Shortly after President Reagan's inauguration, his administration established, amid much fanfare, a "partnership" with the nation's governors and state legislators to work toward a restoration of an orderly system of federalism. The basis of this partnership was that state officials would support the substantial reductions in federal spending sought by the president, in exchange for: (1) consolidation of the nearly 500 federal categorical grants into broad block grants, with much greater flexibility provided for the states in carrying out mandates imposed by the federal government; and (2) a commitment by the administration to pursue a rational "sorting-out" of scrambled government responsibilities, so that each level of government would perform those functions it was best equipped to handle.
As chairman of the National Governors' Association at the time this partnership was formed, I strongly supported this understanding with the administration as the best opportunity in a generation to bring some order to the chaotic condition of federal-state relations, while reducing the burden of runaway government on the American people. I believed the president's assurances that he would treat state officials as true partners in this endeavor, and not just as short-term political allies in the fight to pass his package of budget cuts.
During the last eight months, the president has consistently benefited from the bipartisan support which governors and state legislative leaders have given his overall economic program. In exchange, the states have received the following:
* Of the massive budget cuts passed by Congress at the president's insistence, more than one-third have been in grants-in-aid to states and localities.
* Fifty-three of more than 500 categorical grants have been consolidated into block grants, but unfortunately many of the federal "strings" remain on those that have been combined.
* States have suffered an automatic loss in revenue-raising ability as a result of the administration's tax package.
* The administration was narrowly defeated in an attempt to impose an arbitrary "cap" on federal responsibility for Medicaid, a program that most state officials and independent observers believe should be entirely federalized.
Now the president has decided to embark on a second round of federal budget cuts. Grants-in-aid in general and block grants in particular apparently will absorb a major portion of these reductions. Once again, Capitol Hill sources indicate that the adminstration seems prepared to ask for a cap on Medicaid, which in effect would require the states to bail out this costly federal entitlement program.
The governors wish to remain bipartisan in their support of the president's efforts to balance the federal budget. However, it is most disappointing that our federal partners have not consulted any governors before announcing their latest plans--despite the tremendous adjustment problems these last- minute cuts will pose for state governments.
At this point, governors and state legislators--and the taxpayers-- need to ask the administration some very basic questions about the federal-state partnership.
What is the Reagan administration's philosophy of federalism? Does federalism just mean that states and localities should absorb all excess federal costs that stand in the way of balancing the federal budget? What are the government functions the administration considers primarily federal, to balance against the list of responsibilities it wishes to shift to the states? If, as sometimes seems to be the case, the administration wants to limit the federal government to national defense, then when will the states be given some role in forming the national economic and monetary policies that largely determine the demand for social services?
In the first round of cuts, lack of prior consultation about a common understanding of federalism with the governors was perhaps justified by the urgent need to balance the federal budget and bring about economic recovery. Now, however, many believe the president should give some consideration to available options that would reduce federal spending while promoting the governors' concepts of federalism.
Instead of pursuing additional massive cuts in block grant funding, the president might instead insist that the remaining 400-plus categorical grants be consolidated into broad functional areas, as recommended by the Advisory Commission on Intergovernment Relations. This step could create immediate, permanent savings of at least 5 to 6 billion dollars a year, without reducing actual services.
If the administration believes that controlling entitlement programs is the key to controlling the federal budget, then perhaps the president should move toward controlling these programs at the federal level, where all the regulations and policies affecting costs are already made. A good first step toward accepting this responsibility would be to open immediate negotiations with the governors on how the federal government could move toward more prime responsibility for income maintenance, while the states regained authority and responsibility over more traditional state functions, such as education, transportation and law enforcement.
With such advance consultation, both the president and the governors could develop an orderly and rational agenda for the transfer of governmental functions and resources while minimizing the impacts of necessary federal cuts. With the development of such an agenda, the taxpayer would have a clear understanding of the president's and the governors' sense of restored federalism, and together we could begin to untangle the mass confusion in the minds of the public over when and where the governmental buck stops.