Mr. BREITENBERG. John Breitenberg, representing President Clark of the Maryland State Senate on behalf of the National Conference of State Legislatures. Mr. RUSSELL. Barton Russell, National Association of Towns and Townships. Senator NELSON. Mr. Franke, you are making a statement on behalf of the panel. Your statement will be printed in full in the record; and you may offer it however you may desire. STATEMENT OF HON. JOHN FRANKE, CHAIRMAN, BOARD OF COMMISSIONERS, JOHNSON COUNTY, KANS., AND CHAIRMAN, LABORMANAGEMENT POLICY STEERING COMMITTEE OF THE NATIONAL ASSOCIATION OF COUNTIES Mr. FRANKE. Thank you, Mr. Chairman. I am certain that first of all we must express our obvious and very sincere gratitude for this opportunity because we feel that this is the first time to be heard with regard to the regulations as proposed and also with regard to the report to the Congress with respect to local jurisdictions, small counties, cities, townships, and local jurisdictions. Our written testimony does address three points with regard to the National Association of Counties. I do wish to specify the primary thrust of our testimony is the administrative burden that will be imposed on local jurisdictions, including cities and counties, and that HEW and GAO in their recent reports to Congress have failed to adequately examine the impact of the regulations on local governments. Our opinion with regard to local jurisdictions is that the regulations fail to recognize that the reporting time for local jurisdictions to report to the State would be constrained to between 3 and 5 days, and that many times this would also include weekends and holidays, thereby even further constraining the reporting time. Presently, we have four reporting times as far as cities and counties are concerned. This would increase under the regulations to 12. We feel very strongly that the report and the regulations totally misunderstand the accounting and reporting procedures presently used by local units of government; that most smaller jurisdictions, cities and counties, have rudimentary and limited abilities with regard to our staff and payroll procedures; that most of us do not have computerized systems which most, or all, States and larger jurisdictions. have; that the majority of our reporting officials are part time or voluntary; and that we feel that implementation of the regulations. would add new responsibilities to county government. Senator NELSON. The municipalities now are paying withholding taxes to the Internal Revenue Service on a particular schedule within 3 days after the pay period, excepting, as I recall, those whose withholding is below a certain amount. Mr. FRANKE. That is correct. Senator NELSON. I ask the same question of you that I asked the Social Security Administrator: If the municipalities were required to make out a check for depositing that money on the same schedule that they have to make out a check for depositing withholding taxes, what additional burden is there? Mr. FRANKE. My experience is, as a county commissioner, the former mayor of a small city, and a councilman, that many of these details are things that clerks or various people handle. My own impression is that we deposit IRS withholding funds to a fiduciary account with local banks of some type, directly to that fiduciary account. Our social security withholdings represent a different set of circumstances in that we report to the State periodically; and in my own opinion, the routine that we take, simply by its being different and involving a different recording factor, would give me the problem as the chief elected official. Supervisor Krivitz does have experience with regard to that and might explain it further, Mr. Chairman. Mr. KRIVITZ. Mr. Chairman, certain States such as Wisconsin require that counties be responsible for certain subunits within those counties; for example, senior citizens' homes, or highway departments, or whatever, for the purpose of social security contributions. While, for IRS withholding purposes, these subunits are separate reporting units; for social security deposit purposes, these subunits within the counties would have to be channeled through the county. This would be the additional paperwork that we would be looking at. There is a time frame also. The larger counties, in particular Milwaukee County, would experience a problem from the computer standpoint, but the samller counties mostly are on manual systems and the time frames now are often not being met. Many times, as the State people will testify later on, the smaller counties are sometimes 30 days or more late with the present requirements. Any type of additional burden at all would be catastrophic. Mr. FRANKE. Further, I can talk specifically to Johnson County. With regard to the administrative burden that we discussed, the regulations presently say that the implementing time would give sufficient time for jurisdictions to respond. July 1980, I believe, would allow 18 months for jurisdictions to work out any problems. In Johnson County, we would be required to rewrite our data processing programs. The regulations would also require revision in our software. We would have to retrain some elements of staff as far as any minor new reporting function, and we feel we would have to add one additional clerk. It is very minor when you talk about- Senator NELSON. A municipality with how many employees? Mr. FRANKE. Johnson County has a 250,000 population with employees of 1,200. Senator NELSON. Why would you believe you would have to add an additional clerk? Mr. FRANKE. Not this function alone, perhaps. It is a compounding of various mandates we have received, and one more element being added. What we feel on this specific question-I have asked both our budget director and county clerk for a realistic comment of what this particular reporting function would consist of, and it did amount to one additional account clerk. This is a salaried person, in Johnson County, probably $700 to $800 a month, and in most respects, it sounds fairly minor, but simply because of the 12 reporting times. When we do payroll adjustments-for example, we recently changed our pay scale, our pay dates, from the 5th to the 20th of the month, from the 1st to the 15th, to allow some 3 or 4 days leadtime for a cutoff time. This took us 6 to 8 months to implement and it sounds like such a simple decision. Each small, little straw, at some point in time, adds a clerk and adds some portion of staff time, and in the best of our opinion, this would add one clerk. Then, if we were to do these things incidentally, the rewriting of the data processing program, the revision of software, is not very easy for small unit of government. We are a fairly small unit of govern ment. We feel, then, that it is kind of up in the air. What if this does not work out? What if the time constraints are still such that we still have a difficult time with it, and we cannot meet the State and Federal requirements for reporting in sufficient time. We feel fortunate that our county will be able to more effectively administer the regulations than most local governments because of our population, because of our property valuation methods and that we will be able to do much more than perhaps the 102 other counties in the State of Kansas. When we talk about a possible relative impact or a possible theory that may work, we are very edgy and we try to work out an objective rationale of what it might do to us, but our biggest worry is what are those things that we have not anticipated. We do have a comment in our testimony from smaller counties. One of them, Polk County, Wis., has 35 municipal types of government within its borders. Polk County itself said this would be a repressive action on their behalf, not even speaking of 35 other municipalities. Senator NELSON. How did you happen to pick my hometown? Mr. FRANKE. Even compounded further is my own county, Mr. Chairman. I am very familiar with that. We have over 400 taxing districts. We only have 40 or 50 real municipal type institutions. As Supervisor Krivitz mentioned, if we were put into a position to speak and report on behalf of those other institutions, the mental health center operations, the library operations, county home operations and operations of that nature, it would add some burden to us but we would not know what it would be. We do have a comment, and certainly you will hear other comments, about the loss of interest income-and, incidentally I would like to correct page 8 of the written testimony referring to Johnson County possible loss of interest income. That is $125 monthly that we compiled in 1976, so actually the record should be corrected to show a $30,000 loss of interest income. The only other item in this area I wish to emphasize would be the Harris County, Tex., commentary. Basically their comment is directed to the effect of the regulations and to the transfer of public revenue from the local to the Federal level; and that is probably the primary reason the regulations are being issued. I think that the Social Security Administration and GAO and certainly many elements of our society overlook the fact that State and county governments carry a basic service to the poor, the aging and the unemployed, and while it sounds like we are waving flags or things, we are deeply committed to basic service delivery to those that are least likely to be able to pick up some of the effects of this loss of income. For the most part, we are supplemented by Federal funds, but basic services still go through county agencies through general levies. Senator NELSON. That is the problem. That would indicate that the municipalities and the States are making a profit on their deposits of social security funds. Mr. FRANKE. Certainly, I did not want to speak to this greatly, because other comments will be coming, certainly, but I know in our own county, many times that is overlooked. The basic thrust of general levies and income such as this is not salted away and not used for extraneous purposes, but it used to help in providing certain basic services. Certainly, those least likely to afford it, benefit from it. It is kind of an ancillary comment. Senator NELSON. I understand that and appreciate what you say. However, the argument of those who are paying the tax, the social security tax, and you are the beneficiary of the social security program, is that these are, in fact, social security funds, and nobody ever intended that they be diverted in any way for general municipal or State services as though they were some kind of a general revenue sharing. After all, these funds belong to those people who paid the tax and on whose behalf it was paid by the employer for their retirement program, and I would not be persuaded by any argument that said this takes away, in effect, general revenues from municipalities and States for other important services. I would not consider that a valid argument at all. I think that is an invalid argument. I think the States are entitled to whatever the overhead costs are, but they are not entitled to make a profit, on funds that should be used for the retirement of people covered by social security. Mr. FRANKE. Certainly it was not intended as an argument. I am sure those will come. Sometimes, in realism, we lose those identities, and in Johnson County, if we are talking about a $30,000, perhaps, loss of interest income, either one or two things happen: We make it up somewhere else through property taxes or some other fashion, or we reduce expenditures by that amount, one of the two. I am just making that, Mr. Chairman, as an ancillary comment. Senator DOLE. If all the Federal grants arrived on time, you would not need to hang onto the social security money. I think that may have an impact, too, in Johnson County, or any other county. The Federal Government gets into a program. It is all laid down. The money is supposed to arrive next month, and it is the next month maybe next year. I think that may cause some complications. It is sort of a two-way street. Maybe it is not a legitimate argument, saying you should not hold the money and profit from it, but by doing that, you offset some of the losses that you incur, and costs that you incur, the other way around. Maybe it is not the fault of Social Security, but you have to hit where you can. Maybe they have already been on time in Johnson County. I have had a few calls saying, "Can't you speed up the payments and grants." Mr. FRANKE. I remember some correspondence, Senator. The third and final element of our written testimony is that we do not feel that GAO and HEW in the report and the regulations have really contacted the local and municipal governments to receive objective comments. We realize that the ills of the agency are of national import and many times we feel that certain mandates have not been followed with regard to the effect on local jurisdictions. From our standpoint, from my standpoint, perhaps the State difficulties may have been addressed, although I doubt that from hearing comments of other State officials, but certainly local jurisdictions that represent the length and breadth of local taxing units of government have not been contacted. It is a situation that, I believe, the practicability has never been addressed for local units of government. We could use very strong words. My personal comments would be that the regulations themselves approach the onerous-are arbitrary, overbearing and inequitable. I will not use those right now, Mr. Chairman, but we feel very strongly about the regulations. We feel these are questions, that the questions have not been asked of us. Certainly any comments that we have had have not been addressed. We realize that we have a position and the administration must be supported and the Social Security Act must be supported. We know that it has many ills right now, and we would like to be asked what could be our part in supporting those ills? The Commissioner did mention that he could not see any great withdrawal attempt being made by various local units of government from social security activities. Quite honestly, in discussions we have held within NAC and within the labor-management steering committee this is a valid point and could well speed up such withdrawal feelings. If I might, I have dwelled too long, Mr. Chairman. I would like to leave it for one of the other gentlemen to make a comment. BARTON RUSSELL, EXECUTIVE DIRECTOR, NATIONAL ASSOCIATION OF TOWNS AND TOWNSHIPS Mr. RUSSELL. The National Association of Towns and Townships is a federation representing the interests of local government officials from over 13,000 predominantly nonmetropolitan small communities across the country. Before beginning my testimony today, Mr. Chairman, I would like. to thank you and members of the subcommittee, for inviting the association to provide the township point of view on this very important intergovernmental issue. Mr. Ed Kreuger, executive secretary of the Wisconsin Towns Association and second vice president of our national association, was originally scheduled to testify before this subcommittee but, regrettably, because of a conflicting commitment he could not be here today. At its last meeting, the association's board of directors voted unanimously to oppose attempts by the Social Security Administration to change from the current system requiring quarterly deposits of social security contributions to a process which will require more frequent deposits. 45-083-79 |