working capital loans which are not made in association with a fixed asset loan. Both of these give us more flexibility and offer somewhat broader authority.

We also have a lease guarantee program authorized under the new legislation.

PLANNING GRANTS

Mr. SLACK. Referring to page 10 of the justifications you show $6.5 million for planning grants. Who will receive the additional funds? Mr. BLUNT. Of the $6.5 million of planning grants it is contemplated that $5.5 million wil be used to support planning at the State level. One million dollars would go to other jurisdictions. As you know, we have already, because of extensions in fiscal year 1974, funded the Economic Development Districts for this fiscal year, so I would contemplate that the bulk of that $1 million would go toward cities and other jurisdictions.

GRANTS TO STATES

Mr. SLACK. Give us an explanation of the request for grants to States which you set forth on pages 10 and 11 of the justifications. Mr. BLUNT. The new authority which we get in section 304 of the act contemplates that money would be made available to States for their use in supplementing other EDA grants, to take an example, if we were to make a grant to a county water district the State could use funds distributed under section 304 to supplement that grant in order to help make up the local share under the grant formula and otherwise to help make the project possible at the local level.

Mr. SLACK. Does this mean projects can be fully funded with Federal moneys? Is that what you are saying?

Mr. BLUNT. No, sir, because the State, under the section, must itself supply some matching funds in making those supplemental grants. Mr. SLACK. When you say "some matching funds" what do you mean?

Mr. BLUNT. Twenty-five percent of the amount.

Mr. SLACK. Reading on page 11 of the justifications, it is stated, "Grant supplements by States can be used to reduce or waive the nonFederal share of project funding."

Mr. BLUNT. Further on it does state, "subject to the special matching requirements of the supplemental program"; in other words, funds must be matched on a 25-75 percent basis by the State.

ECONOMIC ADJUSTMENT ASSISTANCE

Mr. SLACK. How much are you requesting for the new Economic Adjustment Assistance Program?

Mr. BLUNT. $30 million.

Mr. SLACK. How will these funds be distributed?

Mr. BLUNT. The legislative authority is new, and therefore I do not have regulations I can show you at this time for administration of the funds. We contemplate that they will be made available in response to plans from States and other jurisdictions, including districts, counties and cities, to be spent under those plans with more discretion at the

State or local level in the actual use of the funds as long as they are used in accordance with the submitted plan.

The grants would be made directly to that jurisdiction which in the particular instance demonstrates the need for the funds as contained in these plans. It is an effort to get away from a project-byproject decision at the Federal level, and also and this is perhaps more important-it is an effort to enable States and localities to try to identify incipient problems. If you notice, this title does not have any specific designation formula as to where the funds can be used. The reason for that—although we will be applying our own need formula-the reason for that is that it is felt the States and localities will be able to determine in advance of the economic dislocation this actually happening, where funds can be used to offset these problems. A simple example might be if a State is told, or a locality is told, that there will be a defense base closing, or some other dislocation caused by Federal action. Various measures might be taken in response to that. This money would be available for that kind of use.

The designation of the base area or the community directly surrounding it might inhibit the most flexible use of those funds. Under this authority the money could be put by the State or the county into facilities which might be nearby which would use the same labor force but not be subject to the designation criteria.

ELIGIBILITY CRITERIA

Mr. SLACK. Can you tell the committee how eligibility is determined?

Mr. BLUNT. Again, we have not developed detailed regulations. What we would include, in general terms, would be a need criteria and a planning review criteria. In other words, we would have to be convinced in seeing the plans and the representations behind the plans that there is sufficient need to command a high priority and that the funds will be used in an effective way to meet that need. We do not contemplate a formula type of designation at this time.

COOPERATION WITH DOD

Mr. WYATT. Mr. Secretary, how does your program and the use of these funds mesh with and coordinate with the program the Defense Department has for adjustments in communities where defense bases are terminated?

Mr. BLUNT. As you may know, we have under our existing authority worked quite closely with the Defense Department effort. In fact, the Secretary of Commerce is part of the group which oversees the work of the Defense Adjustment Committee. EDA has, under that program, provided planning grants and technical assistance grants to the areas to help give them administrative support to plan for actions to be taken.

In addition to that, EDA has been able, on the basis of specific designations, most of them under our sudden rise designation criteria, to locate projects in some of these areas.

Our coordination, and our work under the guidance of this Committee as we have done in the past, would not be changed. If we are concerned, or if concern is expressed to us by a community or State

regarding the impact of the defense base closing, part of the review process we would require to set up the plan in the first place would be clearing with, checking with, and coordinating with the President's Committee which is staffed from the Defense Department. Mr. WYATT. This is not duplicatory with the Defense Department efforts?

Mr. BLUNT. No. In fact, they have called on us for assistance to be able to provide assistance to these communities. As you know, they work directly with the communities as well. They also have representatives in the different Federal regions. This will enable the communities, with their assistance and our planning assistance, to have a more flexible response. In terms of money available for similar types of things, they do not have a program as we do for public works facilities and that type of thing. We have supplemented their efforts in that area. This would give even more flexibility to our ability to respond in the future.

ADMINISTRATION OF ECONOMIC DEVELOPMENT ASSISTANCE PROGRAMS

Mr. SLACK. The second of the two items is a request for $5,275,000 additional for administration of economic development assistance programs.

How much is in the regular 1975 bill for this item?

Mr. BLUNT. $17,625,000.

Mr. SLACK. How many permanent positions are provided for in the regular bill?

Mr. BLUNT. 537.

Mr. SLACK. How many more positions will this request fund?
Mr. BLUNT. 185

STATUS OF AUTHORIZING BILL

Mr. SLACK. Is the EDA program authorized at this time for fiscal 1975?

Mr. BLUNT. We are as close to being authorized as technically possible. As I understand it, after the House and Senate passed identical bills, technical errors were found in the wording of the bills which necessitated a resolution by both Houses. The House, in fact, has enacted a correcting resolution. The Senate in on the verge of it. At that point it will be ready for the President's signature. Mr. SLACK. Are there any other questions?

PERSONNEL

Mr. SMITH. Why do you need 185 more personnel?

Mr. BLUNT. At the time the budget was submitted in fiscal 1974, looking toward fiscal 1975, the future of the agency, whether it would exist for a year and exactly what its responsibilities would be, were still unsettled. At the time that budget came out, if you remember, there was a request for a year-end figure of 420 people, with the idea that the agency was phasing out.

Since then, Congress has, with the support and in the spirit of compromise with the administration, enacted a 2-year extension.

Mr. SMITH. How many people did you have in the year before that? Mr. BLUNT. Yearend 1973, 671 people.

Mr. SMITH. Will this bring it back up?

Mr. BLUNT. This would support year-end employment of approximately 650.

PROPOSED EMPLOYMENT REDUCTIONS

Mr. SMITH. The President now is talking about reducing Federal personnel by attrition, no new slots. Was this request made before this recent drive and talk or has it been cleared since that time?

Mr. BLUNT. In fact, the request has not actually been made. You don't have the official request before you. In terms of rationalizing or making this consistent with the President's general policy, that has been a matter which was considered at the time this request was

made.

Mr. SMITH. When was the request made?

Mr. BLUNT. This supplemental request is being made right now. Mr. SMITH. When did you get the permission of the Office of Management and Budget to make the request?

Mr. BLUNT. A matter of just days.

Mr. SMITH. Less than 2 weeks ago?

Mr. BLUNT. Yes. The answer lies in the fact that we are aware, on the one hand, that we need to keep the number of people in the Agency down to a minimum necessary to carry out the job; however, the budget, as originally submitted, did not contemplate a 2-year extension or the new authority. These matters have to be balanced out.

PROJECT OVERRUNS

Mr. SMITH. Some of these projects which were approved-I am thinking of one in southern Iowa, a water project-were approved 2 years ago and are now ready to go to contract. Suddenly, with inflation, it has been impossible to do so with the figures they have been using. They will have to raise more money locally, charge more for the water, and even then they will have to have an increase in the EDA grant. I assume this is not atypical of projects which have been approved and where contracts are not yet awarded. Is this correct? Are you running into this? What are you going to do about it?

Mr. BLUNT. The problem has, in fact, become more aggravated with regard to overruns. It is also true that even normal waiting periods before construction starts, or before contracts go to bid, create more problems than they have in the past in terms of increased costs. One thing we do about it prospectively is that, when we estimate costs for the purpose of obligating funds, we make every effort we can to take into account the rate of cost increase which is likely to affect the cost of the contract, so that today, being aware of the rate of inflation in the construction industry, we try to make our estimates on that basis.

Mr. SMITH. These are projects where the estimate was made a year or two ago and they have a number of things they have to do after that?

Mr. BLUNT. I understand. As far as the backlog of approved projects is concerned, we have always had a fairly restrictive policy as far as overruns are concerned. In fact, the grant document does not allude to the overruns at all. However, we approve overruns on a limited basis. We will undoubtedly find during the course of this

year that a certain additional amount above normal will have to be made available for this purpose.

Mr. SMITH. Is it an overrun if the increase is known before the contract is let? Is that an overrun or is it an overrun when there is an increase after the contract is let?

Mr. BLUNT. In my terminology, using the term in a broad sense, it includes both. The overruns I am talking about are those where we approve a project and obligate funds at a certain level before the contract is bid and the bid is accepted. We may know as the contract is going to bid that the costs will be higher. If the costs come back higher, that is what I call an overrun.

Mr. SMITH. These problems are surfacing all over the country on these projects, are they not, where contracts have not yet been let? Mr. BLUNT. Without having made a comprehensive survey, certainly it is not something which is regional. I think construction cost increases vary on a regional basis, and I assume that is reflected in the problem as it comes to us.

Mr. SMITH. Then you will have to take some of the allocation which otherwise would have been for new projects to revitalize or make feasible existing projects.

Mr. BLUNT. On some we probably will, although we deal with overruns on a case-by-case basis. Oftentimes we advise the community and require the community to look to other resources to fund parts of overruns, so it is difficult to predict a pattern.

Mr. SMITH. In this kind of project it is difficult to do that because they were originally required to bear all the burden the user would bear, and then your grant was based upon what was left.

Mr. BLUNT. I understand.

Mr. SMITH. The only place they can go is to a bigger grant. A bigger loan would affect the user rate.

Look into that and give me a response as to how you are handling these.

Mr. BLUNT. I would be happy to.

[The information requested follows:]

The construction overrun problem on public works has been a serious one for several years, and with continuing spiraling costs it will be even more serious in fiscal year 1975. Of the 45 projects on which we have had bid openings since July 1, 1974, 43 involve an overrun.

The Economic Development Administration has taken a very strict position on the financing of overruns and will do so only as a last resort. We have asked all grantees concerned to monitor projects diligently, from the time of approval to the time of the bid opening, since every month increases the cost of the project by approximately 2 percent. In addition, we have taken a strong position on change orders after construction has begun to further decrease the overruns which are caused during that period of time.

However, even with these steps taken, overrun costs will no doubt seriously affect the amount of money we will have available for new projects in fiscal year 1975.

STAFFING REQUIREMENTS

Mr. ANDREWS. In your summary of requirements you show under permanent positions, public works activities, 146 for fiscal 1974, and in the revised estimate 166 for 1975. Is that essentially correct?

Mr. BLUNT. Yes, sir.

Mr. ANDREWS. Which is an increase of some 20 positions.