“A lot of people view state government with more alarm than they do Washington,” Senator Paul Laxalt observed recently. Whoa! That will never do. To the woodshed with you, Paul. Surely you’ve heard about New Federalism, strategic fulcrum of former governor Ronald Reagan’s master plan to end government incompetence and strangling bureaucracy. Reagan considers states the most efficient and proper units of government; he wants to turn significant amounts of federal authority over to them. The president likes to suggest that this would solve once and for all the problems of “unmanageable, unaccountable” government agencies. New Federalism, Reagan has said, “is my dream.”
What does Laxalt, also a former governor, know that Reagan doesn’t? Perhaps some basic figures. For instance, state government is a larger and much faster growing organism than federal government. There are 3.5 million state workers compared to 2.8 million at the federal level. While federal employment changed little through the 1970s, state employment grew more than three percent annually. In fact, during the last decade, when Reagan was pounding the stump with his anti-Washington message, federal employment as a percentage of total government employment declined steadily.
Laxalt probably also knows about state spending. Last year state government broke the $1,000 barrier, spending an average of $1,010 per capita (North Dakota spends $1,307 per resident, Delaware $1,378, Hawaii $1,594, and Alaska $4,827). To obtain this kind of money, states have begun borrowing at a furious rate. Total state deficits hit $119 billion in 1980; the percentage increase in state deficits has run ahead of the federal deficit seven of the last ten years. State and local government spending accounted for eight percent of the gross national product in 1950; by 1975, as Reagan was stepping down from control of California’s government, it was up to 15 percent of the GNP.
States are also surging forward in their drive to become as much like Washington as possible. Forty-two states now have agencies modeled after the federal EPA; they serve mainly to issue rules conflicting with other states’ rules, forcing the federal EPA (and the courts) in to mediate. Thirty-five states have agencies patterned after the federal Department of Transportation, which since its creation in 1966 has served mainly to slow highway and subway construction to a crawl while presiding over countless service cutbacks and cost overruns. Most states have agency analogs for the departments of agriculture, commerce, energy, housing, interior (usually called “parks and wildlife”), labor, and even defense, considering the 50 different administrations of the National Guard. Thirty-six states now have “cabinet government,” the system that is a standing joke at the federal level. From the Colorado Board of Abstractors to the Dormitory Authority of New York, miscellaneous manifestations of state government are proliferating as well.
States are also imitating Washington’s most maddening flaws by sheltering their workers under civil service programs: some 75 percent of those 3.5 million state employees have “merit” protections, meaning lifetime job guarantees regardless of whether they perform well, poorly, or at all. Like federal workers, they continue to get hefty raises, oblivious to the hard times that prevail elsewhere. While Virginia governor John Dalton was cutting $3 million from state Medicaid spending early this year, he was also ordering a $47 million across-the-board raise for state employees. At the same time he upped his own salary 33 percent to $80;000 and bestowed even larger raises on other state officials.
“Our nation of sovereign states has come dangerously close to becoming one great national government,” Reagan warns. Not really. In truth the sovereign states are dangerously close to becoming 50 miniature Washingtons.
As the White House staff has ballooned in recent years, so have its 50 miniature counterparts, the staffs, of governors. Jerry Brown has a personal staff of 83. New Mexico’s governor had three aides in 1950 and . now has 21; Oklahoma has gone from 12 to 43; Kentucky has zoomed from seven to 54 and North Carolina from eight to 57. In 17 states, the governor has a personal budget of $1 million or more.
Washington affectations have extended even to lieutenant governors, our miniature vicepresidents. Maryland’s Sam Bogley makes $52,500 and has a staff of six—including two bodyguards and a full-time chauffeur. Bogley recently described himself as having practically no responsibilities. “For what I’m doing,” Bogley told a reporter, “I don’t feel I’m justifying my salary.” Bogley was then asked why he didn’t return some of the money. “That’s a good question,” he replied.
As the states expand into 50 miniature Washingtons, thousands of HO-gauge D.C.s are springing up at the local level, too; local governments, being state-funded and state-regulated, follow in the states’ wake. (New York has II major laws and 6,000 pages of regulations controlling local governments.) While Reagan has vowed that New Federalism will bring government closer to the people, what it may really do is bring Washington closer to the people, planting a Washington-like bureaucracy on every Main Street in America.
But why take my word for it? Instead, let’s examine the states (and their local mini-festations) for the very things Reagan finds most offensive about the federal government—waste, fraud, and inefficiency. Let’s go around the country for a closer look at your tax dollars at play.
State Waste
In Reagan’s home state, Illinois, the Department of Public Aid has been leasing office buildings for more per year than they would cost to buy. In one case the agency paid $750,000 in rent for a building that was appraised at $90,000. In another case it rented a building from a “landlord” who, it turned out, did not own the property.
Meanwhile James Jeffers, director of the Illinois Division of Vocational Rehabilitation, took $250,000 from a fund earmarked for the handicapped to purchase “psychocybernetics” training sessions. Psychocybernetics is a self-actualizing encounter system devised by the late lamented plastic surgeon Dr. Maxwell Maltz. Records show the psychocybernetics sessions were attended mainly by members of the DVR staff. And while the DVR group was groping itself on taxpayers’ time, Vincent Toolen, Illinois’s chief purchasing officer, was using taxpayers’ money to buy himself $1 1,000 worth of office furniture, including a $600 chair and a $2,300 African mahogany credenza. Toolen, asked to explain his excesses, noted, “I needed a desk.” He also paid for the furniture out of the wrong fund, the state’s computer-services budget. Remember, this is the guy in charge of purchasing.
In Wisconsin, there is a state agency called the Solid Waste Recycling Authority. It was created for the purpose of issuing bonds for recycling projects. The agency has existed since 1973 and has spent $1.5 million. It has yet to issue a bond.
In New York, state workers go about their appointed tasks in the $1.5 billion Albany mall built by former governor Nelson Rockefeller. The mall features marble-covered skyscrapers poised on gravity (and budget) defying stilts. Up in Alaska the state continues to plan to spend $4.4 billion to construct an entirely new capital city at the inland rail stop known as Willow.
Today’s governors see themselves as miniature presidents, trotting the globe on “diplomatic” missions for their states. Florida’s Bob Graham, for instance, has made trips recently to Japan, Colombia, South Korea, Puerto Rico, and Taiwan.
But as creative as states can be when dispensing with their own proceeds; they save their highest fiduciary standards for other people’s money; among the worst-managed programs anywhere are those financed by the federal government but administered by states and localities. When the money comes from somebody else, the state or city has no incentive to economize—in government, in fact, it has every reason to waste, since the more (of somebody else’s money) spent, the bigger the spender’s empire.
David Stockman seems to understand this. December’s Atlantic describes the tennis courts in tiny Royalton, Michigan, Stockman’s home. They were built with federal revenue-sharing funds, a program under which Washington went deeper into debt in order to make unrestricted gifts of cash to cities and states. Royalton’s citizens “never would have taxed themselves to build that,” Stockman said, looking out over the deserted courts. “But as long as somebody’s giving them the money, sure, they’re willing to spend it.” Somebody plans to keep giving them the money: Reagan has recently pledged to retain (although at a lower level than Carter) the revenue-sharing program. His first concrete proposal for New Federalism, widespread use of “block grants,” specifies that a larger share of federal funds be turned over to the states with no strings attached.
New York City’s pending Westway project, funded by the federal government but administered by the state and city, will be a four-mile highway running along the southwest edge of Manhattan. It’s slated to cost $2.2 billion. That’s $550 million a mile—not only more expensive than any highway ever built (the previous recordholder was $145 million) but more expensive than any subway. Westway’s four miles are also scheduled to take ten years to complete. Reagan has made a grand show of his backing for Westway, traveling to New York to present a giant cardboard check for $85 million to Mayor Edward Koch. Under New York’s penny-pinching plan that $85 million will buy exactly 816 feet of highway; Westway is programmed to cost $8,680 per inch. Koch, for his part, complained that the federal government had double-crossed him by refusing to pay for the “amenities” like roadside parks and, perhaps, porcelain-inlaid drainage pipes.
California’s federally funded but state-run Medi-Cal system (the state’s version of Medicaid) continues to hum like a well-oiled machine. A California state commission recently said that 25 percent of Medi-Cal’s $4 billion budget is waste—far higher than the ten-percent waste Reagan has said plagues the federal government.
State auditors have found doctors billing Medi-Cal for abortions performed on women who weren’t pregnant; dentists billing to cap teeth they had already billed to extract; and psychiatrists billing an hour’s fee after seeing patients for only 15 minutes. One Los Angeles doctor made $500,000 last year in Medi-Cal fees. Another, Dr. Leo Kenneally, sentenced to 125 days for claiming phony services, continued to submit bills to Medi-Cal while appealing his conviction. A hospital emergency room billed the state $76.30 for fitting a woman for a diaphragm. Now this might have seemed like an emergency situation to the patient (and the guy waiting for her in the car), but had the procedure been done in a clinic it would have cost only $12.
Medical billings and many other examples of federally funded state waste involve intangible circumstances that resist strict fiscal control. But some do not. Chicago’s Deep Tunnel project recently managed to misplace 26 million tons of rock. Deep Tunnel is a mega-sewer financed by Washington but built by Chicago’s Metropolitan Sanitary District. The district (on the advice of a federally funded study by the consulting firm of Booz-Allen) allegedly decided to give away all limestone removed from its excavations. Limestone, it turns out, is selling for $4 a ton in Chicago; the decision cost federal taxpayers about $100 million. “(Most of the stone, by the way, was carted off by contractors for use as roadfill in a federally funded, state-run highway project.)
Federalist Fraud
Okay, that gives you an idea of how states have taken command on the “waste” issue. Now let’s move on to Reagan’s second category, “fraud.”
So far this year, 120 present or former county commissioners have been found guilty (or pleaded guilty) in Oklahoma’s road-building kickback scandals. Oklahoma City’s U.S. attorney says he hopes to nail 250 commissioners be fore it’s over. The FBI estimates that at least $25 million in kickbacks and ill-spent money is involved. Road kickback investigations continue in Illinois, Tennessee, Florida, Virginia, North Carolina, Georgia, and other states.
Investigators found two basic types of scams in Oklahoma. One was a straight ten-percent kickback from contractor to public official. The other was a bit bolder—totally phony purchase documents, 100-percent profit. Kickbacks are a traditional way of doing business in many states, but apparently complete nondelivery of the goods crossed that fine ethical line. “I think the tenpercent kickback probably would have been accepted [by the public] if it had stopped at that,” Oklahoma state senator John Clifton, chairman of a special committee studying the affair, said recently.
Just before Tennessee governor Ray Blanton left office in January 1980, three of his top aides were arrested (carrying marked FBI money) on charges of selling state pardons. One aide, state trooper Charles Taylor, displayed his sterling moral fiber when he told investigators he would sell a pardon to any criminal except one who had “molested a minor child.”
Prosecutors from that incompetent, inefficient federal government you’ve heard so much about found that evidence of Blanton’s pardon-selling apparatus had been given to a Nashville state attorney four years before; he had simply filed the information. Blanton expressed shock and out-rage over the allegations. Then three days before leaving office he commuted the sentences of 52 felons, including 26 murderers and doublemurderer Roger Humphreys, son of one of Blanton’s friends. The good governor’s successor, Lamar Alexander, was sworn into office ahead of schedule when the FBI learned that still more pardons were imminent.
Since then Blanton has also been charged with taking liquor license kickbacks. Shortly after the pardon-selling charges surfaced, Blanton complained that the FBI had violated executive courtesy by not informing him that a secret investigation of his activities was in progress.
Over in Illinois, the fortunes of a company called Canteen Corporation have been closely watched by the Better Government Association. BGA files provide this history:
In 1969, Illinois secretary of state Paul Powell awarded Canteen an exclusive no-bid contract for food concessions in state office buildings. Canteen was being run by former governor William Stratton and by Patrick O’Malley, chairman of the Chicago Park District. (When Powell later died, $800,000 in cash was found in shoe boxes hidden around his hotel residence. It was never precisely determined where the money came from, nor whether Powell had “accepted” it or merely “received” it.)
In 1974, Illinois secretary of state Michael Howlett renewed Canteen’s deal and added a few enhancements—all rent and utilities free, no more royalties to the state, and state subsidies for any disposable items used in Canteen’s cafeterias. These changes added $1 million a year to the profitability of Canteen’s operation, BGA found.
In 1979, Illinois secretary of state Alan Dixon (now Illinois senator Alan Dixon) submitted Canteen’s deal to competitive bidding. Dixon had challenged the contract when campaigning for Howlett’s job. But Canteen won once again. The bid requirements had been written so as to be nearly identical to key elements of Canteen’s previous contracts. (Dixon, when asked his reasons for choosing Canteen, would say only that he had used “subjective” criteria.)
Down in Florida, Daniel Gonzales Roman was, until recently, director of Miami Cruz Outreach-Center, a federally funded, state-supervised community facility. It was discovered that Roman had put himself on the payroll twice—as “Daniel Roman,” director, and “Daniel Gonzales,” clerk-typist.
When confronted, Roman said he deserved both salaries because he did his own typing.
Intergovernmental Inefficiency
So much for “waste” and “fraud.” Now how about Reagan’s third dramatic charge against the federal government—”inefficiency”? If the states had greater authority, Reagan argues, government would be much more efficient. Let’s begin testing his thesis in New England.
Recently the state-chartered Massachusetts Bay Transportation Authority declared a special crash program to get its notoriously faulty buses rolling again. During the two-week “all-out effort,” the M BTA’s bill for maintenance overtime increased from an average of $1,750 per week to about $15,000 weekly. Bus availability, running at 49 percent, fell to 41 percent.
The T is one of the many state-supervised mass transit systems that serve our great cities so magnificently. An extensive Boston Globe study showed that in 1979 the “cost per mile of vehicle operation” for Washington’s Metro was $2.82; for Philadelphia’s SEPTA, $3.13; for San Francisco’s BART, S3.39; and for Boston’s T, $6.22. The cost per mile of Toronto’s subway system— which I can attest as a frequent visitor to Toronto is superior to any of the systems mentioned here—was $2.18. The T’s efficiency is greatly aided by its 28 union contracts, most of which forbid any changes in “established practices.” When, for instance, T managers tried to coordinate bus drivers’ schedules to cut down excessive overtime and drivers sitting idle, the Amalgamated Transit Union blocked this move, claiming that overlapping schedules were established practice. (Overtime cost the T $11 million in 1979, the Globe found, compared .to $2.6 million for Toronto’s sytem, which covers three times as many miles and has 2,000.more employees.) Getting a distributor changed in a T bus can require as many as ten workers—one to drive the bus to a repair shop, another (a “shifter”) to drive it into the shop, a sheet metal worker to open the engine cover, a machinist to remove any parts in the way, an electrician to change the distributor, and sometimes an entirely new set of workers to reverse the sequence.
Lean, mean fighting machines like the T can be found in state governments throughout the country. In Michigan, 18 stages of state approval are required for a community to erect a stop sign. Back in Illinois, a scandal recently broke over poor care and unsanitary conditions in state-chartered nursing homes. There are seven different Illinois agencies that license and monitor nursing homes; each issued statements claiming it was another agency’s responsibility to act.
California’s Public Utilities Commission recently was charged with administering a law giving tax credits to homeowners who install solar heating systems. PVC’s “checklist” to determine eligibility has 54 steps. And PUC will rule on whether a heater qualifies for the tax credit only after it has been installed.
Florida land deals have traditionally been perilous for all but the most sophisticated; this applies to state government, too. Years ago the state accidentally lost 25,000 acres of land to a company called Aerojet General because of a poorly worded “reverter clause,” a contractual element specifying that private parties must return public lands when finished with them: The Aerojet fiasco caused a scandal, and state officials promised never again. But just this September several hundred acres of Florida land were awarded to Offshore Power Systems, a Westinghouse subsidiary that claimed it was going to construct floating nuclear power stations and had been lent state land to build an assembly plant. When, to everyone’s shock, amazement, and great consternation the floating-nuke idea didn’t quite work out, OPS demanded to keep the land anyway. A state judge ruled that an invalid reverter clause meant OPS could have its way. The judge, incidentally, was later arrested for shoplifting.
That’s All Voters Under the Bridge
Overall, not exactly a shining portrait of the sovereign states. But there are other factors to consider besides waste, fraud, and inefficiency. States increasingly have regulatory responsibilities in business, the professions, the environment, and other fields. Consider the following great moments in state regulation:
Indiana’s State Board of Health, its EPA-analog agency, is charged with monitoring water pollution discharge from landfills. The board does this by requiring landfill operators to send in periodic samples of ground water from their property. Vials of water are simply sent to state labs by the operators. The agency has no way of knowing whether the sample actually comes from a landfill, a garden hose, or a bottle of Perrier.
Last spring Florida’s State Board of Pilots reinstated, without penalty, harbor pilot John Lerro. Lerro had been guiding the freighter Summit Venture when it slammed into the Sunshine Skyway Bridge near Tampa, collapsing a 1,300- foot section of roadway and sending 35 people to their deaths. Lerro testified at an inquest that he had decided to sail under the bridge despite a blinding storm that reduced visibility to zero, and knowing full well that the ship’s navigational radar had failed. Asked to describe his feelings about returning to the scene of the tragedy, Lerro told an Associated Press reporter, “It’s nothing you could understand. I walk to the beat of a different drummer.”
In Texas, the legislature became mildly displeased when reports surfaced that one-third of Dallas and Houston public school teachers could not pass high-school-level literacy tests. The legislature demanded teacher-competency testing and assigned the matter to the Texas Education Agency, which quickly convened its Commission on Standards. Like many state regulatory bodies, the Texas Education Agency is staffed almost entirely by people with a great personal stake in making sure no reforms are imposed on whatever they regulate. TEA’s Commission on Standards, for instance, is comprised of teacher’s college administrators, public school administrators, and teacher’s union representatives. Its first act was to ask for $1 million to study the vexing question of whether teachers should be required to read and write; it has yet to issue a ruling on competency testing. It has, however, proposed that if a test is ever staged, any teacher already certified will be allowed to keep his job regardless of how poorly he scores (the commission called this a “grandperson clause”). It also proposed that new teachers who flunk future tests be allowed to remain so long as they begin taking graduate-level education courses. The commission neglected to explain how someone who flunks a high-school literacy test could qualify for a graduate course.
Speaking of commissions and boards, while Reagan was governor of California he supervised the creation of some 65 new state government units. Among them were such long-overdue public necessities as the Joint Highway-Resources Committee, the Department of Navigation and ‘Ocean Development, the Division of Auto Repairs, the Exotic Disease Eradication Program, and the California Crime Technology Research Foundation, which, one hopes, concerned itself with technology for crime prevention.
Some states have camouflaged the existence of their many essential boards and commissions through agency consolidation. Seldom are the functions eliminated; they are merely subsumed under a larger heading, creating the illusion of government streamlining. Connecticut, for instance, had 172 state agencies employing 17,000 people in 1950; today it has 26 agencies employing 53,000.
State professional “regulation” boards exist, of course, mainly to restrict entry into a trade, monopolize it, and thus drive up the earnings of those safely inside and certified. Michigan’s constitution, for instance, specifies that state boards be controlled “by members of that profession.” Members of the barbers’ profession have decided to require 2,000 hours of instruction before anyone could take the state barber’s exam. Before long a little off the sides may require a Ph.D.
We Serve and Protect Ourselves
One of the most distinctively perverse qualities of Washington (and one Reagan has so often blasted) is the federal government’s ironclad civil service system, which prevents firing bureaucrats, ensures perpetual raises for federal employees regardless of performance, and in general makes the federal government less and less accountable to the will of the people. Through 1979 and 1980, for instance, Oregon cut its budget ten percent, a far more drastic reduction than Reagan imposed at the federal level. For 1981 and 1982, Oregon froze its budget exactly at 1980 levels. All told, this means more than a 30-percent loss of buying power after inflation. How many Oregon state employees have been let go? Two percent.
Texas governor Bill Clements took office in 1978 vowing to slash 25,000 of the state’s 187,000 workers. He settled for fewer than 3,000, a figure achieved not through dynamic cuts but by normal attrition (retirements, deaths from insect inhalation in Houston, and so on). If you count state-run colleges, Texas public employment has increased under Clements.
As in Washington, when the ax does fall, it usually falls on those doing productive work while sparing deskbound administrators. Eureka, California’s city manager recently asked to combine his department of public works with his department of parks and recreation, thus saving one managerial salary. The city council refused. It did, however, fire three park maintenance workers. While Chicago’s federally and state-funded school system was laying off 2,000 teachers in 1979 and 1980, it was increasing the number of top administrative posts (paying $40,000 or more) from 80 to 156. It also created a “Department of Employee Relations,” with a $56,000-a-year manager and three $40,000-plus aides whose jobs, apparently, are to find out where those 2,000 teachers went. When the statechartered, federally funded Chicago Transit Authority lapsed into financial distress this summer, its first response was to fire all 107 of its transit policemen. Next it cut service and laid off 97 bus drivers. Only later did it lay off the first administrative workers—and those layoffs came from low-level clerical slots, not management.
And like the federal government, state and local governments are following the pattern of laying off some employees while granting raises to others, instead of trying to keep everybody working. Wayne County (Detroit) recently laid off 78 employees and simultaneously awarded nine-percent raises to those who got to stay. (In 1979 Wayne County was paying $18,300 for an entry-level accountant; private firms in Detroit were paying $14,000.) When Boston’s MBTA shut down two years ago, forcing the state to provide a $41 million emergency appropriation, 75 percent of the extra money went to finance raises for T workers; simultaneously, the T thanked taxpayers by cutting back service on 32 bus routes and three subway lines.
Public servants in the miniature Washingtons have perfected their self-protective instincts in other ways. Several lawyers for the New York Transit Authority recently were found to be doing private work during business hours; some even had private telephone listings at the public offices. The Houston Police Patrolmens Union wrote its members asking them to take their time in answering emergency calls. Rapid responses, the union said, could sabotage efforts to expand the force.
Estate of the States
State and local governments are more responsive, Reagan has said, because they are “closest to the people.” Yet the miniature Washingtons can be especially adept at fouling up the things that concern people most directly.
One close-to-the-people issue affecting nearly everyone is the condition of America’s physical plant—roads, bridges, dams, and sewers. While acid rain may be a faraway abstraction, everyone knows whether the roads are in good shape. Yet in recent years the states have succeeded in dramatically cutting back spending for construction and maintenance of the physical plant—the “infrastructure”—in order to channel money to civil servants’ salaries and raises.
In 1970, state and local infrastructure spending was $29 billion; this year it will be $19 billion, a sheer plummet considering inflation. Two out of every five bridges in the country are said to be “structurally deficient”; one-fifth of the interstate highway system has already passed its expected service life. New York City’s subway system simply stopped doing preventive maintenance in 1975; now it repairs only tracks and vehicles that are already out of order. The results are predictable-12,000 breakdowns in 1977, 36,000 last year. Raises for transit authority workers continue, however, as they do at Chicago’s and Boston’s troubled transit systems.
But as far as state governments themselves are concerned, the story of 1981 has had nothing to do with bureaucracy or inefficiency—it’s been Reagan’s budget cuts. New Federalism, while promising less supervision and red tape (a primary effect of block grants is to convert funds intended to serve some specific purpose into unrestricted gifts), also so far has promised less money. In Reagan’s 1982 budget there is $82 billion for the states, down from $88 billion in Carter’s final budget.
State and local officials had to be peeled off the ceiling after they heard about these cuts; Governor Richard Snelling of Vermont calls them a “tragedy” and an “economic Bay of Pigs.” But in truth they had it coming. When it comes to wallowing up to the federal trough, states may be the most accomplished porkers of our time. Reagan’s 1982 state funding level will still be 11 times higher than federal funding of states in 1960. The CPI has increased about 2.5 times since 1960. In 1955 states drew 20 percent of their revenue from Washington; now it’s 37 percent.
It would be nice to think that channeling so much cash through Washington enables wealthy states to aid their less fortunate neighbors; this is seldom the case. Alaska, with rich oil revenues and a state treasury surplus of $1 billion last year, is in by far the best financial condition of any state. Yet it receives by far the highest proportion of federal assistance, reeling in $4,759 per resident in federal grants and expenditures, according to a National Journal study. The national average of per capita federal assistance to states, $2,101, is less than half Alaska’s allotment. New Jersey gets $1,722 per capita, Iowa gets $1,602, and Michigan, supposed bailout capital of the world, gets only $1,556.
Another measure of funding logic is the “flow” of state-generated tax dollars—how much of the money a state sends to Washington eventually comes back to it in some form. Michigan finishes dead last in flow, getting only 66 cents back for every dollar it supplies Washington. Indiana gets 70 cents, Ohio 71 cents, Delaware 74 cents. Minnesota, with the worst short-term financial condition of any state (it projects a $180 million budget deficit next year), has a federal flow of just 85 cents. Pennsylvania gets 92 cents and New York 96 cents. Meanwhile booming Colorado has a positive flow of $1.06; Washington State gets $1.10, Georgia $1.11, Arizona $1.21, Hawaii $1.30, and Alaska $1.44. Clearly where the federal money is needed has little to do with where it goes.
If so much money is shipped back to the states (after, as Reagan has said, traveling “to Washington and back minus a carrying charge”), why, it’s often asked, does it go to the federal government at all? Why don’t states directly fund their own services like education and highway repair? Why, indeed. Although-most governors claim to detest the Washington round-trip of tax money and long to be left alone, more than likely nothing could be further from the truth.
When money is raised by Washington and then handed back to the states, it keeps governors and mayors from having to face the thing Reagan says they can handle best—political accountability. That federal withholding line on your paycheck is big, unfathomable, unchallengeable, imposed by someone far away. The’ smaller state and local lines are, in contrast, much easier to understand and raise hell about. Witness the fact that there have been recent tax upheavals of one sort or another in California, Minnesota, New Jersey, South Dakota, and Massachusetts, but no serious grassroots political assault against federal taxes.
Mayors and governors would rather keep it this way. The last thing they want to admit is how much they’re really spending; they would rather continue to blame Washington for it all, calling press conferences to denounce that inflationary monster on the Potomac, even as they are subsidized by the national tax bookkeeping swindle. (Miniature Washingtons’ favorite bookjuggler is the industrial revenue bond, which allows states to grant exemption from federal taxes.)
Last summer there were signals from the Reagan administration that New Federalism’s next step would be “tax turnbacks,” ending the arrangement where Washington serves as the states’ collection agency. It was never exactly clear what “tax turnbacks” would be. At first, the proposal seemed to be for some return of taxing authority directly to states. That made governors nervous, since it meant voters could hold’ them responsible. Then it was suggested that Washington would turn back revenues collected from gasoline and cigarette taxes, handing the cash over as unrestricted grants; this prospect pleased the states no end, since Washington would continue to take the blame while states took the money.
Recent gloomy budget projections have, however, forced Reagan to put the tax turnback plan on hold. In October, treasury undersecretary Norman Ture recently said that turnbacks are far off; he noted, however, that Reagan has already effectively returned some revenue-raising power to states via federal income tax cuts. If states are really as badly racked as they claim, Ture said, they could raise their own taxes to soak up recently freed federal tax dollars.
This is accurate. economic thinking and is, philosophically, just what Reagan’s New Federalism preaches. The primary features of Ture’s proposal—self-reliance, decentralized government, voter accountability—are just what nine out of ten governors would endorse, so long as it didn’t apply to them. But states have become addicted to their federal handouts just as many individuals and businesses have—and they reacted to the Ture statement with an intense flurry of lobbying. States succeeded in getting Reagan to make several reconciliatory statements and moderate his plans for the next round of state-aid cuts. Lobbying the full-scale Washington is something the miniature Washingtons seem better poised to do than getting their own houses in order. Thirty one states now maintain their own offices in Washington, some states having different lobbies for different state agencies. They are joined by more than 100 city lobbies representing everything from the metropolises to Natchez, Mississippi; even 25 or so counties have Washington lobbies, including Los Angeles County, King County (Seattle), Hennepin County (Minneapolis), and Pitkin County, Colorado, home of financially strapped Aspen.
The sorry state of today’s state does not mean that New Federalism is a bad idea. In the abstract it is a very good idea—government decision-making, financing, and functioning should be carried out at the levels where they are most keenly felt. The state of the state does indicate, however, that merely handing responsibility over to the country’s 50 miniature Washingtons will not accomplish anything. Stagnant bureaucracy has pervaded American life right down to the local level, and until its causes—self-serving thinking, civil-service inefficiency, interest-group paralysis—are attacked, the rest is just papershuffling. As it stands now, Reagan’s New Federalism mainly calls for tossingadministrative problems back to the states so the bomb will be in somebody else’s hands when it goes off. That might please the tosser, but it doesn’t help the rest of us.
