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Governors Seek Controls on Deficit, Health Costs

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WASHINGTON--The nation's governors last week called for stringent steps to rein in the federal budget deficit and control health-care costs, which they said are "absolutely encroaching on our ability to fund education.''

The decision by the state leaders to tackle the two issues that are expected to be the Clinton Administration's top domestic priorities reflects their desire to be included in the policies' formulation.

"If we expect Congress and the President to take a tough stand,'' Gov. Tommy G. Thompson of Wisconsin said, "we also have to be out there ourselves.''

The governors also welcomed a pledge made by President Clinton during their winter strategy conference here to transform welfare into a "second chance, not a way of life.''

'A Nation Breaker'

The governors endorsed in principle the idea of a managed-competition system, under which a national health-care board would develop a standard-benefits package to be made available to all Americans through large insurance cooperatives. Benefits above that level would be taxed.

They also called on the federal government to reduce the budget deficit to zero within eight years, including Social Security and other trust-fund revenues.

But they cautioned that spending reductions must be in place prior to any revenue increases. And they specifically recommended $2.75 in permanent spending cuts for every $1 in new revenues.

As part of the deficit-reduction proposal, the governors also advocated reducing spending on duplicative or low-priority domestic discretionary programs by 10 percent in 1994.

Any savings would be reallocated to investments in infrastructure, job training, education, and research and development. But the governors did not spell out which programs should be cut.

Gov. Roy Romer of Colorado, this year's chairman of the National Governors' Association, described the federal deficit as a "nation breaker'' that could consume a projected 22 percent of the gross national product by 2020.

"If we don't stop that trend,'' he warned, "we're simply not going to be able to function as states or as a nation.''

Like many governors, Mr. Romer cited attacks on health-care costs as the primary means for decreasing the deficit. Medicaid expenditures now consume 20 percent of some state budgets, making it difficult, state officials argue, to invest in education or other priorities.

The governors opposed any federal cap on Medicaid or Medicare, however, claiming that it would only shift costs to state and local governments and to the private sector.

A 'Second Chance' Program

The governors' overtures were met warmly by President Clinton, who spent more than two hours closeted with the state leaders on Monday and spoke to them again on Tuesday morning, when he outlined his principles for welfare reform.

During the meetings, Mr. Clinton promised to expedite the process that states use to receive federal waivers to experiment with both health-care and welfare policy.

The President's speech on welfare reflected many of the ideas that he enunciated during his campaign. The proposal would increase the earned-income tax credit, to supplement the incomes of the working poor, and expand education and job training for those on Aid to Families with Dependent Children.

Most A.F.D.C. recipients should be limited to two years of benefits, after which they should be required to take a job in either the public or private sector, Mr. Clinton urged.

There must be a "time certain beyond which people don't draw a check for doing nothing when they can do something,'' he argued.

The President also pledged to create a national databank to track down "deadbeat'' parents who are not making their child-support payments.

In addition, he suggested using the Internal Revenue Service to collect child support in seriously delinquent cases.

The governors, many of whom are working on welfare reform in their own states, greeted the President's ideas with enthusiasm.

"I think that the President's welfare program is the program that we all ought to be working under,'' Gov. Howard Dean of Vermont said.

The association has already formed a bipartisan task force on welfare reform to work with the President on the issue. During his speech, Mr. Clinton promised to name a White House task force on the topic this week, composed of officials from government agencies involved in welfare, education, and job training.

In addition, the N.G.A. has named four governors to work with the White House on health-care policy.

Despite the spirit of bipartisanship that characterized the meeting, however, the governors were unable to reach a consensus on some of the tough issues facing Mr. Clinton.

For instance, they did not address whether the federal government should cap medical expenditures as part of health-care reform.

And, while Mr. Romer said "Social Security needs to be on the table'' when a deficit-reduction package is considered, the governors did not address the issue except in the most general terms.

Indeed, the deficit-reduction proposal did not pass unanimously. Some governors, including Ann W. Richards of Texas, objected to its specificity.

'Paying for Good and Bad'

The chief executives' concern with escalating expenditures at both the state and national levels was evident during the meeting of the task force on education. At least half the session was devoted to a discussion of how governors could continue school-reform efforts in tight fiscal times.

Gov. George V. Voinovich of Ohio, the Republican co-chairman of the task force, asked, "What do we do to maximize options so that we can strategically invest in education?''

But he, like others, cautioned that the governors want to see more effective use of education funding.

"We're paying for good and bad,'' Gov. John R. McKernan Jr. of Maine said, "and that, I think, does not bring quality education.''

During the session, the governors heard from Kati Haycock, a member of the independent Commission on Chapter 1, who asked for their help in insuring that the remedial-education program be revamped to focus more on schoolwide improvements and on higher-order thinking skills.

The governors plan to develop their own recommendations for reauthorizing Chapter 1 and other programs under the Elementary and Secondary Education Act, which expires next year.

Six governors were also named to serve as liaisons to the standards-setting efforts in specific subject areas. They are: Gov. William Donald Schaefer of Maryland, for the arts; Governor Voinovich, for science; Gov. Carroll A. Campbell Jr. of South Carolina, for geography; Governor Thompson, for civics; Gov. Mario M. Cuomo of New York, for history; and Gov. Michael Sullivan of Wyoming, for English.

Governor Dean and Gov. Barbara Roberts of Oregon, both Democrats, have stepped down from the National Education Goals Panel. Gov. John Engler of Michigan and Gov. Arne Carlson of Minnesota, both Republicans, are replacing them. The change will maintain the panel's bipartisan balance under a Democratic Administration.

Finally, the governors adopted a set of "principles to insure workforce excellence'' that include the development of national workforce standards and the creation of career-development pathways for youths.

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