Block Those Grants!

By WALTER ISAACSON

Congress roughs up Reagan's plan to return power to the states

In his quest for a "new federalism," President Reagan hopes to reverse a generation of growing federal involvement in America's domestic agenda and return control of social programs to the states.

Last week, however, that philosophy suffered a head-on collision with political reality. Congressmen of both parties, jealously guarding their control of the public purse, rejected the keystone of Reagan's design: the consolidation of categorical grants for some 500 specific programs into six unrestricted block grants.* Those would go directly to the states to divide as they please among various programs, though total spending would be cut by 25%. Yet when it came to deciding whether Capitol Hill or the states should administer social programs, Congress voted in favor of Congress.

Reagan has already won one budget battle on Capitol Hill, reducing domestic allocations from $542.7 billion in President Carter's last proposal to $495.3 billion. Last week House and Senate committees struggled to complete the "reconciliation" process, during which appropriations are trimmed to fit the austere budget goals approved last month.

The House Education and Labor Committee, for example, reluctantly chopped some $12 billion from such programs as Head Start, child nutrition and assistance for the handicapped. Funds for college student loans were slashed by limiting eligibility to families making less than $25,000 a year. The committee, however, bucked the Administration by refusing to fold the remaining funds into block grants to the states. Instead, Congress intends to continue to control the funds through categorical grants. By following this approach, the committee opened the way for the full House to restore money to a number of popular programs.

On the other side of the Hill, the Senate Labor and Human Resources Committee also cut about $11 billion from social spending. But even this Republican-dominated committee could not swallow the idea of block grants. Though Chairman Orrin Hatch of Utah strongly favored Reagan's approach, Republican Moderates Robert Stafford of Vermont and Lowell Weicker of Connecticut wanted to protect important categorical grants for health and education. The President talked with Hatch and Stafford by telephone from Camp David on Sunday to see if an accommodation could be reached. The following night, Hatch, Weicker, Stafford, Budget Director David Stockman, Health Secretary Richard Schweiker and Education Secretary Terrell Bell assembled in Senate Majority Leader Howard Baker's office for a marathon bargaining session.

To the surprise of the moderate Republicans and the pleasure of ranking committee Democrat Edward Kennedy, the Administration agreed at the meeting to make significant concessions. The largest federal education program, funds for school districts that serve disadvantaged children, was kept as a categorical grant. So were programs for education of handicapped, adult and bilingual students. Of the $13 billion available for education, only $585 million was put into a block grant. The committee also refused to go along with Reagan's plan to eliminate legal aid for the poor, though funding was cut from $321 million to $100 million. Many minor health programs were rolled into block grants, but even there the committee added stringent requirements on how the funds must be used. Said disgruntled Republican Senator Dan Quayle of Indiana: "These appear to be categorical grants disguised as block grants."

Where politicians stand on the issue usually depends on where they sit. Congressmen generally dislike the block grant approach because, as Rutgers University Urban Policy Research Director George Sternlieb says, "they like to appear as Santa Claus, handing out goodies to their constituencies." For the very same reason, state officials are enthusiastic about no-strings money. Says Georgia Governor George Busbee: "The categorical grant system wastes too much money on unproductive bureaucrats." He calculates that localities now employ more than 900 lobbyists to fight in Washington for education funds alone. Says Alabama Governor Fob James: "If the President gives us the opportunity, we can show that we can run our own affairs."

That is precisely what worries many critics of block grants. Officials of the U.S. Conference of Mayors, who met last weekend in Louisville, complain that states have historically been insensitive to the needs of urban areas and the disadvantaged. Says Milwaukee Mayor Henry Maier: "Our city has only 16% of the state's population, but we have 30% of the poverty. The state will not reckon with this when it distributes the funds." Civil rights, education and social service leaders are also wary of entrusting the purse strings to statehouses, and more than 60 citizens and religious groups have formed a coalition to oppose the President's plan. Says Marian Wright Edelman of the Children's Defense Fund: "We are really getting a return to the old states' rights philosophy that will make a mockery of our promise of equal opportunity."

Even the most modest steps toward returning power to the states will doubtless provoke a severe clash between Reagan and Congress, a confrontation that already seems to be brewing. House committees last week not only ignored the Administration's block-grant philosophy, but, according to Office of Management and Budget officials, also made "phony, even fraudulent" spending cuts that will inevitably be reversed--such as the elimination of 10,000 post offices. The solution being considered at OMB: introducing in Congress a detailed, 4,000-page Administration alternative to the House Budget Committee's reconciliation package, complete with the serious spending cuts and program-absorbing block grants that Reagan wants. That would surely provoke a second budget battle more heated than the first. --By Walter Isaacson. Reported by Jeanne Saddler/Washington

* Reagan proposed two for education, two for health, one for energy and emergency aid, and one for a group of 13 miscellaneous social services.

With reporting by Jeanne Saddler/Washington

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