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Panel Urges Shift of Federal Programs to States

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Washington--A Presidential advisory group has called for an orderly transfer of federal grant-in-aid programs to state and local governments--along with revenue sources to fund them--rather than a "piecemeal'' approach to reducing the federal deficit.

The Advisory Commission on Intergovernmental Relations, a bipartisan body of federal, state, and local officials and private citizens, recommended the "turnback" of up to 177 grant programs, including 24 in elementary and secondary education. To offset their added obligations, states and localities should be allowed to raise revenues through excise taxes now collected by the federal government, the group said.

In a draft report, "Devolving Federal Program Responsibilities and Revenue Sources to State and Local Governments," the commission outlined several scenarios for consideration by the Reagan Administration and the Congress. The program transfer proposals, ranging from $10 billion to $22 billion, were designed to avoid imposing an unfair burden on any jurisdiction.

"With projected deficits in the $200-billion range, it is certain that Congress will continue to seek spending reductions from that portion of the domestic budget that finances grants-in-aid to state and local government," the report warned. "Indeed, the movement behind Gramm-Rudman-Hollings (or another measure that forces deficit reduction) bespeaks the pressure for fiscal change."

"To allow such cuts to be implemented piecemeal, without consideration of their combined effect," it argued, "is to invite a fiscal burden for state and local governments greatly exceeding what is necessary."

The report said that "well-conceived revenue and program turnbacks" should serve the twin objectives of deficit reduction and increased efficiency through "significant political decentralization." But it left open the question of the fiscal benefit to the federal government.

Deficit-Reduction 'Method'

An analyst for the commission, Max Sawicky, said some members, such as Gov. Richard L. Thornburgh of Pennsylvania, have argued that a "turnback" package must reduce the federal deficit by at least 15 percent to win support in the Congress.

The commission's report recommends "a method, not a final product," Mr. Sawicky said. Each transfer proposal attempts to balance program and revenue transfers to equalize gains or losses among states and localities.

All five scenarios feature a substantial transfer of educational grant programs to the states, including Head Start, bilingual education, programs for handicapped students, Chapter 1 assistance, and Upward Bound. Federal excise taxes on gasoline, cigarettes, alcoholic beverages, and telephone service would be repealed, giving states an opportunity to assess them at identical levels.

Such transfers of social programs have previously been discussed by the Reagan Administration as part of its "new federalism" initiative. Many functions now performed by the federal government, the 26-member advisory council concurred, would be "more appropriately assumed by citizens at the state and local levels."--jc

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