States ready to haggle with Reagan on 'new federalism'

By , Staff writer of The Christian Science Monitor

State and local officials throughout the nation are generally enthusiastic over ''new federalism's'' promise of increased freedom in solving problems.

Many, however, appear increasingly cool to key elements of President Reagan's proposal for shifting some responsibilities from Washington, D.C., to the 50 state capitals.

But state officials say they are optimistic that what they view as major shortcomings in the plan - including as much as a $9 billion first-year shortfall in funds resulting from projected fiscal 1983 budget cuts - can be overcome.

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Considerable progress toward resolving some of the differences between state officials and the Reagan administration could come in the next few days during the midwinter meeting of the National Governors' Association (NGA).

During the three-day session in Washington beginning Feb. 21, governors will meet with several top White House aides, including Budget Director David A. Stockman, and later with the President. After the scheduled closed-door session with the President, the governors should have a better idea as to whether Reagan's plan is close to something they can support, even if it is not entirely to their liking.

Without the strong backing from among state governors and legislative leaders , prospects for getting new federalism through Congress are considered very slim.

Also meeting in Washington over the coming weekend are members of the National Association of Counties (NAC), whose agenda is to include talks with the President.

Like the governors, the county officials say they support the new federalism concept. But they add they are unhappy with some parts of the initiative, such as the use of federal excise taxes to finance the trust fund that would underwrite programs turned back to state and local governments.

Instead, says NAC executive director Bernard Hillkenbrand, county leaders want the aid to come from federal income tax revenues and not subject to annual appropriations.

Local officials share another major concern - whether states will pass along sufficient federal dollars to administer programs at the county and municipal level. Local leaders are seeking a cap on the amount state governments could retain for parceling out trust fund dollars to locally run programs.

Mayors and other municipal leaders also are trying to convince the White House to reshape the program to protect the interests of municipal governments.

Calling new federalism a ''bold and significant initiative,'' Alan Beals, executive director of the National League of Cities, adds that ''too many details remain to be worked out'' for his organization to take a stand.

Sentiments among governors concerning the White House proposal varies from hopeful to apprehensive, according to John Simson, an aide to Vermont Gov. Richard A. Snelling, the current NGA chairman.

Governors say they are especially concerned about the President's proposed fiscal 1983 budget, which asks for cuts in some of the aid programs to be transferred to the states in October 1984 under Reagan's plan.

Mr. Snelling and other governors are concerned not only over the adequacy of the proposed $28 billion trust fund for financing various grant and aid programs to be shifted to the states. They also are concerned about what might happen in fiscal 1988, when Washington starts to scale back its assistance to zero by 1991 .

The governors say they are willing to have fewer federal dollars in exchange for greater flexibility in determining which programs will continue. But they refuse to go along with a plan that fails to protect states with more restricted revenue-raising capacities. Such states could experience hardships as programs and services, no longer supported by federal dollars, are heavily reduced or eliminated.

Particularly attractive to many governors is the President's proposal for full federal assumption of medicaid.

But some are less pleased with the trade-off, which would shift responsibility for aid to families with dependent children (AFDC) and food stamps to the states. These governors say they would prefer to have all welfare programs become the full responsibility of the federal government and other responsibilities turned back to the states, such as the educational assistance.

The President's program ''has no chance of getting to first base unless it takes into account the differences between rich and poor states,'' warns Tennessee's Republican Gov. Lamar Alexander.

New York, for example, would be trading a $4 billion medicaid expense for $1. 7 billion in increased AFDC and food stamp obligations from the federal government. Unless adjusted, this trade-off would benefit the Empire State some billion without the swap would have to shell out only $2.03 billion on the welfare programs it would have to take over.

By contrast, Mississippi would be turning over to the federal government a $ 109 million medicaid program and getting in return a $293 million AFDC and food stamp financing burden. In Florida, a $349 million federal medicaid takeover would be replaced by a $629 million AFDC and food stamp funding burden.

Currently, there is no consensus on what the governors will ask in exchange for their support of the President's proposal. But it is generally agreed any new federalism legislation would have to provide federal aid to states unable to raise sufficient money to support essential programs.

Snelling and four of his colleagues, including Utah's Democratic Gov. Scott M. Matheson - who is next in line to take the NGA's helm - met with Reagan earlier this month and came away encouraged over the prospects for compromise.

With few exceptions, governors say they are reluctant to discuss the specifics of Reagan's proposal or to speculate on its impact on their states. ''There are simply too many unanswered questions,'' explains one gubernatorial aide.

Even state lawmakers are reluctant to endorse or criticize the President's approach to new federalism. Reaction to Reagan's '83 budget and its potential impact on federal aid programs is considerably short of enthusiastic.

''We support the administration's desire to strengthen the national economy and to sort out the proper responsibilities of state and federal governments, but we cannot accept a plan which jeopardizes the fiscal soundness of the states in order to decrease the federal budget,'' asserts Ross Doyen, president of the Kansas state senate and president of the National Conference of State Legislatures.

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