US governors cast wary eyes at 'New Federalism'

The nation's governors are meeting here under the shadow of President Reagan. The Democrats hold a 27-to-23 edge in governorships. But this might as well be as Republican Governors' Conference.

Federal aid to the states has been cut under the President's auspices. But the talk here is of how best to use the approximate $88 billion (down from last year's federal allocation of about $95 billion) and how best to cooperate with Mr. Reagan.

There are some grumblings. But these governors are politicians, and they have, in political language, "gotten the word."

They just are not interested in moving into any kind of confrontation with a very popular president who has just successfully twisted the tail of Democratic leaders in Congress.

Basically, all of the governors have accepted Reagan's concept of "New Federalism" which -- as both he and they define the term -- is to allow states to gain more control over how and where to spend money coming from the federal government.

But there is very strong opposition visible here among Democratic and Republican governors alike (although quietly expressed) to Reagan's desire to turn over much more, if not all, of the financial load for medicaid and welfare to the states and localities. In fact, it was at least partially the persuasion of many governors that cause Congress to reject a fixed cap on federal participation in the medicaid program in favor of a more flexible system of incentives for cost control by states.

Beyond their anxiety over welfare and medicaid, Republican and Democratic governors are wondering where they are going to find the tax money for programs from which the federal government either is pulling back or pulling out.

These governors like the flexibility in the use of federal funds that comes from this reagan-sponsored federalism. They also feel they can run programs much more efficiently when they do not have to conform to federal guidelines.

But they still worry about raising the revenue needed to keep programs going now that the federal government has lopped off some or all of the money headed for the states. The chairman of this year's annual meeting of the National Governors' Association. Democratic Gov. George Busbee of Georgia, expressed his concern over the new federalism.

"Federalism must be a two-way street," Governor Busbee says. "State and local officials are willing to take on greater responsibilities if there is a carefully conceived plan to sort out appropriate roles for each level of government and to balance those with adequate resources."

And then some "tough talk" from Busbee, but again, uttered in tones of reasonable persuasion and not of confrontation:

"In the absence of such a consensus," he says, "further efforts to shift new responsibilities to state and local governments will meet with firm resistance from the states."

The governors here really are saying that they can live at least somewhat comfortably with Reagan's federalism as it has just been put into effect by Congress. In fact, they stress that while it puts a new burden on them, they are happy that the flow of power and funds from states to the federal government finally has been reversed.

But the governors' worry is squarely centered on the near future. They see a president, who has put through the largest tax cut in history, very possibly having to make further reductions in federal aid to the states in order to balance the federal -- thus, giving states and localities an even greater responsibility for raising the revenues needed to carry on essential services for the people.

In this vein a new National Governors' Association report says that state officials, anticipating further federal budget cuts and mounting pressures on their revenue systems, believe that decisions on sorting out responsibilities and returning tax sources should receive early attention in Washington.

Again, the words of resistance here are not being uttered loudly or with passion. But there is anxiety. And governors of both parties are expressing the hope that Reagan will be listening to their fears -- and that he will stem the flow of reagan federalism for a while, at least until these governors have learned to deal with it e ffectively.