New Reagan budget slows plan to give states more power
Washington — President Reagan's ''new federalism'' is encountering increasing doubt and opposition. Top White House officials themselves now admit that the country's economic troubles - and heightened questions about ''Reaganomics'' - make it harder to turn back the responsibility for raising and spending money to state and local governments.
Governors and mayors around the country, including prominent Republicans, look at White House budget cuts already in effect and see little prospect for new ways to raise revenue, which the President has promised, anytime soon.
''As most state and local officials enter the fifth month of their 1982 fiscal years, they do not know the final level of funding of many federal programs they administer,'' Gov. Richard A. Snelling (R) of Vermont told a Senate hearing recently. ''They do not know where tens of billions of dollars in 1983 and 1984 budget cuts will fall.''
More than 70 percent of the cuts in federal spending enacted so far have come from the 14 percent of the federal budget that includes grants-in-aid to states and localities. Federal revenue-sharing (unrestricted grants) has been slashed as well, most recently as part of the President's 12 percent across-the-board cut.
''There's a growing sense that they've taken their fair share . . . maybe more than their fair share,'' admits Richard Williamson, presidential assistant for governmental affairs.
In a breakfast meeting with reporters Nov. 16, Mr. Williamson noted that no more than 10 states have at least a 5 percent ''cushion'' in their budgets. Two years ago, a majority of states had this minimal surplus.
Williamson acknowledges that ''a firestorm was created'' even among Republican state and local officials and ''our allies on Capitol Hill'' when Mr. Reagan cut revenue sharing. Regarding resistance to the consolidation of federal categorical programs into block grants, he says, ''We've had as much trouble with Republicans as Democrats'' in Congress.
Among Republican officials, says Williamson, ''there has been no breaking of the ranks, but a lot of concern'' regarding the recent David Stockman affair. This brouhaha involving the White House budget director's doubts about the Reagan economic program may blow over. However, the controversy points up the basic problems that state and local officials have with ''Reaganomics.''
In essence, they are being asked along with other Americans to make a ''leap of faith'' regarding the supply-side theory. But they now are in the difficult position of taking deep cuts in revenue, having less flexibility than was initially promised from the new block grants, and waiting for new sources of revenue promised by Reagan that have yet to appear.
''It is impossible for states and local governments to rationally plan public works investment given the extraordinary levels of uncertainty induced by the present budget-cutting process,'' Gov. Scott M. Matheson (D) of Utah told senators earlier this month.
Administration officials are considering several options for turning over federal revenues to states and localities. Among these are allocating a portion of the federal gasoline, alcohol, and tobacco taxes to states, increasing revenue sharing, or returning a portion of the federal income tax.
But the impression given by these officials is that the ideas are in the initial talking stage with nothing having been presented to the President for formal consideration. The White House budget office and the Treasury Department are including these possibilities in their computer modeling for the 1983 budget.
Even if they are included as part of an economic program for the next fiscal year, however, it will mean that states' increased revenue-raising powers will lag at least a year behind the big cuts in federal aid. Meanwhile, the President has ruled out an increase in the federal gasoline tax to help state and local governments (as budget director Stockman once suggested), and Williamson says any return of federal taxes down the federal chain of authority would be ''pretty small.''
The dilemma for the White House is this: How to turn over revenue sources to state and local governments without raising taxes (which the President refuses to do) or increasing the federal deficit? It is a question without a firm answer as yet.
Mr. Reagan says a devolution of revenue-raising authority has always been his ''dream.'' Williamson says the President will be disappointed if he has not been able to do this by ''the end of his administration.''
But these new revenue sources could be a long way off, years after budget cuts have been made. And the cuts may be deeper than increased state and local ''flexibility'' can make up for.