By MIKE LAWRENCE

The new federalism: an Illinois forum

Gov. Thompson applauds President Reagan's new federalism but his response contains a number of "ifs," "ands" and "buts." Thompson's reservations are shared by other state and local officials, including Senate President Philip J. Rock; IBHE's Richard Wagner; Nelson Ashline, deputy to Supt. of Education Donald Gill; and Carbondale Mayor Hans J. Fischer. In this third article on the new federalism, Mike Lawrence assesses the responses of these and other local officials and concludes with a look at the way the new federalism will shape the agenda of the General Assembly.

The series was conceived by Louis Ancel, Chicago lawyer and member of the Illinois Issues Board, and is funded in part by a generous grant from the Ancel Charitable Trust.

LATE-NIGHT bar hoppers in Rock Island are not talking these days about the new federalism. But some of them have already tasted it. No longer, the city administration has decreed, will police routinely respond to distress calls from folks who have locked their keys in their cars.

City Manager J. Neil Nielsen says a survey showed the majority of those calls came in the wee hours of the morning. The municipality, he explains, has been shy on revenue, thanks primarily to sputtering sales tax receipts and state income tax sharing, and so the decision was made to halt a nonessential service.

Nielsen anticipates making similar assessments in the months and years ahead if Washington's role in the affairs of cities and states does truly recede, as President Reagan and others before him have proposed. And he welcomes the challenge. "Government," he says, "is finally learning it can't do it all."

Yet, he has reservations, and he is not alone. Nelson Ashline, deputy to state school chief Donald Gill, worries the nation's commitment to addressing the special educational needs of the poor and the handicapped could crack if responsibility shifts from Washington to state capitals. Paul White, who administers an Effingham-based community action agency that attends to the rural impoverished, is concerned he may be diving for social-service dollars in a smaller, Chicago-dominated pool. And Carbondale Mayor Hans J. Fischer, who has cultivated cordial relationships with federal bureaucrats, is somewhat pessimistic about the prospects of maintaining health and child care initiatives his city has launched with

State and municipal officials, mesmerized by federal largess, have subverted local priorities and become delivery agents for programs devised by others

federal dollars if it is forced to compete in what he fears is a highly politicized Springfield environment.

Tax hikes essential

They are all discomforted by this possible scenario: The general public will view the new federalism as a major tax relief program rather than as a transfer of responsibility from one level of government to others with some savings if questionable programs are dumped and administrative costs sliced. Accordingly, state and local officials who see tax hikes as essential to shouldering responsibilities previously borne by Washington could find themselves recoiling from an enraged populace. And, in that event, programs for select minorities may be hardest hit, especially if assertions prove well-founded that state legislatures and city councils lack compassion and courage under fire.

There is no question, Gov. James R. Thompson acknowledges, that there is a "very strong antitax sentiment out there. . .fierce, just fierce, absolutely fierce." But he believes that is precisely why the new federalism must come in some form if government is to meet its missions to the needy in particular and to the general citizenry.

"I make the argument that federal budget cuts over the next decade are a certainty," he says (the governor's remarks are from an interview in May). "They started under Carter. They are continuing under Reagan. Everybody believes that if the federal government does not have the will to raise taxes, which apparently it doesn't have, then it is going to have to cut the budget to get the economy back. So, the states have got to have maximum flexibility over that portion of their budget which the federal government funds." In Illinois, he points out, Washington's contribution has approximated 25 percent. And that, he adds, "is a big chunk."

"Whether we should have been that dependent on the federal government for 25 percent of our budget is history," he continues. "We are. We were when I came in. We still are. And any governor who had tried to wean us off in the last five years would have been lynched because nobody else was weaning off and there was no desire to wean off from Washington until just recently. So, as far as I'm concerned, if you have the right new federalism proposal, you are going to be better off

6 | July 1982 | Illinois Issues

when the budget cuts come."

New federalism, he says, could acceptably take the form of a "super-super block grant or a return to the revenue sharing kind of thing or just a transfer of a program back to the state with enough money to take care of it." The actual impact on taxpayers and service recipients, he says, would depend "on what savings you can achieve from present programs, by not having to go through the delay of Washington or the red tape or the auditing of Washington. It depends on which programs they allow you to cash in because they are of less benefit to your people than they are to some other state. It depends on the level of services that people want."

But what about state government's ability and inclination to make tough decisions concomitant with a shifting of responsibility and taxing power, such as in the excise levy area? "The states," the governor insists, "have grown up — both in terms of ability, structure, talent and social conscience, and one of the proofs is that we have been able to creatively work with archaic federal grant programs. But you can turn that argument around: What makes you think Congress is any more courageous?

"At least, the state legislators are saying, 'No way I'm going to vote for that program because we don't want to raise the taxes to pay for it.' Congress is saying, 'Yes, sure, you can have any program you want, but we're not going to raise the taxes to pay for it either: We're going to deficit-finance and ruin the nation.' That's real courage."

Obviously warming to his argument, Thompson continues, "Look what Congress has done for us over the decade: It has led us to a trillion-dollar deficit. It has adopted programs and promised them to people that it can't pay for. So, it goes and borrows, and in the process, it has ruined

Thompson acknowledges that there is a 'very strong antitax sentiment out there . . . fierce, just fierce, absolutely fierce'

the economy of the nation and thrown people out of work. Now, how compassionate is that — to throw people out of work? All that does is put additional strain on social programs which they say states are not compassionate enough to administer."

Indeed, even those municipal officials who are uneasy about dealing with Springfield instead of Washington sympathize with the thrust of Thompson's negativism about the burgeoning federal role during the 1960s and 1970s. What has happened, Rock Island's Nielsen submits, is that state and municipal officials, mesmerized by federal largess, have subverted local priorities and become delivery agents for programs devised by others.

City officials became vulnerable to such enticement, he contends, because state legislatures severely strapped their taxing powers. To be sure, as the trend toward viewing Washington as a key benefactor took hold, municipal administrators had to be concerned with far more than managing local services well. "City managers for years," Nielsen says, "have been rated on their ability to tap the federal dollar. It is not uncommon for councils to say to an applicant for a manager's job, 'What has been your track record in tapping federal dollars?'"

Thus, when he was city manager of Mexico, Mo., municipal officials bowed to strict federal requirements for funding an urban renewal project — even though it meant channelizing a creek and creating flood problems in another sector of the community. "They were the only big dollars we could get," Nielsen says.

In other words, the cost of wooing Washington has been hefty. "We have a badly overloaded intergovernmental system in which federal regulators struggle to design — for hundreds of programs — rules that they cannot possibly apply well in tens of thousands of communities in a nation with a diverse society," Nielsen says. And, just as significantly, accountability has become muddied.

New marble cake

"Once I learned that government was like a layered cake — with neatly divided responsibilities between the federal, state and local levels. Since the late 1930s, the cake has become 'marbleized,'" Nielsen says. "Popular participation — through the ballot box in local communities — was severely diminished. The traditional balance between competing national, state and local interests is out of balance."

Nielsen's doubts about a stronger state role focus primarily on the revenue-raising disparities among states and the resolve of officials to do what is responsible and not kowtow to

July 1982 | Illinois Issues | 7

special-interest groups and taxpayer revolts. He also wonders whether regionalism will be so rife in Illinois that problem-solving becomes extremely difficult if not impossible.

But his recent encounters with state agencies have reassured him. "The cities have looked at states as being without management

If you don't educate and you don't train, you will never move people out of poverty

capabilities equal to their own; however, I've had some very pleasant experiences with the State of Illinois. I have found willingness to help and a capacity to help. I also think we are getting a better quality of state legislator," he says. So, he suggests, "the 1980s may be a time for re-examination. We should not destroy valuable programs, but we should see how they can be accountably delivered."

White, executive director of CEFS Economic Opportunity Corp., seems in a similar mood, somewhat restless about the potential impact on the disadvantaged in the seven Central Illinois counties he serves but prone to think positively.

On the one hand, White has had rewarding relationships with state government. "Our cooperation from the Department of Commerce and Community Affairs has been real good," he says.

"You have to keep the money in education and training. If you don't educate and you don't train, you will never move people out of poverty," he says. But he also stresses transportation and economic development near the rural poor is important "and there may be more sensitivity to those factors at the state level."

On the other hand, he is concerned that fewer dollars may be available for social service programs and they may be gobbled by gluttonous big-city interests.

He does not anticipate much additional funding. In fact, his organization has already endured reductions. Yet, he believes those he serves need not suffer. "Perhaps delivery will be enhanced."

And that qualified optimism is shared by Richard D. Wagner, executive director of the Illinois Board of Higher Education. He and associates were taken aback by federal budget proposals to cut need-based federal aid to Illinois students by $70.2 million next year. But he, too, endorses reappraisals initiated at institutions and certain to persist if new federalism becomes a true trend.

"The new federalism," Wagner says, " will not directly affect higher education for the most part." But its indirect impact, he quickly explains, could be substantial. That is, if federal dollars for other social service programs are reduced or even evaporate, there will be greater competition for state funds.

In anticipation of that, Wagner says, the Board of Higher Education is encouraging program reevaluations. "I think higher education needs to continue raising questions of quality, increasing the expectations of performance and raising the levels of student performance."

Education amalgam

But he is also among those trying to build a formidable lobby for state dollars. Wagner, who came to state government in the 1960s, contends higher education can no longer rely upon the clout of a few key legislators representing university communities. Consequently, an amalgam of both public and private institutions is viewed as virtually compulsory.

Curiously, that cooperation must increase even as competition between them on another level intensifies. There will be, Wagner notes, 32 percent fewer youths being graduated from high school in 1992 than there were in 1978, and the ramifications of that are evident. But the public and private institutions, he says, cannot afford to fight over state funds, which could be relatively scarce. "It tends to make public service very interesting and very challenging," he says with a smile.

But Carbondale's Fischer grins little when he talks about the new federalism. Already, he says, program in which city government has take pride have felt the budget knife, and is skeptical about a rescue from Springfield.

"Generally, there is an increasin fear at the local level that the federalism and block grants are sub ways of reducing funding for programs," he says. And that fear, he says, has been heightened by what occurred with respect to health and child care programs administered by the community with federal dollars. "We are seeing a reduction in preventative health services. In their place, we are dealing with acute health problems. As time goes on, the acute care items will become more widespread once th neglect caused by a lack of preventative care comes back to haunt us.

"If funds for child care continue to diminish, the number of people staying home from work to care for children will increase. The result, particularly in single-parent households, will be more strain on the state's welfare system."

The federal Department of Housing and Urban Development, Fischer says, has recognized child care funds are especially important to a community like Carbondale, where the existence of Southern Illinois University encourages further education if parental responsibilities can be conveniently met. Moreover, Carbondale's record in managing federal programs has been a factor in attracting even more aid. But what will happen, Fischer asks, if and when - state officials replace their federal counterparts? Will Carbondale's success stories sell?

In assuming control over much of the community development grant money that has come to Illinois, Fischer says, the state elected to reduce the funding level, "impose a much stronger program emphasis on one facet of the eligible activities — economic development. . . and make funding a year-to-year event rather than to allow the possibility of multi-year funding commitments."

But Fischer has other, even more fundamental, concerns about whether partisan politics will prevail in the awarding of block grants and whether efforts to restrict the taxing powers of local government will continue.

"There is no room for partisan politics in the block grants," Fischer states bluntly.

8 | July 1982 | Illinois Issues

And, he adds, "If the federal and state governments are unwilling to fund services, the legislative restrictions should be removed from the ability of local governments to raise revenues. It is totally irrational for the state to impose more and more restrictions on local revenue potentials at the same time it is clear more and more responsibility for financing services will be shifted to the local level."

If his worst notions about the new federalism are realized, the mayor says, it is undoubtedly the social programs that will suffer, especially in downstate Illinois. Those programs, he notes, are the "Johnny-come-latelys" to the gamut of services offered at the local level, and municipal officials would more likely continue traditional and basic functions such as street repair and maintenance, law enforcement and fire protection.

And if Nelson Ashline's worst notions about the new federalism are realized, a sharp decline in federal funding for education could also adversely affect the needy. Only about 8 percent of funding for elementary and secondary education in Illinois comes from Washington, Ashline points out, and the federal reductions have been relatively insignificant. But that does not mean, he stresses, thoughtful Illinoisans should ignore the new federalism's possible impact on education.

Two-thirds of the education funds routed by Washington to the state are intended for the disadvantaged. Already the school lunch program has been trimmed. But primarily at stake is money targeted for the unusual education needs of the economically disadvantaged, big city blacks and Hispanics. If Washington recedes, will Springfield respond? That is one of the most crucial considerations in the new federalism debate, Ashline says.

Statehouse perspective

From Washington, he recalls, policymakers could view America's cities in flames during the 1960s and determine there were national maladies spawned by racial subjugation, maladies that could be attacked by financially bolstering school districts trying to educate masses of disadvantaged. Do policymakers in Springfield, Ashline asks, have the same perspective?

In Washington, he continues, the powers-that-be could see linkage between proper nourishment, success in school and diminishing government food surpluses. Is such a linkage important to Springfield?

However, even as he raises those questions, Ashline is not singing a song of vaunted praise for the feds. "The federal government has never had an auditing problem with us [the State Board of Education]. But it has now increased its auditing force here ten-fold," he says with decided disdain. Moreover, even in those areas in which it has showed legitimate concern,

Today's typical lawmakers have much more to lose if they risk wrath by acting responsibly, particularly in behalf of minorities

Washington has established cumbersome and sometimes nonsensical regulations. One of Ashline's pet peeves is the method by which federal bureaucrats determine whether schools are offering comparable educational opportunities to the disadvantaged before they decide whether Title I funds for the deprived can be allocated to them. For instance, Ashline says, if a school in a relatively affluent neighborhood has a piano, federal officials will require that a nearby school in an impoverished sector buy one.

"I don't think the federal government does a very good job, but I'm not confident the states would pick up some of these vital programs, and it has to be done," he says.

There should always be a federal government interest in education addressed to what it feels are national problems, Ashline continues. In addition, for the state to accommodate the loss of the relatively small amount of education aid that comes from the Potomac would be a major problem. That is because the state would have to tap a far smaller revenue base, Ashline says.

So he also is reluctant to embrace the new federalism. He seriously questions, in the main, whether state legislators lacking national perspective and fearing flogging by antitax fanaticism would defer to the disadvantaged, most of whom do not vote.

And, in actuality, his reservations relate to the broader debate of whether state governments can responsibly assume a greater policy role.

Much of the national discussion thus far has centered on whether state executive and legislative branches are appropriately structured and staffed. In Illinois, there is little doubt about that. The General Assembly has been reapportioned on a one-man, one-vote basis, thereby righting a balance once tipped to rural interests. The legislature is amply staffed, and lawmakers themselves are more professional.

Ironically, however, many of those seemingly positive changes could militate against sound and courageous decisionmaking when it comes to determining which formerly federally funded programs should be dumped and which should be preserved with state dollars.

Lawmakers in the 1960s were employed elsewhere and not as panicky, therefore, about re-election threats. Moreover, as legislative pay has risen and retirement benefits blossomed, long careers in the General Assembly have become more attractive. In short, today's typical lawmakers have much more to lose if they risk wrath by acting responsibly, particularly in behalf of minorities.

So, they may not be willing to bite the bullet. And the inclination not to do so may become more pronounced if lobby groups for the disadvantaged, the handicapped and the environment are unable to mount in 50 state capitals the effective force they have mustered in Washington.

But Richard McClure, a gubernatorial aide who has worked with the legislature on education matters and with the White House on the new federalism, is optimistic. "There is inherently more political heat that comes back with the programs," he says. But municipal officials and most interest groups should find state lawmakers and bureaucrats more accessible and "more capable of assessing Illinois priorities than is the Congress."

Responding to comments by the Carbondale mayor, for example, McClure says

July 1982 | Illinois Issues | 9

"Illinois is a diverse state, and there is nothing to prevent the state from dividing programs into regions and letting the regions set their own priorities," McClure says. But he acknowledges the task of state policy-makers would be easier if new federalism is not ballyhooed as a tax relief program, even though there may be an easing.

And Rep. James Reilly (R., Jacksonville) hastens to concur. As chairman of a House subcommittee scrutinizing appropriations for several human service agencies, Reilly is confident the General Assembly would continue to minister to the needy without oppressive partisanship. The bureaucracy and the General Assembly, he says, have been handling grant programs ably and compassionately for years.

But Reilly, one of the House's more respected members, is concerned that Reagan has not sufficiently emphasized that state and local governments may have to impose new state and local taxes to handle the new responsibilities he proposes to give them. "I think the president ought to tell that side of it," Reilly says.

Difficult sorting-out process

Yet, even without Washington offering that perspective, the General Assembly would rise to the occasion, says Senate President Philip J. Rock (D., Oak Park). He is a liberal in the Hubert Humphrey tradition. He has also been stung by regionalism as a soldier for Chicago. But Rock believes the General Assembly "has the political maturity and sophistication" to meet the challenges of the new federalism.

"I'm not going to minimize the fact that there will be difficult crises. Groups will have to fight for categorical grants. And there will have to be a difficult sorting-out process. But I have faith in the system."

Indeed, the new federalism would offer a litmus test for that faith.

Mike Lawrence is Springfield bureau chief for Lee Enterprises.

10 | July 1982 | Illinois Issues