President Reagan's proposed New Federalism would not be an even swap, but would cost the states $15 billion in lost federal aid in its first year, fiscal 1984, the Congressional Budget Office told Congress yesterday.
Reagan proposed on Jan. 26 that the states take over food stamps, Aid to Families with Dependent Children and about 40 other smaller programs. In return he said the federal government would take over Medicaid and create a temporary $28 billion trust fund for the states. The president claimed that it would be an even trade.
However, CBO Director Alice M. Rivlin told the Senate Governmental Affairs Committee that the states would end up $15 billion in the red if the trade-off went through as initially outlined by the White House.
One reason for the difference is that the administration assumed many of the programs to be taken over by the states would first be cut, as proposed in the president's fiscal 1983 budget. Therefore, the states would be taking on smaller and less costly programs in 1984.
The CBO did not assume such cuts, which, in fact, are meeting strong resistance on Capitol Hill, and based its calculations on the law as of the end of 1981. A second factor is that the CBO foresees higher inflation rates than the administration, so programs to be taken over by the states would cost more by 1984.
A spokesman for the National Governors' Association said the CBO figures confirm the association's own analysis but that the White House has said it is willing to readjust the figures based on actual appropriations for fiscal 1983. Rivlin gave this comparison of the figures:
The administration estimated that in 1984, the states would assume $16.5 billion in costs from taking over AFDC and food stamps, and $30.2 billion from taking over the 40 smaller programs, a combined added burden of $46.7 billion. However, the administration said the federal government would compensate the states by taking over $19.1 billion in Medicaid costs and by giving the states a federally paid trust fund of $28 billion, a total of $47 billion in offsetting funds.
The CBO, on the other hand, calculated that the added state costs would be $20.6 billion from taking over AFDC and food stamps, plus $41.4 billion from the 40 smaller programs, a total of $62 billion. The $47 billion in compensation to the states through federal takeover of Medicaid and creation of the $28 billion trust fund would leave the states $15 billion in the red.
A separate report by the CBO sent to Senate Minority Leader Robert C. Byrd (D-W.Va.) suggested that the $15 billion gap would widen in subsequent years because the cost of maintaining service levels in the 40 smaller programs would continue to grow with inflation while the trust fund would not. By 1991, these programs would grow to $62.5 billion.
In another hearing yesterday, Social Security Commissioner Jack Svahn announced he is easing some procedures in reexamining people on the disability insurance rolls to see if they are still entitled to benefits.
At present, if a person is reexamined and it is discovered from his records that he ceased being disabled some time back, say two years earlier, he is backbilled for the two years. Svahn said that in many cases, the determination delay "is the fault of the system rather than the individual." Therefore, he said, such benefits henceforth will be cut off starting with the date of reexamination, unless fraud is shown.
Svahn endorsed several provisions of a bill by Rep. J. J. (Jake) Pickle (D-Tex.) altering redetermination procedures, and backed the "general concept" of one Pickle provision requiring that an individual work in Social Security-covered employment at least two years in the six before disability in order to qualify, a tighter requirement than now.