The President's News Conference Following a Meeting With the Executive Committee of the Governors' Conference

OPENING REMARKS

THE PRESIDENT. [1.] If you will come in quickly--we are running late for the next meeting--I will review exactly what has happened. Governor Reed is to my right. Bill ¹ has given you a list of those that attended the meeting: Governor Burns of Hawaii, Governor Hansen of Wyoming, Governor Johnson of Mississippi, Governor Volpe of Massachusetts, Governor Scranton of Pennsylvania.

1 Bill D. Moyers, Special Assistant to the President.

Governor Hughes was in Japan and Governor Connally has another commitment and couldn't be here.

FEDERAL-STATE-LOCAL RELATIONSHIPS

[2.] The questions discussed were divided into three pans: What did we have in mind in the establishment of the commission to study Federal, State, and local governments referred to in our State of the Union Message? We discussed that at some length and I explained to the Governors what I had in mind and told them we would go into more detail in our meeting later; that we wanted to know what new institutions and new partnerships were needed to attack these problems.

How could we best organize the Federal Government field structure? How could we go about getting the best and right information on how effective these programs were, our new programs for this year, such as river basin commissions, community health services, multi-State training schools, and so on and so forth? Bill will give you any fill-in on that that you may want.

TAXATION OF INTERSTATE BUSINESS

[3.] The next question was with regard to H.R. 11798. That is the bill introduced by Representative Willis. It sets up uniform formulas that States have to follow in imposing taxes on business engaged in interstate commerce.

My statement in response to their query and discussion of it was that the bill was controversial. Many States have opposed it because they didn't like the thought of being subjected to such formulas. Some businessmen were against it because they thought it would overburden them by increased taxes.

There is a need to simplify and reform the whole area of State taxation of interstate business. That is a tough area full of legal and constitutional complexities. The key question is: What is the best approach? We are trying to study and determine this now.

The Federal Government has a keen interest in insuring fair and just treatment for business and States. We don't have all the answers. There are other alternatives that we are looking at. For example, 11 States have already enacted model codes. The question is: Should those be extended and are they really model? Would they be good for the Nation?

In the meantime, we have our experts here studying H.R. 11798 which concerns the Governors. We are looking at it carefully and looking at the other alternatives as well. We are open to their suggestions. We will be glad to have any comments they have. We are designating Secretary Fowler ² to act as the Federal Government's representative in reviewing the existing proposals and any the Governors might submit.

2 Henry H. Fowler, Secretary of the Treasury.

DISTRIBUTION OF FEDERAL REVENUES TO STATES

[4.] The third one was the question of the Federal Government acting as a partner in restoring fiscal balance and strengthening State and local governments by making available for their use some part of the great and growing Federal tax revenues over and above the existing aids. I told the Governors that we were redistributing Federal revenues; we were increasing our distribution to the States.

When I became President, a little over 2 years ago, we were spending $4.75 billion for education. This year we are spending $10.2 billion for education. That represents more than double the previous amount, an increase of $5 billion; although our budget was $6 billion more than last year exclusive of Vietnam, that we had cut out a lot of old programs in order that we can make new distributions to the States.

That meant research stations, that meant closing of military bases, that meant effecting economies in other routes so we could have what we popularly call Great Society programs--education, health, and conservation in these fields. I illustrated it by the fact that Federal expenditures for aid to State and local governments rose from $ 10.3 billion in fiscal 1964 to $14.6 billion in fiscal 1967, an increase of 40 percent in distribution in 3 years.

The share of Federal aid to State and local governments has risen from 6.4 percent in 1964 to 9.9 percent in 1967. The examples of major programs aimed at States and local governments that we spelled out were: $1.3 billion under the Elementary and Secondary Education Act; $600 million in medical care and social security amendments; new programs to clean up rivers, modernize hospitals, help law enforcement along the line of the crime message.

ECONOMIC OUTLOOK

[5.] That pretty well covered it. I discussed the problem we had with the economy, unemployment dropping to 3.7. I told them we couldn't tell this far ahead just what strains would be put on our economy. We had to watch it very carefully. We couldn't anticipate what would happen in Vietnam very far ahead as near as we could anticipate for--but we might have to ask for extra money. At least we were going to forgo every possible expenditure that we could that we felt could be eliminated that was archaic or obsolete, and I hoped they would do likewise.

Governor Reed can comment or say anything he wants to. We will go into the Appalachian meeting following this one. I am running a little late. We will go to the meeting this afternoon and have a general exchange of briefings on the state of the Nation--the state of the world, a briefing on the state of the Nation, and I hope a briefing on the state of the States. We will hear from them about the State conditions.

We will tell them what we believe the national condition is and we will review in some detail the world condition. Our people will report to you as much as they can after those meetings, and Governor Reed, as the Chairman of this group, if you have any observations, you can make them now, too, so we can go on.

COMMENTS BY THE CONFERENCE CHAIRMAN

[6.] GOVERNOR REED. Thank you, Mr. President.

This marks the third time that the Executive Committee of the National Governors' Conference has had an opportunity to meet with the President. In my recollection, this is the most opportunities that have ever been afforded the Governors to have direct communication with the President. We are very grateful for it.

The President has outlined the areas that we had concern in and I know I speak for my fellow Governors when I say that we are relieved, we are encouraged for the prospects of closer liaison between Federal and State governments.

There are many new programs to be implemented, and we feel that meetings of this type will help better inform the Governors as to the President's view as to how these should be implemented.

We are also delighted with the prospects of continuing closer relationships with our Federal Government. In all these areas the President has outlined his thinking, and we are very pleased that a meeting of this kind has been possible and feel that this is going to result in greater and better Federal-State relationships.

THE PRESIDENT. Governor Reed and his group, the Executive Committee, called upon me at the ranch following my operation last fall. This meeting really grew out of that meeting. I have never participated in a more constructive one. Everything that we do in these respective fields that he enumerated will be done only after a full discussion with the Governors and in full cooperation with them.

The meeting was helpful to me. It was constructive. It was nonpartisan. It was in the very best traditions of the American political system.

Thank you.

GOVERNOR REED. Mr. President, we feel the prospects were never better for Federal-State relationships. We are very grateful to you.

ADDENDUM TO OPENING REMARKS

[7.] THE PRESIDENT. I might add, in addition to the names I gave you, Governor Farris Bryant is sitting in these meetings with me, along with two or three others who are not Governors, but Governor Bryant's experience as Governor, his participation in the Governors' Conference, and so forth-he was here and I asked him to participate in this meeting and be helpful to me and to the Governors today. He will be participating in the meeting later this afternoon.

As all of you know, he is the former chairman of the Governors' Conference.

Any questions you want to ask me, I don't want to dodge or delay them. I will be glad if you will try to be limited with them.

QUESTIONS

[8.] Q. I gather you are going to send up a message on State-Federal relations.

THE PRESIDENT. We have always referred to it in the State of the Union Message.³ They wanted me to add to it today. We have done that. As we get to it, we will spell it out in more detail.

3 See Item 6.

[9.] Q. Mr. President, the Governors' Conference is on record for the so-called Heller plan.⁴

THE PRESIDENT. That is what we were talking about in the distribution of funds. We told them we were distributing a good deal of funds now.

4 A revenue-sharing plan proposed by Walter Heller, former Chairman of the Council of Economic Advisers, under which surplus Federal tax receipts would be distributed annually to the States for use as they determined.

POSSIBILITY OF TAX INCREASE; DEFICIT ESTIMATES

[10.] Q. Mr. President, when you told the Governors that we might have to ask for extra money, were you thinking in terms of an increase in personal taxes, sir?

THE PRESIDENT. I haven't reached any conclusions on that. I think that we have anticipated as accurately and as nearly as we can our appropriations and our revenues for this fiscal year and for the next one. We have no illusions, though, that they may have to be adjusted.

I did review with the Governors the record on our estimates to date. I don't know if the Herald-Tribune would be interested, but I will be glad to give it to you.

Q. Yes, sir.

THE PRESIDENT. In the 1964 budget estimate, the President's estimates were down $1.1 billion from the original estimate as submitted to the the Congress. In the fiscal 1965 budget they were down $1.4 billion from the estimate that he submitted to Congress. At the moment--the estimate he submitted to Congress--we are within about a billion dollars of that estimate, notwithstanding the increased, unanticipated Vietnam expenditures, because our revenue has gone up also.

That is a 3-year period. We will know more about it June 30th, but we estimated, as you will recall, a deficit of $5.3 billion, and we think that deficit will be in the neighborhood of that figure, within roughly a billion dollars.

Contrast that with fiscal 1959's budget. They estimated $500 million surplus and had a deficit of $12.4 billion. In 1956 we had a $4.1 billion deficit; in 1957 a $4.4 billion deficit. So we cannot tell at this time, but we think that our estimates on budget revenues and expenditures show an excellent guess.

The Budget Director says it is perhaps the best estimating record in the memory of the Budget, and we did review that in some detail.

But we do want to make it clear that we cannot foresee how many planes we are going to lose, how many shells we are going to fire, how many losses we are going to suffer, but as near as we can anticipate them, we have provided for them in the budget.

I might say that as of March 10th, that our estimates for January and February are running a little under what we estimated we would spend in Vietnam for those periods. That is an unusual period, as you know, because of the weather and other things, but we are running a little under. We may well run over next month.

Q. That is the period January to date?

THE PRESIDENT. Yes.

Reporter: Thank you, Mr. President.