Agenda - Council - 07/22/1980 - Laserfiche WebLink

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TIme To Re-examine? ~j~ Perhaps one saving aspect of the present situation of American govern- ment will be renewed attention to the responsibilities and resources of state, local and federal government. As W. Bowman Cutter, executive associate director of the federal Office of Management and Budget recently told a Washington, D.C. meeting of the National Association of Ld~is- lafive Fiscal Officers, "... to make the obvious point that this is not a planned system, that like Topsy 'the system just growed.' It's now a jumble, in many, many respects." "There really are no clear understandings of roles," said Cutter. "In my judgement, it's clear that in a period of great scarcity, it's difficult o see the system continue as it · i ." he said.. One reason that the responsibilities of state, federal and local govern- ments will probably change over the 1980's will be demographics, said Cut- ter. The growth of state and local government".., correlates with the ndUCafion of the baby boom" and ow the U.S. will see a "major lump of spending march along from level of government to level of government with the aging of the baby boomJ' Thus, the federal government faces increased spending for Social Secur- ity, social insurance and medical The 1980's may see more cuts in aid to state and local governments, predicts Robert Reischauer, deputy director of the Congressional Budget Office. He told state legislative fiscal officers that if the total federal pie is to remain the same, and if spending in- creases for defense and energy pro- grams, while human services expen- ditures at least remain the same, then a large portion of federal cuts "has to be aid to state and local govern- ments.'' Spending limits and pressure to balance the federal budget, he said, mean that federal spending as a percentage of GNP now 23 percent is likely to be constant or even decline. The states and cities, says Alien Schick, a senior specialist in American Government at the Congressional Research Service, "can't possibly prevail" in the three-sided conflict "between increased spending for defense, Social Security, and other entitlement programs." Schick told NCSL's Urban Development Com- minee that the result will be an in- crease in political conflict, "distri- buting grief," rather than the economy's wealth dividend as in the past. The changing burdens of the dif- ferent levels of government and the scaricity of financial resources, says Cutter, will "lead us to a need, cooperafively~ to begin to think about roles," and that framework will need. federal, state and local cooperation. A redef'mifion of functions may be needed, agrees Robert E. Gordon, of the National Center for Municipal Development. Over the years, localities have been required to pro- vide. services "that a generation ago they never dreamt of providing," he asserted. And, since local govern- ments usually are less able to raise revenue, he said, "It's just like local government being the last guy on the end of the line: what get's shoved to the end of the line ends up on local government's plate." "It becomes a question of as to what is properly the role of what level of government," Gordon said. For the states, though, a prime con- cern in the 1980's will certainly be in- creased scrutiny of a new or existing federal mandates which impose costs on state governments without federal reimbursement or aid. The dependency of localities on direct federal aid was stressed by Princeton's Nathan, who said that over half of all federal grants-in-aid for non-welfare purposes now go directly from Washington to local governments. "That's a momentous change in our federalism," he said. Nathan also urges a re-examination _ of the roles of state, federal and local' governments, asking if the nation really intends to reduce the role of the states to that of "middlemen." State governments, he said, are the insititu- tional arbiters of the "functions and finances and boundaries of local governments." Cutting the states out of a meaningful role in urban policy makes it harder for the states to pro- vide leadership, Nathan said, and to supervise the fiscal health of local governments. At the national level, the state-local relationship is often hazily perceived. Yet,-by statute and constitution, the states prescribe tax revenue respon- sibilities and spending responsibilities between localities and the state government. As the ACIR's Myers, and his colleague, John Shannon, ACIR assistant director, have pointed out: "In short, state government deci- sions determine the character of local. government." . · A major aspect, however, is the fact that a function performed in one state at the local level may be undertaken at the state level in another state: State- aid-to-localities data, therefore, when totaled up for the nation are some- what misleading. Still, it is obvious that states have assumed a major role in state-local tax systems. Twenty state governments raised less than half of total state-local tax revenues in 1959. By 1977, however, only five states generated less than half of the total. Meanwhile, the equity of the state-local tax revenue system was im- proved through various restraints on property and sales taxes. The end result of the changes under- way in the intergovernmental finance system, says Myers, may be that local and state budget-makers, rather than thinking how to effectively spend avail- able revenues, instead will "start out with an expenditure goat in mind, and say, 'What expenditure level do we need in order to meet the requirements that our constituency seems to feel is ne6es- sary to have a decent place to live and whatever other goals we have in the pub- lic sector?' "The emphasis may be on jusfif.ving spending levels, Myers said. "And maybe that's the way government always should have operated."