HOWEVER TOUGH the budgetary problems facing the administration and Congress, those facing the nation's governors are worse. Unlike the federal government, which now seems locked into chronically gargantuan deficits, most state governments are constitutionally bound to balance their operating budgets. Doing that in a prolonged recession--with federal aid and revenues falling just as needs mount--is some trick.
Already, most states have had to cut back services, raise taxes or both. Last year, 21 states raised taxes by almost $3 billion on top of an even larger increase the year before. That undercuts the stimulative effect of federal tax cuts. Cuts in state and local spending, which tend to go mostly for labor costs, also add to local unemployment. In a reversal of their normal role, state and local governments have thus added to the economic decline rather than cushioned its effects.
While the governors successfully resisted administration attempts to make further cuts in state aid in the 1983 budget year, they are understandably wary of further attempts to solve federal budget problems by dumping them on Statehouse doorsteps under the guise of a "new federalism." The governors are right to be suspicious of "even-swap" proposals that are far from even, but they also need to decide what they are willing to trade.
Last month's fight over the gas tax found them divided. Most governors thought the prospect of more federal money for roads and highways alluring. But some governors wondered whether the gas tax was really such a favor. They noted that, under the formula that governs highway aid, many hard-hit states would export more in gas taxes than they would get back in aid, and that states would be forced to use some of the money for low-priority interstate extensions when repairs of existing roads were much more important.
Every governor's--and mayor's--dream, of course, is the revenue-sharing model. The federal government takes on the unpleasant job of raising taxes and then turns the money over to them to spend as they please. But at a time when federal aid is more in the nature of deficit-sharing than revenue-sharing, a case needs to be made as to why the federal government should get involved at all.
One good reason is that local revenues are frequently out of balance with local needs and that competition among states to attract businesses can discourage needed tax increases. But this presupposes that federal money is fairly distributed according to some reasonable measure of need--which is rarely the case by the time a bill has been lobbied through Congress. The other is that a national purpose is being served. But this requires the imposition of federal standards. If the governors and the administration really want to pursue a new--and presumably better--federalism, they need to sort through all the many responsibilities now shared, and decide which programs meet these specific tests.