States still learning their roles as 'new federalism' debuts

Are the 50 states really ready for their debut this week as the stars of Reagan's "new federalism?" Many have been working around the clock to get ready for the smoothest possible takeover of the new block-grant programs.

But preparing for change and being ready for it are not necessarily synonymous. Officials in many states say that so much has happened so fast with so few important details known that they may have to learn their new roles "on stage" when the "play" is already under way. Some admit to last-minute jitters that services to some of the truly needy could be lost in the administrative shuffle. They also are aware that their new responsibities make them more accountable and a more likely target of blame than in years past.

"There's an awful lot of scrambling going on at the state level," says Joseph McLaughlin, spokesman for the National Governors Association (NGA). "The problem that states are most worried about is having to make decisions in interpreting federal rules and handling federal aid cuts under this kind of time pressure. They feel it will inevitably result in some mistakes."

As policy leaders in most states see it, time constraints and sharp budget cuts do not really allow "restored" federalism, as the governors prefer to call it, to be put to a fair test. The states long have been eager for broad block grants that would give them more voice in channeling federal funds where they see needs, but they view the set of nine human services and education grants they have been handed as political hot potatoes still bound by too many congressional strings.

Indeed, Georgia Gov. George Busbee, a Democrat and the outgoing NGA president , has accused the Reagan administration of "budgetary tunnel vision" for picking out the most expensive, unmanageable, and politically controversial federal programs to hand over.

The governors had said they could absorb a 10 percent cut in many programs without severe service reductions, if they were given new flexibility as well. Instead, the cuts amounted to 25 percent before inflation, and states were given little new authority. And even as states were adjusting to that, President Reagan last week dropped a new bombshell by saying he would ask Congress to deepen the cuts on the domestic front by another 12 percent.

"That additional cut is really going to be quite a burden -- it makes an entirely new project to work on," says an aide to Iowa's Republican Gov. Robert Ray.

As a group, the nation's governors immediately opposed the newest round of cuts. An emergency policy session of the National Conference of State Legislatures (NCSL) this week could lead to a similar stand by state lawmakers.

"We might be joining hands with the governors to see if we can stop the newest increase," explains Mary Jane Gallagher, NCSL spokeswoman. She adds that most states have been on "pins and needles" wondering what the actual dollar figures are in the administration's proposed cuts.

"We're kind of operating in the dark -- all we know for sure is we're going to get less money," says William Burns, Secretary of office and policy and management for the State of Connecticut. He notes that Congress has not even yet appropriated the funds affected by the first round of cuts.

Certainly some states, facing higher-than-usual unemployment and welfare caseloads and experiencing serious revenue problems of their own, will be hit harder than others by the Washington cutbacks. Michigan, for instance, already has been forced to clip $1 billion from its budget over the last year, an amount equal to that spent during the state's first 90 years of existence. And, in an effort to keep his state budget balanced, Missouri's Republican Gov. Christopher S. Bond withheld 10 percent of each department's operating budget for fiscal 1982 and cut state medicaid payments to try to detour that program from an expected $37 million deficit.

"We feel we've cut off the fat and are down to the bone in terms of state revenues -- there's no money to make up for federal cutbacks," Says Bond aide Elaine Bowers.

Reduced federal taxes on personal and corporate income that take effect this week will pinch available state revenue even further. Many states base their taxes on federal rates, deductions, and depreciation schedules. The NGA estimates that the Washington tax cuts will cost state and local governments some $2.3 billion in the new fiscal year.

Some states are moving faster than others to take over the reins on block grants from Washington. Congress allows the states a year's leeway in taking over some of the programs, but many states do not want to lose the 10 percent in funds that Washington then would deduct for administrative purposes.

"The bulk of states will move in early and assume their new role under very difficult circumstances," insists Dr. David Walker, assistant director of the Advisory Committee on Intergovernmental Relations, a nonpartisan congressional agency that will closely monitor state actions under the "new federalism" in weeks to come.