Whatever happened to the New Federalism?

By , Staff correspondent of The Christian Science Monitor

The 1982 legislative year is fast closing with no congressional action whatsoever on President Reagan's New Federalism - a $47 billion swap of programs and revenues between Washington and the states promised last January as the centerpiece of the White House's domestic agenda.

The New Federalism faded from sight through the year as the bitter and Byzantine budget maneuvers on Capitol Hill stretched on and on and the deficit, jobs, and the lagging recovery emerged as the most urgent national economic issues.

The White House is expected to reintroduce the concept in its next budget, in a scaled-down version.

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In 1983, the administration's selling job on federalism could prove even tougher. The new Congress will in effect be some 52 votes more Democratic in the House, after the switch of 26 seats following the election.

The nation's governors - with seven new Democrats in their ranks after Jan. 1 - are already balking. The National Governors' Association (NGA) told President Reagan Dec. 8 they've about lost interest in his New Federalism, which took up three-fourths of the organization's time this year.

The big issue now is ''budget, budget, budget,'' Utah's Gov. Scott Matheson told Reagan in a White House session. It is ''fiscal'' federalism - meaning a sustained level of federal funding for the states, not an exchange of powers or organization - that concerns governors now, said Mr. Matheson, the chairman of the NGA. Federal aid to states and localities has already dropped $17 billion in budget authority in Reagan's first two years, he pointed out.

The Democrats' new grip on governorships - 34 to the GOP's 16 - ''means President Reagan's New Federalism stands very little chance of being enacted,'' says congressional expert John F. Bibby.

Actually, the White House never did get a legislative bill up to Congress for action in 1982. The administration's bargaining with governors, state legislators, and local officials bogged down. The governors in November sent their own proposals to the White House - a three-tier swap of the states' medicaid load in exchange for the states' takeover of $18 billion in vocational aid, water and sewer grants, bridge repair, job training, and other programs now funded by Washington.

But the governors hadn't heard back from the White House this week when they went to Reagan and said their support for him in 1983 would be directly tied to his budget's funding levels for states, and that further federal cuts would have to be taken from defense or other categories.

The states would try to absorb inflation, but not more spending cuts, Matheson said. ''Half the states have had to raise taxes just to get by,'' he said. Together, 21 states have raised taxes a near-record $3 billion this year, according to the Tax Foundation, a Washington-based research group.

The governors ''are unanimous in calling upon Congress to avoid new cuts in domestic programs,'' Matheson wrote to Senate majority leader Howard H. Baker Jr. a week ago. ''In fact, several safety net and needs-tested entitlement programs such as food stamps, AFDC (Aid to Families with Dependent Children), and medicaid already require increased funding to provide basic needs to the new individuals on the growing welfare and unemployment roles due to the prolonged recession. We believe that further restraint can be applied to defense and indexed entitlements.''

Washington observers expect at least a mini-federalism proposal - possibly a White House is working on now.

The President's budgeters are trying to whittle down a potential $200 billion deficit for fiscal 1984. Budget experts figure Reagan must shoot for at least $ 50 billion in spending cuts or revenue offsets, leaving at most a $150 billion projected deficit. If the President sticks with his tough stand on defense spending demands, protects his third scheduled tax cut, and leaves social security much as it is - all considered likely - then shunting the financial burden for many programs over to the states will look attractive to White House budgeters.

Already the White House has shown interest in a transportation swap, with states taking over the cost of rural roads and bridges and Washington assuming entirely the Interstate Highway burden. There is also talk of combining three grant programs - general revenue sharing to states and local units, Community Development Block Grants, and Urban Development Action grants - into one lump sum paid to localities in exchange for fewer federal ties.

Whatever federalism swap emerges early next year in President Reagan's budget , it will certainly be a much scaled-down version from the President's first concept, which would have involved 40 federal programs.

Doing the job in smaller chunks, over a longer period of years, makes sense, argue many federalism supporters outside the administration. The White House has already been able to hack away at its unwanted federal role in state and city affairs by a wide range of other actions and inactions.

''For better or worse, the administration's budget cuts have fallen more heavily on intergovernmental programs than on any other sector, thereby forcing the states to stand on their own,'' says Daniel J. Elazar, director of the Center for Study of Federalism at Temple University.

''In Congress, the Reagan administration succeeded in collapsing a substantial number of categorical programs into a few block grants, which will presumably give the states more discretion (although much less money) to operate the programs.''

''On the other hand, despite a promising rhetorical beginning last January, the administration has not been able to come forward with a major federal system reform program,'' says Mr. Elazar. ''Nor has there always been a sufficiently clear conception of what federalism is about, since it is mixed with an overall desire on the part of the Reagan administration to reduce the size of government in every arena, based upon a libertarianism which wishes to emancipate individuals from external controls more than anything else.''

Reagan will need more time, likely two full terms in office, to fully implement his federalism concept, political experts say.

By use of the budget mechanism alone, however, Reagan may be well on his way toward pulling the federal government largely out of its partnership with the state and local units, according to some worried governors.

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