Washington

By ROBERT MACKAY

The New Federalism: waiting for answers

A FEW DAYS after President Reagan announced his "New Federalism" plan to return more than 40 federally funded programs to the states, a headline in one Illinois newspaper read: "Reagan Welfare Plan Stirs Fear, Skepticism Here." Another one proclaimed: "Thompson fears $100 million loss."

All of this "fear" is unwarranted. First of all, no one — Reagan, Gov. James R. Thompson or budget director David Stockman — knows exactly how Illinois or any other state would fare under such a plan. The official Washington line is "no winners, no losers," though Stockman has already qualified that statement.

Second, this "New Federalism" plan is merely an idea that, as of this writing (mid-February), has yet to be submitted to Congress. If submitted in the spring, as Stockman hoped, Congress might get to it in the fall. But that is still a long shot. The economy in general and the federal budget in particular will dominate the Congress, and no one is going to call up such a proposal - already labeled "a diversionary tactic" by Democrats — when unemployment and interest rates are at record highs.

Third, and probably most important, the proposal would have to overcome two very big hurdles — congressional committee chairmen and skeptical governors. Few, if any, committee chairmen would support and vote for a proposal to give away some of the programs they control, and with it some of their influence. Also, the administration would have to come up with a workable plan that is acceptable to at least a majority of the 50 governors. That is not a legal requirement, just one that would be needed to generate support for the proposal in Congress. Getting more than 25 governors to agree on anything is a lofty goal in itself.

Reagan's plan has two major parts —"swap" and "turnback." Under the swap, the federal government would assume all costs of the Medicaid program for the poor — about $19.1 billion, which the states now pay — and the states would assume all costs for the food stamp program and the main welfare program, Aid to Families with Dependent Children — about $16.5 billion, which Washington now pays.

In the second part of the plan, Washington would turn back 43 other federally funded programs to the states —  about $30.2 billion worth — and provide the states with an annual $28 billion trust fund to run them. The fund would be comprised of revenue from the federal excise taxes on alcohol and tobacco, half of the excise tax on gasoline and from part of the windfall oil profits tax.

States that lose revenue in the swap would be allocated a larger amount from the trust fund; initial "winners" would be given less. In theory, therefore, the costs would offset each other, the trust fund — as Stockman puts it —  would be the "greater equalizer," and states would be directing the programs more to the specific needs of their own residents and administering them more cost-efficiently.

One problem is in the timing. The plan would take effect in 1984. But beginning in fiscal year 1988, the trust fund would be reduced by 25 percent a year. In 1991, the trust fund would be completely eliminated, along with those federal taxes that provided revenue for it. But the states would still have the responsibility of funding the programs. Perhaps that is why administration officials stressed in briefings that Reagan's plan was only a "framework."

Just how much of a framework became clear when Stockman first testified about the proposal before the Senate Governmental Affairs Committee, of which Sen. Charles H. Percy is a member.

Stockman was asked how long Washington would require states to provide a minimal "maintenance of benefits" for welfare recipients and others, once the states gain control of the programs. "I think that would be one of the details you'd want to work out," he replied.

Percy noted Illinois provides greater health benefits to its Medicaid recipients than many other states. Once the federal government takes control of Medicaid and implements benefit standards for recipients in all 50 states, will that mean a lowering of benefits for current Illinois recipients? Percy asked. "That is one of the details that have to be worked out," Stockman replied. "It won't be easy to do."

Another senator noted the program-cost figures the administration used in its federalism proposal differed substantially from those provided by some states. Would the actual federalism plan submitted to Congress be based on federal numbers or state numbers? "That would have to be worked out," Stockman replied, provoking some snickers from the audience. He quickly added, "I think we ought to set up some sort of independent statistical tribune."

As for the expiration of the trust fund in 1991, Stockman said states could replace the lost federal revenue with higher excise taxes of their own. He conceded, however, that non-oil producing states such as Illinois would have a tougher time replacing the lost federal revenue from the windfall oil profits tax than Texas or Oklahoma. Stockman argued he had said only that there would be "no winners or losers" among the states for the first four years of the program.

Stockman promised Percy he would be able to provide him with more details of the plan when Percy attends a conference in Springfield in May on the "New Federalism." Perhaps Stockman will have the names of the people appointed to the statistical tribune by then.

April 1982/Illinois lssues/39