After decades of deferring to Washington, leaders of state government are increasingly asserting themselves as policy innovators on a variety of domestic concerns. The shift of leadership -- a direct byproduct of President Reagan's fiscal policies and philosophical preferences -- is producing demands for a fresh effort to "sort out" the complex relationships between overlapping levels of government.
The debate is likely to increase in 1986, as Congress struggles again with federal budget deficits and gubernatorial and legislative elections take place in almost three-fourths of the states. The rest of this decade and the 1990s "could be an historic 'window of opportunity' for the states," the Council of State Governments (CSG) said in a report released Thursday. "Never before have they been looked to by both their federal and local partners as leaders in dealing with domestic needs and problems."
The Republican Governors Association, which begins its winter meeting today in Wilmington, Del., is spotlighting what it calls 86 "modern answers" its members have advanced "for creative excellence in government close to the people."
On Tuesday, a bipartisan group of local, state and federal officials will formally propose a "thorough overhaul" of grant-in-aid programs, which would see the states take over management and financing of many economic-development, environmental and social-service activities, in return for greater federal support of the two major welfare programs, Aid to Families with Dependent Children (AFDC) and Medicaid.
Retiring Virginia Gov. Charles S. Robb (D) told a CSG meeting Thursday that budget deficits leave the Reagan administration and Congress "no choice but to unload substantial responsibilities" onto the states. He warned legislators and other governors at the Lake Tahoe, Nev., meeting that "states should prepare for the possibility that federal funding -- with the exception of income-support programs -- may be completely shut off."
Sen. Daniel J. Evans (R-Wash.), co-chairman with Robb of a prestigious Committee on Federalism and National Purpose, said the premise of its forthcoming report is that "we're running up against the limits of what we can do in Washington . . . and we have to give more flexibility to state and local governments to do what they can best do."
The CSG report warned that state governments may find themselves in "a fiscal vise" as Washington cuts domestic programs and local governments are pressuring the states for "more aid and more authority over their fiscal, functional and personnel systems."
Governors may be "in an uncomfortable political position," the report said, with more calls for assistance conflicting with demands to "hold the line or reduce taxes."
Nonetheless, the report said, state officials are gaining increased recognition for "their achievements as budget balancers, cutback managers, policy initiators, program innovators and service deliverers . . . especially when compared with the federal government's record in these areas."
The growing importance of state government is reflected in the heightened competition for state office. The meeting of GOP governors in Wilmington is the kickoff of a major 1986 campaign to improve their standing in the states. With 27 Democratic-held governorships at stake and only 9 Republican seats up, the GOP sees a big opening. Only 16 of the 50 governors are Republican.
Materials prepared for their meeting describe policy innovations ranging from a state-sponsored "investment bank" designed to develop jobs in West Virginia to a South Dakota effort to find alternatives to foster care for children.
Setting a campaign theme for next year, they say that "Republican governors of the '80s will surely shape the next generation of America as much as the Democratic Congress of the '60s shaped the last."
Democrats challenge the partisan tone of that claim but, increasingly, accept the idea that domestic-policy innovation is more likely to develop beyond the Capital Beltway. A Democratic Party policy commission, which will hold regional hearings and issue recommendations next year, is headed by former Utah governor Scott M. Matheson and is dominated by state and local officials.
The Robb-Evans commission report demonstrates spreading bipartisan recognition of the growing policy role of state and local government.
Its signatories include not only three former members of the Reagan administration but former president Jimmy Carter's domestic policy assistant, two influential House Democrats and prominent Democratic officeholders at the state, county and city levels.
The 25-member commission -- part of the National Conference on Social Welfare's project on the federal social role -- agreed that the current pattern of "cooperative federalism," which channels about $100 billion of assistance through some 300 intergovernmental programs, "is out of step with the realities that face our nation today. The national government is involved too little where it is uniquely equipped to perform well and too much where states and localities could do the job better."
President Reagan -- a longtime advocate of shifting domestic programs out of Washington -- offered a federalism initiative as the centerpiece of his domestic program in 1982, but the proposal quickly became mired in controversy and was lost in that year's preoccupation with recession and emerging budget deficits.
The commission headed by Robb and Evans, a former three-term governor of Washington and past chairman of the National Governors Association, has come forward with a new version of Reagan's proposed "swap" of federal and state responsibilities.
It includes one idea that Reagan has always rejected in the past -- federal financing and uniform national standards for the two major welfare programs.
The long-term care part of Medicaid would be separated and run by the states with the help of block grants. Many existing categorical aid programs would be turned back to the states, which could use some of their AFDC and Medicaid savings to finance them. To help the dozen poorest states meet those expenses, the commission recommends tightly targeted federal "fiscal capacity" grants, instead of general revenue-sharing with all jurisdictions. It also calls for expanding the efforts, already under way in a handful of states, to help welfare recipients into jobs by training, placement and child-care services.
Commission members said White House aides had been briefed on the report but were noncommittal. In 1982, Reagan suggested a federal takeover of Medicaid but said AFDC and food stamps should be shifted to the states, with other federal aid programs following them over a period of years. That proposal proved so controversial that implementing legislation was never introduced.
The commission recommendations were endorsed by three members who are Reagan administration alumni, former Health and Human Services secretary Richard S. Schweiker, his former assistant secretary for health, Dr. Robert J. Rubin, and Richard S. Williamson, former assistant to the president for intergovernmental affairs.
Influential Democrats on the commission included Rep. Richard A. Gephardt (Mo.), chairman of the House Democratic Caucus; Rep. Leon E. Panetta (Calif.), Mayor W. Wilson Goode of Philadelphia, Montgomery County Executive Charles W. Gilchrist, Maryland House Speaker Benjamin L. Cardin and Stuart E. Eizenstat, Carter's assistant for domestic policy.
Evans and Sen. David F. Durenberger (R-Minn.), another commission member, are planning to develop legislation carrying out the recommendations for "fiscal capacity" grants and other parts of its blueprint.
Evans and Robb pointed to the prospect of continuing federal budget deficits as a driving force in the shift to state and local policy initiatives. "We just have to find a way to get a clearer delineation of responsibilities and more trust between the levels of government," Evans said. "We spend so much time and money regulating and supervising the states instead of delivering services."
Robb, using even blunter language, said in Nevada that "the federal government, once the source of financial support and the impetus for social change, is in retreat . . . . The shift in responsibilities from Washington to the states will continue, regardless of which party is in power."
The retiring Virginia governor said, "I don't know if the decision to let deficits soar in the early '80s was part of an undercover plan to reorder the nation's government. But plan or no plan," he said, deficits make it certain that "more cuts are coming."
At the Wilmington meeting, which continues through Tuesday, Republican governors will try to put a more positive spin on the trend. The session is the first step in carrying out a strategy outlined by Tennessee Gov. Lamar Alexander and a handful of other GOP governors, members of the House and campaign strategists at a meeting last summer at Alexander's retreat, Blackberry Farm, in the Smokies.
The theme they developed for the 1986 gubernatorial races is that "if Reagan Stage I was an end to the smothering excesses of government from Washington, Reagan Stage II is a new beginning for creative excellence in government close to the people."
New Hampshire Gov. John H. Sununu (R), vice chairman of the campaign group, asked his colleagues to submit examples of their innovative programs. The brochure developed for the Wilmington meeting depicts those Republicans as innovative activists in such fields as the environment, welfare and education reform, and assistance in providing utilities and food that Democrats have claimed as their special province.
The flurry of developments suggests that partisan competition for control of domestic policy will not abate, but shift its venue from Washington to the state capitals.