Reagan second-term budget plan troubles US mayors

How will the nation's cities fare under the second Reagan administration? Not nearly as well as under the first - and that was never anything to brag about, urban leaders say. As they see it, they are once again being asked to bear the brunt of the budget cuts.

''We've taken our fair share of some of these cuts during the last several years, and we haven't the capacity locally to make up the dollars,'' insists George Voinovich, president of the National League of Cities (NLC). ''It's going to be a very difficult year for everyone.''

In a telephone interview, the NLC chief, who is also the Republican mayor of Cleveland, notes that Washington's aid to cities has been cut by more than 50 percent in the areas of economic development, housing, and jobs since 1979, while defense spending grew by more than $100 billion. ''You have to wonder about the fairness of this,'' he says.

''Obviously these are hard times,'' agrees Hernan Padilla, president of the US Conference of Mayors, the other leading national mayoral group, and mayor of San Juan, Puerto Rico. ''They place a new responsibility on the backs of mayors, '' he said in a phone interview. ''Now we must be very creative in economic development. . . . We must either reduce services that depend on federal funds or find new sources of revenue for them.''

One factor that may ease the impact of the program terminations, in Mayor Padilla's view, is that most are scheduled for fiscal 1986, or later.''The process is not a wipeout - it's a gradual phase-out of some programs,'' he observes. ''There's a possibility of adapting to change.''

But the NLC's Mayor Voinovich insists that most cities have already tightened the screws as much as they can, through spending cuts and higher local taxes. Just last year, according to NLC data, 39 percent of all US cities raised user-fee rates on once-free public services ranging from libraries to city recreation facilities. Twenty-four percent raised business taxes and 30 percent increased property taxes. And 53 percent of all US cities raised local sewer rates to help them meet federally mandated standards.

''Cities clearly have changed their sources of revenue - there's a much greater reliance, for instance, on user fees,'' notes Jeffrey Esser, executive director of the Chicago-based Municipal Finance Officers Association. He says that the federal share of the average city's budget has been falling steadily for several years. In 1981, federal aid met 8.3 percent of the average city's expenses. By 1983, that dropped to 6.5 percent. And although 1984 figures have not been published yet, Mr. Esser says the trend is down.

Both of the nation's mayoral groups put a high priority on the need to reduce the federal deficit. And most members agree with the Reagan administration's philosophy that many of Washington's urban efforts are more properly the province of cities themselves.

But Voinovich argues, ''If that's the way they're going to go, they've got to go all the way. Cities have to have the wherewithal to take on these additional responsibilities. When the administration officials first talked about cutting programs back in 1980 and '81, they talked of revenues being turned back to state and local government to take up the slack. That hasn't occurred.''

As part of its rationale for holding back on the dollars, the administration points to US Treasury Department forecasts that state and local budget surpluses will hit $65 billion a year by 1990.

But urban fiscal experts argue that Washington is using a faulty econometric model and disagree with the assumption that most cities are well off.

For one thing, the federal government's model lumps state and local government revenues together, says Jeffrey Esser, so the handful of states reaping a ''windfall'' from oil and mineral taxes raises the average.

''It makes everyone look wealthy,'' he says. ''But Alaska and Louisiana aren't sharing their money with Cleveland.''

Indeed, if Cleveland were forced to do without the $14 million in general revenue sharing that it expects from Washington this year, Mayor Voinovich says he would have to raise the city's payroll tax another 10 percent (voters have already twice rejected his efforts to raise it this year) or lay off 500 city workers, such as policemen and garbage collectors.

''The frustration of all this is that if you're sitting in Washington and you see some places where unemployment is 3.5 percent and the dollars are coming in, there's a tendency to say, 'Well, these folks don't need it.' Some don't. But with others you've got to reach out and do something for them. There are tremendous human needs all over this country and we've got to respond to them. The number of people hitting our hunger centers is up way over what it was a couple of years ago. I have tremendous sympathy for the problems of the administration, but I'm faced with unemployment here of 12 to 15 percent. . . . Finding a way to smooth over all these rough edges is as essential as is the defense of our country.''

In Voinovich's view, the challenge of the second Reagan administration is to find better ways to target sparse federal dollars to those cities and their residents that haven't participated as fully as others in the nation's economic recovery and to preserve the programs having the greatest impact.

''There's a tendency to take some of these programs and spread them around the country because of the politics involved,'' he says. ''You could get a much bigger bang for them if you targeted them where they are most needed.''

Invited to the White House Dec. 14 for a lunch with state governors and legislative leaders to hear about the administration's deficit-solution plans, Voinovich and Padilla had the opportunity to make their case for fairness in a brief question-and-answer session with President Reagan and Vice-President Bush. They say they came away convinced that the administration is determined to solve the problem.

''We know we were listened to - what kind of flexibility is there is another question,'' says Voinovich.

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