the old-age assistance recipients were under age 70 and about 45 percent were age 75 or over. To some extent, the differences in expendi tures and case loads of the various programs may also reflect the absence of Federal participation in general assistance and the lower rate of Federal participation in aid to dependent children. States and localities have not been encouraged to put money into these programs to the same extent as in old-age assistance and aid to the blind. Several other factors should be taken into account in seeking an explanation of the differences in expenditures from one year to the next and among the various programs. These factors include (1) the increase in the number of aged persons in the population from about 9 million in 1940 to about 10.8 million in 1947, (2) the long waiting lists of eligible applicants during the early years of the State-Federal programs, a fact which indicates that the number of recipients was lower in the early years because funds were not available to meet existing need (witness the 260,000 applications for old-age assistance pending in January 1940 as compared with 42,000 in January 1945), and (3) the increase in expenditures for assistance resulting from rising prices. MAJOR DEFECTS IN THE SYSTEM OF FEDERAL GRANTS-IN-AID FOR PUBLIC ASSISTANCE The Council believes that the basic features of the present arrangements are sound. In particular, it believes that the diversity of conditions and traditions among the States makes it desirable that the States retain wide discretion in determining needs, eligibility, and administrative policies. The Council feels, however, that the present system of Federal grants-in-aid for public assistance has many gaps and inequities. Federal participation in aid to dependent children is far less adequate than in old-age assistance and aid to the blind. Needy persons who require medical attention cannot receive adequate medical services within the limits of the ceilings on Federal matching. Moreover, many persons who do not fall within the categories of the aged, the blind, or dependent children may be in dire need of public assistance. As now constituted, the Social Security Act ignores the needs of this group. In point of fact, the act has led some States to apply virtually all the State and local funds available for public assistance to the specific programs for which Federal reimbursement is available, leaving little or no money for so-called general assistance. State funds are thus concentrated on programs which have Federal grants-in-aid.. There is an immediate and imperative need to redress this imbalance by eliminating the existing gaps and correcting the inequities in the public assistance titles of the Social Security Act. More extensive Federal participation in such programs has been recommended because of the conviction that readjustments are urgently needed and cannot otherwise be achieved as expeditiously. The Council believes, however, that the total amount of Federal expenditure for assistance should decline as the insurance program becomes more fully operative. In making recommendations to improve the present Federal policy in assistance, the Council has been guided by the following major considerations: 1. The public-assistance program should not interfere with the growth and improvement of the insurance program. 2. The Federal Government's participation in public assistance should be designed to encourage the best possible administration by the States and localities and promote adequate support of the needy by the States and the localities. 3. The Federal Government should continue its present practice of setting only minimum standards relating to conditions of eligibility and administration but, beyond the minimum, it should leave to the States wide discretion both in determining policies and in setting standards of need. SUMMARY OF RECOMMENDATIONS 1. The Federal Government's responsibility for aid to dependent children should be made comparable to the responsibility it has assumed for old-age assistance and aid to the blind. In determining the extent of Federal financial participation, the needs of adult members of the family as well as of the children should be taken into consideration. Federal funds should equal three-fourths of the first $20 of the average monthly payment per recipient (including children and adults) plus one-half the remainder, except that such participation should not apply to that part of payments to recipients in excess of $50 for each of two eligible persons in a family and $15 for each additional person beyond the second. 2. Federal grants-in-aid should be made available to the States for general assistance payments to needy persons not now eligible for assistance under the existing State-Federal public assistance programs. Federal financial participation should equal one-third of the expenditures for general assistance payments, except that such participation should not apply to that part of monthly payments to recipients in excess of $30 for each of two eligible persons in a family and $15 for each additional person beyond the second. In addition, the Federal Government should match administrative expenses incurred by the States for general assistance on a 50-50 basis, in the same manner that it now shares in administrative expenses for the existing State-Federal public assistance programs. The proposed grants-in-aid for general assistance, however, should not be considered as a substitute for a program designed to deal with large-scale unemployment. 3. To help meet the medical needs of recipients of old-age assistance, aid to the blind, and aid to dependent children, the Federal Government should participate in payments made directly to agencies and individuals providing medical care, as well as in money payments to recipients as at present. The Federal Government should pay onehalf the medical-care costs incurred by the States above the regular maximums of $50 a month for a recipient ($15 for the third and succeeding persons in a family receiving aid to dependent children) but should not participate in the medical costs above the regular maximums which exceed a monthly average of $6 per person receiving old-age assistance or aid to the blind and a monthly average of $3 per person receiving aid to dependent children. to submit plans to the Social Security Administration for its approval, setting forth 80258-483 the conditions under which medical needs will be met, the scope and standards of care, the methods of payment, and the amount of compensation for such care. 4. The Federal Government should participate in payments made to or for the care of old-age-assistance recipients living in public medical institutions other than mental hospitals. Payments in excess of the regular $50 maximum made to recipients living in public or private institutions or made by the public-assistance agency directly to those institutions for the care of aged recipients should be included as a part of medical-care expenditures under recommendation 3. To receive Federal funds to assist aged persons in medical institutions under either public or private auspices, a State should be required to establish and maintain adequate minimum standards for the facilities and for the care of persons living in these facilities. These standards should be subject to approval by the Social Security Administration. 5. Federal funds should not be available for any public-assistance program in which the State imposes residence requirements as a condition of eligibility for assistance, except that States should be allowed to impose a 1-year residence requirement for old-age assistance. 6. A commission should be appointed to study current child health and welfare needs and to review the programs operating under title V of the Social Security Act relating to maternal and child health services, services for crippled children, and child welfare services. The commission should make recommendations as to the proper scope of these services and the responsibilities that should be assumed by the Federal and State governments, respectively. THE COST OF THE COUNCIL'S RECOMMENDATIONS Assuming the continuation of current conditions, it is estimated that the annual cost to the Federal Government of all the public-assistance recommendations of the Council will range between about $270,000,000 and $340,000,000. If the Council's recommendations for social insurance become effective, the cost of assistance to the Federal Government should gradually decline as insurance benefits eliminate or reduce the need for assistance among more and more persons affected by old age, loss of parental support, or permanent and total disability. These estimates are subject to a considerable margin of error since many unpredictable factors will influence the Federal cost of these recommendations. As public assistance is a matching program, that cost is determined by the extent to which the States take advantage of the offer of Federal funds as well as by the extent of the actual need to be met. The availability of State revenues to finance a share of public assistance, the competing demands of other governmental functions, State and local policies in determining need and granting aid are all important factors in determining costs. These estimates are based on recent case loads which may prove unreliable guides for the future. Changes in social and economic conditions would have a substantial effect on the need for assistance and thus on future case loads. The error which can arise from this factor is limited, however, by the fact that the recommendations in this report are not intended to meet the problem of mass unemployment in the event of a severe or even moderately severe depression. In its report to be submitted on unemployment insurance, the Council plans to consider the problem of the responsibility of the Federal Government for the income maintenance of workers in time of business depression. Yet, even though the recommendations in this report pertain to the needs that arise in times when employment is good, these needs are nevertheless greatly influenced by changes in price levels and by even relatively minor changes in levels of employment and unemployment. Changes in other social provisions to meet or prevent need, such as social insurance, dependents' allowances for servicemen, veterans' benefits, and health programs, may also have a significant effect on the extent to which the assistance programs will be called on to aid needy persons. The extent of need for general assistance and for medical care (including care of the aged in public medical institutions) will not be completely clear until Federal funds become available for these types of aid. Present case loads in general assistance and present expenditures for medical care reflect more nearly what States and localities are able and willing to spend than the actual need for these services. As long as the means to meet need are lacking, much need remains hidden. Few people apply for help that they know they cannot get. Because of the uncertainty of the effect of many of these factors, the estimates have been stated as a range. Separate estimates have been given for each recommendation. FINANCING THE PUBLIC ASSISTANCE PROGRAMS The Council believes that, as provided in Public Law 642, the Federal Government should, for the near future, meet three-fourths of the first $20 of the average monthly payment per recipient and half the remainder within given maximums for old-age assistance and aid to the blind, and that Federal participation in aid to dependent children should be made comparable. The Council believes that the maximums up to which the Federal Government makes grants should be uniform for these three programs. As the burden on the States is reduced through the expansion and liberalization of the Federal insurance program, the rate as well as the total amount of Federal participation in these assistance programs should be reduced. For general assistance, the Council recommends a much lower rate of participation by the Federal Government than for the other parts of the assistance program. The Council believes that, in general, the present method of participation by the Federal Government in the existing State-Federal programs is well adapted to a public-assistance program which leaves the States wide discretion in determining eligibility for assistance and in making administrative policies. Under such a program, the Council believes that it is wise to have the Federal Government and the States share equally in the costs above some low figure such as $20 a month per recipient. In some of the proposals which the Council has examined, such as those for relating the rate of Federal participation to the per capita income in the State, the amount of State financial interest would not seem sufficient in the lowest-income States to guarantee prudent consideration of the level of payments.3 Under See Annual Report of the Federal Security Agency, Section One, Social Security Administration, 1947, pp. 109-110, for discussion of typical plan. one per capita income plan studied, several States would be able to get three Federal dollars for each State and local dollar even if they made average assistance payments well above the national average. Lowincome States could, for example, make average payments of nearly the Federal maximum of $50 for old-age assistance and the Federal Government would still pay three-fourths of the total cost. The present method, as well as those which would vary the rate of Federal participation in accordance with per capita income, provides Federal funds which represent a larger proportion of the costs of assistance in most low-income States than in the high. Because the average assistance payment in low-income States is usually low, Federal participation at the rate of three-fourths of the first $20 of average payments will mean that the Federal Government will bear nearly threefourths of the total expenditures for assistance payments in most of the lowest-income States. For example, in the calendar year 1947, when the rate of Federal participation was two-thirds of the first $15 in old-age assistance and aid to the blind and two-thirds of the first $9 in aid to dependent children, the Federal Government paid only 52.7 percent of all costs of old-age assistance in the United States, 50.6 percent of the total costs of approved plans for aid to the blind. and 39.4 percent of the total costs for aid to dependent children. In the five States with the lowest per capita income, however, Federal participation in old-age assistance ranged from 62.5 to 64.7 percent of total costs; in aid to the blind the Federal share ranged from 60.5 to 63.6 percent; and in aid to dependent children from 60.5 to 65.8 percent. FEDERAL, STATE, AND LOCAL RESPONSIBILITY Although it is beyond the scope of the present study to analyze the policy which should govern the over-all financing of public services in the United States and the relationship of the Federal Government to the States and localities, the Council wishes to express its belief) that the only sound long-run method of preserving a workable StateFederal system lies in the readjustment of State-Federal tax and fiscal relationships. The principles of citizen-participation in Government and maximum State and local responsibility will be promoted if States and localities are better able and more willing than at present to raise the funds necessary to finance their own activities. Two world wars and a major depression have introduced a degree of central fiscal authority and an aggregate tax burden undreamed of 50 years ago. Indeed, within the last few years the demands upon the Federal Government have increased much faster than anyone would have anticipated. Several years ago forecasts of the postwar Federal budget usually ran in the neighborhood of $15,000,000,000 to $25,000,000,000 a year. For example, the Committee for Economic Development in a study of the tax problem assumed that the budget of the Federal Government would be about $18,000,000,000 in dollars of 1943 purchasing power or about $23,000,000,000 in dollars of 1947 purchasing power. The budget is now more than $40,000,000,000 and is likely to remain at that level. Because of these developments and because of the ever-increasing public demand for services from all units of government, means must be found to make sure that State and local governments have revenues adequate to finance the func tions which they can best perform. These broad problems of inter |