous administration from time to time announced cutbacks in the highway program and it went up and down depending upon the administration's view of the necessity to control inflation. I presume this is what is going on downtown now. I assume what the Vice President has said will come to pass and we will have further information about it later. First, it would not have that significant an impact upon the budget for this year. I would not think you will cut it back 75 percent or that kind of reduction in the highway program. That kind of reduction would be almost unthinkable, so the total impact on our budget this year would not be very great. Is that right? Mr. BAKER. That is correct. Mr. McFALL. And also we will know more about this later. Would you just tell us when the time comes and we will be able to estimate the impact on the budget at that time after we have the proper figures? Mr. BAKER. Yes. Even with a cut of the magnitude of 70 to 75 percent for a period of 60 days, which has been talked about, or even 90 days, the impact on appropriations for the highway program for fiscal 1970 would be on the order of $50 million to $100 million. However, such a reduction would have an impact on the appropriations for fiscal 1971 perhaps on the order of $500 to $600 million. What I am saying is that as far as the appropriations for 1970 are concerned, no matter what happens, this would have relatively little impact. Mr. McFALL. 1971? Mr. BAKER. Significantly more if this kind of cut was made. Mr. McFALL. You will inform the committee concerning the events as they transpire? Mr. BAKER. Yes, sir. OUTLAY REDUCTIONS Mr. McFALL. With reference to the final decisions on the last page of Mr. Prestemon's statement, "Final decisions on what our Department's share of this cutback will be have not yet been made," when can we expect that they will be made and when will the committee be advised as to what these cutbacks are? Mr. PRESTEMON. I think it really depends on when the final decisions are made on the construction cutbacks. As Mr. Baker has said, I think those decisions, of necessity, will probably have to be made within 2 or 3 weeks. The longer any decision is postponed, the smaller the budgetary impact in 1970 will be. The decision has to be made reasonably soon, and our information is that it will be. Mr. McFALL. So your cutbacks in controllable programs, if we want to describe it that way, would be affected by what your cutback would be in the highway program? Mr. PRESTEMON. It would be affected by any cutbacks in construction generally throughout the Government, whatever decision is made. Mr. McFALL. Not in construction of just the highway program? I understood it that way. You mean construction throughout the Government? Mr. PRESTEMON. Yes, construction generally. Mr. McFALL. And what other programs besides the highway programs? Building programs? Mr. PRESTEMON. Yes. Mr. McFALL. How will this affect the Transportation Department? I am thinking of the effect upon your program. Mr. PRESTEMON. It depends on how large the cuts are in the nonconstruction field. We have a number of construction programs besides the Federal-aid highway program. We have public lands highways, a good deal of construction under the mass transportation program, and some in FAA, as well. We have received no firm guidance on what those cuts will be. From all we have been able to determine those decisions will simply be made a little later on, perhaps in 2 or 3 weeks. Mr. McFALL. Off the record. (Discussion held off the record.) Mr. BOLAND. You said the Department would be prepared to give the committee the amounts of the reductions. We would like a little firmer information. We would like you to inform the committee precisely what the reductions will be across the board in the Department of Transportation, not alone in construction, but salaries and all other activities of the Department. We would like to know that both the Department and the committee are operating with the same set of figures rather than the committee operating on a set of figures which does not include revisions made as a result of the President's desire to keep within the expenditure figure cited. Mr. PRESTEMON. We shall supply you with the information as soon as we have it. Mr. MINSHALL. At the outset I would like to welcome Mr. Baker here. With his impressive background and the quality of his testimony, even though this morning it has been brief, I know it augurs well for this subcommittee. We welcome you. Mr. BAKER. Thank you. Mr. CONTE. I have no questions. Mr. BOLAND. Thank you very much, Mr. Prestemon, and thank you, Secretary Baker. WEDNESDAY, SEPTEMBER 3, 1969. U.S. COAST GUARD WITNESSES ADM. W. J. SMITH, COMMANDANT VICE ADM. P. E. TRIMBLE, ASSISTANT COMMANDANT REAR ADM. H. S. PEARSON, CHIEF, OFFICE OF ENGINEERING CAPT. F. D. HEYWARD, CHIEF, LAW ENFORCEMENT DIVISION REAR ADM. J. J. MCCLELLAND, CHIEF, OFFICE OF BOATING SAFETY CAPT. G. F. HEMPTON, CHIEF, COMMUNICATIONS STAFF CHARLES D. BAKER, DEPUTY UNDER SECRETARY, DEPARTMENT ROBERT G. PRESTEMON, DIRECTOR OF BUDGET Mr. BOLAND. We will turn to the budget of the U.S. Coast Guard. We are delighted to have this very important agency of the Government before us. As has been said on many occasions, it is an organization which does a very fine job in all the important activities assigned to it. We therefore welcome the Commandant of the Coast Guard, Adm. W. J. Smith, and the staff which accompanies him. Admiral Smith, we will be pleased to hear you. GENERAL STATEMENT Admiral SMITH. Mr. Chairman and members of the committee, 1968, the Coast Guard's first full year as a part of the Department of Transportation, was a year which saw us become a complete partner in the challenging task of developing and sustaining the Federal Government's role on the transportation scene. For this reason, I think it would be well for me to review the "state of the Coast Guard" before launching into a discussion of our fiscal 1970 appropriations request now before you. |