Mr. SPRINGER. Your effort so far as I know has been good. I would hope that if you do get sizable amounts from Mellon, from Ford, from the Carnegie Foundation, that those would come with no strings attached except your best judgment on how this money ought to be spent. Is that about the philosophy you have?

Mr. HUGHES. I certainly do. I think it would be appropriate for a gift to be made for programing, let us say, but certainly not with any strings that would in any way inhibit the Corporation or its

actions.

Mr. SPRINGER. I think that is a good policy to start out with. That certainly meets with my approval.

Mr. HUGHES. I could not agree more.

Mr. SPRINGER. I hope you will impress on your board of directors' friends that this Congress will be appropriating after this year. You will be back next year. We will be here to ask you what you have done and to give an account of your stewardship. For a few years, I think the Congress will want to know pretty intimately what is being done. I can say that generally the Board has received good approval for the type of men you have. So far as I am concerned, I want to wish you every success.

Mr. HUGHES. Thank you.

Mr. SPRINGER. Thank you, Mr. Chairman.

Mr. MACDONALD. Mr. Harvey?

Mr. HARVEY. I apologize for coming in late, Mr. Hughes. I just want to inform you that I intend to vote against the particular bill. I don't want any reflection either on Mr. Pace or the other appointees, because I think the President did a very outstanding job in making his appointments.

On the contrary, I intend to oppose the bill for the same reason that I opposed it originally; that is, I think we are putting the cart before the horse. I think we ought to have the proper financing for public broadcasting before we get into the venture at all. I think that at this time in our history it is way down the line as far as priorities are concerned, as far as what else we are trying to do in America today. It doesn't reflect anything at all, however, either on Mr. Pace or the other appointees.

As I say, I think they are outstanding. I think the purposes that are attempted to be accomplished are good, as well.

Thank you.

Mr. MACDONALD. Mr. Hughes, since there has been discussion of the appointees, I think it speaks very well. Since neither Mr. Springer, myself, or Mr. Staggers knew who the appointees were, it might be appropriate to spell out in the record who the appointees are.

Mr. HUGHES. Frank Pace, Jr., has been named Chairman for the first year. Joseph A. Bierne of Washington, D.C., president of the United Electrical and Communications Workers of America; Robert S. Benjamin of New York, a New York attorney and chairman of the board of United Artists Corp.; Roscoe C. Carroll of Los Angeles, an attorney and general counsel of the Golden State Life Insurance Co.: Michael A. Gammino of Providence, president of the Columbus National Bank of Rhode Island and also chairman of the Metropolitan Opera Festival Foundation of Newport: Mrs. Hobby, of Texas, who is president and editor of the Houston Post, and along with Dr.

Killian served as a member of the Carnegie Commission: Sol Hause, of Seattle, chairman of the board of KRRO, a commercial station: Mr. Hughes of Pittsburgh: Erich Leinsdorf of Boston, the music director of the Boston Symphony; John D. Rockefeller III, chairman of the board of trustees of the Rockefeller Foundation; Carl Sanders of Atlanta, attorney and former Governor of the State of Georgia: Frank E. Schoolie of Champaign, Ill., director of university broadcasting at the University of Illinois; Jack Valenti of Washington, D.C., president of the Motion Picture Association of America: Milton S. Eisenhower of Baltimore, president emeritus, Johns Hopkins University; James R. Killian, Jr., of Cambridge, Mass., chairman of the corporation, Massachusetts Institute of Technology.

Mr. MACDONALD. Thank you very much, Mr. Hughes. I would like to say in passing that the Board of Directors has pretty good access to foundation money, I would think, and I hope the Board exercises its contacts with those groups.

Mr. Brown?

Mr. BROWN. I have no questions, Mr. Chairman.
Mr. MACDONALD. Mr. Broyhill?

Mr. BROYHILL. No questions, Mr. Chairman.

Mr. MACDONALD. Thank you both very much.

Mr. HUGHES. Thank you, Mr. Chairman and members of the

committee.

Mr. MACDONALD. We shall hear next from our colleague, the Honorable Leonard Farbstein.

STATEMENT OF HON. LEONARD FARBSTEIN, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF NEW YORK

Mr. FARBSTEIN. Mr. Chairman, this subcommittee has under consideration today legislation (H.R. 15986) authorizing $9 million in program funds for fiscal 1969 for the Corporation for Public Broadcasting.

What this bill does is delay for 1 year the initial Government financing of educational broadcasting authorized under the Public Broadcasting Act of 1967. Like the 1967 act, it contains no provision. for the long-term financing of educational stations.

H.R. 15986 is needed. It is essential that the Government provide short-term funds for educational programing. But left unresolved, is the more fundamental and controversial question of permanent longterm financing free from any one influence, either public or private. The question is who should contribute to the long-term financing of public broadcasting. The answer will spell out the scope and independence of educational television and radio.

Mr. Chairman, I submit the commercial broadcasters in this country have an obligation to provide substantial financing for nonprofit educational stations. On February 8, 1968, I introduced a resolution (H.J. Res. 1079) directing the Federal Communications Commission to study the means and the extent to which commercial broadcasters can be required to provide such fundamental support. The resolution would have further put the Congress on record clearly supporting the view that commercial television and radio broadcasters should contribute substantially to the long-range financing of educational television and radio.

Mr. Chairman, this resolution is primarily a statement of policy. I believe the Congress should go on record favoring such financial support by commercial broadcasters for this public effort.

President Johnson, in his February message on education, stated that he was asking administration officials to work with the Board of Directors of the Corporation for Public Broadcasting in formulating a long-term financing plan. The President did not spell out the range of this work. I can only assume that the possibility of commercial broadcasters contributing will be considered. Communications from the Federal Communication Commission's Chairman, Rosel Hyde, indicate that in view of the President's announcement, the Federal Communication Commission does not deem it appropriate to take a position, nor to make a study of this issue.

Mr. Chairman, I support H.R. 15986 because it provides short-term financing for educational television and radio. However, I urge the members of this subcommittee to support the content of my resolution and ask that you express this support to the administration so that we may be assured that they will consider commercial broadcasters as a source of permanent financing for public education broadcasting. Mr. MACDONALD. Thank you for your brief statement, Mr. Farbstein. The next witness is Mr. William Carey, Assistant Director of the Bureau of the Budget, with two associates.

STATEMENT OF WILLIAM D. CAREY, ASSISTANT DIRECTOR, BUREAU OF THE BUDGET; ACCOMPANIED BY DEAN W. COSTON, DEPUTY UNDER SECRETARY, DEPARTMENT OF HEALTH, EDUCATION, AND WELFARE; AND GERARD M. BRANNAN, DIRECTOR, OFFICE OF TAX ANALYSIS, DEPARTMENT OF THE TREASURY

Mr. CAREY. I have Mr. Dean Coston, the Deputy Under Secretary of the Department of Health, Education, and Welfare; and Mr. Brennan, representing Assistant Secretary of the Treasury Surrey. It is our understanding that the Subcommittee on Communications is interested in the status of planning for permanent financing of of the Public Broadcasting Corporation authorized by Public Law 90-129.

I would like first to describe the administration's position on the interim financing bill now before you.

The purpose of H.R. 15986 is to authorize appropriations in 1969 instead of 1968 for startup activities of the Corporation for Public Broadcasting. Fiscal year 1968 is fast drawing to a close. The members of the Corporation have just been confirmed by the U.S. Senate, and incorporation is now arranged under the laws of the District of Columbia.

The Corporation will not be in a position to function fully until the fiscal year which begins next July 1. There was a general understanding when Public Law 90-129 was under review by the Congress that the appropriation authorization in the bill was an interim measure only, and that the Corporation should begin to operate before longterm financing was authorized.

The present law did not anticipate the unavoidable delays associated with enacting legislation and starting any such new enterprise. For these reasons, the administration recommends enactment of H.R.

al

15986 which will authorize appropriations to be made in fiscal year

1969.

Let me turn, now to the question of permanent financing for public broadcasting. The working out of a long-term financing plan for the Corporation requires the most thorough consideration. This is why the President has requested the Secretary of HEW, the Secretary of the Treasury and the Director of the Bureau of the Budget to work with the Board of Directors of the Corporation for Public Broadcasting and the appropriate committees of the Congress to formulate a long-range financing plan that will promote and protect this important new institution. As the President stated on signing the Public Broadcasting Act of 1967:

The Corporation will be carefully guarded from Government or from party control. It will be free, and it will be independent—and it will belong to all the people.

Television is still a young invention. But we have learned already that it has immense even revolutionary-power to change, to change our lives.

In brief, we are asked to devise some means of providing funds for the Corporation that will, with the agreement of the Congress, minimize those aspects of the usual Federal budgeting and appropriations cycle which might restrict the free production of programs for this public media.

On the other hand, such a plan must also include some means for a public accounting at reasonable intervals, for use of public funds, and for decisions to be made as to the appropriate level of public interest for the ensuing period.

Another challenge is to provide sufficient sources of revenue to get the job done. Estimating the needed range of revenues requires the making of assumptions as to the quality and cost of producing program materials, the number of program "options" which are to be available, the number and capability of stations, the costs and extent of use of interconnection, and the amount of research, training, and other activities to be carried out. Given the rapidly changing technology, economics, population trends, et cetera, estimating for several years hence is extremely hazardous.

At the moment, it appears there are three principal techniques for providing Federal funds for public broadcasting. Each has its advantages and disadvantages and we in the executive branch have not yet formed a preference for any one or a combination of them.

These are: (1) a tax on television and radio sets manufactured; (2) a tax on gross revenues of commercial broadcasters; and (3) some special kind of "insulation" for general Federal revenues. The following paragraphs explore these alternatives.

NEW TAX ON TELEVISION AND RADIO SETS MANUFACTURED

This is essentially the Carnegie Commission proposal. The argument would be that purchasers of TV sets and radios will be the direct beneficiaries of public broadcasting. The tax would be collected from the manufacturer and hence relatively easy to administer.

On the other hand, it is possible that the level of expenditures for TV sets, currently about $2 billion annually, may level off after the current conversion to color sets is complete. Thus, the tax revenues

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would not keep up with the need unless there were periodic increases in the tax rates.

It can also be argued that people will not benefit from public broadcasting in proportion to the amount they spend on TV sets. And finally, such a tax would be regressive because low-income people spend a higher proportion of their income on television sets than high-income people and would, therefore, pay a higher proportionate tax.

A NEW TAX ON THE GROSS REVENUES OF COMMERCIAL BROADCASTERS

The rationale for a tax on gross revenues of commercial broadcasters would be that the frequency spectrum is a public resource to begin with, and that a portion of the economic returns from its commercial use can appropriately be dedicated to sharing the costs of public broadcasting. It is, of course, a statutory requirement under the Federal Communications Act that applications meet the test of public interest, convenience, and necessity. A gross revenue tax would be an extension of that well-established principle.

Gross revenues of radio and television broadcasters currently total about $3 billion and have been growing nearly 10 percent annually. A tax on gross revenues would change over time roughly in proportion to changes in programing costs for the broadcasters. Thus, the revenue would grow and maintain a reasonable relationship to the financial needs of public broadcasting.

On the other hand, it is possible that a large share of such a tax would be passed on to consumers through increases in the retail price of products advertised on the broadcast media. The portion of the tax passed on would be highly regressive, since the products accounting for the largest share of broadcast revenues-automobiles, beer, cosmetics, nonprescription drugs, soap, and tobacco-account for a much larger proportion of expenditures by low-income and middle-income families than by high-income families.

USE OF GENERAL REVENUES

General tax revenues might legitimately be called on to finance public broadcasting on the grounds that there is a general benefit to the public from the activities of the Corporation. This approach, supported by classic public finance doctrine, would not exhibit the regressive tax tendency of the foregoing approaches.

On the other hand, some people would reject this approach on the grounds that general fund financing entails strict budgetary controls. Nevertheless, it is possible that the Executive and the Congress could work out some satisfactory arrangement that would permit review periodically but not annually.

For example

Provide for paying of general fund revenues into a trust fund according to a statutory formula-perhaps related to the total number of public television and radio stations and authorize appropriations for a 3-year period to be made all at one time.

Provide that all payments into a trust fund established by law would be paid automatically to the Corporation unless the Congress took negative action to prevent such payment.