Cold comfort from a pinch-penny Congress

By ROBERT MACKAY

ILLINOIS, like most other states, took what it considers a financial beating in the last session of the 96th Congress, and the losses in federal revenue probably will be passed along to Illinois residents through increased taxes or reduced programs and services.

The outlook doesn't appear any brighter for Illinois and other state governments in the new, 97th Congress. Members of Congress are trying to curb inflation by reducing federal spending, and their primary targets are the federal grants and subsidies given to the states.

Instead of seeking more federal money for transportation and social services programs, state governments are just trying to keep the amount of federal revenue they already get. And they haven't been very successful. In the last session of Congress, the state of Illinois lost money in the following areas:

• General Revenue Sharing. All GRS funds for state governments were eliminated for fiscal year 1981, which amounts to about $113 million for Illinois. The state uses all of its GRS funds for local education. The state hopes to get GRS funds restored for fiscal year 1982.

• Justice. The amount of money given to the Illinois Law Enforcement Commission was reduced, a loss that could amount to $22 million. The Illinois legislature will have to decide whether to reduce the program accordingly or eliminate it altogether.

• Transportation. Congress changed the way the Department of Transportation funds the highway system and also imposed a limit on the amount of discretionary federal grants a state can receive. As a result, the state could lose some $65 million. The exact figure will be determined by how much money is provided in a supplemental appropriations bill later this year.

"Victories [by the states] were measured this year in relative losses," said Alie Randlett, a deputy director of the State of Illinois Office in Washington who is assigned to keep track of federal funding. But Illinois could have fared worse than it did during the last session, she said.

"It's trying to reduce the damage," said Michael Masterson, one of her colleagues who concentrates on the fields of transportation, agriculture and energy. "But it hasn't been a bad session as far as I'm concerned. It could have been a lot worse." Masterson said the reduction in federal highway funds could have been much worse.

On the positive side, funding for agriculture was not affected, employees of the bankrupt Rock Island Railroad received aid, and federal approval "looks pretty good" this year for the proposed coal gasification plant in Illinois — partly because of lobbying by the Illinois congressional delegation last session.

Raymond Willis, a deputy director in the office who specializes in the human services area, said an example of a "victory" in the last session of Congress was the death of a Carter administration proposal called Checks Paid Credit System. The proposal was opposed by a coalition of about 10 large states, including Illinois.

Under the proposal, the federal government would not deposit its share of funds for Illinois' welfare costs into the state's bank account until the state had sent checks to the welfare recipients and they were cashed. Washington wanted a daily accounting of how many checks were cashed and the total amount of money involved.

The federal government was concerned that its original practice of depositing funds in states' accounts was costing it too much money, because the states were earning millions of dollars in interest on the federal money before the welfare checks were cashed — interest the federal government could have earned itself.

But Illinois and the other states pointed out to the administration that under the Checks Paid Credit System large states would suffer financially, because they would have to increase their accounting staffs to provide daily proof that a certain number of checks were cashed in order to get the federal reimbursement. Willis said the proposal probably would have forced Illinois to double its accounting staff, which could have cost between $7 million and $8 million more a year.

Instead, the administration and the states reached a compromise proposal called Delay of Draw Down. Under it, the federal money will be deposited in smaller amounts in Illinois' account a few days before the money is to be "drawn down," or the checks cashed. The state will estimate for the federal government when it believes the money will be drawn down. Thus, the state is not forced into extra paperwork and expense, the federal government earns interest on its money until the last possible moment, and the state will not have to borrow money to meet short-term shortages that likely would have occurred through delays of reimbursement under the Checks Paid Credit System.

"It was basically a defensive measure," Willis said of the states' fight against the proposal. "Most of the success states have been having is keeping the [federal] money from going out."

As long as inflation continues to wipe out the economic gains of taxpayers and the income of the Treasury, members of Congress will be unable to seek federal funding for new programs. What will they do with their time, instead?

"Regulatory reform," answers Ms. Randlett. "They will minimize federal funding. It bodes ill for the states."□

January 1981/Illinois Issues/37