sissippi. The Senate bill provides further inclusion of 18 Mississippi counties which are those in the Tombigbee Watershed where a watershed development organization is now operating, and for the inclusion of Schoharie County in the State of New York based on findings by the Committee that its economy is closely related to the continguous areas in the Region and that its economic circumstances justify its inclusion. S. 602 makes one significant change in the overall structure of the program. The bill as introduced in the Senate provided for the appropriation of all program funds to the Commission. Under the 1965 Act, funds are appropriated to a number of Federal departments. Direct appropriations were recommended by the Commission as a means of consolidating the program in the appropriations process. At the present time, Appalachian items are contained in six different appropriation bills and go to as many appropriations subcommittees. Further, since these items are contained in departmental budgets, there has been no opportunity for us to present testimony describing the relationship of each to the total program. The Senate bill provides for appropriation of all program funds to the President. While the bill itself does not spell out the means for transferring funds to program agencies, it is intended that the President would subsequently transfer such appropriations to the Federal Cochairman for allocation to the departments and agencies responsible for carrying out the programs authorized by the Act. We have no intention of changing the structure of the program and certainly it is not intended that the Commission should become an operating agency. Funds will continue to be administered by departments of the Federal Government. In the case of Section 302, the bill would authorize the President to make grants to the Commission for research and for administrative expenses and technical services of local development districts. We believe this change will be helpful in expediting projects and in obtaining a thorough and unified review of the program in the appropriations process. I concur fully in the statement made to the Subcommittee by Mr. Sweeney on the need for and utility of involvement of the states in the planning and implementation of a major public investment program such as that provided for in the Appalachian Act. The testimony of Mr. Sweeney and others before this Subcommittee in 1965 indicated clearly that the Appalachian Development Program was intended to exploit the potential for growth in the Region over the long haul rather than to provide immediate relief through the employment generated in the construction of public works. We have made considerable progress in the planning and generation of projects. The summer of 1967 will see a significant increase in construction activity in the highway program and in the construction of other types of public facilities as the planning and project development accomplished in the first two years come to fruition. It should be noted also that the states are increasing expenditures in their Appalachian areas. The following table summarizes the state reports on Maintenance of Effort required by Section 221 of the Act. COMPARISON OF STATE EXPENDITURES IN APPALACHIA IN FISCAL YEAR 1963-FISCAL YEAR 1964 BASE PERIOD AND FISCAL YEAR 1966; AND IN FISCAL YEAR 1966 AND FISCAL YEAR 1967 We have, I believe, achieved an effective relationship between the Federal Government and the states as manifested in the Commission itself. We are seeing some remarkable changes and achievements by the States themselves in the programming of Appalachian funds. Some programs are moving very well and have an enviable record of success. The supplemental grant program, particularly, has clearly begun to accomplish the purpose for which it was enacted. The way is now clear for rapid progress in the construction of the development highway system. Other programs have had varying degrees of success and some for reasons which will be described have not moved as quickly as we would like. Many of the legislative changes provided in S. 602 will facilitate a more rapid rate of progress by eliminating or mitigating some obstacles which have been encountered. While there are a number of innovations in the Appalachian program, there are, I believe, two essential elements which distinguish it from other Federal efforts in the field of development. These are the unique and, indeed, pre-eminent involvement of the Governors, both in the process of establishing policies and in judging projects, and the congressional directive that funds appropriated under authority of the Act should be invested in areas with "significant potential for future growth". These provisions are closely related. It was the judgment of the Congress in 1965 that there was not enough money to rebuild Appalachia in the nation's image and that concentration, both geographically and by program, was necessary. This means simply that within the scheme of priorities contained in the Act itself, further judgments had to be made as to where maximum return on the funds available could be achieved. It was further recognized that such judgments could not be made in Washington and that the Appalachian States-the Appalachian Governors-should have this basic responsibility. Thus, the Act provides that the States shall submit and sponsor all projects which come before the Commission. It is our experience that sound planning can only be achieved if it is related to the amount of money available for expenditure. It is for this reason that the Commission established the practice of allocating most program funds state-bystate, and established the policy of requiring from the States investment plans which set the priorities for their expenditure, both from the standpoint of geography and types of projects. It is to the development of these plans that a great deal of the Commission's time and effort-particularly staff effort-has been directed. The plans developed by the states for FY 1967 were admittedly rudimentary but they are, I believe, responsive to the Act and to Commission policies. The great bulk of the research undertaken by the Commission, funded largely under Section 302, has been geared to continually improving these plans and, thus, the ability of the states and the Commission to make judgments about expenditures. For example, the Commission contracted with the Fantus Company, a noted plant location consultant, to spell out the key locational requirements of various types of industries which are deemed most likely to locate or expand in the Appalachian Region. Many of the findings of this study bear direct relation to the public expenditures authorized by the Act, particularly in the fields of transportation, education and health. To clearly establish the location, capacity and quality of public facilities which presently exist in the Region, a public facility inventory was made, providing each state with a thorough appraisal of the facilities which now exist in its Appalachian area. The Commission contracted with Robert Nathan Associates for a study of the economic implications of recreational developments. The results of that study indicate that few local economies can be built on recreation of tourism alone and that recreation projects should be generally geared to improving the total environment of a locality for further private investment rather than as the prime source of development. The results of this study obviously are being carefully weighed in each state in the development of its Fiscal 1968 investment program. We have, of course, also undertaken economic and demographic studies to lay out the current state of the Region and its component parts. These studies were undertaken to serve the common needs of all states after discussions in the Commission established those needs. The information and analyses which have become available in the past two years will immeasurably strengthen and refine the FY 1968 Investment Plans. The forum provided by the Commission for interstate cooperation and coordination has also resulted in such positive actions as joint planning of facilities and programs. There is presently underway a planning effort by Kentucky, Ten nessee, Virginia and West Virginia addressed to the peculiar problems of the coal fields of central Appalachia. This is a joint effort to improve the state investment planning of the four states relative to this area. We have seen other gestures of cooperation such as waivers of out-of-state tuition for vocational education schools assisted with Appalachian funds and the advancement of Appalachian funds from one state to another to accommodate immediate program objectives. We do not have a master plan for Appalachia nor is it, at least at this stage of the game, possible to develop one. We are, however, well along toward the achievement of an increasingly better feel for the potential for development which exists in the Region and what can be done with Appalachian Act funds to exploit it. AUTHORIZATION 1965 ACT, APPROPRIATION, COMMITTED FUNDS, AND AUTHORIZED S. 602 Total nonhighway funds appropriated under authorization of Public Law 89-4 and authorized under S. 602 TITLE I-THE APPALACHIAN REGIONAL COMMISSION $442, 340,000 1,015, 000, 000 1,457, 340,000 Title I of the Appalachian Act established the Appalachian Regional Commission and outlined its functions. The Commission is composed of the Governors of the twelve Appalachian States and a Federal Cochairman, the position which I am privileged to hold. The Act provides that a State Cochairman shall be elected by the Governors. The States have established a six-month term for this position. Governor Hulett C. Smith of West Virginia is currently the State Cochairman of the Commission. As this Sub Committee is well aware, the Conference of Appalachian Governors was a major force in the generation and passage of the Appalachian Act. The deep interest and commitment of the Governors, which preceded the passage of the Appalachian Act, has been further manifested in the operation of the Commission. Plenary meetings of the Governors have been held at approximately six-months' intervals. Within their respectvie states, the interest and leadership of the Governors has been the key to whatever success we have enjoyed. The Governors have appointed representatives who attend the monthly meetings of the Commission when the Governors are not present. They are generally members of the Governors' staffs or the heads of major state departments. The current State Representatives are: Alabama: Richard S. Brooks, Director of Employment Service, Department of Industrial Relations. Georgia: V. R. Steubing, Director, Planning Division, Department of Industry and Trade. Kentucky: Robert Cornett, Administrator Kentucky Area Development Office. Maryland: Robert G. Garner, Attorney, Annapolis, Maryland. New York: Ronald B. Peterson, Commerce Commissioner. North Carolina: Woodrow W. Jones, State Representative of Appalachian Regional Commission. Ohio: Albert G. Giles, Director, Ohio Office of Appalachia. Pennsylvania: Clifford Jones, Secretary of Commerce. South Carolina: R. E. Hughes, State Representative, Appalachian Advisory Commission. Tennessee: Bob Pitts, Acting Federal Programs Coordinator, Federal Development Program Coordination. Virginia: Lynn H. Currey, Director, Federal Programs, Division of Industrial Development. West Virginia: Angus E. Peyton, Commissioner, Department of Commerce. To carry out the work of the States on a daily basis, the Governors have a States Regional Representative who is selected and paid by them. It is his responsibility to serve as the chief policy and administrative officer of the Commission for the states-as a functional equivalent to the Federal Cochairman— and to advise and assist the states on questions involving plans, programs and projects. The Governors initially selected Mr. Harry Boswell, Jr., of Maryland, for this position. In June 1966, Mr. Boswell was succeeded in this position by Mr. John D. Whisman of Kentucky. It may be of interest to the Subcommittee that the States have budgeted $92,000 for this office in FY 1968. Section 105 of the Act authorized $2,200,000 to support the Commission, and in Section 401 $200,000 is provided for the staff of the Federal Cochairman during FY 1966 and FY 1967. Of this amount, $2,390,000 has been appropriated. It has further provided that at the end of the second full fiscal year after the establishment of the Commission, the states are to pay one-half of its administrative expenses. The bill passed by the Senate, S. 602, authorizes $1.7 million for Federal support of the Commission in fiscal years 1968 and 1969. This authorization is predicated on an annual budget for the Commission staff of approximately $1.3 million, 50 percent of which would be borne by the Federal Government. We support the provision for the Federal Cochairman and the Federal staff to be compensated entirely from Federal funds. The testimony before this Subcommittee in 1965 indicated that there would be approximately sixty-five people on the Commission staff responsible to the Commission as a whole. In fact, we have averaged between fifty and fifty-five during the two years the Commission has been in existence. The staff, which is composed of 31 professionals and 20 supporting personnel, is in my judgment of exceptionally high quality. I believe this view is shared by the Governors and their representatives. The bulk of the staff's work is concerned with providing services and assistance to the states in the preparation of plans and programs and the development of projects to fulfill them. Section 201—Appalachian development highway system The testimony before this Committee on the Appalachian Regional Development Act of 1965 made it clear that a special highway program to improve access within and through Appalachia was the foundation for any and all efforts to build the economy of the Region. The Administration requested, and the Congress approved, an authorization of $840 million for a development highway system of not to exceed 2350 miles of construction and access roads of not to exceed 1000 miles. The pace, design and construction of the Appalachian highway system has been a major concern of the Commission. The basic judgments on the implementation of the program have now been made. The system contemplated when the Act was considered and passed is being planned and constructed. S. 602 provides for an increase of $175 million in the authorization in Section 201. This is to cover part of the cost of constructing a development highway in the Appalachian section of New York State and a connecting link in Pennsylvania to tie this corridor to the remainder of the system. $140 million of the $175 million increase would be used for these roads. $35 million would be earmarked for access road construction. I would like to report on this facet of the bill in detail, but first I think it would be appropriate to review the steps taken by the Commission to implement the highway program as authorized in the 1965 Act. Because of the urgent need for the construction of these highways, the Commission at its meeting in May 1965, took several steps to get the program underway. A number of corridors were designated for construction and within those corridors a number of "quick start" construction projects were authorized. These were projects on which the planning and engineering had been accomplished and which were ready for construction. On July 14, 1965, the Commission approved additional corridors to bring the mileage eligible for construction to 2220 miles of the 2350 miles authorized, and requested the Bureau of Public Roads and the State Highway Departments, working with our highway consultant, to prepare cost estimates on the corridors designated by the Commission. At the same time, the Commission, in keeping with the testimony before this Committee prior to the passage of the Act, set aside $35 million of the $840 million authorized for the construction of access roads. The following map shows the highway corridors designated by the Commission. It should be recognized that within these corridors there are adequate highway sections on which construction will not be undertaken with 201 funds. Entire corridors are shown to demonstrate the continuity of the system. The highway corridors designated by the Commission are essentially those which are identified for this Committee in testimony on the 1965 bill as having high priority. These routes are designed to complement the interstate highways and the major primary routes in the Region. Additional projects were approved by the Commission on October 13, 1965, bringing the total approved projects to $301 million, requiring $190 million Federal funds, based on the initial cost estimates. In 1966, the cost estimates for the remainder of the system were completed. It became apparent that the design standards employed in making these estimates exceeded the standards which could be met with the funds authorized by the Congress if Federal participation was to be at 70 percent of cost. This realization forced the Commission to examine carefully the goals and objectives of the highway program and to consider the various alternatives for providing an adequate highway network consistent with the intent of the Congress in the enactment of the Appalachian program. The result of these deliberations was the adoption by the Commission of a Resolution allocating the authorized funds among the states participating in the highway program and establishing criteria for their use. Despite well-documented needs and strong pleas from many quarters, the Commission decided, by unanimous vote, that a highway system adequate to support a development effort for the Region could be achieved by the proper and judicious application of the funds authorized. A key element of the policies established for the accomplishment of the highway program was the decision not to request additional development highway funds with the exception of the amendment proposed to cover the corridor in New York State and the connecting link in Pennsylvania. In August, 1966, the Commission's lengthy debate on the proper means of allocating highway construction funds concluded in the adoption of Commission Resolution 92, which allocated the funds authorized by Section 201 among the |