Message to the Congress Transmitting Proposed Federalism Legislation

February 24, 1983

To the Congress of the United States:

I am transmitting to the Congress today four pieces of legislation: the State Fiscal Assistance Block Grant Act; the Local Fiscal Assistance Block Grant Act of 1983; the Federalism Block Grant Highway Act of 1983; and the Rural Housing Block Grant Act.

These four proposals represent a continuation and expansion of the efforts of my Administration to return authority, responsibility and revenue resources to State and local governments.

In my January 25, 1983 State of the Union message, I indicated that I would be sending to the Congress shortly a comprehensive federalism proposal that will continue our efforts to restore to State and local governments their roles as dynamic laboratories of change in a creative society. We have now completed our work on this effort and it is embodied in these four proposed bills.

Therefore, I am requesting today that these bills be referred to the appropriate committees and I urge their early enactment.

The Need for Change

In a 1957 speech to the National Governors' Conference, President Eisenhower sounded the first words of caution about the trend toward increased central government control. He said:

``Our governmental system, so carefully checked, so delicately balanced, with power fettered and people free, has survived longer than any other attempt to conduct group affairs by the authority of the group itself. Yet, a distinguished American scholar has only recently counseled us that in the measurable future, if present trends continue, the states are sure to degenerate into powerless satellites of the national government in Washington.

``That this forecast does not suffer from lack of supporting evidence, all of us know full well. The irony of the whole thing is accentuated as we recall that the national government was itself not the parent, but the creature of the states acting together. Yet today it is often made to appear that the creature, Frankenstein-like, is determined to destroy the creator.''

Had he known how prophetic his statement was, his rhetoric undoubtedly would have been far stronger. During the two decades following the Eisenhower Administration, the Federal government increasingly encroached on state and local prerogatives. Narrow and restrictive Federal grant-in-aid programs grew from under 50 to over 500, pervading such obviously local concerns as rat control and sewer extensions. The dollar amount usurped from State and local treasuries to finance these programs ballooned from $7 billion in 1960 to $95 billion 1981. With increased Federal dollars came suffocating Federal control. Lost was the efficiency and accountability of local spending priorities.

A generation of governors, state legislators, mayors and county officials began to echo President Eisenhower's sentiments throughout the 1960's and 1970's. They came to realize that the mushrooming Federal programs reflected the fact that Presidents and Congresses failed to trust State and local officials as their partners in our Federal system.

The Federal government had too much control, many felt. Programs lacked flexibility. Regulations were restrictive. Federal mandates were depleting State and local treasuries. Expenditures were being made for programs that were not really needed in particular localities. In short, State and local officials believed that they were more capable of making more prudent decisions to run their own jurisdictions than Federal bureaucrats. They started calling for a reordering of priorities and a sorting out of responsibilities among the various levels of government.

Initiatives in 1981 - 82

During the past two years, hundreds of decisions and proposals have been made by my Administration in an effort to restore balance to our Federal system.

For example, throughout the economic recovery program, which I proposed in 1981, there was the underlying theme of federalism. The spending reductions were a reordering of priorities so that the national budget would address truly national needs. The tax cuts addressed the problem created by the Federal government usurping revenue sources which otherwise would have been available to State and local governments and to individuals. And the regulatory relief effort was directed in large part to removing the regulatory manacles which bind State and local governments.

In a more direct assault on Federal usurpation, we proposed the consolidation of scores of narrow and restrictive categorical grant-in-aid programs into seven broad block grants. The package which was ultimately passed by the Congress, and which I signed, consolidated 57 programs into nine block grants. It is estimated that these block grants resulted in a reduction of 5.4 million manhours (83%) in FY '82 for State and local officials and 5.9 million manhours (91%) in subsequent years from the level required to administer the predecessor categorical programs.

This block grant effort continued in 1982, with enactment of the Job Training Partnership Act and the Urban Mass Transportation Block Grant.

Many other initiatives were taken on the federalism front.

  • Of the 119 regulatory reviews targeted by the Task Force on Regulatory Relief, 35 were directed to State and local governments.

  • For the first time in many years, the Executive branch actively participated in the Advisory Commission on Intergovernmental Relations (ACIR).

  • I created a Federalism Advisory Committee chaired by Senator Paul Laxalt (R-Nevada). The work of that committee has now been completed and its suggestions have been incorporated into the package which I am today sending to the Congress.

  • At the White House, we have pursued an active outreach effort with State and local officials. Personally, I have met with more than 1,000 such officials in the White House during 1981 and 1982.

Finally, early in 1982, I proposed the outline of a major Federalism Initiative. I stated at the time that my package was just a conceptual framework and that I wanted to work out the details following extensive consultation with State and local officials. The process which followed was unprecedented, and I want to thank the many State and local officials who assisted me in the development of the legislation. The package which I am sending to the Congress today reflects the input which we received from State and local officials throughout 1982 and early 1983.

The 1983 Federalism Initiative

These legislative proposals would consolidate 34 programs into four mega-block grants. The Administration's budget request for these programs for FY '84 is approximately $21 billion.

The following programs would be consolidated into the four mega-block grants.

State Block Grant

Rehabilitation Services

Vocational Education

Adult Education

State Education Block Grant (ECIA, Chapter 2)

WIN

Low-Income Home Energy Assistance

Social Services Block Grant

Community Services Block Grant

ADAMHA Block Grant

MCH Services Block Grant

Rural Water and Waste Disposal Grants (FmHA)

Water and Sewer Facility Loans (FmHA)

Community Facility Loans (FmHA)

CDBG -- Non-Entitlement Portion Grants for the Construction of Municipal Waste Water Treatment Works (EPA)

Child Welfare Services

Child Welfare Training

Adoption Assistance

Foster Care

Prevention Health and Health Services Block Grant

Child Abuse State Grants

Runaway Youth

Federal-Local Block Grant

General Revenue Sharing

CDBG -- Entitlement Portion

Transportation Block Grant

Urban System

Secondary System

Non-Primary Bridges

Highway Safety (FHWA 402 Grants)

Hazard Elimination

Rail-Highway Crossing

Rural Housing Block Grant

Rural Housing Insurance Fund

Very Low-Income Repair Grants

Mutual and Self-Help Grants

Rental Assistance Program

This is a five-year program. It would guarantee funding for the programs turned back at the level enacted for FY '84. This funding level would remain in effect through FY '88.

This will provide a stable and certain funding source for State and local governments. It is not a vehicle for budgetary savings.

During this five-year period we will carefully monitor the block grants and determine whether it would be feasible to return revenue sources, such as Federal excise taxes or a percentage of the Federal income tax, to State and local governments along with the programs in the block grants. I will appoint a presidential commission to review this issue and to provide recommendations to me.

The proposals have been drafted to avoid dislocations on State and local governments. For example:

  • For the Federal-State and Federal-Local block grants, beginning on October 1, 1983, a recipient could take 20 percent of the money from the program and spend it anywhere else within the block. This percentage would increase to 40%, 60%, 80%, and finally 100% in each of the succeeding four fiscal years. Thus, in fiscal year 1988, a recipient would be able to spend 100 percent of the dollars in each block for any of the purposes within the block.

  • In the Federal-State block grant, for programs where Federal dollars go to the States but are passed through to some degree by the State to local units of government, each State would be required to pass through the percentage that was available to localities in fiscal years 1981, 1982 and 1983 in that program.

  • States would be required to have meaningful consultations with local officials prior to final decisions on the distribution of these pass-through funds.

  • For three Farmer's Home Administration (FmHA) programs -- rural water and sewer grants, water and sewer loans, and community facility loans -- 100% of these FmHA program funds will be passed through State governments directly to rural communities of less than 10,000 in population. In addition, at least 70% of the ``small cities'' funds of the Community Development Block Grant program will be apportioned to communities of less than 20,000 in population.

Implicit in the Federal-local block grant is the assumption that revenue sharing would be reauthorized for 5 years at the current funding level of $4.6 billion annually.

Allocations to States for each program included in the State block grant, would be based on the historical program shares (FY '81 - '83), or on the basis of formula allocations.

Funding for the Federal-State block grant would come from three Federal excise taxes on alcohol, tobacco, and telephones. The transportation block grant would be funded by part of the Federal gasoline tax.

The swap of federalization of Medicaid for State assumption of AFDC and Food Stamps, which was included in my January, 1982 framework has been dropped from the package. Reform of these three programs will be considered on a separate track.

Many of the more controversial programs in the original package (such as child nutrition, handicapped education, urban development action grants and others) have been dropped from the initiative.

The block grants include vastly reduced Federal strings and regulations. I strongly urge Congress to provide the flexibility in the programs that State and local officials need and deserve.

I request that Congress give these legislative proposals its immediate attention. With the help of the Congress, we can make government work more effectively for all Americans.

Ronald Reagan

The White House,

February 24, 1983.

Note: The text of the message was released by the Office of the Press Secretary on February 25.