When retiring Virginia Gov. Charles S. Robb told his colleagues in the Council of State Governments last December that they should ”prepare for the possibility that federal funding–with the exception of income-support programs–may be completely shut off,” it seemed like scare-talk to many. It turns out Robb was simply anticipating the fiscal 1987 budget President Reagan sent to Congress last week.
Buried far back in the supporting documents with which the budget bureau inundated Washington last Wednesday was a table showing where federal aid to states and cities has been and where it will go, under Reagan`s plans. The table does two things that are critical to understanding the trend: It corrects for inflation and it separates out intergovernmental aid from those programs where the state and local governments simply act as transmission belts for federal dollars going to (mostly needy) individuals.
Using constant 1982 dollars, here`s what it shows: Federal aid to state and local government hit its peak in 1978 at $75.7 billion. It started down in Jimmy Carter`s final two years, then dropped sharply to $50.3 billion in the first full Reagan budget. It has been pretty steady since then, but if Reagan has his way, that number will drop to $40.3 billion in the next fiscal year and to $31.2 billion by fiscal 1991.
In that final year, federal aid to state and local governments would amount to only 3.9 percent of federal outlays (one-third the 1978 level) and a minuscule 0.7 percent of the gross national product.
Two comments can be made about this trend. The first is to point out that no one should ever underestimate Ronald Reagan`s persistence. Ten years ago, in his first full-scale campaign for president, he set forth a controversial plan for unloading vast federal responsibilities on the states. What was regarded as a colossal political blunder in 1976 can become an accomplished fact in 1986, if Reagan sticks to his guns and uses the Gramm-Rudman trigger to enact across-the-board cuts in unprotected domestic programs.
The second point is that, whether he succeeds in all his ambitions or not, state and local governments will increasingly find themselves in a go-it- alone game. Your mayors and city councils, your legislators and governors face a whole new world.
Just how tough that new world can be was spelled out the other day by two legislators who were in Washington. North Dakota`s Senate majority leader, David E. Nething, a Republican, and state finance committee chairman Rep. John Bragg of Tennessee, a Democrat, are the current and former presidents of the National Conference of State Legislatures.
Both knew the states would get it in the neck in the first Gramm-Rudman budget cuts, but when we talked, they hadn`t seen the specifics of Reagan`s proposals. What both of them talked about was the fundamental injustice of the federal government`s attempting to balance its budget on the backs of the states and the cities.
When Reagan`s first federal-aid cuts hit in 1982, in the depths of the recession, some 40 states raised taxes, Bragg pointed out. That made it possible for them to absorb some of the later cuts, but now they face a new double or, in some cases, triple whammy.
Reagan is proposing a further giant slash in federal aid. At the same time, through tax reform, he is moving to end the deductibility of state taxes, which increases the cost of revenue-raising in the states. In some states, like Nething`s, the agriculture and oil price declines that have been welcomed by the administration are knocking the props from under the economy. Is it any wonder that John Bragg says, with some scorn, ”The federal government has paralyzed itself and now it is going to paralyze the states.”
