Balancing the federal budget: The intergovernmental casualty and opportunity

TY - JOUR

T1 - Balancing the federal budget

T2 - The intergovernmental casualty and opportunity

AU - Haider, Donald H.

N1 - Funding Information: The shift in federal resource allocation away from the state and local sector began well before the election of President Ronald Reagan in 1980. From FY 1978 to FY 1981, the annual rate of increase in federal aid to state and local governments slowed to 7.8 percent, nearly half the annual rate of increase experienced during the preceding twenty years. Federal aid, in fact, peaked in 1978, as measured by grants as a percentage of total federal outlays and total domestic outlays, and as a percentage of state and local government expenditures. Following 1978, federal aid declined in constant dollar terms as inflation far exceeded increments in federal funds. By subtracting grants to individuals (transfer payments for housing, medicaid, public assistance, and low income fuel support) from grant totals, the remaining aid declined in current dollars as well. "Making decisions about the size and structure of the federal grant system when pressure for defense spending is rising at the national level and movements to limit taxes and expenditures are spreading at the state and local levels is not a task for the fainthearted," notes Brookings' George Break.20The inescapable conclusion from demand pressures and budget squeeze is that the major expenditure casualty will be federal aid to state and local governments. A future scenario involving the ratcheting down of grant programs is not necessary. It already has arrived. Funding Information: intergovernmental irritants and introduce greater flexibility than currently exists. Procedural and administrative reforms are the least controversial of changes, and will continue to be the most frequently used tools for intergovernmental management improvement. If pursued consistently and given legislative support, the accompanying results would be significant. A second direction follows from the Nixon and Ford administrations with respect to grant consolidation and block grants. Block grants differ from the 500 or so narrower categorical grants due to their broader scope, recipient discretion, and statutory disribution. Between 1966 and 1980, only five of the twenty major block grants proposed by presidents have been enacted. This was due not only to a decrease in funding from the aggregate total of existing categoricals, but also because of basic issues of distribution, use, recipient discretion and federal oversight. The record of block grants as compiled by the ACIR suggests that "they neither lived up to the high expectations of their most enthusiastic supporters nor to the devastating predictions of doom from their most ardent critics."22They can lead to improved economy and efficiency, greater decentralization and generalist control, but they are not suited for targetting of resources, innovation, or program growth. In the past, successful passage of block grants generally required additional resources to protect major beneficiaries and to resolve endless disputes between governors and mayors over distribution. Controversial as block grants may be and important as they are to decongestion of the federal system, they constitute only a partial step toward a sorting out of governmental functions. President-elect Reagan also has given serious consideration to a third alternative which is an extension of the previous alternatives, namely "turnback policies," involving the return to states and localities shared functional responsibilities as well as financial resources necessary to support them. This alternative is really the other side of what the ACIR and the National Governors' Association have advocated. The latter supported a "trade-off' approach whereby the federal government would assume responsibility for human need functions (welfare, medicaid, employment security, and basic nutrition programs) in exchange for consolidating, phasing out, or terminating federal programs that overlap, or where federal involvement is small. Problems of increased federal costs and winners-losers have plagued this option. Turnback policies would accomplish a financial, structural, and administrative overhaul of the intergovernmental system through massive federal disengagement as opposed to mutual agreement between Washington and the states on who does what, who pays for what, and who is responsi- Copyright: Copyright 2020 Elsevier B.V., All rights reserved.

PY - 1981

Y1 - 1981

UR - http://www.scopus.com/inward/record.url?scp=77957176215&partnerID=8YFLogxK

UR - http://www.scopus.com/inward/citedby.url?scp=77957176215&partnerID=8YFLogxK

U2 - 10.2307/3329896

DO - 10.2307/3329896

M3 - Article

AN - SCOPUS:77957176215

SN - 0048-5950

VL - 11

SP - 21

EP - 38

JO - Publius

JF - Publius

IS - 3

ER -