Solutions for the states
Since last spring America's governors and mayors have been warning that the Reagan revolution would save the federal budget only by shifting the economic burden to state and local taxpayers.
They warned. But most of them went along with the Reagan prescription for the New Federalism.
Now we are witnessing a new round of concern - even alarm - about the ability of states and cities to absorb Washington's ''gift'' of more responsibility and less federal aid.
The concern has brought forth a number of proposed remedies - and two reminders: Mr. Reagan did not begin the reduction in federal aid and state and local expenditures; allowing for inflation, they have been falling since 1978. And improvements in state government over the past quarter century have left most states institutionally better prepared to cope with new responsibilities than before.
The effort now is to prevent a widespread decline in public facilities - roads, sewage disposal, education, job training - from reaching crisis proportions. Already businessmen see the President's revitalization of the economy jeopardized by failings in the ''infrastructure'' of physical and human services on which industry depends.
Business Week recently produced a cover story analyzing the problem. Felix Rohatyn, main shaper of New York's fiscal rebound, proposed a list of solutions that in part matched those tendered by the magazine.
Among their suggestions:
* Setting up an agency like the old Reconstruction Finance Corporation. It would supply low-cost capital for urban redevelopment. This would risk distorting the marketplace to which Mr. Reagan is committed. Such aid would have to be carefully targeted to serve genuine needs and avoid subsidies for useless projects or ones that business would undertake anyway.
* Recycling energy severance taxes. These are taxes like those on coal and petroleum production that states currently levy for their own use. The proposal is to share the land's bounty through national distribution of such revenues. Opposition would come from energy-rich states. But other states are complaining about the severance taxes now - and considering various kinds of retaliatory fees. Exploration of the proposal could lead to a rethinking of how to help the partnership of the states work better for all.
* Making state and local bonds more competitive. The present bonds, with tax-free interest at relatively low rates, are challenged by the new tax-free All Savers Certificates and by the money market's high taxable interest rates, which mean more to those in lower tax brackets who get less advantage from tax-free rates. The proposal is for states and cities to issue taxable bonds at competitive market rates.
The budgetary catch is that the federal government would subsidize the extra interest that the localities would have to pay. This at least would be an overt subsidy requiring an appropriation process, rather than the silent subsidy of uncollected revenue on the tax-exempt bonds. But when all subsidies are or should be under scrutiny, a new one should at least not exceed an old one for the same purpose.
* Exploring other sources of state and local revenue. These might include excise taxes and user fees of the sorts ordinarily imposed by the federal government. Prospects are uncertain, because the suggestion arrives just as Washington contemplates expanding its own use of such devices rather than offering them to the states.
The consideration of every possible solution is required not only to rescue the public services required by business but to meet simple human needs.
Just this week the Census Bureau reported that the latest national increase in poverty (over 1979) is one of the largest since the bureau began compiling statistics two decades ago. The report came on the heels of a congressional study showing that states are not now ready to make up for federal cuts in welfare.
Regional differences cannot be overlooked. A number of states and cities, particularly in the South and West, have the natural resources or industrial growth to ease the economic transition away from Washington.
At the same time, there is the more general and largely unsung story of advance in state governmental institutions. Governors' offices have been strengthened. Legislatures have become more representative through one-man-one-vote reapportionment. Most states have established revenue systems, drawing on income or sales taxes, to ''fill in behind the retreating feds,'' as one analyst of public finance puts it.
Whatever the specific solutions selected there must be the key element of fiscal accountability. This can be fostered by ensuring that whichever level of government mandates an expenditure - pays for it. If the federal government requires air or water of a certain standard, for example, it should be expected to provide funding for enforcement. If states mandate police retirement policies for localities, the localities cannot simply be expected to pick up any extra costs.
Finally, in dealing with this whole serious challenge, three things are of basic, long-range importance:
First, that any formula for redistributing government responsibility and taxing power should actually cut the total federal-state-local pie - not just move the pieces around. Streamlining, ingenuity, and greater productivity are demanded at every level of the civil service. In general, the larger and older American bureaucracies - local and national government; the steel, automotive, and rail industries - have all lost worker efficiency and failed to attract innovative new managers. Architects of the New Federalism ought to address this problem relentlessly and in practical detail.
Second, that cooperative planning between the national and local levels of government has to have an improved machinery. Revolution on such a giant scale as the Reagan federalism cannot be built in a short period. It is no coincidence that the building of the New Deal lasted through three-and-a-half terms of Roosevelt and on into the Johnson years.
Third, that sacrifices are needed all along the line while the shift away from federal dollar feedback is being completed. Such sacrifice should be spread as evenly as possible, keeping in mind the wisdom of the dictum about the greatest good for the greatest number. The one who places the last stone and steps across to the terra firma of accomplished discovery gets all the credit. Only the initiated know and honor those whose patient integrity and devotion to exact observation have made the last step possible Hans Zinsser