Governors: Two Cheers For Grants

THE BALTIMORE SUN

In the budget-cutting process now under way in Washington, likely losers include teen-age mothers on welfare and their children, drug abusers and legal immigrants.

Winners are present and future taxpayers, deficit-reduction proponents and promoters of the "Contract with America" -- groups that support the Republican agenda made up of an increasing number of Democrats.

Another small political group falls somewhere in between: the nation's governors.

So far, the discussion has focused on social programs and state-by-state accounting of dollars to be slashed by "cruel" Republicans or defended by "liberal" Democrats. Beneath the rhetoric is a proposal that would fundamentally alter the nation's governing system. It could permit a new round of program development or a dramatic step away from the nation's commitment to the poor.

It will almost certainly involve a massive shift of money and power from Washington to the states even if all the contemplated program-by-program reductions are made. The National Governors Association calculates that the welfare reform bill passed by the House on Friday would return about $235 billion per year to the states. Block grants -- lump sums of federal money -- would be given to the states to fund hundreds of programs. While the states would receive less money, the governors would be allowed to set their own spending priorities, within broad guidelines.

This means that Gov. Parris N. Glendening and his 49 colleagues could find themselves with new opportunities to showcase management skills.

But if there is any cheering, it is muted. Too many important decisions are yet to be made. So, the dramatic changes draw most of the attention: cutting off benefits for drug abusers, ending cash welfare payments to unmarried parents under age 18, and barring legal immigrants from receiving food stamps or non-emergency health care.

While carefully establishing his bona fides as a critic of welfare as we know it, Mr. Glendening decries what he calls a "headlong rush" to undo the current relationship between the state and federal governments. In areas such as pollution control, mass transit and nutrition standards for children, Mr. Glendening says, the federal government must continue to lead.

"But the emphasis is all on the cuts, how we get rid of things, not how to make them work better," he says. That thrust looks "punitive" and "divisive.

"It makes the underclass the whipping boy of Middle America," he said. A university professor who has written a textbook called "Pragmatic Federalism," he said change of this sort is not unusual. But as it stands now, he said in an interview last week, the proposed change leaves him deeply apprehensive.

He would be willing, he said, to absorb a 10 percent to 15 percent cut in some programs if outlays could be guaranteed and if the advertised freedom from regulations would actually be delivered. He fears the worst of both worlds: too little money, too little regulatory relief.

"I doubt that they'll say, 'Here's our share of the program dollars. You go ahead and do what you want with it.' They're just not going to say that."

For this reason and others, Mr. Glendening persuaded the Maryland General Assembly's Democratic leadership last week to put off consideration of a tax cut at least until next year.

Republicans ridiculed the decision.

"We've got so much money we don't know where else to sock it away," said Del. Robert L. Flanagan, a Howard County Republican, observing that $350 million had been tucked into a rainy day fund and another $50 million in a special projects fund.

A successful transition from dependency on federal money, he said, "requires growing the private sector economy. You retard that growth when you suck all the tax money out and you don't put any back in."

At the heart of the debate in Annapolis and in Washington is the issue of "entitlements," a four-letter word to some.

Critics of entitlements equate them to a "free lunch." As a concept in federal law, however, entitlements were designed to overcome resistance to welfare in some states: Those who qualified by virtue of low income, for example, are "entitled" to benefits. States are compelled to provide assistance if the applicant is eligible.

Entitlements would be eliminated under welfare reform.

Programs would be limited to the amount of money in the block grant; and when the money ran out, the payments would end, no matter how many people were in need.

Detractors say the proposed changes are unduly harsh. Some fear that the real objective is to aggressively ratchet down or eliminate social welfare spending.

And governors can envision themselves holding the empty bag: The money will be shifted to them, so they will be asked to answer for any damage down the road.

A new entitlement

As a result they are asking -- even as they attempt to escape the regulatory web -- for a new form of state entitlement: a guarantee of steady funding. At the same time, they wish to avoid a federal demand for "maintenance of effort," a continuation of state spending at the same level in any given program.

More flexibility, they argue, will lead to greater efficiency and savings. Hence, Mr. Glendening's willingness to trade dollars for authority to try new approaches not now permitted under federal regulations. Mr. Glendening would like to experiment with removing the so-called "man-in-the-house" prohibition now a part the welfare system. That rule can split families attempting to qualify for benefits. He would also use federal dollars to subsidize wages for those marginally employable persons who cannot find work. Moves of this sort are not permissible now without hard-to-get federal waivers.

The reasons for national standards, though, are not difficult to find.

In New York City, when the state proposed to cut welfare allowances, Mayor Rudolph Guliani suggested an even deeper cut, apparently hoping to drive the poor away. Some went to work, some left for a better deal elsewhere, some disappeared.

Such a state of negative competition will occur, Mr. Glendening predicted, if the federal government does not maintain uniformity in some grant levels. Most states will use federal dollars well and look for better approaches. But the federal government should intervene to assert the minimum nutrition standards if a state fails to perform adequately, he said.

Mr. Glendening and his colleagues are saying that the federal government will demonstrate how sincere it is when it decides what to do about training and day care for the women it wants off welfare. States have shown already that welfare-to-work programs can succeed if day care and training are provided. But the cost is significant. Government shows no inclination to pay it.

They also want to know who will harness the so-called "Medicaid Pac-Man," a voracious medical care insurance program for the poor made more expensive by federal coverage requirements. States currently spend about 22 percent of their budgets on education, but in two years Medicaid costs will be higher than that. It was Medicaid that broke whatever bond of trust that existed between Washington and the states.

One thing to try

Here's one proposed solution: Because the feds already handle Medicare, a program for the disabled and elderly who qualify for Social Security, wouldn't it be consistent for them to take over Medicaid, a federal-state program aimed at low income families with children, the elderly and the disabled?

Even more deeply seated fears among governors come with the drive to balance the federal budget by the year 2002 and the knowledge that an economic recession could come at any time. The gains might still outweigh the losses. Block grant flexibility attracts the governors' attention and offers them some hope for finding new approaches to welfare dependency.

"But getting from here to there," said Raymond C. Scheppach, executive director of the governors association, "will be hell."

C. Fraser Smith is a reporter for The Baltimore Sun.

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