Enlarging a Budget Rip-Off

With consumer prices climbing, politicians belatedly have begun thumping the tub to squeeze out wasteful and excessive Government spending. Yet when it comes to cutting specific programs that benefit their own constituents, most lawmakers run for cover. One egregious case: Impact Aid, an ever expanding relic of the 1940s. Almost everyone in Washington agrees that it should be sharply reduced, but Congress is moving to expand it, adding well over $200 million in needless expenditures to next year's projected budget deficit of $48.5 billion. Having examined the tangled story of Impact Aid, TIME Washington Economic Correspondent George Taber filed this report:

Like most Government programs, Impact Aid began as a modest proposal to solve a major problem--and just grew and grew. As the armed forces built up during World War II and the Korean War, military bases mushroomed overnight and threw heavy burdens on local school districts, which were expected to educate children of servicemen. In Midwest City, Okla., for example, the number of kids in classes jumped from 285 to 1,500 in one year after Tinker Air Force Base opened near by. School officials around the country lobbied Congress to pass a law granting federal aid in lieu of the local property taxes that the base or the soldiers living there, if they were civilians, would have paid.

Once federal money starts flowing, it almost never stops. Though Impact Aid was designed primarily to cover only uniformed service personnel, Congressmen from districts without military installations also wanted their constituencies to benefit, and step by step they found ways for them to do so. Over the years they expanded the program to include Indians and all Federal Government workers, even those who did not reside on federal land and thus paid local property taxes, and children living in federally financed public housing projects. The program, which originally covered 512,000 children, now blankets 2.4 million. So long as 3% of the kids in a school district fall into one of the many categories designated, the district gets sums that can be more than $2,000 per pupil.

Because of the growth of the federal bureaucracy, which employs some 4.9 million workers around the country in everything from the space program to Social Security offices, Impact Aid today goes to 432 of the nation's 435 congressional districts. It has inflated from a $27 million funding plan that aided 1,172 school districts in 1951 to an enormous federal giveaway that this year will cost $770 million and benefit 4,100 of the nation's 16,000 school districts. The Senate will vote shortly on next year's Impact Aid program, and proposed changes could well send the cost leaping to nearly $1 billion. Some members, for example, want to expand the coverage to include children of postal workers, and even foreign embassy kids.

School officials regard Impact Aid as manna. They can spend it on anything they want--books, teachers' pay, a new swimming pool--with a minimum of red tape and no federal inspections. The San Diego school district administers its $11.7 million in Impact Aid with one accountant and one clerk. Says Dave Fish, who supervises the funds in San Diego: "Out here people are worried about the property tax. If we didn't get this aid, we would have had to increase local taxes. And why shouldn't the Federal Government pay its rent?"

In a vague sense, Impact Aid is a form of rent paid by the Government in lieu of local taxes on federal buildings and property. But Carter Administration officials, who are trying to cut the fat out of a half-trillion-dollar budget, point out that often the money from Impact Aid goes to communities whether they need it or not. Some of the biggest beneficiaries are among the wealthiest school districts in the nation. Montgomery County, Md., has a per capita income about 50% above the national average, thanks largely to the battalions of Washington bureaucrats who live there. Even though these residents pay local real estate taxes, Montgomery County receives $6 million a year in Impact Aid. Similarly, Washington's suburban Fairfax County, Va., where Langley High School has a country club atmosphere, receives $13 million annually.

Every President since Eisenhower has proposed reductions, but without success. Says Health, Education and Welfare Secretary Joseph Califano: "It is an annual rite of spring for the Executive Branch to march up Capitol Hill with a broad proposal to reform Impact Aid and to march down the hill in the summer without it."

No proposal has ever been made to stop funds for children of employees who actually live on federal property. But scrapping aid for people who live on private property--and thus pay local taxes--would save about $400 million annually. This year the Administration proposed saving $76 million through such minor changes as stopping payments for children whose parents work on federal property outside the county where their school district is located. House and Senate subcommittees not only ignored those requests but added benefits.

One of the strong proponents of this expansion is Representative William Ford, a Michigan Democrat who comes from one of the three congressional districts that now do not get Impact Aid--but will do so, if the changes are enacted as expected. Says he: "Why make a distinction between the federal employee wearing a postal uniform and one wearing a Navy uniform?" It is on logic like this that Impact Aid will again glide through Congress. Yet until Congress and the public realize that Impact Aid is not funny money but comes from taxes on everyone, there is scant hope of controlling federal spending. qed

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