created in the multiplicity of programs that we have promulgated over the past several years.

HIGHER NET COSTS FOR WELFARE PROGRAMS

Senator SASSER. Thank you very much, Mrs. Moynihan, for appearing here this morning. And I might comment that the administration is projecting a net cost for total welfare programs that you are discussing of $12.9 billion in fiscal year 1983. This is considerably higher than the original administration estimate had been. And I might also add that the Budget Committee tries to take national needs into consideration in considering the Administration's proposals, and in making broad allocations of funds for the Federal budget. But these are indeed very broad allocations and it does not attempt nor does the Budget Committee under the budgetmaking process have the authority, to allocate funds for specific program spending. This is really the job of the authorizing committees of the House and Senate and also the Appropriations Committees of the House and Senate. I'm on the Appropriations Committee in the Senate, and I'll put on my Appropriations hat and listen to you this morning.

Thank you very much for appearing.

Congressman ALLEN. A very excellent statement.

[Prepared statement of Mrs. Linda Christie Moynihan follows:]

PREPARED STatement of MRS. LINDA CHRISTIE MOYNIHAN

The Tennessee Conference on Social Welfare was organized in 1915, as a private, not-for-profit association of individuals and organizations across the state of Tennessee, working together to promote the social well-being of all Tennesseans. Our membership last year totalled approximately 1,500 individuals and organizations and included representatives in 88 of Tennessee's 95 counties. Volunteers as well as professionals and public as well as private agencies, join together providing leadership in identifying social and health needs, advocating for programs that enhance individual opportunity, presenting facts to the general public, planning, and carrying out a concerted program of action to meet human needs, and supporting constructive social welfare legislation.

GOALS OF TENNESSEE CONFERENCE ON SOCIAL WELFARE

Our conference has an annual operating budget of approximately $20,000 which is under the control of an elected Board of Directors who represent the membership across the state. Our income is derived from membership dues and we have been fortunate to receive foundation grants for special projects in the past. We are not receiving federal funds currently, nor are we under contract to any specific state agency. On-going concerns of the Conference include issues such as (1) economic opportunity for all Tennesseans, including adequate public assistance programs, (2) adequate, effective social services, such as counseling, day care, protective services, public housing, etc., (3) law and order with justice and rehabilitation of offenders, (4) medical and rehabilitation services for the sick and handicapped, regardless of ability to pay, (5) community based mental health and retardation services, and (6) equitable availability of services for minority and ethnic groups. While the Conference does not and would not claim expertise in all the aforementioned areas, its voice in this state does represent a multi-disciplinary point of view which is often difficult to acquire.

FEDERAL ALLOCATIONS PROCESS

The very important role of the Federal Government in its contributions to State and local governments in meeting the Nation's needs has increased tremendously over the past 10 years. This increase has occurred at such a high rate of speed that opponents and critics have had a "field day" describing gaps, duplications, waste, inequities, disincentives, and many other related problems. Your attempts, and those of your fellow Congressmen, to bring some order to the federal allocations

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process, is applauded by those of us "at home." The allocations process at the state level in Tennessee is already benefiting from these initiatives and has improved both its accountability and its responsiveness.

President Carter's budget for 1979 seems to have components that could significantly increase the current capabilities of administration and service delivery systems at the state and local levels. All efforts to simplify the administrative requirements related to grants need to recieve high priority and close scrutiny for flexibility of coordination. This should not be construed as abdication of authority, but viewed as the transfer of responsibility for a more orderly and responsive system with periodic evaluations that can be examined on the basis of factual information rather than rhetoric.

COMPREHENSIVE SOCIAL SERVICE PROGRAM

One excellent illustration of this state's ability to manage and perform is the Comprehensive Social Service Program under Title XX of the Social Security Act. Several measures have been adopted by the Tennessee Department of Human Services that are designed to maximize the use of these available social service dollars. These measures include the following: (1) the 90th General Assembly was pursuaded to allow the department to contract on an overall basis at a 110% level of Title XX funds available for contract services; (2) development and implementation of an interim system for measuring performance of Title XX agencies; (3) establishment of cost ceilings on the services with the largest expenditure of Title XX funds; and (4) development and implementation of a Title XX reallocation plan for 1978-79 in time for reallocated funds to be integrated into contract services planning for 1978-79.

Due to the very active and meaningful involvement of a broad range of citizens, the Department of Human Services has established model systems by which Tennessee may provide and purchase quality services at a reasonable cost. Tennessee has documented needs for services that prevent and remedy many of our complex social problems, such as protective services for children and adults who are abused and neglected, day care for children and adults, as well as other equally necessary and important services. The increased service needs of our citizens, and the demand for services in this state has increased astronomically in recent years. These developments, coupled with the ever increasing cost of delivering services due primarily to rising inflation, increases in social security deductions, and increases in the minimum wage have precipitated a major funding crisis for the Social Services Program. This crisis can only be resolved through a substantial increase in the $2.5 billion ceiling on Title XX funds by Congress.

INCREASE FUNDING FOR TITLE XX PROGRAM

According to recent information, Senator Robert Dole is considering a floor amendment that would provide an additional increase over the proposed $200 million in the budget. It is hoped you would seriously consider co-sponsorship of such an amendment. HR 7200, now pending in Congress, includes an increase in the ceiling from $2.5 billion to $2.7 billion. This increase in the ceiling would not mean additional Title XX funds for Tennessee. It will only make permanent funding for child day care services being received under Public Law 95-171.

An increased ceiling of $500 million from $2.5 billion to $3 billion would allow us to continue the expansion of services in the critical areas and reverse the trend of reducing services each year. Unless we receive a substantial increase in Title XX funds or a corresponding increase in state funds, the future for the development of public social services in Tennessee is grim. It is also my understanding that HR 10833 has been introduced by Representative Fraser and Representative Keys to provide $2.9 billion in fiscal year 1979, $3.15 billion fiscal year 1980, and $3.45 billion in fiscal year 1981 as the proposed ceilings for Title XX. Their amendment would encourage orderly development of services based upon state and community evaluations of effective programs for citizens; and it would also provide the states with very necessary advance budget-planning information. Even though the first annual report to Congress on Title XX indicated that some states were not spending Title XX funds up to their own state's ceiling, that report was based upon prior year's figures. I can assure you, Tenneessee is in dire need of additional funds; and I can also ausure you, Tennessee will be making additional improvements in its evaluation systems on its own use and the effectiveness of these funds for the benefit of its needy citizens.

TITLE IV-B

Another concern of the Tennessee Conference on Social Welfare is expressed in positive recommendations of President Carter's budget proposals for fiscal year 1979; and we would ask you support along with you inquiry into several unanswered questions. Title IV-B of the Social Security Act has a legislative authorization for $266 million. These funds "historically" have been utilized in Tennessee to provide services based upon needs of children-not income or other categorical requirements. We have children that "fall between" the program "cracks", that don't meet the crieteria that have been set for the multiplicity or programs develoed over the years. The needs of these children are very real and very important to their future growth as citizens. Title IV-B has enabled Tennessee to meet the needs of only a portion of these children.

The budget proposes $64 million with an additional $21 million available so that states which have the required protective systems virtually in place could draw their second year Title IV-B. Our share of that total possible outlay of $140 million is a tremendous need in Tennessee. The State legislature has already enacted several enabling laws as we look at the possible requirements associated with this proposal concerning foster care review systems, so Tennessee is implementing some portions and would be very close to being able to serve the many children needing additional services. One question concerns a proposed ceiling on AFDC Foster Care. If such a ceiling is contained in the Administration proposal, its implications need clarification and its impact known prior to inclusion. A second question concerns funding for the Adopton Information Exchange. Is this included, or not? Your attention to these specific questions would be greatly appreciated.

NEW PROGRAMS

The conference also supports a new program designed to improve and correct problems and ineffeciencies of the Early Periodic Screening, Diagnosis and Treatment (EPSD&T) program. The Child Health Assessment Program (CHAP) may provide the opportunity to treat current heath problems of children that would otherwise become much greater expenses of the local, state, and federal government in later years.

COMBINE PUBLIC AND PRIVATE FUNDS TO MEET CITIZEN NEEDS

In supporting participation in all these programs, the Tennessee Conference on Social Welfare does advocate public funds combined with private funds to meet the needs of all our citizens. We do not do this negligently or without regard for the taxpayers and contributors across the state or nation. The documented and frightfully well-known costs of permitting thousands, even millions, of youngsters to spend their early years in hunger, ignorance, and general abuse and neglect mandate the Conference positon that we feel must be faced and dealt with by all citizens in this state and nation.

WIDENING GAP BETWEEN THE "HAVES" AND "HAVE-NOTS"

The distance between the "Haves" and the "Have-Nots" has widened in the last two decades. One-fifth of our population is submerged in chronic poverty that neither society nor its victims can afford. It is a drag on our economy as well as a social powder keg that can blow up at any time. Politics have been played with the poor. They have been made promises, told lies, "locked-in" to dependency, had program after program designed for them, and have been labled "Cheaters" and "Frauds". Perhaps the most progressive change that has occurred in years if the focus on "better jobs and income". The proposed program certainly is not perfect yet; but, perhaps, this new focus will stimulate the country to think differently. The $35 million contained in the Administration's 1979 budget for states and localities to develop new plans for employment opportunities (Title II of the proposed Better Jobs and Income Act) must be viewed as pre-planning funds and must allow the states to assess the impact of the total proposed program upon the state's economy. Questions concerning the minimum wage versus the prevailing wage are acutely in need of answers when inclusion of the Comprehensive Employment and Training Act (CETA) jobs are consolidated into the eventual program. Other questions arise concerning state unemployment compensation laws, and the possible ramifications of not applying the Earned Income Tax Credit to the holders of public service jobs while applying it to the holders of private industry jobs.

These questions deal only with those areas of the Better Jobs and Income Act that would be included in the current budget. While the Conference has many further questions about proposed HR 9030, most are not scheduled for budget inclusion, so give a great deal more time for further study and clarification. The Regional

hearings that members of the Special House Subcommittee on Welfare Reform held this fall were of great benefit to citizens attempting to understand this very complex program. It also enabled many concerns about and support of various components to be voiced in a meaningful way for citizens. The Tennessee Conference on Social Welfare appreciates this opportunity to record our opinions and concerns about the federal budget for 1978-79.

Senator SASSER. Our next witness is Mr. David Fishman who has asked to appear here this morning and make a statement. Is Mr. Fishman present in the room?

STATEMENT OF DAVID FISHMAN

Mr. FISHMAN. I would first like to thank the panel for the opportunity to speak here today, and appreciate the opportunity to have some direct input into the policymaking process. The national budget has long been of interest to me and the greatest concern I have with the budget is the priorities to which it is directed. Since the Federal Government is again projecting a budget deficit in excess of $40 billion, I do feel we should perhaps take a closer look at some economic issues which require immediate attention.

ENERGY FIELD PRESSING CONCERN

Apart from the traditional arguments of defense versus social welfare programs, I suggest we direct some of our dollars into the field of energy for this is undoubtedly the most pressing concern we as a nation face today. The immediacy of the coal miners' strike is upon us, threatening to cripple both industry and consumers by curtailing power output, reducing industrial productivity, fueling unemployment and feeding inflation. No matter what the outcome of the arbitration between the coal miners' union and management, the inescapable result will be higher prices for energy. Now, not only do we suffer from the threat of embargos from abroad, we now face a serious domestic threat which demands affirmative and immediate Presidential and congressional action, particularly after the settlement of the strike. One avenue of approach which has received little attention thus far is direct industry subsidization, that is to subsidize not only the production cost of the coal industry, but also of the petroleum industry. The traditional methods of price control, wage-price controls, tax incentives, regulation and deregulation simply will prove ineffective in the long run. Subsidization through congressional appropriations, together with continued price regulation, would provide its own intrinsic incentives, benefiting both the producer and the consumer.

INCREASED ENERGY COSTS MEAN DECREASE IN DISPOSABLE INCOME

For example, in the area served by TVA, we are now paying 20 percent higher cost for electricity than we were 1 year ago for the same quantity consumed. Obviously, this means a 20 percent drop in disposable income which could have been spent on other goods or services. Correspondingly, industry output declines as fewer goods are purchased and higher cost of goods and services are necessitated by higher average production costs. Not surprisingly, employment within that manufacturer's plant will decrease, and the cycle is repeated manifold.

FORMULA FOR SUBSIDIZATION OF PRODUCTION COSTS

In recalling the Senate subcommittee hearings on natural gas deregulation, I recall that subsidiary companies of the major gas producers were charging prices in excess of regulated prices, and were doing so completely within legal limits. Moreover, although they were charging a higher price, the industry maintained that higher prices were needed to allow further development and exploration. We note that there was no mention of an increase in quantity to be supplied or produced. This inconsistency is also visible in the petroleum industry. In the months shortly after the oil embargo, oil producers were reaping exorbitant profits while maintaining that increased costs consumed the greater share of profits and wanted to raise prices even more. Congress then found it necessary to pass the windfall profits tax despite industry cries to discourage further unwarranted price gouging. Instead of allowing the battle over rising costs and regulation, tax incentives and so forth, why not arrive at an equitable formula for subsidization of production costs, directly basing the amount of subsidy to increases in gains and productivity? By keeping present price regulations in effect, this action would accomplish several things which are necessary. First of all, it would allow the producer to make a reasonable profit, and to increase profits by producing more as the subsidy would increase as did real output. This would remove the present push for higher prices with less quantity supplied. Second, such a plan would allow greater participation in the field of energy. Funding would come from the Treasury Department and monitoring would emanate from the newly formed Department of Energy.

The second priority item in budgetary attention centers around the concept of economic security and development, areas where the administration and Congress can do much to provide long-term positive results. What I am referring to is unemployment, but not unemployment per se. Rather, I suggest that unemployment be viewed as an overall barometer of economic activity and not dealt with in terms of percentages. When the underlying problems which cause and aggravate unemployment are solved, the corrective measures themselves will reduce unemployment since unemployment remains a manifestation of a system in disequilibrium.

PUBLIC WORKS EMPLOYMENT

The Keynesian economic theories advanced in the thirties advocated pump priming by the Government via public works employment as a means to solve unemployment. My question is, how long will we continue to rely on this approach while doing little if anything to alleviate conditions which are its true percursors. Theoretically, public works employment does have some effect, but not enough to insure that some time in the future we do not have to resort to that remedy again.

DISCOURAGES CAPITAL INVESTMENT

The first essential is a stable and reasonably priced energy supply and this topic was previously mentioned. Keynesian economic theory was developed with the cost of energy being relatively low in the overall cost of production. This variable is certainly