Reagan administration officials sought yesterday to assure skeptical state and local officials that no one would lose money on the president's proposal to shift programs from the federal to the state and local levels.
But they conceded that, to make the arithmetic come out even, they had made several assumptions about two main programs the states would take over--assumptions that made their costs look smaller. And they confirmed that the "hold-harmless" guarantees to state and local governments against any financial losses would run out entirely after a few years.
Budget director David A. Stockman also told reporters the plan would eliminate 75,000 federal jobs.
Meanwhile, President Reagan gained an endorsement of his ambitious and quickly controversial swap and turnback program from three Republican mayors. But the congressional prospects remained very clouded for the federalism initiative Reagan made the focus of last Tuesday's State of the Union speech.
At a meeting with reporters, White House chief of staff James A. Baker III conceded it would be "extremely difficult" to move the program through an election-minded Congress in 1982. But he said it was so central to the president's overall goals that "we won't abandon it even if it goes on past this year."
Health and Human Services Secretary Richard S. Schweiker told the U.S. Conference of Mayors there was a "50-50 chance of getting it through this year." House Speaker Thomas P. (Tip) O'Neill Jr. (D-Mass.) told the same meeting there would be "full hearings" before a half-dozen congressional committees on what he called "little more than a disguised attempt to balance the budget on the backs of states, cities and local communities."
Baker, Stockman, presidential counselor Edwin Meese III and the president's assistant for intergovernmental relations Richard S. Williamson joined several Cabinet members in an all-out effort to rebut the notion that some states would lose millions if the Reagan program took effect.
A number of newspaper stories, including one in The Washington Post, yesterday reported fears of state officials that for some states, the swap the president proposed beginning in fiscal 1984 (October, 1983) would be a losing proposition. The swap would have the federal government assume the state share of Medicaid, while the states took over the federal food stamp program and the federal share of Aid to Families with Dependent Children (AFDC).
West Virginia would be an example. It would save an estimated $65 million if the federal government took over its share of Medicaid, but would have to take on AFDC and food stamp burdens totaling $156 million, making it a $91 million loser on the swap. Twenty other states would be in the same position, according to a chart Stockman produced yesterday.
But in each case, he said, the state would be reimbursed dollar for dollar for its loss, from a trust fund to be created in 1984 out of federal excise and oil windfall profits taxes. After the equalization payments, the rest of the $27.6 billion trust fund would be used to support some 43 other federal programs the president would transfer to the states.
According to Stockman's figures, the entire swap would produce a net saving of $2.6 billion for the 50 states and the District of Columbia. That is the difference between the $19.1 billion of Medicaid costs the federal government would take over and the $16.5 billion of food stamps and AFDC the states would pick up.
But OMB officials confirmed that the figure they are using for the 1984 costs of food stamps and AFDC assumes that Congress passes new cuts, to be proposed in the coming budget, which will reduce the cost to the states by $3.7 billion. If these cuts are not made, the total burden of food stamps and AFDC going to the states would rise to $20.2 billion, making the states $1 billion losers on the swap.
Under the Reagan plan, the trust fund would disappear by 1991, as the federal taxes supporting it were eliminated, and then states would be on their own, dependent on taxes they raised themselves. Because there are enormous "fiscal disparities" in the tax bases of the 50 states, depending on their incomes, sales and energy resources, key members of Congress and state and local officials have raised questions about how the plan would assure adequate minimum financial support for the 43 programs in each state.
Stockman said that, beyond the temporary hold-harmless provisions, the Reagan plan is simply not designed as "a solution to the fiscal disparities problem," which has risen most notably in recent years in the Sunbelt-Snowbelt dispute.
"If that whole issue gets injected, no progress can be made" on sorting out federal and state functions, he said.
But Sen. Dave Durenberger (R-Minn.), the chairman of the Senate intergovernmental relations subcommittee. whom the administration is seeking out as a sponsor of its program, told the mayors conference the disparities issue cannot be ignored.
"It is time for the federal government to recognize a responsibility for equalizing the fiscal capacity of places," he said, adding that the trust fund should be used for that purpose. "In the first years, we might seek to minimize winners and losers to ease the transition. But we must in the long run use these funds to give every place an equal opportunity to be a good place to live."
Durenberger proposed that the trust fund be financed, not from expiring excise and windfall profits taxes, but "by permanently setting aside a percentage of the federal individual income tax for distribution to state and local governments according to a formula that moves toward equalizing fiscal capacity."
But Stockman said it was a question whether the federal government should even address the disparities issue and said Durenberger's proposal was a "dangerous thing to get into . . . . I'd be opposed and I think the president would look with great skepticism at a program to levelize the country."
Durenberger's view was endorsed by a leading Republican governor and the spokesman for Democratic mayors. Vermont Gov. Richard A. Snelling, the chairman of the National Governors Association, said he would like to see the trust fund expanded "to deal with imbalances" among the states. "You do not build a strong federal union by having 25 strong states and 25 weak states," he said.
And Mayor Lee Alexander of Syracuse, the head of the national conference of Democratic mayors commented, "I think we should be eliminating, rather than encouraging, disparity among the states of this union. And I think the president's message calls for disparity, rather than community."
Three Republican mayors, Richard Carver of Peoria, Jim Inhofe of Tulsa and Margaret Hance of Phoenix, visited the White House and endorsed the program, as presidential aides said Reagan would be stepping up his sales campaign in coming weeks.
But chief of staff Baker told reporters the administration was still uncertain "how to hold it the proposal together as a package" when legislation is submitted this spring. Baker said the complex program might be split into two proposals, but other aides said a single bill might have a better chance of escaping referral to as many committees as O'Neill suggested might be involved in scrutinizing the plan.
Rep. Barber B. Conable (R-N.Y.), the ranking Republican on the House Ways and Means Committee, said the fate of the program would be bleak unless governors and state legislators strongly endorsed it. "If the states want it, they can probably have it," he said. "But if the administration can't convince the states it's a good deal, it will not pass."