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HEW cuts threaten state programs
A THREATENED cutoff by the U.S. Department of Health, Education and Welfare (HEW) of $831 million for welfare recipients across the U.S. prompted emergency action by Congress and a lawsuit against HEW by 23 states, including Illinois. In Illinois, the proposed cuts would have lopped $56.1 million from Aid to Families with Dependent Children (AFDC) and $25.1 million from Medicaid. Only California and New York would have lost more.

HEW's bombshell had a long fuse. Rep. Robert H. Michel (R., 111.) lit the match over a year ago when he tacked on an amendment to HEW's fiscal 1979 appropriations bill. The amendment ordered HEW to reduce its spending by $1 billion through cuts in fraud, abuse and waste. For over eight months disagreement smouldered between HEW and its congressional critics as to whether the amendment affected state programs.

Uncertainty ended in June when the Justice Department agreed with an earlier ruling by the General Accounting Office (GAO) that Michel's amendment applies to fraud, abuse and waste in AFDC, Supplementary Security Income (SSI) and Medicaid -- all state administered programs. At that point, HEW made its June 19 announcement that state programs would be drastically cut for the months of July, I August and September so that the department could comply with the law.

Congressional critics quickly accused HEW of avoiding compliance as long as possible and then passing the buck to the states in an attempt to get the amendment repealed. And Gov. James R. Thompson called HEW's action "a blatant abuse of discretion" in a June letter to Rep. Michel asking his help in straightening out the situation. Thompson also pointed out that Illinois has gone ahead in its program to combat Medicaid fraud in spite of "the absence of fully developed federal regulations" and HEW's delay of over a year in funding the state's Medicaid fraud control unit.

The Michel amendment was motivated by an HEW audit showing the agency was losing about $6 billion a year to ineligible welfare recipients. "Much of the waste is going on in programs administered by states. ... If the amendment had been implemented, it would have forced states to gear up their fraud abuse programs," said David Kehn, Michel's appropriations assistant.

But Susan Foster, HEW's deputy undersecretary for intergovernmental affairs, says the Michel amendment is "confusing at best .... The first part reduces by $1 billion our appropriations for 1979. The second part says it's not to be construed to change any law authorizing appropriations ... in this act." While the amendment was still being debated, HEW went on record with its interpretation that the amendment was "an exhortation" to save $1 billion and would not affect state programs. Sen. Warren G. Magnuson (D., Washington) also interpreted the amendment as not involving money for state programs, Foster said.

According to Foster, HEW submitted two plans to save the required $ 1 billion. The first plan, ordered by the Congressional Conference Report, was submitted late in 1978. A second plan was submitted early in 1979 at the request of Rep. William H. Natcher(D., Kentucky). But when the GAO and the Justice Department decisions came down, the only spending reduction that was still valid was $169 million HEW had saved in its student loan program. All the rest would have to come from state welfare programs.

Since then, HEW has asked for authority to borrow against the 1980 budget and has sought clarification of the amendment so that it won't cut state funds, Foster said. In addition, HEW agreed to let the states have their regular July allotments, giving the Senate-House Conference Committee time to modify Michel's amendment in its July 10 meeting and the federal court time to hold hearings July 11 on the lawsuit against HEW.

A proposal by Sen. Roger W. Jepsen (R., Iowa), which has already passed the Senate, would give HEW authority to borrow against its 1980 budget. And Rep. Michel's proposal, which has passed the House, would also defer the $1 billion cut until 1980. Under Michel's proposal, $500 million would be cut from HEW's 1980 budget through reductions in abuse in AFDC and other programs mentioned in the HEW audit. HEW would also agree to cut another $450 million through savings achieved by reducing fraud in the Medicaid and SSI programs, plus the savings already made in the student loan program.

A key point in negotiations between HEW and Michel's office is the way sanctions are applied to states who make too many errors in their AFDC payments. At present, the mean error rate in AFDC payments for all states is 8.1 percent. Under an HEW program begun in January 1978, states which are above the national mean must show an acceptable decrease in errors in order to avoid reductions in federal funds. As states decrease their error rates, the mean error rate also decreases, thus providing a continuing incentive for accuracy. (HEW is about to announce a 7.1 percent mean error rate for AFDC, Foster said.) Under this program, Illinois has avoided federal sanctions by reducing its error rate in AFDC payments from 19.5 percent to 13.0 percent during the last 18 months.

But according to Michel's special assistant, Mike Johnson, Michel considers the 8.1 figure too high. He would like to see the acceptable error rate gradually reduced to 4 percent. HEW, however, opposes setting an arbitrary figure by law. "Nobody knows what a tolerable error rate is," Foster says. "What is the cutoff point between how much it costs to eliminate error and how much is saved?" An arbitrary figure, if it is too high, would discourage states from saving, and if too low, "could totally disrupt state and federal programs." Big urban states like

Illinois would suffer the most. States which would benefit from lowered error ceilings are those which do not look for errors in their programs and therefore do not find any. Illinois, which has a high error rate but has been working successfully to lower it, could be penalized for doing a good job, she added.

Whether Michel proposes legislation setting a ceiling on the AFDC error rate will depend on how HEW cooperates, Johnson says. The same goes for cuts in HEW funding in 1981. "If Michel sees an earnest attempt at the end of the next fiscal year to cut fraud and abuse, then he might take [this] into consideration. What he wants is to see reduction in welfare fraud done at Congress's pace and not Secretary Califano's pace," Johnson says.

From HEW's point of view, cutting $1 billion from appropriations will not have a positive effect in reducing errors. HEW already has programs to reduce errors, Foster says. One is the AFDC program already in effect, and another is a joint state-federal technical assistance project still in the preparation stage. This program is aimed at reducing errors in the six states with the highest error rates, which includes Illinois. Foster also points out that Congress has failed to pass some good proposals for welfare reform. One is retrospective budgeting: the income of the welfare recipient during the past month is used to determine his or her grant for the current month.

"There is quite a bit of interest in Congress in showing the flag in reducing waste and abuse," Foster says, "but there is little interest in recognizing the complexity of the situation."

NIU acquires a law school
Northern Illinois University, DeKalb, will take over the Lewis University College of Law in Glen Ellyn in August. The school, which has an enrollment of 500 full-time and part-time students, will remain in Glen Ellyn for the next three years and then move to a remodeled building on NIU's DeKalb campus. Legislation for the move passed the General Assembly with the backing of upstate legislators and was signed by Gov. James R. Thompson this June. The Board of Higher Education opposed the takeover, asserting that even if the Lewis University law school had been forced to close, students would still have adequate access to a legal education. The board also said there is an oversupply of lawyers in the state. But Lewis University, the Board of Regents and NIU argued that northern Illinois needs a public law school and that the transfer is a good way to get one at comparatively low cost to the state.

SIU law school
Southern Illinois University at Carbondale received $7.58 million in capital development bond funds in June for construction of its School of Law building. Scheduled for completion in September 1981, the building will house the law library and enable the school to increase enrollments from 250 to 450 students. SIU's law school began accepting students in 1973. About 50 percent of the graduates have located in southern Illinois and another 40 percent in central Illinois or the Chicago area.

Agricultural research funds
The University of Illinois at Urbana-Champaign received $28.6 million in capital development bond funds in June for construction of a veterinary sciences building and an agricultural engineering building. This is part of the Food for Century III program which has expanded agricultural research facilities both at the I University of Illinois and Southern Illinois University at Carbondale.

Unclaimed tax money
Illinois received $5 million in unclaimed money from a protest fund established in 1967 after the state's graphic arts tax was declared unconstitutional. The Cook County Circuit Court ordered the money delivered to Atty. Gen. William J. Scott in June. Another $20 million from the fund had been previously released to the state in 1970. The fund now has a balance of $ 1.5 million which will remain until all appeals have been settled. Some 46,000 corporations and individuals have collected refunds on the tax.