How '86 budget proposals would affect aid to cities

If President Reagan's proposed three-year solution to narrow the federal deficit to about $100 billion makes it through Congress, two major federal sources of revenue for cities will dry up.

Slated for extinction are the $4.5 billion-a-year general revenue sharing program and Urban Development Action Grants, which funnel some $440 million a year to cities as low-interest loans for developers.

Urban Development Action Grants (UDAG) are widely regarded as having been a vital catalyst in the economic revitalization of many cities in recent years. Revenue sharing, begun in 1972 under President Nixon and supported by President Reagan in past years, is the chief source of federal help for many medium and small cities.

UDAG money, which comes with relatively few strings attached, is often used for such staples as fire and police personnel.

''Some have the idea that revenue sharing is a sort of slush fund, but if you check around the country you'll find that revenue sharing is fundamental,'' observes Cleveland Mayor George Voinovich, adding, ''If you cut that out of the budgets of most cities, they'll be cut to the quick in terms of service delivery.''

The other major federal urban program - Community Development Block Grants - distributes some $3.5 billion to cities for housing and neighborhood improvements. Under the administration's plan, these grants would be cut by 10 percent in fiscal 1986 with more reductions to follow. Other less exclusively urban programs, such as housing assistance, mass-transit subsidies, and library grants, would also take sharp cuts.

And some Washington efforts primarily serving urban areas, such as the Jobs Corps, the Small Business Administration, and federal water and sewage system construction grants, would be eliminated.

''From our perspective, they (the administration) cut things to the bone four years ago and left only the bare essentials. Now they're talking about cutting those,'' says Jeffrey Esser, executive director of the Municipal Finance Officers Association.

''This is not another chorus of the past - there are new things being proposed (for cuts and elimination),'' agrees National League of Cities spokesman Randy Arndt.

''We feel there's a lot yet to be discussed and negotiated,'' he says.

''A lot of people have been surprised that rather than talking about just freezes or cuts, they're talking about complete terminations,'' says US Conference of Mayors spokesman Mike Brown. ''It doesn't look good at all.''