973 



87 



proposed Federal grants is not made clear in the bills. Although the 

 exploitation of oil and gas along the OCS may indeed entail ecological 

 and economic costs, it has not yet been shown that these would out- 

 weigh benefits, such as increased employment and increased avail- 

 ability of energy supplies, that would also accrue to coastal States. 

 Until it is effectively demonstrated that OCS leasing will result in a 

 net cost to coastal States, the creation of a new special Federal Fund 

 to assist States in the development and implementation of programs 

 to counteract the negative effects of OCS leasing would seem un- 

 justified. 



The broad new programs authorized by each of these bills would 

 appear to largely overlap ongoing programs of a number of Federal 

 agencies, including the Departments of Agriculture, Army, Commerce, 

 Housing and Urban Development, Interior, the Environmental Pro- 

 tection Agency, and the Small Business Administration. These new 

 programs could result in confusion of responsibilities and duplication 

 of activities, and would make difficult the establishment of budget 

 priorities for the ongoing programs of the above listed agencies. 



The Department also has strong objections to the financing arrange- 

 ments involved in H.R. 1776 and H.K. 4413. The special funds estab- 

 lished by these bills are created by earmarking a certain percentage 

 of Federal receipts from the leasing of OCS lands to the funds for 

 conditional transfer to the coastal States affected by OCS activities. 

 As a general principle of budgetary management, the Department 

 believes that budget receipts should not be earmarked for particular 

 expenditures, but should be available in the general fund of the 

 Treasury for appropriation by the Congress for achievement of current 

 programs and objectives. The Department believes that legislative 

 enactments setting aside certain budgetary receipts for particular pur- 

 poses tend to introduce undesirable rigidities into the budgetary 

 process and thereby limit the flexibility of the President and the Con- 

 gress in determining annual budgetary priorities. Earmarking also 

 tends to promote unnecessary public spending. 



The Department also questions the desirability of providing wind- 

 fall revenues to States adjacent to the Outer Continental Shelf based 

 solely on their geographical locations. The Department views these 

 grants as windfalls in the absence of evidence that offshore exploration 

 and production has a net unfavorable impact on the economies of adja- 

 cent coastal States. 



The Administration is now reviewing the questions of whether there 

 is a need for additional Federal assistance to coastal jurisdictions re- 

 sulting from OCS activities and, if so, of what alternative means of 

 delivering assistance would be most desirable. It is possible that the 

 review will develop evidence that additional assistance is needed and 

 that earmarking, although generally undesirable, may be appropriate 

 in tliis instance for some unique reason. Until the review is completed, 

 the Department believes that the above objections remain valid. 



In liirht of the above, this Department opposes enactment of H.R. 

 1776, H.R. 3637, H.R. 3981, and H.R. 4413. 



The Department has been advised by the Office of Management and 

 Budget that there is no objection from the standpoint of the Adminis- 

 tration's program to the submission of this report to your Committee. 

 Sincerely yours, 



DoiTALD L. E. RiTGER, 



Acting General Counsel. 



