THREE GOVERNORS went before a Senate subcommittee last Thursday to call for a halt to the shifting of federal burdens to states and localities that the administration's policies seem to require.
Testifying before the Senate subcommittee on intergovernmental relations, Govs. George Busbee of Georgia, Richard A. Snelling of Vermont and Scott Matheson of Utah--the past, present and future chairmen of the National Governors' Association-- pointed to the already staggering difficulties that states and localities can expect to face in the coming years and warned that a continuation of present economic policies might push these to crisis dimensions.
Despite considerable belt-tightening, state governments were already in pretty bad shape when the Reagan budget cuts came. A survey last spring showed that cash flow in most states--a handful of oil-, coal-and other resource-producing states being the exceptions--might not cover operating expenses this fiscal year. States and localities have also been neglecting repair and maintenance of roads, sewers, prisons and public transit and water systems, so that spending in the hundreds of billions will be needed over the next decade in addition to investment to meet new requirements.
Financing this investment will be much more difficult and expensive not only because of high interest rates, but also because municipal bonds must now compete with new types of tax-exempt investments such as All Savers certificates and expanded Individual Retirement Accounts. Lower tax rates for the rich also mean that tax-exempt bonds are less attractive than before to their traditional purchasers.
Adding to these pressures is the immediate need to absorb a 25 percent cut in the purchasing power of federal aid voted by Congress last summer. Worse yet is the fact that the administration's plans for more than $100 billion in additional budget cuts imply that aid to states and localities would be all but wiped out by 1984.
To head off a kind of paralysis caused by uncertainty about future budget cuts, Gov. Snelling suggested that federal grants-in-aid--except for welfare and other payments to individuals--be frozen at about their present level for the next few years. Inflation would still cause the purchasing power of federal aid to decline, but states would at least know how to plan. That would still leave a need, however, for some clearer thinking about how the society's responsibilities can best be shared among the federal, state and local levels of government.
Mindlessly shifting federal burdens to state and local tax bases doesn't do the average taxpayer any favor. Because states and localities find it hard to raise taxes--especially when they are also having to cut services--this strategy is also likely to promote the sort of beggar-thy-neighbor policies that corrode any sense of national purpose. In his testimony, Gov. Busbee suggested a "domestic summit" of administration, congressional, state and local officials. That might not be a bad way to begin planning a federal system that strikes the right balance between the benefits in flexibility and administrative efficiency that come from local management and the fairness and revenue-raising efficiency that come from the federal taxing power.