PAGENO="0001" BLOCK GRANT IMPLEMENTATION ~ ~(~D) V-~ HEARINGS* BEFORE THE SUBCOMMITTEE ON INTERGOVERNMENTAL RELATIONS OF THE COMMITTEE ON GOVERNMENTAL AFFAIRS UNITED STATES SENATE NINETY-SEVENTH CONGRESS SECOND SESSION MAY 5 AND 11, 1982 Printed for the use of the Committee on Governmental Affairs 0 U.S. GOVERNMENT PRINTING OFFICE 99-9650 WASHINGTON: 1982 SD2~1~ PAGENO="0002" COMMITTEE ON GOVERNMENTAL AFFAIRS WILLIAM V. ROTH, Ja~, Delaware, Chairman CHARLES H. PERCY, Illinois THOMAS F. EAGLETON, Missouri TED STEVENS, Alaska HENRY M. JACKSON, Washington CHARLES McC. MATHIA5, Ja., Maryland LAWTON CHIlIES, Florida JOHN C. DANFORTH, Missouri SAM NUNN, Georgia WILLIAM S. COHEN, Maine JOHN GLENN, Ohio DAVID DURENBERGER, Minnesota JIM SASSER, Tennessee MACK MATTINGLY, Georgia DAVID PRYOR, Arkansas WARREN B. RUDMAN, New Hampshire CARL LEVIN, Michigan HARRISON "JACK" SCHMITT, New Mexico JOAN M. MCENTRE, Staff Director IRA S. SHAPIRO, Minority Staff Director and Chief Counsel SUBCOMMITTEE ON INTERGOVERNMENTAL RELATIONS DAVID DURENBERGER, Minnesota, Chairman JOHN C. DANFORTH, Missouri JIM SASSER, Tennessee MACK MATTINGLY, Georgia SAM NUNN, Georgia JIMMIE POWELL, Staff Director JOHN CALLAHAN, Minority Staff Director RUTH hi. DOERFLEIN, Chief Clerk (II) PAGENO="0003" CONTENTS Opening statements: Page Senator Durenberger 1, 59 Senator Danforth 2 Senator Sasser 60 WITNESSES WEDNESDAY, MAY 5, 1982 Christopher (Kit) Bond, Governor of Missouri, on behalf of the National Governors' Association 3 Richard D. Lamm, Governor of Colorado, on behalf of the National Gov- ernors' Association 8 THURSDAY, MAY 11, 1982 Robert J. Rubin, M.D., Assistant Secretary for Planning and Evaluation, Department of Health and Human Services 60 Diane Ahrens, commissioner of Ramsey County, Minn., on behalf of the National Association of Counties, accompanied by Ronald Gibbs, associ- ate director, National Association of Counties; and Angelo Martinelli, mayor of Yonkers, N.Y., on behalf of the U.S. Conference of Mayors, accompanied by Laura Dekoven Waxman, assistant executive director, U.S. National Conference of Mayors - 79 Charles A. Bowsher, Comptroller General, U.S. General Accounting Office, accompanied by Harry S. Havens, Assistant Comptroller General, and Gene L. Dodaro, Supervisory GAO Evaluator 101 Alma G. Stallworth, president, Detroit Metro Affiliate of the National Black Child Development Institute, Detroit, Mich.; and Brenda L. Russell, legislative analyst for Child Welfare League 116 Paul Hess, Kansas State senator and chairman of the Kansas Senate Committee on Ways and Means, on behalf of the National Conference of State Legislatures, accompanied by Gary Falle, staff associate, NOSL~. 147 Delores S. Delahanty, board member of the National Association of Social Workers, Louisville, Ky., accompanied by Susan E. Rees, director, NASW, Project Block Grant; and Sandy Solomon, executive director, Coalition on Block Grants, Washington, D.C., accompanied by Nancy Ebb, senior staff attorney, Children's Defense Fund 169 ALPHABETICAL LIST OF WITNESSES Ahrens, Diane: Testimony 79 Prepared statement 88 Bond, Christopher (Kit): Testimony 3 Prepared statement 25 Bowsher, Charles A.: Testimony 101 Prepared statement with attachment 105 Delahanty, Delores S.: Testimony 169 Prepared statement with attachments 178 Dodaro, Gene L.: Testimony 101 Ebb, Nancy: Testimony 169 Falle, Gary: Testimony 147 (HI) PAGENO="0004" Iv ALPHABETICAL LIST OF WITNESSES-Continued Page Gibbs, Ronald: Testimony 79 Havens, Harry S.: Testimony 101 Hess, Paul: - Testimony 147 Prepared statement with attachment 152 Lamm, Richard D.: Testimony 8 Letter to Senator Durenberger, June 14, 1982 20 Prepared statement 45 Martinelli, Angelo: Testimony 79 Rees, Susan E.: Testimony 169 Rubin, Robert J., M.D.: Testimony State use of block grant transfers (chart) 65 Prepared statement 68 Russell, Brenda L.: Testimony 116 Prepared statement 139 Solomon, Sandy: Testimony 169 Prepared statement with attachments 200 Stallworth, Alma G.: Testimony 116 Prepared statement 124 Addendum to testimony 137 Waxman, Laura Dekoven: Testimony 79 ADDITIONAL MATERIAL SUBMITTED FOR THE RECORD Letter to Senator Durenberger from Jerry Coursey, metropolitan and regional planning division, American Planning Association, June 15, 1982 227 Letter to Senator Durenberger from Stanley J. Matek, M.S., president, American Public Health Association, May 18, 1982 232 Letter to Ruth Doerfiein, chief clerk, Subcommittee on Intergovernmental Relations, Committee on Governmental Affairs, from Laurence I. Hewes III, law offices of Wald, Harkrader & Ross, with enclosure, June 1, 1982 233 "Block Grants: A New Chance for State Legislatures to Oversee Federal Funds," by National Conference of State Legislature, February 1982---- 249 "1982 Governors' Guide to Block Grant Implementation," prepared by National Governors' Association, Center for Policy Research, Council of State Community Affairs Agencies, Council of State Planning Agencies, and National Association of State Budget Officers, February 1982 292 "State CDB4I Program Briefs," Council of State Community Affairs Agencies, May 1982 421 "Briefing Book on Block Grants and the New Federalism," Coalition on Block Grants and Human Needs, April 1982 4~2 PAGENO="0005" BLOCK GRANT IMPLEMENTATION WEDNESDAY, NAY 5, 1982 U.S. SENATE, SuBooMMrrrEE ON INTERGOVERNMENTAL RELATIONS, CoMMrrr1~E ON GOVERNMENTAL AFFAIRS, Wu$llington, D.C. The subcommittee met at 9:30 a.m., in room 4232, Dirksen Senate Office Building, Hon. Dave Durenberger (chairman of the subcom- mittee) presiding. Present: Senators Durenberger and Danforth. OPENING STATEMENT OP SENATOR DURENBERGER Senator DURENBERGER. The hearing will come to order. Today, the subcommittee is holding the first of two oversight hear- ings on the implementation of the 1981 block grants. We will have only two witnesses this morning: Governor Bond of Missouri and Governor Lamm of Colorado. They will both be testifying on behalf of the National Governors' Association. Next week we will hear from other State and local officials, the U.S. General Accounting Office, and representatives of several human resources organizations. Last week this subcommittee held a hearing in Minneapolis on the subject of the President's New Federalism, with Governor Snelling and others in attendance. One of the witnesses was a self-described unreconstructed Federalist. By "unreconstructed" I believe he meant to say he still doesn't trust the States. By "federalist" I think he meant to say that only the Federal Government has the capacity to fulfill his visions of a just society. I hope we are about to find out whether or not we can trust the States. For me, the answer is in these hearings. Last year, under the worst possible fiscal and administrative con- ditions, the States were asked to assume responsibility for nine new block grants. The President proposed six new block grants in March of 1981. By that time, the budget planning cycle was nearly complete in many of the States. Legislatures were in mid-session, moving to adjournment. The nine block grants were authorized by the Congress in the Budget Reconciliation Act which did not pass both Houses until the end of July. By that time, 48 States were already 1 month into their fiscal year. In September, the President's fall budget initiative introduced new uncertainties. He requested an across-the-board 12-percent cut in block grant appropriations below the reconciliation level. On October 1, 1981, States were expected to begin new block grant implementation, and most of them did. However, October 1 was also the day on which the bulk of the regulations for the new block grants were being published. (1) PAGENO="0006" 2 It wasn't until mid-December of last year that appropriations for the block grants were finally made by the Congress. In the end, Con- gress had merged 57 programs into 9 block grants. Total funding had been cut 13 percent, from $11.3 billion to $9.8 billion. Although some new administrative flexibility was provided, many of the mandates and requirements were left in place. That is all, of course, last year's news. The surprise is that we won't be making any headlines with these hearings. Under the conditions I have just. described, the 1981 block grants should have been a total failure. We did everything we could, here at the Federal level, to make it difficult for the States to succeed. Yet, the record of this and next week's hearing will be, I think, largely positive on the 1981 block grants. The question is whether this is a testament to the compassion and the capacity of the Federal Gov- ernment, to the wisdom of Congressmen here in Washington; or, is it the best possible evidence that it is time to trust the States? In my view, 50 State governments have saved our bacon on the block grants, and they did it despite. countless handicaps imposed by some of the unreconstructed Federalists here in Congress. I wish we could make headlines with this story. If the American public really understood what happened in 1981, we might all be New Federalists. We could, once again as a nation, find the compassion and the capacity to fulfill our commitment to a just society. With that, we will move to our first witness. I will leave his intro- duction to my colleague, Senator Jack Danforth, who is a member of this subcommittee. Jack? OPENING STATEMENT OP SENATOR DANPORTH Senator DANFORTH. Mr. Chairman, thank you very much for the privilege. I am the unofficial chairman of the board of the Kit Bond Admiration Society of the world. Kit Bond and I started in govern- ment on exactly the same day-in State government, I might say. He has served with the attorney general's office. He has served as State auditor, and he is now in his second term as Governor of our State. He has viewed our State government, and particularly Federal-State relations, from three different vantage points over a 14-year-it seems amazing-over a 14-year period of time. I know he has thought very deeply about the relationship between the Federal Government and the State governments. I know he has had the experience of witnessing Washington using State govern- ments as almost an administrative arm. He has experienced the fact that this arrangement has not worked very well. I also think that Governor Bond, himself, is testimony of the fact that State govern- merits are very competent, are close to the people, and are able to discern their needs and serve them. So often we, in Washington, have the view that State and local governments just cannot do it unless we tell them precisely how to do it, when to do it, and what to do. I think that is clearly an erroneous view of the competence, the character, and the will of State and local governments. PAGENO="0007" 3 I am delighted to be here in his presence. I am looking forward to hearing his testimony. Senator DURENBERGER. Thank you very much. Governor Bond, after that, you can take all the time you want to prove he was right; or, you can speak on the subject [laughter], either one. Thank you for coming. We welcome you. TESTIMONY OF CHRISTOPHER (KIT) BOND, GOVERNOR OF MIS- SOURI, ON BEHALF OF THE NATIONAL GOVERNORS' ASSOCIATION Mr. BOND. Mr. Chairman, my name is Christopher Bond. I am Governor of Missouri. I want to extend my deep thanks to Senator Danforth for those very kind remarks. I would like to say that they were simple justice and long overdue, but modesty and some regard for the truth force me to issue a disclaimer. When Senator Danforth and I both tried to get into politics in 1968, he was headed for State government and I was headed toward Washington. Fortunately, the good people of Missouri had the sense to keep us both in Missouri at that time. I had the opportunity of working for Senator Danforth as he began central reforms in State government in the attorney general's office. As Senator Danforth has stated, I am particularly interested and concerned about the issue of the Federal-State relationship. It is a real privilege for me to testify before this subcommittee on behalf of the National Governors' Association on the subject of block grant imple- mentation. I would like to note that we, as Governors, do appreciate the sensitivity of this subcommittee and its long bipartisan commit- ment to the needs of State and local governments. Mr. Chairman, your comments on the difficulties caused by the man- ner of implementing the block grants last year, particularly the un- certainties, the funding cuts, and their timing, are ones to which we in Missouri can warmly relate. I will not dwell on those problems of last year, other than to say we do appreciate the fact that you recognize them. I am a very strong supporter of the concept of block grants and other Federal policies that would return program planning and administra- tive responsibilities to the States. The States are still constrained by some 500 separate categorical programs and their attendant regula- tions, over 1,000 separate mandates on State and local government, and a paperwork burden estimated in 1977 to have cost some $5 billion. We did some checking in Missouri to see if we could come up with an estimate of how much this paperwork burden costs Missouri's tax- payers. We found that in fiscal year 1981, before block grants really were implemented, we spent an estimated $8.4 million to comply with 1,400 pages of Federal rules and regulations for health and social services programs. Some, but not all of these, of course, have been re- duced. The thing that was most appalling to me was that the Federal health programs alone required some 2,202 separate reports. Our State division of health estimated that it took the equivalent of one em- ployee out of five to comply with all of the Federal reporting, regula- tion writing, and reading requirements. Certainly this time could have been better spent in delivering needed health care services to our people. PAGENO="0008" 4 We feel the block grant concept is one mechanism that provides the States some needed relief from the redtape and the inflexibility of rigid categorical programs; yet, it provides us the resources we need to deal with high priority areas. The nine block grants approved in 1981 represent only a fraction of the total number of Federal grants- in-aid to State and local governments. I must say to you that the flexi- bility originally included in the President's block grant proposals was sharply compromised in the legislative process, as you have already noted. Most block grants had their funding substantially reduced. Moreover, the States had little opportunity to plan for the assumption of the new responsibility. Nevertheless, a majority of States elected to assume the available block grants at the earliest possible date. Mr. Chairman, in order to provide you and the subcommittee with detailed information on the implementation of block grants in each *State, with your permission, I would like to. submit a comprehensive study sponsored by the NGA and the Council of State Planning Agen- cies.' I think that you will find this to be a most-informative document. Senator DURENBERGER. Without objection, that report will be made a part of the record. Mr. BOND. Thank you very much. Again, with your permission, I would like to focus the rest of my testimony on some of our experiences in Missouri, with the thought that these are probably indicative of the response and the activities in many other States. To give you an idea of how we approached imple- mentation, I would like to spend just a few moments to describe the mechanics of our block grant planning process. Even before the passage of the legislation we started to develop a comprehensive, decisionmaking process so we could take on block grant responsibilities in October 1981. I set up a task force to coordi- nate the delivery of services. This task force consisted of the heads of the departments that had jurisdiction over the programs which were included in the block grants, my director of budget and planning, and my executive assistant. This group sponsored a series of public hear- ings across the State. The hearings were conducted by the departments responsible for the programs in each block. After those hearings, there was a careful review by advisory com- mittees made up of service providers and client representatives. Fol- lowing the reports of these advisory committees, and on the basis of comments received at the public hearings, tentative program funding decisions were made. Next, we took these program decisions and tentative allocations to our general assembly to work with them in developing an overall pol- icy for administering the block grants and distributing the funds, with particular attention to absorbing the funding reductions. I would say that in Missouri our legislative committees took their responsi- bilities very seriously. They studied the materials carefully, listened to their constituents, and offered us helpful modifications in our plans so that we could implement the block grants in the most effective manner. Turning to the individual block grants, let me describe how Mis- souri expects to receive and handle approximately $26 million in See p. 292. PAGENO="0009" 5 Community Development Block Grant funds which we will distribute to our nonentitlemciit small cities and counties. Actually, because of multiyear commitments previously made by, the Department of Hens- in~ and Urban Development, we will have approximately $1~' million to distribute to new applicants. Based on our consultations with local officials and other interested parties, we have designed a competitive program for the distribution of the funds based on need. We designed the Missouri program to fund four categories of activities: Economic development, housing rehabilitation, public facilities, and emergencies threatening health and welfare. Of the $1'? million to new applicants, 35 percent will go for economic development; 60 percent will be split between housing and public facilities, based upon the percentage of dollars requested in each category; and 5 percent will `be set aside for emergencies. In designing our program, we made a concentrated effort tO sim- plify substantially the applications process in order to take away the advantages of grantsmanship and make it easier for small cities and counties to compete. The criteria for judging applications will balance need with oppor- tunity for economic developine~nt. Also, we are putting together a com- prehensive technical assistance program to help local officials partici- pate in the program. We would note with some pride that we think we will be able to run the program more efficiently and in a less costly manner than HTJD. For example, we plan to administer the small cities program with only 12 full-time employees; whereas, previously, the Federal Government required 31 persons working in 2 regional offices to run its program for the nonentitlement areas. In a second area, the social services block grant, funding for the consolidated programs was cut 20 percent by Congress. Our State lost another 2 percent due to a decline in population in Missouri. On the good news side, the SSBG eliminated certain costly and time-consum- ing planning and reporting requirements. As a result, Missouri was able to make major reductions in staff, equipment and other adminis- trative expenses. The State achieved substantial additional savings by consolidating reporting requirements for a variety of programs. The bottom line was that we were able to cut the cost of administering pro- grams in this block grant by roughly one-half. When we turned our attention to improvements in the existing day care reimbursement system, we found that Federal requirements and cost-based rates had produced inflationary reimbursements. These were higher than the amount charged in the private sector for similar serv- ices. By moving to a standard negotiated rate, we were able to reduce costs by $1.3 million without curtailing the amount of day care time urovided. In addition, thanks to the new flexibility provided under the block grant, we encouraged day care centers to negotiate copayment arrangements with clients who were able to pay something for their services. Finally. we were able to minimize the impact of the SSBG funding reductions by transferring into the block some~ $4 million of Low In- come Energy Assistance funds. Through these measures, Missouri suc- cessfully held overall reductions in client services to approximately PAGENO="0010" 6 13 percent, whereas the total cuts in funding had been 22 percent for our State. In addition to the above program modifications, we made other economies in our own very tight State budget in order to find addi- tional State dollars to minimize the impact of Federal funding reduc- tions on children's programs. Last week, the Missouri General As- sembly approved partial funding for several new children's initiatives. These will provide preventive health services and care for abused and neglected children that will allow them to remain in their home environment. I have already mentioned the Low Income Energy Assistance block grant. I would like to commenf on that third block grant briefly. In contrast to the funding reductions in other areas. this block grant actually received a slight funding increase in fiscal year 1982. Problems with the program in Missouri in fiscal year 1981-including dissatisfaction of the energy providers because of the redtape and the difficulty of participating in the program-caused over L000 of the providers to drop out of the program. In Missouri, in order to attract these providers back into the program. we developed a new central service delivery system which guaranteed time reimbursement and required minimal paperwork. In addition, we feel we were able to further improve the cost effec- tiveness of Missouri's LIEA by modifying a benefit formula that in- *advertently had discouraged energy conservation. These changes and the appropriation of supplemental funding made it possible for us to dedicate some $5 million of funds under LIEA. to weatherize ap- proximately 3,700 homes of the elderly and handicapped in our State. You will note that many States, including Missouri~ chose to trans- fer funds from the energy block grant to other high priority programs in order to distribute funding cuts more evenly among energy assist- ance and social services programs. We are concerned by the efforts of a few Members of Congress to use the fact that States had exercised the transferability option as an excuse for congressional reduction of LIEA funds. Frankly, we found that transferability offered a prac- tical solution to one of the major problems of the grants*-in-aid sys- tem-namely, the inefficient distribution of Federal funds among categorical programs. In Missouri, had we not been able to transfer some funds from LIEA, vital protective services for children would have been stopped for many months. Moving to a fourth area, the alcoholism, drug abuse, and mental health block grant, we have found that a reduction in the Federal regulations has enabled us to make great strides in improving the effec- tiveness and efficiency of our mental health programs. Prior to the enactment of our block grant, I must tell you that State mental health planners were faced with an uncoordinated network of mental health services. We were unable to effectively implement statewide funding priorities because we had no authority over the use of Federal moneys. As a result, a significant amount of Federal money was being spent for the treatment of short-term episodic mental illness, rather than chronic illness which is responsible for the major part of the repeat, long-term mental health care expense in the State~. Basic mental health services were not available in some parts of the State, while wasteful duplication existed in other areas. Finally, both State and privately PAGENO="0011" 7 operated facilities were expending significant amounts of money in complying with separate State and Federal mandatory service require- ments, as well as complicated accounting and reporting procedures. Under the ADA/MH block grant, we are now able to target Federal resources to chronic illnesses and other mental health problems which we know are most critical in our State. Mental health centers have been able to significantly reduce their administrative overhead because they are no longer forced to comply with two separate sets of regulations. Finally, as a result of new service area boundaries, wasteful duplica- tion of services has been eliminated, and mental health services will now be available to previously underserved areas of the State. Funding for the maternal and child health block grant was reduced by 12 percent. This funding reduction required us to reexamine our spen:ding priorities very carefully. Our first step was to cut funding for some sub-State specialty projects established under the old cate- gorical programs on a pilot project basis. Reductions in these proj- ects raised approximately $800,000, which we passed through to coun- ties in the form of block grants. Service mandates under these block grants were limited to an established minimum package of basic pub- lic health services for children, such as well-baby care and health screening. In this way, we were able to pass administrative flexibility on to local governments. For the first time, eight counties in Missouri that did not have public health offices will provide a significant amount of child health care services. In fiscal year 1983., we plan to use State funds to increase the amount of block grant funds available to the counties. In summary, I would say that Missouri's block grant implementation record illustrates that States are competent to assume greater responsi- bility for identifying and serving the needs of their citizens. During the past year. we made every effort to use the flexibility provided under the block grants to set some intelligent funding priorities, to target funds to previously underserved sub-State regions, to eliminate waste- ful duplication of services and to abolish unnecessary reporting and administrative requirements. By concentrating on staff reductions, other administrative savings and more efficient delivery systems, Missouri has been able to minimize the effect of funding reductions on services. Where service cutbacks could not be avoided, provider groups and clients were closely involved in setting funding priorities. In addition to developing more efficient and effective ~vays to use Federal funds, Missouri has increased State funding for social services and public health services which we feel are primarily State responsibilities. As you consider Federal budget proposals for fiscal year 1983, we hope the activities and the performance of the States during the past year will encourage you to support further increases in administrative flexibility. Thank you, Mr. Chairman. Senator DURENBERGER. Thank you very much, Governor. I understand that we are going to go until 10:50 because both of you are going to be involved in a meeting at about 11. So, we will move now to Governor Lamm, and then we will go to our questions. Governor Lamm is the Governor of Colorado. He is a native of Madison, Wis., and a graduate of the Business School of the University of Wisconsin and the Law School of the University of California. PAGENO="0012" 8 He served in the U.S. Army, was with the California Franchise Tax Board, and was associate professor of law in Denver. He was elected to the Colorado House of Representatives in 1966, and served as assistant minority leader of the House for 4 years. In 1974, his Inst year in the House, he was designated by Time magazine as one of 200 young Amer- ican leaders-along with Wendy Anderson from my State. In 1975, Governor Lamm was elected to his first term as Governor; he is now in his second term. He serves on NGA's executive committee. We welcome you to this hearing, Governor. Please proceed with your testimony. TESTIMONY OF RICHARD D. LAMM, GOVERNOR OF COLORADO, ON BEHALF OF THE NATIONAL GOVERNORS' ASSOCIATION Mr. LAMM. Thank you, Senator. I deeply appreciate the very thoughtful way this subcommittee, and in particular the two Senators in attendance today, have approached the block grant issue. You are doing the day-to-day work of govern- ment, and it is of immense importance. It greatly affects the work of State legislators, mayors, city council people and Governors. This is really where so much of the undramatic but immensely important part of the government takes place. I think for the block grant concept, which, as you know from Governor Bond's testimony, has the strong support of the Governors, this is a time for review. This is the time for consolidation. This is the time for thoughtful assessment as to how the concept is working out there. It is working, but with some hiccups, some serious hiccups, that I think all Governors view with concern. I would like to summarize my statement and go through it fairly fast so we will have plenty of time for discussion. I sense that that is the most important thing for both of you. Even with the proposed eight new block grants and the three ex- panded initiatives, just 25 percent of the grants-in-aid would be pro- vided through more flexible block grants in 1983. This is, of course, only slightly above the 21 percent level of the previous year. In other words, aid provided to State and local governments is still largely in the form of categorical aid, which is often too restri~tive to adequately meet State needs. Block grants are an important mechanism for reconciling the prin- ciples of federalism with the realities of national concern and local diversity. The Governors believed so firmly in the block grant concept last year that we~ offered to exchange a 10-percent cut in consohdated programs for enactment of the block grants. We offered this incentive in the belief that increased flexibility would provide an opportunity for administrative savings and retargeting worth a 10-percent funding reduction. Instead, we got larger cuts and, as you know, more limited flexibility. I would like, to discuss the magnitude of the budget cuts and illustrate that the lack of flexibility has caused us a certain degree of problems. First of all, there has been a certain amount of damage, not irre- parable, to t:he whole concept of block grants. The term is an umbrella under which many different things huddle. To preserve it we must try to identify exactly what is a block grant. One thing we must clarify PAGENO="0013" 9 is whether or not a block grant is just a disguised term for reducing vital services. One human service administrator in another State said, "Block grants mean more authority to do less." I think that statement is an illustration of the impact of the budget cuts on the block grant concept. The two were extricably intertwined. I have attached to my testimony a table showing the dollar levels associated with the block grants enacted in 1981 and another table illustrating the President's fiscal year 1983 recommendation.1 The tables show that President Reagan's block grant proposals for 1983 expand upon the use of the block grant as a budget cutting tool. In fiscal year 1982, total funding for newly enacted block grants was reduced by 13 percent, a total cut of $1.5 billion. These cuts in- cluded a 19.8-percent reduction in social services block grants, a 24-per- cent cut in the maternal and child health care program, a loss of 26.4- percent in the community services block grant and a 21.3-percent cut in the alcohol, mental health, and drug abuse programs. These cuts have had a substantial impact upon persons who rely upon these programs. The fiscal year 1983 budget proposes new cuts in the block grants. These reductions are hard to track because it would be confusing to compare the reconfigured programs from one year to the next. For example, it appears that the administration has actually budgeted more money for the women, infants, and children supplemental feed- ing programs for fiscal year 1982 than was budgeted in fiscal year 1982. Because of the program changes involved, the WIC program- women, infants, and children-was combined with the maternal and child health block grant. In fiscal year 1982 the WIC block grant was funded at $950 million. The fiscal year 1983 proposed funding for the block grant is $1 billion. For the WIC serviees to be provided at fiscal year 1982 levels, the maternal and child health care block grant activities would have to be eliminated under the combined block. The combined programs are actually slated for a cut of almost 22 percent. Under the administration's fiscal year 1983 proposed block grants, the constituent programs proposed for consolidations would be reduced overall by 16.2 percent from fiscal year 1982 to fiscal year 1983. These same programs suffered reductions of over 21.6 percent from fiscal year 1981 to fiscal year 1982. Thus, the net reductions under the President's proposals will be over 34 percent between 1981 and 1983. These reductions reflect cuts in vital programs, such as child welfare services which will reduced by 18.3 percent from fiscal year 1982 to fiscal year 1983. They represent reductions of 32.6 percent in rehabilitation service programs for the disabled to achieve self-suffi- ciency. The most drastic cuts could be in the community services block grant program, which would be reduced by 71.3 percent. So the question then has to be raised: Is it any wonder that more and more people have come to view block grants with concern, as a subtle way of cutting the budget-maybe not so subtle? While the Governors have repeatedly supported consolidation to improve the efficiency and the effectiveness of the delivery of serv- ices, and the responsiveness to the people, we have not propo~ed using block grants for substantial budget cutting. In fact, we believe that ~ See p. 55. PAGENO="0014" 10 the fiscal year 1983 reductions proposed by the President for block grants and for other programs will weaken the capacity of State and local governments to assume greater responsibilities in the Federal system. In addition to the use of block grants as a budget cutting device, block grants have been used as a means to propose fundamental alterations in the character of program funding, by converting pro- grams for open ended entitlement status to "capped"-or close ended appropriation. For example, the fiscal year 1983 proposal to combine, cap and cut State welfare administrative costs in the food stamp, AFDC and medicaid programs under a "combined welfare adminis- tration block grant" radically restructures these important programs' programmatic and policy concepts which `are essential to their ad- ministration. Open ended funding exists in these programs for a very good reason. It is difficult to estimate the costs involved and the level of services to be provided because they rise and fall according to need, not predetermined levels of funding. The third problem in the implementation of the block grants has been the uncertainty of the block grant funding. Congress has funded the majority of the block grant programs this year under three con- tinuing resolutions. What is very difficult to appreciate is the damage this uncertainty causes to the effective administration of the block grant~ at the State level. One of the primary advantages of the block grants is the flexibility it affords the Governor to plan a more rational system of service delivery for the citizens of the State. However, this planning process could be devalued when the funding level of the programs remain clouded through two-thirds of the budget year. In addition to the legislative situation, there have been administra- tive uncertainties raised regarding the release of moneys and the granting of awards. A prime example of this extralegislative fiscal un- certainty affected the community services block grant. At the time of the First Continuing Resolution, the Office of Management and Budget apportioned the moneys not on the basis of the congressionally adopted level of $362 million, but rather on the basis of the adminis- tration's proposed funding level of $225 million. Similar problems occurred with each of the subsequent Continuing Resolutions. The House of Representatives has raised questions of impoundment vio- lations. Thus, in the States vital administrative decisions as well as the delivery of crucial services were impaired by the on-again/off- again funding confusion that occurred at each round of the budget process for fiscal year 1982. At the present time, community service grants to the States are not guaranteed after the third quarter, in spite of the fact that the Con- tinuing Resolution provides for an appropriation for the remainder of the year. In a nutshell, if States do not know how much they are going to receive for the block gritht programs and when they will receive it. how can they plan and how can they use the intended flexibility? How can they effectively administer the programs? A fourth problem in block grant implementation relates to the transfer provisio~is. During the many years that `the block grants have been under discussion, a central issue has been whether States should have increased authority to redirect Federal grants to meet the needs and priorities identified in those individual States. PAGENO="0015" 11 An initial step toward limited flexibility was realized in the ap- nroval of the block grants in 1981. Most of the block grants allow for the transfer of a small fraction-about 15 percent of the total- and only, as a rule, to certain identified programs. When Governor Busbee testified before you last year, he provided an illustration of how minimal the flexibility provided by the transfer provision really is. He pointed out that the transfer allowed him to reprogram just $91,000 of the $3 million in block grant funds available to his State. In spite of the limited flexibility they offer, the transfers are clearly filling a need in the States and are being used. It would be a mistake for Congress to act against the transferability provision of the block grants, as some members did in the Low Income Energy Assistance block grant supplemental by exempting $123 million from the trans- fer clause. These actions show a lack of support for the flexibility which the Governors believe to be the chief advantage of block grants. Given that the overall reductions in the block grants is 13 percent. the transfer provision allows priority setting and should be preserved. Mr. Chairman, in providing you with a list of the problem areas, I do not mean to imply that the experience has heen'all bad, although the funding decisions have, indeed, created serious service problems. I believe the response of the States in accepting block grants indicates the success of the concept. I think the work of the administration in developing regulations which are as simple and as clear as l)Ossible is another major imple- mentation success. The regulations represent a strong effort to main- tain the integrity of the block grants. Another positive factor is the development under your leadership, Mr. Chairman, of boilerplate language for the block grants. This is a very important project and of critical importance to the States. A structure of this kind would be useful in giving guidance to Con- gress on future block grant legislation. Such a structure will go far in rationalizing block grant requirements and will help recipients ad- minister the programs more effectively. I thus find much to commend and very little to criticize in the Durenberger bill. It is carefully crafted to provide great flexibility to the States while assuring that standards of public participation, fiscal and program integrity, and minimal Federal agency interfer- ence are maintained. We are pleased to see strict limits placed on the authority of Federal agencies to devise administrative restrictions on grant recipients. It is imperative that the block grant concept be free from unnecessary redtape and needless problems over minor issues. The NGA has recently transmitted the boilerplate language to State officials. We will ask them to evaluate the language and ge.t back to us with their comments. In summary, I really appreciate your work. Senator DURENBEROER. Thank you very much, Governor. Let me start the dialog with some of the problems and quotes that have been created on the notion of blocking. I think one of them Senator Dan'forth and I both experienced in the Senate Finance Oom- mittee last year where we had three or four of these blocks. For example, one of them, the title XX social services, was going to be blocked. Nobody told the folks that it had actually been blocked about 10 years earlier. The whole notion had been that we are going PAGENO="0016" 12 to block categoricais, cut out 25 percent of the money-all that was a waste of some kind on the administrative side-and we will be able to live with that much less money. I guess the average reduction for all of the 1981 blocks was some- thing in the neighborhood of 13 percent. However, the administration is coming along, in its budget proposal of this year, with another 16-percent cut. I wonder if either or both of you would react to the issue of how many administrative dollars are actually saved when we move from categoricals to blocks. I don't expect a specific percentage, just some general reactions to the notion that we can save large amounts of money by blocking categoricals. Governor Bond? Mr. BOND. Mr. Chairman, I think when the block grants were ini- tially proposed, as Governor Lamm has indicated, we felt that at least 10 percent of the cost of the programs could be saved by eliminating administrative overlap. In the State of Missouri, as I indicated in my testimony, perhaps as much as 20 percent of the funds in the health care programs went to administrative Federal-State reporting require- ments and regulations. In our social services block grant, we were able to cut administrative costs in half as a result of the flexibility of the block grants. I don't think that you can put a precise dollar figure on each area, but we believe that 10 percent is a realistic amount that can be saved by eliminating restrictive Federal-State requirements. Obviously, there is still going to be some administrative expense. In addition, I would say, as I indicated in my testimony, that we were able to use the flexibility provided under the block grants to target some of the dollars so that program payments were more coSt-effective. We also have changed to different forms of reimbursement which do not reward inefficiency in `the delivery of day ca.re services or waste in the use of energy resources. I suppose 10 percent is the figure we would suggest that can gen- erally be saved on the administrative side. Senator DURENBERGER. That is an across-the-board application, then, to a lot of the categoricals which are under consideration. I judge from your testimony that we ought to look carefully at each of the areas. We ought to realize that there will be a different amount of oppor- tunity in each of the blocked areas-depending on the constituent groups, the amount of categoricals, and some of the mandates which are associated with those categoricals. Is that correct? Mr. BOND. That is correct. Senator DURENBERGER. There is another kind of savings that I think is presumed in all of this. Those of us who pass out money through the categorical-type plans at this end of the governmental system are aware of the fact that we try to treat everybody the same. We try to make sure that everything gets into all the district that we represent. So, we do things like the Low Income Energy Assistance formula which was really designed to get at high heating bills as a result of oil decontrol. However, we ended up allocating a substantial amount to places like Hawaii or American Samoa. I guess last year Hawaii didn't even apply for its money, which is to its credit. Looking at that as an area of savings-in other words, changing the way we make decisions about high priority areas versus low priority PAGENO="0017" 13 areas, and shifting that decisionmaking to the States-have you any estimate for us about what savings might be achieved by the blocking process? Mr. BoND. I am not sure that major savings can be achieved; but we definitely feel that we have been able to target priorities. I will defer to Governor Lamm on that. Mr. LAMM. The lack of empirical evidence that we have in front of us suggests that we should approach the question cautiously. I thmk in federalism we are building a structure which is going to take more than 1 year. We must do it slowly and thoughtfully. I think the only number we can offer, as Governor Bond said, is 10 percent. I think all of us, having seen the effects of last year, will be very cautious about having too much more thrown at us, until we gain some empirical evidence. Senator DURENBERGER. There is a great concern among those who have propounded and those who have a commitment to the categorical processes. They are afraid that priorities will get distorted to a degree at the local level if we give you portability, flexibility, and transfer- ability. I guess I make the presumption that it is a little early to know how much use has been made of portability or transferability. Maybe one of the reasons is because you're not sure how long we are going to stick with this program, or how much more we are going to cut out of it. Is it your view, both of you, that not much use of portability or transferability, or whatever w~ might call it, has been made so far? However, to the degree that we commit to a logical blocking process, that portability can be used as a vehicle for continuing to meet the highest priorities? Mr. LAMM. I don't think you should take the first year of utilization as indicative of what is potential. Mr. BOND. As I indicated in my testimony, we feel that the child welfare and protective services funded under the social services block grant-for which substantial funds were cut in Missouri-was of such high priority that we had to use the portebility of the Low Income En- ergy Assistance to address those needs. In addition, we cut other St~te programs. The general assembly in Missouri went along with appropri- ating funds to pick up cuts in Federal programs. In the past, this has been an absolute prohibition for the Missouri Legislature. They have always said, "We will not pick up abandoned Federal funds." How- ever, in the children's services area, the cuts would have been so harsh that if we had not had the advantage of portability, we would have been forced to take State funds from other vital programs. We have had problems in Missouri that were different from those in Minnesota or Colorado. We have had to use a good deal of flexibility to deal with some of the particular problems that we feel are most pressing in our State, but may not be as high a priority to other States. Senator DURENBERGER. That leads us into the perceived problem of competition-that is, the competition between our constituents and the varjous needs that they have. We have answered that, here, by eliminating competition through the categorical grant process. We have grants for each particular group. Even when their needs overlap, we tend to focus on the categorical classifications of people out there. 99-965 0 - 82 - 2 PAGENO="0018" 14 The great fear, of course, when we block is that we bring elderly people into competition with children, and disabled persons into com- petition with persons who need money for education. What has been the experience, to date, with regard to the competi- tion that has been created by the blocking process? Mr. LAMM. That is no different than what Governors and State legislatures face on a day-to-day basis. I really think that it is all within the normal scope of the give-and-take of State politics. I think that obviously different decisions have been given in different States. I think that overall, the legislatures and the Governors have stepped up to the plate and have made their decisions. Sure, there is com- petition, but there is competition for State tax revenues in the first place. I think the block grant allocation process is just a continuation of the existing decisionmaking process that occurs whenever a State writes its budget. Mr. BOND. Basically, we would have to say that our legislators are extremely close to the needs of our citizens. We are there in the State worrying about the needs of the elderly, the disabled, the handicapped and our ghildren. We are making, for our State, the priority judg- ments that you are making for the Nation as a whole. To the extent that Federal legislation and regulation allows the State priority- setting system to operate, we feel it results in better decisions on com- puting needs within the State, because Missouri has different needs from those of other States. That, simply put, is the basis on which we support the concept of federalism. Senator DURENBERGER. Senator Danforth? Senator DANFORTH. I can remember fighting this battle on the floor and doing my best to uphold the position of the Finance Committee. A stirring argument was made in opposition to my position to the effect that there are no orphans in the gallery, there are no battered children in the gallery and so on. It was as though taking a position in support of block grants as opposed to categorical grants was tak- ing a position against the needy, the disenfranchised, the weak, the poor, and the children. In your view, has it turned out that way? Is it turning out that way? Would you say that the move from categorical grants to block grants is a move from sensitivity to insensitivity, from compassion to callous- ness? Mr. BOND. Senator, I am offended by the thought that the orphans, the disabled, and the handicapped can somehow better get to the gal- leries of Congress than they can get to the legislative halls in our State capitals. I wish to point out to you that the major budget initiatives adopted by the Missouri General Assembly this year related to abused and neglected children, children in foster care, or children in homes with real problems where the State can provide some support to assist them. Of course, the records of some States in meeting these needs are going to be better; some are going to he~ worse. To say, in this day and age, that State government is insensitive to those needs is purest fantasy. T regard it as a slanderous assertion. Mr. LAMM. Let me give you a political science sort of argument. It seems to me that you people back here already have such an avalanche PAGENO="0019" 15 of things coming at you. I would appreciate it if you would solve the Middle East crisis, get inflation under control, and think about- Senator DANFORTH. How about getting the budget balanced? Mr. LAMM. That would be nice. It is laudatory, but I think it is unnecessary to worry about potholes and other things that are ade- quately taken care of at the State and local level. There is only so much time and energy that you have back here. I would hope that you would address the big issues. Senator DANFORTIT. That is the political argument. We are all poli- ticians-you are; we are. That is exactly the political argument. We had a domestic violence bill on the floor. The issue was whether or not to create yet another categorical grant program-this was 2 or 3 years ago-for domestic violence. We had already provided for it under title XX. I can remember making that argument on the floor: "Look, we have a block grant that allows the States to put money into domestic violence and into the treatment of alcoholism, drug addiction or whatever else they want to do in this broad category. Why have a specifiç~ grant program for domestic violence?" The argument on the other side was: "But there are people who are being brutalized. We have to be sensitive toward them. Therefore, if we are going to be sensitive, we must have a categorical grant. We must have a separate program for them." Senator DURENBERGER. Let me briefly make the argument on the other side-in this case, the "unreconstructed Federalist" whom I spoke abOut earlier. A lot of the battered women's programs initially started in Minne- sota. In fact, I was involved in a cooperative philanthropy effort to start the first home for battered women. I just watched it grow after that. We had two successful ones in Minnesota. People around the country said, "Gee, how did you do it?" So, the Minnesotans started going around the country speaking on how you do this. Of course, they were doing it with contributions, free work and that sort of thing. As the word spread around the country, people would go to their local communities to try to get local support. They didn't find much support, so they agreed the best place to go was Washington. We could design a program here, through the categorical grant process, which would take the wonderful things done with a little money in Minnesota and apply them all over the country. I guess the unreconstructed Federalist would say that if Mississippi, Colorado, or Missouri haven't gotten the benefit, somehow, of the in- sight into this problem, or haven't the fiscal ability to respond to it, then the Federal Government ought to bring Minnesota to the rest of the country. Currently, there is a lot of concern as States have difficulty coming to grips with their own budgetary problems, and with the unwilling- ness of the taxpayers to meet the needs of the people. The States are going to pick up on some of these things. I'm sure that you have sensed that because you listen to the same people we do. I choose to think that this is a temporary phenomenon. Until we do come to grips with the budget, people are tightening their willingness to pay taxes all up and down the line. It doesn't mean, though, that they are insensitive to the needs of the people. PAGENO="0020" 16 I think we just need to deal with how believable our Governors are when they come and say that they and the legislatures can do a better job of setting priorities with the same or fewer dollars. Right now, that is a fairly tough sale. Let me ask another question because I am curious. It may be one of the reasons we are not able to come to grips with the budget. By some miracle, we have put off the debt ceiling bill beyond the time we thought we would have to raise the limit on the national debt. I suspect there might be a couple of reasons for it. One, there are more revenues coming into the Federal Treasury than this administration is willing to tell us. Two, I suspect somebody over in 0MB-and I wouldn't accuse Dave Stockman of providing leadership on this-is just refusing to commit funds to the level authorized and appropriated by Congress. One of you mentioned this, I think, with regard to the community services grant. We have experienced it with regard to the Low income Energy Assistance program. I wondered whether or not the~se were just isolated cases-a $100 million here, a $100 million there-or whether 0MB has a more pervasive impact by holding back money that we have appropriated and authorized. Have you seen it in any other areas? Mr. LA~1~r. I wouldn't know. Mr. BOND. I would say that the most distressing thing we have run into-I suppose it comes from 0MB-are the totally unrealistic as- sumptions that all sociai programs can achieve a 3 percent and then a 2 percent, 1 percent, zero error rate. These are totally unrealistic standards, standards which the Federal Government obviously can- not meet and no government in the real world can meet. It leadis one to the strong suspicion that the Federal Government is not interested in saving and making legitimate budgetary reduc- tions, but is, in fact, weiching on its obligations. It is promising more than it intends to deliver and is stuffing the States-which are faced with very tight budgets. We are being forced to pick up the programs promised by the Federal Government. We have been concerned about the holdbacks in funding. We are aTso concerned about some of the proposals to cap expenditures, where we do not have the ability or the power under existing Federal law to affect a savings. These particular "budgetary" efforts are most concerning to us. We do not even feel that these proposals are in good faith. Senator DURENBERGER. Let me ask you another question which re- laites to competition-that is, the competition between local govern- ments and agencies for grant funds. The question is premised on the fact that most of our old categoricals are in the nature of project grants. I think, Governor Bond, you talked about the Small Cities CDBG program. When this program was turned over to the States, the Minnesota Legislature in its wisdom just decided to spread the money around as though it didn't have the ability to address the needs on a grant-by-grant basis. They just set up a formula grant and, basi- cally, distributed the money over the whole State based on population. The Governor vetoed that bill. I heard you talk differently from a Missouri perspective. I am curious to know what the general approach has been around the country. Do States have, as yet, sufficient experience with the PAGENO="0021" 17 project grant process, so that we might trust them to use the Missouri models, rather than the Minnesota models, as we turn back some of these programs in the form of blocks? Mr. LAMM. We have a study that shows that of the 34 which have so far decided to accept the small cities block grants, 33 of them targeted the money and did the weighing process based on priorities and needs. They didn't just prorate the money. We would like to siThmit this report for your consideration.' I do think that the process you described is the exception certainly not the rule. Senator DURENBERGER. Without objection, it will be included in the record. Mr. BOND. We think only about two or three States have gone that route. I am not willing to say with absolute confidence that the process Missouri has adopted is right and the process Minnesota chose is wrong. However, when a legislator in Missouri proposed a distribution formula for the CDBG funds similar to the one Minnesota is using, it was not adopted. We opposed it very strongly. The local govern- ment officials generally agreed with us that the amount of dollars would be so small that they would rather, for the welfare of all the communities and all of the citizens of Missouri, see these dollars go to those communities which had some good programs, could dem- onstrate a need, and could show there would be an impact on eco- nomic development, housing rehabilitation, or public facilfties. We will soon have the experience in Missouri to compare with that in Minnesota. We hope our approach is correct. One good thing about having laboratories at the State level is that we will see if Min- nesota may have been in the minority but had the right view. Senator DURENBERGER. Let me ask you some general questions about the future of blocking. This year. the administration's recommenda- tion lays out eight more blocks. We have only seen two specific bills so far. I would like to ask you both about the welfare administration block grant. What is your reaction to that proposal? I am also curious to know about the blocking of Low Income En- ergy Assistance with other emergency assistance programs. That is important to those of us who are on the Senate Finance Committee, be- cause we are going to have to deal either with that or with the impact. of the alternative-the impact of the administration's recommenda- tions to include Low Income Energy Assistance in computing food stamp benefits. My inclination, for example, is to accept the blocking notion. I suppose there are savings, as you indicated earlier, in welfare administration. With regard to the combining of Low Income Energy Assistance with emergency assistance and the impact on food stamps, person- ally, I really hesitate to include the Low Income Ener~v Assistance in computing the earnings disregard for food stamps. However, my sense is that we could reduce the total amount of money. If we fought off that one. we could then reduce. the total amount of money from $1.8 billion that is going into Low Income Energy Assistance, to some- thing less than that. I See p. 421. PAGENO="0022" 18 Do you have any reactions to that thought? Mr. LAMM. Let me underscore what Governor Bond said in answer to an earlier question relating to the error rates. I know that some- body someplace says, "Well, it must be a lot easier to reduce error rates." But please understand a couple of important concepts. One is that we get charged with client caused error rates. There are errors that are completely outside our ability to control. All of a sudden we get charged for them. Then all of a sudden we find substantial pen- alties coming from them and from the ever changing regulations. At the same time, we have to deal with the practical delivery of serv- ices that we have to administer out there. We have to train, retrain and then retrain people to this ever changing kaleidoscope of regulations coming at us. The SSI population is much more stable than the AFDC, medicaid~ and food stamps population~ in which clients' status is con- stantly changing. The SSI error rate is above 5 percent. In this con- text, a Federal regulation, to hold us to 3 percent, is the kind of thing that scares us. The reasons for the Governors' opposition to the welfare block grant are the proposed budget cuts and the unrealistic shifting of some of these administrative costs to the States. We are on record as oppos- ing it. Mr. BOND. That is correct. Many of our States have already had to cut administrative costs substantially. This is what we did to achieve at least part of the sav- ings necessitated by last year's budget cuts. For Congress to come in now with more program revisions, but hold us to 95 percent of fiscal 1982 administrative expenses, is purely dumping additional costs on the States, costs that we cannot avoid. To echo what Governor Lamm has said, in many instances, we are forced by a Federal mandate to carry out procedures which result in higher error rates. For example, when we are prohibited by Federal law from obtaining collateral information on the eligibility of clients, or when we are required to act on various applications within a lim- ited time, we have higher administrative costs. We have no way to avoid a certain level of errors. To suggest that we can cut those ad- ministrative costs simply because the Congress imposes a limit on the expenses is not realistic. We would be far better off if Congress would respond by giving us the flexibility to institute necessary controls which we think make sense. Obviously, to the extent that we have the flexibility in block grants, we will do things such as establish prospective reimbursement for various services, initiate copayments where it is feasible and take other steps which will bring costs under control. But to issue a mandate and says "These expenditures will be held at 95 percent of the exist- ing level," is totally unrealistic. Senator DURENBERGER. Let me ask you both to respond, either in a specific or a general sense, to the problems we have created with the Low Income Energy Assistance program. Jack and I were both, consistently, on the prevailing side in sup- porting the windfall profits tax. We strongly supported a dedica- tion of much of that tax to relieve the economic burden of those who were going to have to pay for that tax, and also to move in the direc- tion of alternative energies and conservation. PAGENO="0023" 19 However, it was our contemplation, back in the summer of 1979, in the Senate Finance Committee that the economic consequences of de- control would last in the neighborhood of 3 years. Therefore, we would structure a Low Income Energy Assistance program that would be relatively uncomplicated. We would block it back to the States, after we had gone through one quick experience with SSI, with the notion that after 3 years, we would get out of the business. Well, my sense is that the 3 years are up, but they are up at the same time that we are in the middle of a recession. People are just having difficulty in meeting a variety of needs. We may not be faced with escalating home heating oil prices right now, but we are faced with escalating natural gas prices and electricity prices as a consequence of increases in the cost of coal and other items. So we are in the danger, it seems to me, of making permanent another welfare program called Low Income Energy Assistance. To a degree, the administration has recognized this by saying, "Here is another one you have to factor into food stamps for determining the earnings dis- regard;" and, at the same time, "We want to reduce the amount of money that is going into the program." I guess I need your general observations on this subject since we can just cut the whole thing out on the theory that its time has ended. We can go back to taking care of the energy needs of people through cash assistance programs. Mr. LAMM. Let me see if I can remember this. On behalf of the NGA, I met with Senator Hatfield concerning ad- ditional flexibility. About 85 percent of the money has to be paid for low income. Is that it under the terms? Senator DURENBERGER. Yes. Mr. LAMM. It was an 85 percent figure. We wanted some additional flexibility to do energy conservation. Senator DURENBERGER. Weatherization, et cetera? Mr. LAMM. Weatherization, yes. I passionately believe that one of the ways to keep heating bills to a minimum is to undertake as much weatherization and energy conservation as possible. I sense I am not answering the real thrust of your questions. I will give them further thought and will send you a more detailed response. [The material follows:] PAGENO="0024" 20 STATE OF COLORADO EXECUTWE CHAMBERS ()0.cózd Denver, Colorado 80203 Phone (303) 866-2471 Richard 0. amm, Goc'ernor June 14, 1982 The Honorable David Durenberger U.S. Senate Office Building Washington, D.C~ 20015 Dear Senator Durenberger: When Governor Bond and I testified before your Subcommittee on Intergovernmental Relations on May 5, 1982, on behalf of the National Governors' Association, you raised some very important questions regarding the Low Income Energy Assistance Programr Unfortunately, time did not permit a full discussion of these issues at that time. As a result, I would appreciate the opportunity to provide this additional information for the hearing record. First of all, you asked how Governors feel about the Admini- stration's proposal to combine the Energy Assistance Block Grant Program with the AFDC emergency assistance program. Governors have testified regularly before your subcommittee and other congressional committees on behalf of maximum flexi- bility in administering programs where Congress provides funds to the states to meet human needsr Governors continue to press for that flexibility and would welcome changes in both the Emergency Assistance Program and in the Low Income Energy Assistance Program designed to provide that flexibility. The Administration has proposed to combine three programs into one, and at the same time, reduce funding by more than 36%~ The figures are as follows: FY82 FY83 Program Appropriation Proposed Lw Income Energy Assistance $l.875 billion $1.3 billion AFDC Emergency Assistance 61 million -- DOE Home Weatherization 144 million -- TOTALS $2.O59 billion $L3 billion These cuts are inappropriate and cannot be accomplished without major program reductionsr PAGENO="0025" 21 Senator David Durenberger June 14, 1982 Page 2 The Administration has provided no factual data to indicate that the demand for these three programs has declined in any way or is likely to diminish in the future. To fold them into one program in the name of flexibility while drastically cutting federal support does a disservice to the concept of block grants and federalism, and is unacceptable to states~ Next, you asked about the Administration's proposal to count Energy Assistance payments as income for AFDC and food stamp recipients. We oppose this concept because it creates seri- ous problems for the recipients as well as for the administer- ing state agencies. For persons receiving both AFDC and food stamps, the effect would be simply to negate the benefits of the Energy Assistance Program, causing beneficiaries to lose almost $1 in AFDC/food stamp benefits for every $1 they re- ceived in Energy Assistance. While such a manipulation of programs might give the appearance of federal budget savings, nothing really would be accomplished beyond reducing benefits to persons certified to be truly needy and leaving the states with fewer resources to deal with an undiminished caseload. States already have sufficient authority to avoid any potential duplication of benefits. Finally, you asked about the future of the Energy Assistance Program, stating that some had expected the program to last for only three years and asking whether in establishing Energy Assistance the Congress had, in effect, created another welfare program. In the extended debate over decontrol of oil prices, it was recognized from the outset that there were certain tradeoffs-- that the nation should benefit from allowing energy supplies to seek their true market levels, which would encourage energy conservation, for example. At the same time, it was recognized that persons living on low, fixed incomes would suffer an extra- ordinary increase in their unavoidable fuel costs--costs which they would simply be unable to pay unless provided some form of assistance In effect, the nation struck a bargain with itself, agreeing to accept the painful adjustments resulting from decOntrol as long. as the needy were given some assistance in meeting extraordi- nary fuel price increases. In the 1980 Crude Oil Windfall Profit Tax Act, Congress adopted language stating that 35% of the net proceeds of the tax should be reserved for Low Income Energy Assistance during this decade. Although strictly speaking this language is not binding, it is equally true that appropriations for Energy Assistance have never come close to the 35% goal. PAGENO="0026" 22 Senator David Durenberger June 14, 1982 Page 3 Although there is some tendency today to focus attention on the recent leveling off of certain energy prices, particularly gasoline and fuel oil, it must be remembered that these recent reductions came only after increases which have caused many home fuel bills to double, triple and quadruple. Furthermore, prices for electricity and other fuels, particu- larly natural gas, have continued to increase in recent months~ Testimony at congressional hearings indicates that typical fuel assistance to a needy family in the recent record-breaking winter was in the range of $500, and that total fuel bills over $1,500 are increasingly common. Equally important, neither the states nor the Federal government have been able to make the extraordinary adjustments that would have been required to as- sure that SSI and AFDC benefits were sufficient to meet energy needs. Governors strongly support continuation of the federal assist- ance provided through the Energy Assistance Block Grant program and are firmly on record that FY 1982 funding levels for block grants should be continued in FY 1983 and thereafter~ We are, however, fully prepared to discuss alternative ways in which that assistance might be provided within a broader examination of federalism~ If we may provide additional information on these matters, we would be pleased to do so. Sincerely, Rich rd D~ Lamm Governor cc: Governor Jay Rockefeller Senator Gary Hart Senator William Armstrong Congresswoman Pat Schroeder Congressman Tim Wirth Congressman Ray Kogovsek Congressman Hank Brown Congressman Ken Kramer Steve Farber, Executive Director, NGA Deirdre Riemer, Staff Director, NGA PAGENO="0027" 23 Mr. BOND. Mr. Chairman, obviously the problem of natural gas and the increasing prices imposed on consumers in Missouri is one of the very real problems that we face. The recent runup of natural gas prices has been a far more significant burden on our State than heating oil costs. We feel very strongly that not only is this a problem for low- income households, but it is also a problem for middle-income house- holds in our State. Regarding the proposal to count low-income energy assistance or AFDC in food stamps, it is the view of our departmental people that this would hit the poorest the hardest. Those who receive both AFDC and food stamp benefits would get a double whammy if the Low In- come Energy Assistance were counted. Obviously, you have pointed out a real problem: How do we take care of the needs of our people? The energy costs are ongoing costs that have to be paid. We don't have any magic solution as to how you can resolve the issue you have raised, but we can assure you that the problem still exists. With continually increasing natural gas prices in Missouri, it is going to be an even more serious problem. Senator DtTRENBERGER. Of course, the problem for those of us who are dealing with the New Federalism is: Can we muddle through this year~ without any difficulty? I mean, we will cut a little money. We will bite off the administra- tion's recommendations on AFDC. However, at least on my part, it is a real concern. We have just created another inkind program to take care of another need when, at some point, people might make those decisions better with cash through the AFDC program or some- thing else. For some period of time, it seems to me, we have been going the wrong way. We are diluting the weatherization decidedly and main- taining the energy payment side of it. I think at some point we need to address that. I am conscious of your time. I have one last question I would like to ask you both. It deals with what we call the crosscutting require- ments. That is, the 60-some laws and regulations that apply to any- body and everybody who takes Federal grants-the Davis-Bacon Act, the Civil Rights Act, the National Environmental Policy Act, archi- tectural heritage, and all the various regulations and 0MB circulars. All of these, presumably, have the force and the effect of law. It has been a little difficult for us to determine whether 0MB really believes they apply to the block grants. What is your view as to whether or not they do or ought to apply, given the role that the courts usually have in the process of deter- mining the application of these kinds of crosscutting requirements? Should we just make the decision that all of these requirements are going to continue to apply to the block grants? Or, should we be more definitive in that area as we go into the blocking process? Mr. BOND. I would say that, to the extent that there are basic Federal policies which should be followed-you mentioned a number of areas including nondiscrimination-we would understand a Federal corn- pliance requirement attached to the block grants. On a case-by-case basis, there may be some requirements that are not appropriate to par- ticular block grants. I think the first step in addressing this question is for the Congress to examine the extent of all of these national p01- PAGENO="0028" 24 icies to assure that they are all still warranted. Then, following on that, the Congress should make a decision on a case-by-case basis as to which of the various crosscutting requirements should apply to the block grant programs. Mr. LAMM. I support Governor Bond's response and would point out, in addition, that you have included in your boilerplate bill a pro- vision to prevent any additional restrictions being imposed by admin- istrative regulations. Your proposal is a constructive approach to the problem. Senator DtTRENBERGER. The time of 10 :öO having arrived, I will express my appreciation to both of you and to the NGA for youi contributions. Mr. BOND. Thank you, Mr. Chairman. [The prepared statements of Governors Bond and Lamm follow:] PAGENO="0029" 25 ~ National Governors' Association A. elling * Chairman Stephen 0. Farber Executive Director Testimony of The Honorable Christopher S. Bond Governor of Missouri before the Subco~ittee on Intergovernmental Relations Committee on Governmental Affairs U.S. Senate May 5, 1982 HALL OF THE STATES ~444 North Capitol Street. Washington, D.C. 20001 (202) 624.5300 PAGENO="0030" 26 Mr. Chairman, my name is Christopher S. Bond, and I am Governor of Missouri. Thank you for permitting me to appear today on behalf of the Nation4 Governors' Association to discuss implementation of block grants. Mr. Chairman, I am particularly pleased to appear before this. subcommittee, because of its long standing bipartisan sensitivity to the needs of state and local governments. The nation's Governors are grateful for your commitment to the federal system of government. As my old friend and fellow Missourian Senator Jack Danforth can attest, I have long been an ardent supporter of block grants and other federal policies that return program planning and administration to the states. Block grants provide states with the only real flexibility in an otherwise restrictive grants-in-aid system. There is a need to continue the process of relieving states from the constraints of 500 separate categorical programs and their attendant regulations, which impose over 1,000 separate mandates on state and local government and a paperwork burden estimated to have cost $5 billion in 1977. In Missouri, we spent an estimated $8.4 million in FY 1981 to comply with 1,400 pages of federal rules and regulations for categorical health and social service programs. Health programs alone required 2,202 separate reports. We estimated that one-fifth of state employees' time was spent writing proposals and reports to meet federal reporting and accounting requirements. Under these conditions, it is little .wonder that many Americans believed that government was not meetiug their needs. Nor was it surprising Governors felt they must be given greater flexibility to develop and administer programs. PAGENO="0031" 27 TheGovernors have welcomed the priority the President has given to the issue of federalism and the return of greater responsibility for programs to the states. Certainly the block grant concept is a mechanism that provides a vital link between rigid categorical programs and needed reforms. Block grants are an important vehicle for achieving national objectives while maintaining the flexibility of a federalist system. Although 1981 provided a good start toward a new federalism, we still have a long way to go. As you know, the nine block grants approved in 1981 represent only a fraction of the total number of federal grants- in-aid to stats and local governments. The flexibility originally included in the President's block grant proposal was sharply compromised in the legislative process. In addition, funding for most blocks was substantially reduced. States had little opportunity to plan for either the assumption of new responsibility or these funding reductions. Nevertheless, I feel the states have made real progress in remedying the problems of the grants-in-aid system. Mr. Chairman, I would like to share with you some of the improvements we have been able to make in Missouri as a result of the increased flexibility provided under the block grants. But first, with your permission, I want to give you some general information on block grant implementation nationwide. In view of the attention block grants have attracted, NGA knew that there would be a demand for information on how the blocks were being implemented. Accordingly, in January and early February, the National Governors' Association and the Council of State Planning Agencies sponsored a survey on the status of the block grants. The survey covered the nine block grants enacted in the Omnibus Reconciliation Act of 1981 and was circulated to all Governors, their executive assistants, block grant contacts, intergovernmental relations representatives and budget and planning officers. PAGENO="0032" 28 -3- The survey was coordinated by the Governor's office in each state and was composed of two parts. Part one was a fourteen-item questionnaire examining options to transfer funds among blocks; the public participation process; and the use of increased flexibility to alleviate state financial and administrative burdens. It also dealt with state matching of federal funds; the role of the Governor's staff; the enactment of state legislation concerning block grant appropriation, allocation, and administration; the use of programmatic and administrative flexibility to improve service delivery; and initiatives to pass flexibility on to local governments. Part two asked states to provide a concise description of a planning, policy or management reform, a program innovation, or problems encountered by states in implementing block grants. The culmination of this two-part survey is the 1982 Governors' Guide to Block Grant Implementation, a 131 page document published in February and released at the National Governors' Association winter meeting. All fifty states responded to the survey, providing the most complete and up-to-date information available on block grant implementation in the states. A copy of this document is being submitted with this testimony. The survey provides valuable information on implementation timetables. Despite the very short lead time for implementation of the block grants, most states elected to assume the available block grants at the earliest possible date. PAGENO="0033" 29 -4- * The Alcohol, Drug Abuse and Mental Health Block Grant has been implemented by forty-seven states. The remaining three states will implement the grant October 1, 1982. * Forty-six states implemented the Preventive Health Services Block Grant by January 1982. Officials in one state plan to implement the grant July 1, 1982, and two s'tates have plans to take this grant October 1, 1982. One state did not report its intention. * The Maternal and Child Health Care Block Grant has been accepted by forty-seven states. One state will assume this grant July 1, 1982, and two others indicate their willingness to take over the grant on October 1, 1982. * All fifty states implemented the Social Services Block Grant and the Home Energy Assistance Block Grant on October 1, 1981, as federal legislation required the assumption of both grants at the beginning of FL 1982. * Thirty-nine states have chosen to administer the Community Services Block Grant. Eight states will begin administering the grant October 1., 1982. In three states a final decision on this grant had not been made at the time of the survey. States electing not to implement this block grant in FT 1982 indicated that the main reasons behind the decision were unfamiliarity with the operation of the program, which had always been primarily a federal government-to-local agencies program, with little state control; lack of planning time because of late passage of federal legislation; and uncertainties regarding federal funding levels. One state reported that there was opposition from tihe local agencies to the state assuming administration of the block grant before F? 1983. 99-965 0 - 82 - 3 PAGENO="0034" 30 * A variety of implementation dates is being used for the Community Development Block Grant:. -October 1, 1981 - eight states -December 1, 1981 - one state -January 1, 1982 - one state - April 1, 1982 -- two states -May 1, 1982 -one state -June 1, 1982 - one state -July 1, 1982 - two states -August 1, 1982 - one state -October 1, 1982 - six states Twenty-six states at the tine of the survey ~iere undecided, and oneT state had accepted a planning grant but did not list an implementation date. Most states which delayed acceptance of the Community Development Block Grant stated they were hampered by delays in the publication of regulations by the Department of Housing and Urban Development. States also cited insufficient planning time- particularly for local input-and state legislatures were not in session to authorize acceptance of the program. * The Elementary and Secondary Education Block Grant was forward funded for July 1982 distribution. Twenty-nine states will begin administering this grant on Juiy 1, 1982 while sixteen -. others will implement it October 1, 1982. One state will begin implementation September 1, and four states were undecided abQut this grant at th.e time of the survey. * As you Tatow, the Primary Care block grant does not go into effect until F? 1983. According to the Hational Governors' Asso~iation survey, some states have serious reservations about assuming this grant PAGENO="0035" 31 -6- because they are not satisfied that federal dollars received by the state under the block would offset the administrative burden incurred in operating the program. In addition to information on the timing of implementation, the NGA survey revealed the following preliminary trends: First: In most states the degree of public participation in the administration of the blocked programs significantly increased, even though there was short lead time to upgrade the process. Previously, most programs were administered with a minimum of involve- ment from the public, the legislature, and local policymak~rs. A variety of techniques is being used to increase participation: there has been a marked increase in legislative involvement, more meetings with citizens, and more attempts to interact with local units of government. Creative approaches used included' statewide teleconferencing, televised meetings, task forces, special consti- tuency groups, and the provision of speakers for groups requesting information. In most states, the executive agency administering the particular block grant took primary responsibility for coordinating public participation. The Office of the Governor, followed closely by the state legislature, were the next units of government most frequently responsiblé.for this activity. Second: Governors are taking advantage of the increased administrative authority provided under the block grants to coordinate the use of federal and state dollars. As part of this effort, Governors' offices and state legislatures are working to develop new resource allocation guidelines. PAGENO="0036" 32 Third: Most state legislatures have t±ied to anticipate the procedures that would be necessary to carry out the responsibilities of block grant implementation. In some states, block grants must be included in the legislative appropriations process. In other states, agency and block grant program funding must be in the same proportion as that for categorical grants from the previous year. Fourth: As you know, a major benefit of the block grant concept is the opportunity for administrative simplification. Most states indicate that there will be efforts to streamline procedures and to reduce red tape. In Missouri, we expect to achieve significant savings through administrative simplifications which I will describe in greater detail later in my testimony. However, at the time of the NGA survey early last winter, many states were unsure whether the present block grants would lead to simplification or complication. Some states actually indicated a fear of increased administrative burdens, resulting from changes in contracting and legislative appropriations rules. More than half the states indicated there would be no effect from liberalized audit requirements, and six states anticipated an increase in state audit responsibilities. Fifth: The Omnibus Reconciliation Act provided limited power to transfer funds from one program to another to meet state priorities. The most frequent transfer to date is from the Low Income Energy Assistance program into the Social Services block grant. We feel the transfer reflects the fact that funding for the Social Servic~ PAGENO="0037" 33 -8- block grant was reduced on a national basis by 19.8%, while the Low Income Energy Assistance block grant, after the aost recent supplemental, received a slight increase in funding. Many states, including Missouri, chose to transfer monies from the Energy Block Grant to other high priority programs in order to distribute funding cuts more evenly among critical energy assistance and social service programs. As block grant implementation progresses, NGA will continue to monitor activities in each state. We will report to you with any additional information. With your permission, Mr. Chairman, I would like to turn to Missouri's experience in implementing the block grants. First, I would like to take a few moments to describe the mechanics of our block grant planning process. Anticipating the passage of block grants, in March of last year we began developing a comprehensive decisionmaking process that enabled Missouri to assume responsibility for all available block gra~its on October 1, 1981. To coordinate the delivery of services under the individual block grants, I appointed a task force that brought together heads of departments with jurisdiction over block programs, my Director of Budget and Planning, and my Chief Executive Assistant. The task force developed a consistent process for developing program adjustments for all of the block grants. The process began with a series of public hearings across the State conducted by the department responsible for the programs in each block. These hearings were followed by careful review by an advisory committee made up of service providers and client representatives. Following advisory committee input, tentative program funding decisions were announced. PAGENO="0038" 34 -9- Members of my immediate staff and department directors next worked closely with the General Assembly in developing overall policy for administering the block grants and distributing funding reduct~ions. Where necessary, the General Assembly modified FY 1982 appropriations to provide the flexibility necessary to implement the block grants. For example, the General Assembly removed language tying spending authority to particular federal categorical programs, and estimated appropriations to accommodate ultimate block grant funding levels. In appropriating block grant funds for FY 1983, the Missouri General Assembly institutionalized its involvement by creating oversight committees- consisting of five representatives and five Senators-to oversee each block grant ares. These committees will be fully informed of all aspects of the programs funded by each grant. The grants themselves, however, were appropriated in one lump sum, providing broad administrative discretion to ensure maximum efficiency and responsiveness in service delivery. I am especially pleased with the efforts we have made to involve community groups in our decisionmaking process. I am well aware of the frequently voiced fear that community interests would not be adequately consulted in block grant funding decisions because of relaxed program planning and public hearing requirements. Let me assure you that this criticism can not be made about Missouri. Each department with jurisdiction over block grants established special communication channels with state and local elected officials, service providers, recipient advocacy groups and the general public. Activities undertaken in preparation for assumption of the Community Development Block Grant are illustrative of our consultation process. PAGENO="0039" 35 -10- As Chairman of the NGA Committee on Community and Economic Development, I was particularly concerned with burying once-and-for-all the myth that state governments are insensitive to the economic development needs of their local jurisdictions. Even prior to the passage of the Omnibus Reconciliation Act, my administration undertook preliminary conversations with local officials to discuss state assumption of the program. Following passage of the statute, I designated the Missouri Division on Community and Economic Development (CED) as the lead agency for administering the block grant and I appointed a twenty member advisory committee composed of elected county and city officials, as well as professional staffers from local governments. The committee, which has held four meetings, has offered valuable assistance in developing our program. To ensure that all local governments were consulted, we also sent a twenty page questionnaire to each presiding county judge (county executive) and mayor in the state, asking them to advise us on a wide variety of questions including: types of projects that should be emphasized; types of targeting criteria which should be utilized; kinds of limitations which should be placed on grants, such as grant ceilings, grant minimums and multi-year commitments; and type of technical assistance that would be most beneficial to local officials. Finally, early this year we convened four regional meetings with local government officals and other interested parties to ask their advise on how the program should be designed. I would now like to disucss the specific initiatives Missouri has taken under each block grant. Community Development Block Grant This year Missouri expects to receive approximately $26 million in CDBG funds to dintribute to its small cities and counties. Of this amount, about 2% or $6,000 is allowed for administration. Another $9 million PAGENO="0040" 36 -11- will come off the top to honor multi-year commitments already made by HUD. This leaves approximately $17 million to distribute to new applicants. With nearly 1,000 eligible units of government, we did not deem it wise or in the best interests of the State to distribute the funds to each unit of government on a formula basis. Thus, we devised a competitive grant program. The Missouri program is designed to fund four categories of activities: 1) economic development, 2) housing rehabilitation, 3) public facilities, and 4) emergencies that threaten health and welfare. Competition for housing and public facilities will occur annually. Competition for economic development and emergencies will take place quarterly. Of the $17 million left to distribute to new applicants, five percent will be set aside for emergencies and hhirty-five percent will go for economic development. The remaining sixty percent will be split between housing and public facilities based upon the percentage of dollars requested in each category. An applicant may apply for a maximum of $500,000 in hou~ing or public facilities grants and up to $750,000 for economic development grants. No limitation is set for emergencies since a case-by-case determination must be made. We anticipate being able to receive applications for housing and community facilities funds from June 1 to July 17 of this year. For the first quarterly ec:onomic development and emergency categories, we will accept applications between July 1 to August 15. We have already mailed nearly 2,000 packets to officials of eligible governments which included details of the Missouri program. We have attempted to greatly simplify the applications in order to reduce the advantages of "grantmanship" and make it easier for small cities and counties to compete. PAGENO="0041" 37 -12- The criteria for judging applications will balance need and opportunity for economic development. There is no bias for one part of the state over another, or for the size of any competing local government entity... In addition, we are putting together a comprehensive technical assistance program to help local officials participate in the block grant. I think it is important to note that we are able to do all this in a manner which is more efficient and less costly than HOD. For example, we are administering the small cities program with only twelve full time employees whereas HOD required 31 persons working in two regional offices to run its program for non-entitlement areas. Social Services Block Grant Funding for the programs included in the Social Services block grant (SSBG) was cut 20% nationwide. In Missouri, funding was actually cut by 22% due to a loss in population. As a result, our funding was reduced by over $13 million, from $65 million in FT 1981 to $51.8 million in FY 1982. Fortunately, through a combination of administrative cuts, service delivery modifications and alternative funding sources, Missouri was able to minimize client service reductions. As you kiiow, the SSBG eliminated certain costly and time-consuming planning and reporting requirements. Missouri was therefore able to make major reductions in staff, equipment and other administrative expenses. The state achieved additional savings by consolidating and simplifying reporting requirements for Title XX social service programs with child abuse and neglect programs and foster care and adoption assistance services under Title TV-B and E of the Social Security Act. As a result, we were able to cut the cost:of administering programs in this block grant by roughly one-half. PAGENO="0042" 38 -13- * Once we had achieved all possible administrative savings, we turned our attention to improvements in the existing day care reimbursement system. Federal Inter-Agency Day Care Requirements and rates based on estimates of center costs had produced state subsidized day care charges that exceeded day care rates in the private market. By moving to a standard negotiated rate ($8 per day for children and $12 per day for infants), we were able to reduce costs by $1.3 million without curtailing the amount of day care time provided. The third way we absorbed funding reductions was by encouraging day care centers to negotiate copayment arrangements with their clients. Prior to the enactment of the SSBG, federal regulations had effectively, discouraged copayment for day care by reducing federal reimbursement to states in the amount of the copayment. Finally, SSBG funding reductions were further offset by transferring into the block $4 million of Low Income Energy Assistance funds. * Through these measures, Missouri successfully held overall reductions in client services to approximately 13%. Unavoidable service reductions were targeted away from life-sustaining services, such as protective services for children. In addition to the above program modifications, my administration aggressively lobbied for increased state dollars to minimize the effect of federal reductions on children's programs. Last week, the Missouri General Assembly approved partial funding for significant new initiatives in children's programs providing 8or preventive health programs and services for abused and neglected children that will allow them to remain in their home environment, The combined effect of the children's budget initiative and changes in funding priorities has resulted in a social service program in Missouri which successfully targets available funds to the most critical social service needs. * PAGENO="0043" 39 -14- Low Income Energy Assistance Block Grant In contrast to deep funding reductions in the Social Services Block Grant, FY 1982 funding under the Low Income Energy Assistance Block Grant (LIEA) underwent a slight increase. Our efforts in implementing this block grant were concentrated in three areas: comprehensive overhaul of our service delivery system; changes in our benefit schedule; and use of funds for weatherization activity. Prior to this fiscal year, utilities participating in Miaaouri'a LIEA were reimbursed for expenses after heat was supplied. Providers had to submit bills each month. Payment to utilities was routinely delayed anywhere from 30 to 90 days. Largely as a result of these factors, approximately 1,000 providers dropped out of Missouri's program during the FY 1981 winter season. In order to attract providers back into the program, we needed to develop a new service delivery system that guaranteed timely, reimbursement and provided minimal paperwork. As a result of the Department of Health and Human Services' commitment to allowing maximum administrative flexibility under all block grants, we were able to implement a new energy assistance system that addressed both needs. Under our new system, the Missouri Department of Social Services determines each eligible applicant's maximum benefit for the entire winter heating system and advances that amount to the utility contracting to provide heat for that individual. At the end of the year, the utility returns any unused funds to the state. Seventy-five to eighty percent of our utility providers have rejoined our program in response to this service delivery modification. We further improved the cost-effectiveness of Missouri's LIEA by modifying a benefit formula that inadvertently discouraged energy conservation. Under last year's plan, Missouri paid a percentage (based PAGENO="0044" 40 -15- on income) of each eligible person's heating bill, up to a maximum of 50% of the total bill. By comparison, under this year's formOla, maximum benefit levels are based solely on income. Unlike last year's calculation, the new formula encourages fuel efficiency because the benefit amount does not rise with increases in fuel useage. Although the maximum benefit is lower under the new formula, the average monthly grant amount available to LIEA recipients has increased by 36%, and more recipients have received assistance than in FT 1981. Missouri originally did not plan to exercise the option to use LIEA funds for weatherization activities. However, the unexpected appropriation of supplemental funding has made it possible for us to dedicate $5 million of LIEA funds for this purpose. Weatherization projects will be carried out by our Department of Natural Resources, and will emphasize services for the elderly and handicapped. We estimate that 3,700 homes will be weatherized as a result of the flexibility allowed under the block grant. As I mentioned earlier, Missouri exercised the transferability option provided under the Low-Income Energy Block Grant to transfer $4 million into the Social Services Block Grant. With your permission, Mr. Chairman, I would like to make a few brief remarks concerning recent attempts by some members of Congress to use state exercise of this transferability option as an excuse for reducing LIEA funding in FT 1983. The transferability of funds between block grants is essential to the successful implementation of the block grant concept. Transferability is the best solution to one of the major problems of the grants-in-aid system--the inefficient distribution of federal funds among categorical programs--because it gives states the opportunity to use federal funds in the most cost-efficient way possible. PAGENO="0045" 41 -16- The factors surrounding Missouri's decision to use LIEA funds for certain social service programs provide a sound example of the importance of this mechanism to the successful delivery of essential state services. As I have discussed previously, funding for Missouri's social service programs was cut by 22%. Although every effort was made to absorb this cut through administrative reductions and modifications in service delivery systems, it soon became apparent that the state would have to increase appropriations to offset funding reductions in vital children's protective services. Although my Administration worked quickly to enact a children's budget initiative, these vital services would have been stopped for many months if we had not been able to transfer funds from the LIEA. Because of the transferability option, we were able to distribute funds among competing programs in the fairest and most effective manner. Alcohol, Drug Abuse and Mental Health Block Grant Missouri has also been able to use block grant flexibility to make significant improvements in the delivery of health services. In particular, the Alcohol, Drug Abuse and Mental Health Block Grant (ADA/MH) reduced federal regulation to such an extent that we have been able to make great strides in improving the effectiveness and efficiency of our mental health programs. Prior to the enactment of the ADA/MM Block Grant, state mental health planners were faced with an uncoordinated network of mental health services. One system of care is comprised of state-operated mental health facilities--five hospitals and three mental health centers. These facilities are primarily state-funded. However, because they also receive some federal funding, the fadilities are subject to both federal and state laws and regulations. A second "purchase of service" system of mental PAGENO="0046" 42 -17- health care is delivered by twenty-one privately operated community `mental health centers also receiving both state and federal funds and subject to both Missouri and federal laws and regulations. Frankly, it is difficult to imagine a service delivery system any less efficient. We were unable to effectively implement statewide funding priorities because we had no authority over the use of federal monies. As a result, a significant amount of federal money was being spent for the treatment of short-term episodic mental illness rather than chronic illness, which is responsible for the major part of repeat, long-term mental health care expenditures in the state. In addition, poorly defined federal service delivery areas--based solely on population--did not adequately reflect factors having a significant effect on availability of health care. Basic mental health services were not readily ava~lable in some parts of the state, while wasteful duplication of services existed in other areas. Finally, both state and privately operated facilities were spending significant amounts of money in complying with separate state and federal mandatory service requirements, as well as an unbelievably complicated array of accounting and reporting procedures. With reduced federal service mandates and increased administrative authority provided the state under the ADA/MR Block Grant, we have been able to make significant inroads into this administrative nightmare. We are now able to target federal resources to chronic illnesses and other mental health problems which we know are most critical in our state. Mental health centers have been `able to significantly reduce administrative overhead because they are no longer forced to oomnply with two separate PAGENO="0047" 43 -18- sets of regulations. Aggressive enforcement of service delivery contracts between facilities serving the same area has eliminated wasteful duplication. Finally, as a result of new service area boundaries, federally-funded mental health services will now be available in previously underserved areas of the state. As a result of these changes, we were able to minimize the effect of federal budget reductions. FY 1982 funding to Missouri for the programs within the block was cut by approximately 35%. In spite of this major funding cut, ten of the twenty-one purchase of service areas in Missouri will experience funding increases--some as high as 40% and 23%. Three areas will receive constant funding. Funding decreases in the eight remaining areas will range from 3.9% to 19.7%. Maternal and Child Health Block Grant Implementation of the Maternal and Child Health Block Grant also required a reexamination of spending priorities. Our first step in implementing this block grant was to significantly reduce funding for sub-state specialty projects established under the old categorical programs on a pilot project basis. Funding for the majority of these projects was reduced as much as 50%. While many of these programs were meritorious, the limited scope of the projects convinced us to accept recommendations from community groups to reduce funding. Reductions in spending for these projects freed-up approximately $800,000 which we passed through to counties in the form of block grants. Service mandates were limited to a set minimum amount of basic public health services for children, such as well-baby care and health screening. In this way, we were able to pass administrative flexibility on to local governments which we felt were better able to make effective decisions PAGENO="0048" 44 -19- concerning the delivery of public health services. In addition, as a result of our county block grant initiative, eight counties in Missouri which do not have public health offices are now receiving a minimum amount of child health services. In F? 1983, we plan to use state funds provided under my children's budget initiative to increase the amount of block grant funds available to counties. Conclusion In closing, I believe that Missouri's block grant implementation record illustrates that the states are fully competent to assume greater responsibility for identifying and serving needs of their citizens. During the past year we have made every effort to use the flexibility provided under the block grants to set intelligent funding priorities, target funds to previously underserved ;subsrate regions, eliminate wasteful duplication of services, and abolish unnecessary reporting and administrative requirements. By concentrating on staff reductions, other administrative savings and more efficient delivery systems, Missouri has been able to minimize the effect of funding reductions on services. Where service cutbacks could not be avoided, community groups were closely involved in setting funding priorities. In addition to developing more efficient and effective ways to use federal funds, Missouri has increased state funding for social services and public health services, which we feel are primarily state responsibilities. As you consider federal budget proposals for FY 1983, we hope that the activities of the states during the past year will encourage you to support further increases in administrative flexibility. PAGENO="0049" 45 **~~(* ~ National Governors' Association ~chd~e111ng Chairman Stephen B. Farber Executive Director Testimony of The Honorable Richard D. Lamm Governor of Colorado before the Subcommittee on Intergovernmental Relations Committee on Governmental Affairs U.S. Senate May 5, 1982 HALL OF THE STATES ~444 North Capitol Street. Washington. D.C. 20001 (202) 624-5300 99-965 0 - 82 - 14 PAGENO="0050" 46 Mr. Chairman, my name is RichardD. Lamm. I am Governor of Colorado and a member of the National Governors' Association Executive Committee. I am pleased to have this opportunity to present the views of the National Governors' Association and the experience of my state on the subject of block grants. This is an area of great concern to me and to all Governors, and I wish to thank the subcommittee for the work you have done to improve the relations between states and the federal government to the benefit of both program recipients and the taxpayer. In the interest of time and efficiency, Governor Bond and I have accomplished our own "sorting out" exercise for this hearing. Governor Bond, in addition to his discussion of the operation of block grants in his state, has focused on NGA's recent block grant implementation survey. I will focus upon the problems states have encountered with the block grants. The problem areas I will cover in my testimony today are budget reductions, program design, uncertainty in funding levels, and issues relating to the transfer provisions. Last year, the President proposed consolidating 85 categorical programs into six block grants. Congress approved the merging of 57 programs into nine block grants. The President also proposed more sweeping state flexibility in the programs than Congress allowed, While the Administration is to be applauded in its efforts to rationalize and make manageable the some 500 separate categorical programs and their attendant regulations, the changes passed in 1981 make only a small dent in the much larger problem. Even with the proposed eight new block PAGENO="0051" 47 grants and three expanded initiatives, just 25% of grants-in-aid would be provided through more flexible block grants in FY 1983, up only slightly from 21% the previous year. In other words, aid provided to state and local governments is still largely in the form of categorical aid, which is often too restrictive to adequately meet state needs. Block grants are an important mechanism for reconciling the principles of federalism with the realities of national concerns and local diversity. The Governors believed so firmly in the block grant concept that we offered last year to exchange a 10% cut in the consolidated programs for enactment of the block grants. We offered this incentive in the belief that increased flexibility would provide an opportunity for administrative savings and retargeting worth a 10% funding reduction. Instead, Congress enacted much larger cuts, as we all know, along with more limited flexibility. Problems in Block Grant Implementation This brings me to the first problem I wish to outline respecting the implementation of the block grants: the magnitude of the budget cuts they represent. 1. Budget Reductions It would be a terrible shame and would create damage difficult to repair if the block grant concept becomes known as merely a tool for reducing vital services. To quote one human services administrator, "block grants mean more authority to do less". Its an illustration of the impact of budget cuts on block grants, I have attached to my testimony a table showing the dollar reductions associated with the block grants enacted in 1981 and another table that illustrates the President's FY 1983 recommendations. PAGENO="0052" 48 -3- As can be seen by these tables, President Reagan's block grant proposals for FY 1983 expand upon the use of block grants as a budget cutting tool. In PT 1982, total funding for the newly enacted block grants was reduced by 13%, a total cut of almost $1.5 billion. These cuts included a 19.8% reduction in the social services block grant, a 24% cut in the maternal and child health program, a loss of 26.4% in the community services block, and a 21.3% cut in the alcohol, drug abuse and mental health programs (ADAMEA). These cuts have had a substantial impact upon persons who rely on the programs for vital services. The FY 1983 budget proposed new cuts for block grants. These reductions are difficult to track, because it can be confusing to compare reconfigured programs from one year to the next. For example, it appeared that the Administration was actually budgeting more money for the women, infants and children supplemental feeding j~rogram (WIC) for F? 1983 than in F? 1982 because of the program changes involved: WIC was being combined with the maternal and child health block grant. The WIC program was funded at $950 million in F? 1983 and the F? 1983 proposed funding for the block grant was $1 billion. In fact, however, in order for WIC services to be provided at FY 1982 levels, the maternal and child health block grant activities would have to be eliminated under the combined block. The combined programs were actually slated for a cut of almost * 22%. Under the Administration's F? 1983 proposed block grants, the constituent programs proposed for consolidations would be reduced overall by 16.2% from FY 1982 to FY 1983. These same programs suffered reductions of over 21.6% from FY 1981 to FY 1982. The net reduction under the President's proposal would be over 34% from FY 1981 to FY 1983. PAGENO="0053" 49 -4- These reductions reflect cuts in vital programs such as child welfare services that from FY 1982 to FY 1983 would be reduced by 18.3%. They represent reductions of 32.6% in rehabilitation service programs that provide hope for the disabled to achieve self-sufficiency. The most drastic cut would be in the community services block grant program, which would be reduced by 71.3%. Is it any wonder that more and more persons have come to view block grants with concern? ~`Thile the Governors have repeatedly supported consolidation to improve efficiency, responsiveness to the people, and effectiveness in the delivery of services, we have not proposed the use of block grants for substantial budget cutting. In fact, we believe that the FY 1983 reductions proposed by the President--for the block grants and other programs--would weaken the capaeity of state and local governments to assume greater responsibilities in the federal system. 2. Fundamental Program Redesign ifl addition to the use of block grants as a budget cutting device, block grants have been used as a means to propose fundamental alterations in the character of program funding by converting programs from open- ended entitlement status to "capped" (or close-ended appropriation) programs. For example, the FY 1983 proposal to combine, cap, and cut state welfare administrative costs in the food stamp, AFDC, and Medicaid programs under a "combined welfare administration block grant" radically restructures important programmatic and policy concepts that are essential to the administration of these programs. Open-ended funding exists for a very good reason in these programs. It is difficult to estimate the costs involved and the levels of service to be provided because they rise and fall according to need, not pre-determined levels of funding. PAGENO="0054" 50 3. Uncertainty in Block Grant Fundinf Congress has funded the majority of the block grant programs this year under three continuing resolutions. Uhat you may not fully appreciate is the damage this uncertainty causes to the effective administration at the state level of the block grant programs. One of the primary advantages of block grants is the flexibility it affords Governors to plan a more rational system of ~ervice delivery for citizens of their states. However, this planning process is devalued when the funding levels of the programs remain clouded through two-thirds of the budget year. In addition to the legislative situation, there have been administrative uncertainties regarding the release of monies and the granting of awards. A prime example of this extra-legislative fiscal uncertainty affected the community services block grant. At the time of the first continuing resolution, the Office of Management and Budget apportioned the monies not on the basis of the congressionally adopted level of $362 million, but rather on the basis of the Administration's proposed funding level of $225 million. Similar problems occurred with each of the subsequent continuing resolutions. The House of Representatives raised questions of impoundment violations. In the states, vital administrative decisions as well as delivery of crucial services were impaired by the "on again, off again" funding confusion that occurred at each round of the budget process for FY 1982. At the present time, community services grants to states are not guaranteed after the third quarter in spite of the fact PAGENO="0055" 51 -6- that the continuing resolution provides for an appropriation for the remainder of the year. In a nutshell, if states do not know how much they are going to receive for a block grant program, and when they will receive it, how can they plan? How can they use the intended flexibility? How can they efficiently administer programs? 4~ Transfer Pro~iaiona During the many years that block grants have been under discussion, a central issue has been whether states should have increased authority to redirect federal grants to meet needs and priorities identified in the individual states. An initial step toward limited statutory flexibility was realized in the approval of block grants in 1981. Most of the block grants allow for the transfer of a small fraction (about 15%) of the total and only, as a rule, to certain identified programs. When Governor Busbee testified before you last year, he provided an illustration of how minimal the flexibility provided by the transfer provision really is. He pointed Out that the transfer allowed him to reprogram just $9l,00D out of the $3 million in block grant funds available to his state. In spite of the limited flexibility they offer, the transfers are clearly filling a need in the states and are being used. It would be a mistake for Congress to act against the transferability provision of the block grants, as Members did in the low income energy block grant supplemental by exempting the $123 million provided from the transfer clause. The action signals a lack of support for the flexibility which Governors believe to be the chief advantage of block grants. Given overall reductions in block grants of 13%, the transfer provision allows priority setting and should be preserved. PAGENO="0056" 52 Block Grant Successes Mr. Chairman, in providing you with this list of problem areas, I do not mean to imply that the experience has been all bad, although indeed the funding decisions have created serious service problems. I believe the response of the states in accepting the block grants, indicates the success of the concept. In addition, I think the work of the Administration in developing regulations that are as simple and clear as possible is another major implementation success. The regulations represent a strong effort to maintain the integrity of the block grants. Another positive factor affecting block grant implementation is the development, under your leadership, Mr. Chairman, of boilerplate language for block grants. This is a very important project and of critical concern to states. A structure of this kind would be very helpful in giving guidance to future congressional actions on block grant legislation. Such a structure will also go far in rationalizing and coordinating block grant program requirements that will help recipients administer programs more effectively. I find much to commend and very little to criticize in the Durenberger bill. It is carefully crafted to provide greater flexibility to states while assuring that standards of public participation, fiscal and program integrity, and minimal federal agency interference are maintained. We are particularly pleased to see that strict limits were placed on the authority of federal agencies to devise administrative restrictions on grant recipients in your bill. It is imperative that the block grant concept be free from unnecessary red tape and needless problems over minor issues. PAGENO="0057" 53 The National Governors' Association recently transmitted the boilerplate language to state officials who are working on block grants to ask them to evaluate it based on their current experience. We will be submitting comments to you as soon as we have collected them. Block Grant Implementation In Colorado Before ending my statement, I would like to provide you with some highlights of my own state's experience in block grant implementation. Colorado began planning more than six months in advance for the implementation of the block grants. Public hearings were held throughout the state, and the involvement of interested citizens was solicited. These efforts led us to take creative cost containment actions, refinancing initiatives, and reprogramming changes that helped to mitigate the effects of the budget cuts. However, we have exhausted most of these innovative possibilities and will have to pass future cuts through to recipients in the form of service reductions if Congress were to adopt the President's proposed domestic cuts for FY 1983. I am pleased to report to the Committee that the General Accounting Office (GAO) has recently completed a thorough review of Colorado's transition to~ the block grants. The GAO team took an in-depth look at our efforts thus far and gave us a favorable review. The report stated, "Colorado's transition to block grants has been relatively smooth despite its assuming some additional administrative and programmatic responsibilities while also absorbing Federal funding reductions in many former categorical programs." PAGENO="0058" ~54 Conclusion Let me conclude by reiteratins the most important point I can make today__Congress should impose a two-year moratorium on further domestic cuts. As you know, states and localities took a disproportionate share of the F? 1982 cuts, and we no longer have the capacity to absorb additional federal budget reductions. We all recognize the urgent need to reduce the prospective federal deficits in the near future (estimated at $180 billion, $220 billion and S240 billion before additional cuts in F? 1983, F? 1984 and FY 1985, respectively). It is these large deficits that are keeping interest rates so high and damaging our economy so severely. Thank you for the opportunity to testify this morning on these important block grant initiatives. We look forward to cooperating with you to make the concept work. I will be pleased to respond to any questions ~ou might have. PAGENO="0059" FY 1932 BLOCK GRANT FUNDING PROGRA4 DY 1971 DY 1002 1; CHANGE $ CHANGE 81 TO 02 01 TO 02 OCCIAL SERVICES B. 5. 2201.10 2400.00 -19.77 -5O1.~ EDUCA'fION B.G. 535.40 470.50 -12.12 _04.9O IATEI4NAL & CHILD HEALTH e.G. 457.50 3~7.50 -2~.R4 -112.00 CORlJNITY SERVICES E.G. 472.77 348.00 -20.30 -12~.7O PREVENTIVE HEALTH 3.G. 99.20 81.RD -17.74 -17.52 ACANHA E.G. 545.68 432.00 -21.25 -11~.79 LO( INCO~tE ENERGY ASS'T * 1850.00 1875.00 1.35 25.00 CONG 4370.08 3395.70 -10.05 -474.30 (INCLUDING UDAG) TOTAL 11324.50 0050.30 -13.02 -14~4.22 * LDN INCO:48 ENERGY ASSISTANCE INCLUDES $123 MILLION ADDED IN AN E~(ERGE1CY SUPPLEMENTAL. PAGENO="0060" 56 -11- PRESIDENT'S FY 1953 BLOCK GRMYr PROPOSALS I CHANGE CHANCE PROGRAM NY 1932 NY 1003 92 TO 23 22 TO 93 3CCIAL SERvICES 2460.23 1974.10 -17.75 -425.90 ADAMUA 432.10 422.22 -.22 -.10 PREVENTIVE HEALTH 81.40 31.60 .20 .06 CO!14U4ITY SERIVICES 348.22 106.20 -71.22 -2~6.68 COMMUNITY DEVELP1ENI 3452.02 3453.Cfl .22 .00 UDUCATION 472.70 431.00 -S.d -37.7(1 LON INCOME ENERGY * 1938.20 1362.82 -32.65 -632.20 PRIMARY CARE 414.80 412.23 .48 2.110 SERVICES FOR WIC 12O1.~6 1668.09 -21.97 -281.20 CHILD WELFARE 495.19 300.10 -18.22 -85.02 CO1BINE WELFARE ADMN. 2292.00 2121.00 -5.01 -115.00 VOC AND ADULT ED. 732.56 502.20 -31.74 -232.52 HANDICAPPED ED. 1042.10 942.06 -10.92 -192.16 TRAINING AND EMPL0YI1E('r 2252.82 1000.00 -22.07 _452.60 SENIAB. SERVICES 925.26 223.50 -32.59 -301.52 TOTAL 18527.72 15524.12 -12.21 -2623.42 * LOW INCOME ENERGY RECEIVED AN ADDITIONAL $123 MILLION IN AN EMERGENCY SUPPLER ENIAL PAGENO="0061" 57 Senator DURENBERGER. We will adjourn the hearing until next week. [Whereupon, at 10:50 a.m., the subcommittee recessed, to reconvene at the call of the Chair.] PAGENO="0062" PAGENO="0063" BLOCK (~RANT IMPLEMENTATION TUESDAY, MAY 11, 1982 U.S. SENATE, SUBCOMMIT'rEE ON INTERGOVERNMENTAL RELATIONS, COMMIITEE ON `GOVERNMENTAL AFFAIRS, Wtshimgton, D.C. The subcommittee met at 9:50 a.m. in room 357, Russell Senate Office Building, Hon. Dave Duren'berger (chairman of the subcom- mittee) presiding. Present: Senator Durenberger. OPENING STATEMENT OP SENATOR DURENBERGER Senator DTLTRENBERGER. The hearing will come to order. We will hear testimony on block grant implementation and on the issues that have been raised during the first 6 months of implementa- tion. We have a lot of witnesses today, and their statements are long. I tried to read them all laSt night. However. it took more time than has been allocated for this hearing, so I didn't quite make it through. To make sure that all the witnesses have an opportunity to give their statements, my questions will be brief. I will just put my opening statement in the record without reading it. I will also include a statement from Senator Jim Sasser, who is the ranking minority member of this subcommittee. [The statements of Senator Durenberger and Senator Sasser fol- low:] PREPARED STATEMENT OF SENATOR DTJRENBEROER This is our second oversight hearing on the implementation of the 1981 block grants. This morning, we will hear from representatives of Federal, state and local governments, as well as witnesses from human resources groups. Before we begin, I have to say that the testimony on the new block grants so far has been gratifying. Last week, we heard testimony from two governors: Richard Lamm of Colorado, a Democrat; and Kit Bond of Missouri, a Republican. Both men had basically the same message: That Congress did take too long to act on block grants last year, but even so, the programs generally are success- ful. The governors also said they appreciate the increased flexibility the states get from block grants, and they urged the formation of more block grant pro- grams for Fiscal Year 1983. This means a lot to those of us who believe in the concept of New Federalism, of giving more of these responsibilities to the states. Most of the programs are being successfully picked up by the states. And the majority of state governments have chosen to administer the grants themselves, rather than letting the Federal agencies handle them. Last year, almost half of the state legislatures passed laws increasing their involvement in the oversight of Federal funds. And that's a lot of funding to deal with. Federal aid makes up about 25 percent of combined state and lOcal budgets. As for the recipients of those grants, 30 states have reported little or no change In eligible recipient groups since the formation of the new block grants. Public (59) PAGENO="0064" 60 participation in the programs seems to be on the rise, and most states are encour- aging local governments to get Involved through advisory boards and public hearings. This is not to say there aren't problems. For instance, the consequences of budget cuts. There are also some administrative issues that need to be resolved, and I have some proposals for resolving them. But that's why these hearings are being held. To hear both the positives and the negatives. To find out just how the states are allocating the block grant funds, and how this is affecting the recipients. To talk about the proposals for better managing the new system, and to discuss the relationship of the block grants to the New Federalism. That phrase, "New Federalism," has a rather partisan ring to it. And yet, the creation of block grants as part of that concept is a genuinely bipartisan issue. We saw that In last week's testimony from the two governors. I think that's partly because we are reminding ourselves that grant programs are not created to give politicians something to argue about. The man who needs to weatherize his house, and the single mother on welfare, and the person who needs treatment for alcoholism-those people don't care whether or not we call it "New Federalism." They don't care whether it's the Democrats or the Republicans backing their grants. They just want help from a program that's run wisely, efficiently and effectively. We're trying to work out a system that will achieve that. And that Is why we're here today. OPENING STATEMENT OF SENATOB SAS5EB Mr. Chairman, I am pleased to welcome Delores Delahanty, the executive direc- tor of the Human Services Coordination Alliance for the State of Kentucky, to testify before the subcommittee. Her prepared testimony on block grant implementation adds the important human dimension to the reports the subcommittee has received on this subject. Block grants have been recommended by experts on management as one means of constructing more efficient and effective service delivery systems for government programs. Efficiency and effectiveness are certainly very important considerations. But we must not lose sight of the real goal which is better delivery of services- to people. Ms. Delahanty reminds us of that in her prepared remarks. I commend her testi- mony to my Senate colleagues for review as we deliberate on various proposals to change the intergovernmental fiscal system. The National Association of Social Workers, which Ms. Delahanty represents here today, has always been helpful to me in the past when I relied upon them for advice about issues before the Con- gress. So, I certainly intend to take their views into account at this crucial time in our budget-making history. Mr. Chairman, thank you for holding this important hearing to asses~ how far we have come and where we are heading in block grant implementation. Your work in generic language to make requirements applicable to block grant uniform is to be complimented. Thank you very much. Senator DURENBERGER. I ask the cooperation of all the witnesses in keeping the hearing on the tight time schedule that we have set. We have allotted 7 minutes for each witness. I ask that you not read your statements in full. With that, I will go to our first witness, who is Dr. Robert Rubin, Assistant Secretary for Planning and Evaluation, U.S. Department of Health and Human Services. Dr. Rubin, thank you for coming. TESTIMONY OP ROBERT J. RUBIN, M.D., ASSISTANT SECRETARY FOR PLANNING AND EVALUATION, DEPARTMENT OF HEALTH AND HUMAN SERVICES Dr. RUBIN. Thank you, Senator. I am here to discuss the implication of the health and human services block grants. As you know, I have been involved closely with both PAGENO="0065" 61 the design and the implementation of these blocks, having been charged by Secretary Schweiker to prepare the legislation that was sent to the Congress and to coordinate the implementation after enactment of that legislation. The Department of Health and Human Services administers the seven health and human services block grants which are consolidated into 32 categorical programs. Upon enactment of the Reconciliation Act on August 13, we moved rapidly to implement these blocks, work- ing closely with the States. As you know, we issued interim final regulations for all the blocks on October 1. Most States began operation of the blocks soon there- after. From our vantage point, the implementation has proceeded rapidly and smoothly without any major problems other than delays in funding, which was caused principally by the lack of fiscal year 1982 appropriations. To refresh your memory, we have summarized the seven HHS block grants oii charts.1 They also are appended to my formal statement. We will briefly go over them. As you know, there is the preventative health and health services block; the alcohol, drug abuse and mental health block; the ma- ternal and child health block; and the primary care block, which is not to begin functioning as a block until October 1, 1982. To go on to the second chart, the social services block grant; the community serv- ices block grant and the Low Income Energy Assistance block grant complete the list of block grants administered by our Department. The statutes of four of the block grants give States the option to assume the operation of the blocks in fiscal year 1982 or to have our Department continue the administration of the categorical programs which are consolidated into the blocks. The third chart shows the number of States and tribes participating in each block. Currently, 49 States have chosen to operate the alcohol, drug abuse and mental health block; 48 States operate the remain- ing two health blocks; 40 have opted to assume the community serv- ices block; all States are participating in both the energy and the social services block grants. As you know, we are also making direct grants to Indian tribes as required in the statutes of four of the blocks. The administration of the blocks at the Federal level is primarily the responsibility of the operating divisions of our Department. How- ever, the Secretary has charged my office with coordinating implemen- tation and insuring consistency across the various HHS agencies. The Department issued a single interim final regulation for all seven block grants. We èonducted regional conferences last August and September to insure, that State and local governments were completely informed about and clearly understood the blocks. We provided the State governments with information on local HHS grantees previ- ously funded under the categorical programs which were consolidated into the blocks. Our most difficult and challenging task was taking over the responsibility for closing out grants for the Community Serv- ices Administration and implementing the community services block. 1 See p. 76. 99-965 0 - 82 - 5 PAGENO="0066" 62 As of mid-April, our agencies have made grants awarding `75 per- cent of the block grant funds. Roughly 50 percent of the funds have actually been transferred to the States. We have been monitoring the States' implementation of the blocks through a variety of means, including voluntary and cooperative col- lection of information by State associations. Our preliminary assess- ment is that the States have handled the block grants responsively and responsibly. States have moved quickly to involve a wide spectrum of people and groups. In our submission for the current fiscal year, we are proposing some changes in existing block grant statutes that would consolidate a few additional programs which can he administered best through the blocks and that would reduce and simplify Federal requirements. The existing and pronosed block ~rrants are part of the logical pro- gression from a federally dominated categorical grants-in-aid system to the State-oriented system proposed under the New Federalism. Under New Federalism, all HHS blocks are included in the set of programs to be turned back to complete State control. Block grants are clearly a midway point in this necessary transfer of authority and responsibility from the l~'ederai Government to the States. The admin- istration hopes to have its New Federalism proposal to the Congress in the very near future. In the meantime, we will continue to press for simplification of both the block grants and other departmental programs. Since I have just received a draft of the proposed Uniform Block Manac~ement Act, I will not respond to its contents provision by provi- sion. I can, however, provide some tentative thoughts. We support fully its goal of making block grant administrative requirements con- sistent and have attempted to do this for HHS blocks through our regulations and our recent legislative proposals. States understand the requirements in the current statutes apd can live with most of them. They are well along in preparing for block operation for fiscal year 1983. We should be careful about making changes now that add new reciuirements or increase existing ones. Block grant administration by the States is evolving over this and the next~several years. There is time to make changes after we have all had a bit more experience. We would be pleased to work with your staff in further pursuit of that. Mr. Chairman, in conclusion, I think within my timeframe, we believe that the transition from categorical to block operations in our Department has been both rapid and reasonably smooth. States have been responsible and responsive to their citizenry. We look forward to continued efficiencies and improvements in service delivery effective- ness as a result of the blocks. I would be happy to answer questions. Senator DURENBERGER. Thank you very much. We had two Governors as witnesses last week-one a Democratic Governor from Colorado, and th~ other a Republican Governor from Missouri. They certainly left us with the impression that your testi- mony, in the general sense, is accurate. The States have, despite the problems, picked up on the block grants. They have tried to do their best with them. There are some shortcomings, but it is much too early in the process to come to a final judgment. PAGENO="0067" 63 However, one of the areas of constant criticism-and I am sure I was `among the critics last year-was the notion that we could block a variety of categoricals into a variety of areas of need and come up with 25 percent administrative savings every single time. I am wondering what information you have relative to the actual administrative sav- ings that have come about because of the 7 block grants over which you have jurisdiction. Dr. RUBIN. We are just in the process of assessing that. As you know, the blocks obviously have not been in operation for a full year. One would anticipate that the changes in the governmental struc- ture in the States, annuaiizing start-up costs might not accurately reflect State costs over the entire year. We are waiting for the first full year of operation before we make any firm assessment. However, preliminary assessments suggest that the States are capable of ad- ministering these blocks. They have not made any radical changes, except for perhaps some consolidations. It is unclear to the extent of the administrative savings across the blocks. Senator DURENBERGER. In the area of health grants, there has been a great deal of paperwork; there has been a great deal of regulations; and there has been a great deal of what you might call "administra- tive overburden" when things were approached categorically. The administrative savings from blocking health programs might be greater, for example, than the administrative savings that would be achieved in social services or some other area where there is not an existing set of paperwork. Do you have some opinion about the judgment with regard to that? In what program areas might we find the greater amount of savings? Dr. RUBIN. I think that is a point well made. The social services block grant and the energy block grant were, in essence, preexist- ing block grants. The larger the number of categorical programs that are consolidated, the greater the ability to save money. So I would agree with you that the greatest percentage savings would most likely be in the health block grants. Of course, the primary care grant is not yet in operation.. We would expect to see large economies of scaie in that operation, as well. Senator DURENBERGER. Let me ask you a question about the issue of targeting. We have Federal categorical programs because the Congress recognizes special populations with special needs. We have targeted the categoricals to those needs, although we don't always do a good job. One often fears that the blocking process will result in Governors and legislatures just spreading money all over the place and not sen- sitively reflecting those needs. That is one of the criticisms that I have heard from my own State. In other words, they put a little bit of money in every local government area based on its population. Is there any evidence yet, that you have seen, that this is happening? Dr. RUBIN. No. We have seen, again in a very preliminary way since these programs haven't been in operation for a long period of time, that different States have responded differently in terms of what they believe are their highest priorities. Some States appropriately have put greater emphasis into, say, hypertension control in the preventive health services grant. Other States have emphasized different parts of the preventive health grants PAGENO="0068" 64 Concerning the alcohol, drug abuse and mental health block, I was fortunate enough to appear on a panel with Dr. Stewart Shapiro, who is the administrator of health for the city of Philadelphia. He was fairly clear that this block has given him the ability to get people to work together who hadn't normally worked together before. The alco- hol group was working on one corner, the drug abuse group was work- ing on the other corner, and the mental health group was probably in the middle of the street. You can use this block as a lever to consolidate these activities into a rational delivery service mode. I think that has been going on. There has been some consolidation and improvements in effectiveness. I think also that the States each recognize what their particular needs are and have reacted in an appropriate and, albeit, different fashion. Senator DURENBERGER. Let me ask you about the portability of the transferability provision that allows Governors to move funds from one program to another. I know this varies from one block to another. Your testimony indicated that 33 States have shifted funds from Low Income Energy Assistance to other areas. I would be curious to know how many dollars were involved. The 33 States, which is a large number, would seem to be an indication that we are putting too much money into Low Income Energy Assistance and not enough money into other social services. Would I be correct in that? Dr. RUBIN. Certainly, our request for Low Income Energy Assist- ance was considerably lower than what the Congress gave us, so we share that concern. I can't give you the precise dollars, but I can tell you into what they switched the money. If you prefer, in the interest of time, we can make that part of the record. Senator DURENBERGER. Why don't we do that? Maybe my curiosity about it can also be made a part of the record. I was one of those who supported the higher number, but I was supporting a greater per- centage being used for weatherization at the same time. [The material mentioned follows:] PAGENO="0069" 65 State Use of Block Grant Transfers State LIHEAP A~1 Prey. Health CSBG SS~ Transfer To Transfer To Transfer To Transfer To Transfer To Alabama SS~ Alaska Arizona Arkansas SSBG Older Ajter. Act California SS~ Colorado Connecticut Delaware District of Columbia Florida SSBG Georgia WCH/5533 MCH Hawaii Idaho MCH Illinois Indiana I~ia SS3 Kansas SSBG Kentucky SS~/M2H Louisiana SSBJ ?~H MCH Maine Maryland SSBG Massachusetts Michigan SSB~ Minnesota CSB~ Mississippi MCH Missouri SSB3 M3ntana SS~ Nebraska SS~ Nevada CSB~ New HaTpshire New Jersey PtCH/SSBJ New Mexico ACM New York SS~3 North Carolina MH/PH North Dakota SS~ Older Amer. Act Ohio Oklahctna Oregon 5533 Pennsylvania Head Start Rhode Island South Carolina South Dakota SSBG ¶I~nnessee tCH/ADM Texas Utah 5533 Versont 5533 Virginia 5533 Washington C~BG/SSB3 Nest Virginia 5533 Wisconsin SSB3 Wyuming 5595 flliar Am~r At± Funds cannot be transferred out of the ~CH block grant. PAGENO="0070" 66 Senator DURENBERGER. Your testimony indicated that 33 States have moved money from Low Income Energy Assistance to other areas. My evidence is that we came up short in Minnesota. By the end of February, people who were entitled to the Low Income Assistance program had used up the assistance to which they were entitled. So Minnesota was out of money while other States were transferring money out of their programs. Would that say something to you about the total dollars involved or about the formula used in allocating moneys among the States? Dr. Rur~IN. Clearly it is a lot colder in the northern part of the coun- try than in the southern part of the country. I concur with your observation. Senator DURENBERGER. If you can add some information to that point, it would be helpful. Not only might it tell us something about the Low Income Energy Assistance program, but it might tell us something about the way in which we should improve the formula or the entitlement. Dr. RtmIN. We have preliminary information which suggests that about $92 million was transferred out of the Low Income Energy As- sistance program into the other block grants. Senator DURENBERGER. $92 million? Dr. RUI3IN. Yes, sir, but I don't have a breakdown of the other blocks. Most of the States transferred money into the social services block grant. The next highest was maternal and child health. The others were insignificant. Senator D1JRENBERGER. Good. I promised not to ask a lot of ques- tions, so this will probably be the last one. I will ask you to persuade me as to the merits of moving the women. infants, and children (WIC) program into the maternal and child health block grant. We were careful last year, in the process of reacting to the admin- istration's fiscal 1982 recommendations, to avoid pitting persons in need against each other on the basis of age, sex, or some other criteria. In the area of maternal and child health, we tried to take a first step toward developing a focus on what the appropriate Federal role ought to be. Since your fiscal 1983 recommendations came outS I have noticed that a lot of people who have worked with the WIC program have objected, and quite strenuously, to the proposal to block it with MCII. A couple of health professional organizations, like the AMACH and the American Academy of Pediatrics, have not yet taken that position, although they have stated positions supporting WIC. :Can you make an argument as to why this special nutritional pro- gram ought to be moved into the block grant? Dr. RUBIN. I think, in order to make the argument, one needs to disaggregate two pieces of the argument. The first is on a program- matic basis, does the consolidation make any sense? The second question which, in my own judgment, is the question most peonle are addressing when they oppose the merger is: Are the dollars that we are providing for the new block grants sufficient to carry out the pur- poses as articulated by people who would oppose the transfer? I think if one does that, it becomes pretty clear that consolidating these two programs makes a lot of sense on a programmatic basis. There is a study done by the Research Triangle Institute. They found that the merging of the two programs-supplemental nutritional food, education, and preventative health care, as well as maternal and PAGENO="0071" 67 child health care activities-was something they seemed to find throughout the country. The two programs have very similar objec- tives, which is mainly to improve the health outcomes of new mothers and infants. They serve pretty much the same population. The idea of linking health and nutrition programs reflects the fact-which I'm sure you will agree, and I, as a physician, will cer- tainly agree-that good nutrition is certainly a key to good health, certainly in prenatal and postnatal care. By combining the MCH activities into a single block grant, we will give the States the maxi- mum flexibility to target the resources for health and nutrition serv- ices to those who require them. The same providers and ~rantees frequently administer both pro- grams. So I think a compelling case can be made for combining these programs, absent any discussion of how many dollars we are putting into the programs. Clearly, that is the single issue that I think about which people disagree. I would remind you only of two things. One is that this program was proposed for transfer to our Department from the Agriculture Department. As others in our Department have previously testified before the Congress, we were unfamiliar with the particulars of the program. This was a program that grew from around $230 million 2 years ago to around $900 million last year. It doesn't seem unreason- able to cut it back to the $600-or-so million that we are talking about for inclusion in the block grant. Obviously, there are a lot of people across the country who feel differently. I think that the ball, as they say, is now in your court to make the final decision as to the precise amount of money that will be available for this program. But, on a programmatic basis, I have yet to be persuaded that there is anything wrong with combining the programs. Senator DURENBERGER. Would you speak also, in that regard, to the commodity supplemental food program, the predecessor to WIC? It is still in existence in 21 project areas around the country. I am sure this is one of those holdovers from the Agriculture Department. The De- partment is providing Federal aid via commodities to the States which, in turn, distribute them to low-income agencies, pregnant women, infants, and children who reside in these areas. Is this one of the programs that would go in connection with a block- ing of this process? Or, would we continue the commodity purchase program as part of meeting the nutritional needs of women and children? Dr. RUBEN. I can't answer that question directly. I'mjust not faniil- jar enough with the specifics of that program to responcL~We will pro- vide an accurate response for the record. Senator DURENBERGER. I wasn't familiar with it either until I read about it. I appreciate your response. [The information referred to follows:] While this program is part of the block, the Federal Government will continue to assist in obtaining commodities. I am not familiar with the specifics of this pro- gram, but as I understand it, under current law, the Department of Agriculture arranges for the purchase and transport of food to local projects within States, which then distribute these commodities to the needy. Under the block grant, States can request the Department of Agriculture to continue the purchase and transport of food, but must reimburse the Department for this. Senator DURENBERGER. Thank you, Dr. Rubin, for being here today. I apologize that we couldn't start earlier to have more time for questions. [The prepared statement of Dr. Rubin follows:] PAGENO="0072" 68 PREPARED STATEMENT OF DR. ROBERT J. RUBIN, M.D., DEPARTMENT OF HEALTH AND HUMAN SERVICES Mr. Chairman, I appreciate the opportunity to appear before this Subcomittee on behalf of Secretary Schweiker to discuss the implementation of the health and human services block grants. I have been involved closely in both the design and implementation of these blocks, having been charged by the Secretary with preparing the legislation sent to the Congress in 1981, and coordinating implementation after enactment of that legislation. On August 13, the President signed into law the Omnibus Budget Reconciliation Act of 1981 which, among other things, consoli- dated 33 categorical programs into seven health and human service block grants administered by my Department. Working closely with the States, we moved rapidly to implement these blocks. We issued interim final regulations for all the blocks on October 1, 1981, and most States began operation of the blocks soon thereafter. From our vantage point, implemen- tation has proceeded rapidly and smoothly, without major problems other than delays in funding. These delays were caused principally by the lack of a fiscal year 1982 appropriation. I will discuss some of the highlights of the implementation, but before proceeding to do that, let me briefly outline the nature of the HHS block grants. THE HHS BLOCK GRANTS AND THEIR STATUS We administer seven block grants, four in the health area, two that fund social services, and one that provides funds for home energy assistance for low-income households. Six of these block grants, at a total funding level of $5.5 billion, are in operation this year; the primary care block is authorized to begin operation on October 1, 1982. The seven block grants are -- o Preventive Health and Health Services, which consolidated categorical programs for Hypertension Control, Health Incentive Grants, Risk Reduction and Health Education, Fluoridation, Rodent Control, Emergency Medical Services, Home Health, and Rape Prevention and Crisis services. o Alcohol and Drug Abuse and Mental Health Services, which consolidated five categorical programs, provides mental health, drug abuse and alcoholism prevention, treatment and rehabilitation services, and services for the chronically mentally ill. o Maternal and Child Health, which consolidated mine programs, enables States to assist and improve the health of mothers and children through a State-administered program and also provides for discretionary funds to support special research and service programs, principally those addressing hemophilia and genetic diseases. PAGENO="0073" 69 o Primary Care, which subsumed the categorical Community Health Centers program, assists States in providing primary care services. o Social Services, which consolidated three programs, provides funds for social services directed at achieving or maintain- ing economic self-support or self-sufficiency; preventing or remedying neglect, abuse or exploitation of vulnerable children and adults; preventing or reducing inappropriate institutional care; and securing referral or admission for institutional care when most apropriate. o Community Services, which replaced many of the programs previously administered by the Community Services Adminis- tration, assists States in providing health, nutrition, housing, and employment-related services to improve the standard of living of low-income persons. o Low-Income Home Energy Assistance, which redesigned the FY 1981 Low-Income Energy Assistance program, provides grants to States to assist low-income households to partially offset the costs of home energy, through heating, cooling, emergency, and low-cost weatherization assistance. Transition provisions exist in four of the block grants' statutes: Maternal and Child Health; Alcohol, Drug Abuse and Mental Health; Preventive Health and Health Services; and Community Services. In these blocks, States may either imple- ment the block in FY 1982 or allow the Federal Government to continue administering the categorical programs. As I mentioned, the Primary Care block grant does not become effective until October 1, 1982, at which time a State may choose to accept the block grant for that and succeeding years, or allow us to continue administration of the categorical Community Health Centers program. Currently, most of the 50 States and the District of Columbia are operating the HHS blocks. All States are operating the energy and social services blocks. Forty-nine States are operating the Alcohol, Drug Abuse and Mental Health block, and 48 States are operating the remaining two health blocks. Forty States have opted to administer the Community Services block grant. In addition, 217 grants have been made directly to Indian tribes from the four block grants which authorize such funding this year. HHS ADMINISTRATION Responsibilities Administration of the block grants at the Federal level is primarily the responsibility of the Department's Operating Divisions. The Office of Human Development Services manages the Social Services block grant, the Social Security Adminis- tration manages the Low-Income Home Energy Assistance block grant, the Public Health Service manages the health blocks, and a mew division, the Office of Community Services, was established to administer the community services block and handle closeout of Community Services Administration grantees. PAGENO="0074" 70 To coordinate implementation activities and ensure consistency across the various agencies administering the blocks within HHS, Secretary Schweiker established a Departmental task force under my oversight to identify and rapidly resolve implementa- tion policy issues. We also have worked closely with the Block Grant Implementation Task Force established by the Office of Management and Budget that performed a similar function across the Federal Government. Regulations and Information Excha~g~ Immediately after enactment of the blocks, our priorities were to ensure that all the States, territories and eligible Indian tribes had accurate information about the blocks, and to issue the regulations. We provided States~ basic information on the block grants and on local grantees funded under project grant programs consolidated into the blocks. We worked closely with the other Departments administering block grants, the 0MB, and the White House Intergovernmental Affairs staff to develop and conduct eight regional conferences during August and September. At these conferences, State and local officials were provided with basic information on the mew block grants and State officials were given the opportunity to raise issues of concern. Approxi- mately 4,500 State and local officials attended these conferences. We also moved rapidly to issue interim final regulations. On October 1, 1981, just six weeks after enactment of the block legislation, the regulations were published. To ensure consistency among the blocks and flexibility for the States, we prepared a single rule for all seven HHS block grants, and limited the regulations to the minimum necessary for implementation and clarification. While the interim final rules had full regulatory effect, we asked for public comment and received over 200 replies. The interim rules have been revised based on these comments. The final rules should be signed by Secretary Schweiker next week, and published in the Federal register soon. There have been few changes in the regulation itself, but a substan- tial number of clarifying changes have been made in the preamble. Funding As of April 10, 75 percent of the monies available for the blocks had been awarded to the States. This included nearly 100 percent of the low-income energy assistance funds, which needed to be made available quickly for fuel assistance and weatherization activities during the winter months. Approximately 50 percent of the funds available for all the blocks actually have been transferred to the States. Technical Assistance to States and Localities We are continuing to exchange information with, and provide technical assistance to, States and localities concerning the PAGENO="0075" 71 blocks. We are providing States with results of Departmental research, arranging for conferences and workshops on practices of interest to several States, and assisting States in locating sources of technical expertise in the private sector or in other States. For example, the National Governors Association, the National Association of Counties, the National League of Cities, and the U.S. Conference of Mayors are sponsoring a series, of conferences through a grant from the Department. These conferences will provide opportunities for representa- tives of State and local governments to share information and ideas about the implementation of the block grants, primarily the Social Services block. The Social Security Administration also has held conferences on the Low-Income Home Energy Assis- tance block grant. In addition, the health block grant statutes allow States to request and have detailed to them professional staff of Federal agencies in lieu of some of their block grant funds. Ten States are taking advantage of this provision to obtain the services of the Public Health Service specialists. Monitoring Implementation We are monitoring block grant implementation to identify and help resolve any problems. In line with the intent of the statutes, we cannot involve ourselves in States' day-to-day administration of the blocks, take positions on resource allocation decisions, or require the kind of detailed data often provided on the categorical programs. Interestingly, the blocks have stimulated close cooperation between us and organi- zations of States about monitoring and data collection. For example, associations of State agencies, such as the National Governors Association, are collecting data on a voluntary basis and we are working closely with them. STATE ACTIONS Through these voluntary information collection efforts, discussions with State officials and others, and review of State applications and plans, we believe we have a fair idea of what the States are doing, but our data are not complete nor highly quantitative. I can, however, provide you a summary of our preliminary assessment of what is happening in the States in several key areas of block grant operation. Involvement by State Legislatures and Governors In general, the governors and State legislatures have been directly involved in block grant implementation. The governors' offices have been more heavily involved in the planning and resource allocation of the block grants than they were in many Federal categorical programs. About two-thirds of the governors established task forces or similar groups to study implementa- tion options and the impact of Federal budget reductions on State programs. In some States, the governors and their staffs also took major roles in coordinating block grant implementa- tion. The governors of several States employed strategies that included holding public hearings, and preparing analyses of issues for the legislature. PAGENO="0076" 72 State legislatures have been involved primarily with establishing broad priorities for programs and services funded by the blocks. In several States authority to apply for, accept, or expend Federal funds resides with or must be authorized by the legislature. Anticipating the Federal block grant initiative, several State legislatures passed laws requiring legislative concurrence with the application for and acceptance of Federal funds. Many other State legislatures have taken steps to ensure legislative review of block grant implementation activities. State Administration As expected, the State executive branch agencies continue to retain authority in planning and administering programs funded by the block grants, especially since the completion of transi- tion activities. In most cases, the agencies designated as responsible for implementing the block grants were those that administered the corresponding programs prior to the block grants. Even though this is the first year of block grant implementa- tion and States had little lead time in preparing for the block grant, some organizational changes have been made as a result of the block grants. For example, in Louisiana the governor placed the Community services block grant in the State Department of Labor. In Vermont, the governor assigned a block grant manager for each block grant. Several States also made organizational changes within agencies designated to administer block grant programs. We believe that States may make more administrative changes as they have an opportunity to make longer range plans in response to their own State needs and priorities. Public Hearings and Public Participation There appears to have been greater access by the public to information about the intended use of block grant funds than was the case with the categorical programs. In accordance with the Federal block grant legislation,~ all of the States undertook activities to inform the public of the availability of block grant pre-expenditure reports for public review and comment. Most of the States published advertisements in one or more major newspapers noting the locations where copies of the reports were available. In a few States, toll-free telephone numbers were provided and public service announcements have been used. In addition, a large number of States sponsored special activi- ties to inform and consult with the public, local government officials, service providers, and interested organizations. These activities generally related to planning for block grant implementation and establishing service and program priorities. For many of the States, FY 1982 was the first year that the public has been involved in the planning process for some of the block grant programs. While some States did not provide PAGENO="0077" 73 extensive opportunities for public involvement because of time constraints, they plan to do so prior to FY 1983. Now that the States have had-an opportunity to review their processes, there are indications that the States nay standardize participation procedures across the block grants and rely more extensively on public hearings of the legislatures. Service Delivery In general, the approaches to service delivery and service delivery priorities that States described in their block grant applications and plans appeared to be similar to previous practices. Few major shifts were planned for the first year of block operation. - Inter-Block Transfers Five blocks allow limited transfer of funds to other blocks. So far, 36 States have taken advantage of the transfer provi- sions or are planning on doing so. Thirty-three States are transferring funds from the Energy block to other blocks, primarily the Social Services block. Four other States have transfered funds to Maternal and Child Health from the other two health block grants. From the Community Services block, three States are transferring funds to the Older Americans Act program and one State to the Head Start program. One State has transferred funds from the Social Services block to another block grant program. In sum, we believe that States have handled the block grant programs responsively and responsibly. States have moved quickly to expand the involvement of a wide spectrum of people and groups. But, because Of the short period of time between passage of the legislation and implementation of the block grant programs, they have moved slowly in making changes in the service delivery systems, service priori- ties and administrative structures. PROPOSED LEGISLATIVE CHANGES For fiscal year 1983, we are proposing some changes inexisting block grant statutes that would consolidate a few additional programs, and reduce and standardize Federal requirements. We also are proposing to establish one additional block for child welfare services. Specifically -- o We are proposing that three additional programs be consolidated in the Primary Care block grant--Family Planning, Migrant Health, and Black Lung Clinics--and that the requirements imposed on the States under this block be simplified significantly. We also are proposing that States be required to administer this block after a one-year transition period. Currently, because of onerous requirements (such as prohibiting any of its funds from being used for administrative costs), it appears that only a few States will choose to operate it inFY 1983 unless the legislation is changed. PAGENO="0078" 74 o For the Maternal and Child Health block, we are proposing that the Department of Agriculture's Women, Infants and Children's program be combined with it because those programs are often operated by the same agency at the local level, and because nutrition and health services delivered together can improve people's health substan- tially. We also are proposing simplification and standardization of administrative requirements and inclusion of the special grant component of this block in the State grant portion. o We are proposing that the Emergency~ Assistance program authorized by title IV-A of the Social Security Act be consolidated into the Low-Income Home Energy Assistance block, thereby creating a mechanism for assisting low- income families and individuals with emergencies of all types. o Finally, the new child welfare block grant would consoli- date current programs providing funding for foster care, adoption assistance, and child welfare services under parts A, B, and E of title IV of the Social Security Act, providing a more flexible funding rneähanisn for States to protect the welfare of children. The safeguards for foster care children created by the Congress in the Adoption Assistance and Child Welfare Act of 1980 are maintained. Proposed amendments to existing block grants to further reduce and simplify administrative requirements imposed on the States include changing from annual to biennial audit requirements, reducing the required content of State applications, and standardizing interbiock transfer provisions. THE NEW FEDERALISM AND THE BLOCKS The existing and proposed block grants are part of a logical progression from a federally dominated categorical grant-in-aid system to the State oriented system proposed under the New Federalism. Under the New Federalism, all ENS blocks are viable candidates for inclusion in the set of programs to be turned back to complete State control over several years. Block grants are a mid-way point in this necessary transfer of authority and responsibility from the Federal Government to the States. The Administration is working with the National Governors Association and other State and local organizations on specific provisions of its New Federalism proposal, and plans to have its proposal to the Congress soon for considera- tion. In the meantime, we will continue to press for simpli- fication and standardization of the block grants and other Departmental programs, such as grants for. welfare adminis- trative costs. THE UNIFORM BLOCK GRANT MANAGEMENT ACT Since we just received a draft of proposed "Uniform Block Grant Management Act," I cannot respond to its contents provision-by- provision. I can, however, provide some initial thoughts. PAGENO="0079" 75 First, we support fully its goal of making the block grant administrative requirements consistent, and have attempted to do this for HHS blocks through our regulations, and our recent legislative proposals. Thus, the Act probably would have little real impact on HHS programs. We view block grant administration by the States as something that is evolving over this and the next several years. States understand the require- ments in the current statutes and are well along in preparing for block operation for FY 1983. Making changes now that add new requirements or increase existing ones may slow that preparation. Second, concerning some particular provisions of the Act, we are unclear how they relate to similar provisions in current law. For example, why does the head of a Federal agency need to approve State payments for audits and reserve one percent of the block funds for this purpose? Under our blocks, States can use block monies for this purpose without prior approval. And what is the relationship to the transition provision in the draft bill to transition provisions in current law for the blocks? In sum, we suggest proceeding very cautiously in formulating any legislation that would standardize all administrative requirements, giving careful consideration to its timing and potential impact on State operation. It would be useful to gain more experience with block administration before making major changes. Regardless, we would be pleased to continue discussions with this Subcommittee on ways to standardize and simplify block grant administrative requirements. CONCLUS ION Mr. Chairman, in conclusion, we believe that the transition from categorical to block operation in the health and human services area has been both rapid and reasonably smooth. States have been responsible and responsive to their citizenry, and we look forward to continued efficiencies and improvements in service delivery effectiveness as a result of the blocks. PAGENO="0080" THE FIHS BLOCK GRN~fl'S F&IRPOSES PROGHAMS ODNSOLIDP~TED AppPoE'RLNrIO~I ($ millions) Preventive Health and Health Services Prevent injury, illness and death and iit~rove the quality of life. o Hypertension Control 0 Health Incentive Grants o Risk Reduction/Health' Education o Podent Control o Dser9ency Medical Services o nape & Crises Services o Fluoridation o Ibne Health 81.6 Alcohol, Drug Abuse Provide mental health, alcoholism o Alcohol Project and ~brnzila Grants Abuse Project and ~brmula Grants 434 and Mental Health drug abuse & o Drug Mental Health Services . prevention treatment & rehabilitation, and o . services for chronically mentally ill. . MATERNAL AND CHILD HEALTH Improve health of rrothers and children. o Grants for MCII and Crippled Children' s Services o Payments for SSI Disabled Children o Sudden Infant I)sath Syndrcire o Laad-Based Paint tkisoning o Adolescent Health 347.5 o Hei~philia o Genetic Diseases o Research and Trainim3 PRIMARY CARE Improve health of o Catm.inity Health Centers Met Authorized until Fl 1983 . pDpulations in need. PAGENO="0081" tURPOSES PROGRAMS CX)NSOLIDP~TED APPROPRIATION ($ millions) SOGIAL SERVICES . Prcrrote econcinic self- support and self- sufficiency. Prevent neglect, abuse and exploitation. Provide alternatives to institutional care as appropriate. o Social Services o E~y Care Services o State and Local Training . ~ , 2,400 CONMUNITY SERVICES Prdvide health, nutrition, housing and employment-related services to low- inccme persons. o Ccxwrunity Action S o Discretionary Programs - Camrunity Developrent Corporations - Crnminity Facilities - Youth Sports - Rural ~busirxg and Seasonal Farrm~orkers 348 ~ - Migrant IJ~1-INCC(~1E IICME Provide heating, 0 Low-Incone Energy 1,875 EJ~]ERGY ASSISTANCE cooling, emergency, ar~1 weatherization services to low- inccine households. PAGENO="0082" STATES IN BWCK GR~RT STATUS STATES NOT IN TERRITORIES IN INDIAN TRIBES PRUVERTIVE HEALTH 48 + D.C. California 2 2 AM) HEALTH SERVICES New York ALCOHOL, DRUG ABUSE 49 + D.C. California 4 6 & MENTAL HEALTI.1 . MATERNAL AND 48 + D.C. California 4 NONE CHILD HEALTH New York - AUTHORIZED SCXIAL SERVICES 50 + D.C. NONE 6 NONE AUTHORIZED CONt~TJNITY SERVICES 40 + D.C. * Alaska California Colorado Florida Georgia New Mexico New York Texas Virginia W. Virginia 6 86 LO~7-INCCt1E HONE 50 + D.C. NONE 6 123 ENERGY ASSISTANCE PAGENO="0083" 79 Senator DURINBERGER. Our next two witnesses will appear as a panel. They are both elected officials of local governments. One is Mayor Angelo Martinelli of Yonkers, N.Y., who is representing the U.S. Conference of Mayors. We also have Commissioner Diane Ahrens, of Ramsey County, Minn., which includes the city of St. Paul and some of its suburbs. Ms. Ahrens is here representing the National Associa- tion of Counties. Let's start with Commissioner Ahrens. TESTIMONY OP DIANE AHRENS, COMMISSIONER OP RAMSEY COUNTY, MINN., ON BEHALF OP THE NATIONAL ASSOCIATION OP COUNTIES, ACCOMPANIED BY RONALD GIBBS, ASSOCIATE DIREC- TOR, NATIONAL ASSOCIATION OP COUNTIES; AND ANGELO MAR- TINELLI, MAYOR OF YONKERS, N.Y., ON BEHALF OP THE U.S. CONFERENCE OP MAYORS, ACCOMPANIED BY LAURA DEKOVEN WAXMAN, ASSISTANT EXECUTIVE DIRECTOR, U.S. CONFERENCE OP MAYORS Ms. AHRENS. Chairman Durenberger, I have on my left Ron Gibbs, associate director of the National Association of Counties (NACo). I want to say that I have brought with me good Minnesota weather to Washington. I hope you appreciate that. I am an elected county commissioner in Ramsey County. I serve as a member of the Human Services Policy Steering Committee for the National Association for Counties. I am pleased to appear this morn- ing on NACo's behwlf to present our views on the effects of the nine most recent block grants on county government, its operation and its capacity to continue the services. As NACo stated before this subcommittee last October, counties sup- port wider uses of the block grant mechanism. We do not believe, how- ever, that block grants should be used as a budget cutting tool. In fact, Mr. Chairman, we passed a resolution at our March legislative confer- ence which calls for a moratorium of all further budget cuts, including the fiscal year 1983 proposals. Our solution urges a pacing of the devo- lution process. Regarding block grants: It is extremely difficult to provide you with a clear and accurate record of their impact. Frankly, it is just too early to assess. As the National Governors' Association report says: "Most were compromised sharply in the congressional process * * * States had little opportunity to plan." This and other factors have delayed the impact. It would also be more misleading to make an assessment in isolation from the impacts of inflation, of increasing unemployment, and of the States' fiscal crises. All of these compound the impact on the procedure and the growing number of distrusts in our communities. It is our belief, Senator, that the real test will begin under the next fiscal year. With much tighter budgets, far fewer Federal dollars, States' assumption of new responsibilities and a year of planning time, the full effects of the block granting experience will be better known. In the meantime, however, I can provide you with a few exam- ples. As you are well aware, not all States operate the same. Some States will design excellent systems and provide ample opportunities for local governments to be involved in the planning process. On the other hand, other States will simply provide local governments with a plan, fait accompli. PAGENO="0084" 80 In my State, intergovernmental cooperation involving counties has been largely window dressing. When done, it is more often than not done to suit the State's hidden agenda. This becomes more understand- able when one considers that counties are viewed as an administrative arm of the State government, particularly the State legislature. Only 500 counties in the country have home rule. We are viewed as that unit which functions to do State government's bidding. The following could serve to illustrate that the block grant pro- grams with reduced funding is ill advised. In Minnesota, we have labored under a social services block grant for over 2 years. Our legislature passed the Community Social Services Act which simply combined the title XX money and the State cate- gorical money for social services. This one pot was then allocated on a formula basis according to a county plan. Just what social services were to be provided was left largely to the county's discretion. Shortly thereafter, the State imnosed a levy limitation on t.he human services budget and the title XX program was cut at the Federal level. Ramsey County was forced to cut social services programs by one- third. We cut or eliminated 93 purchase of services contracts. We cut services to the mentally retarded, the mentally ill, and the chemically dependent by 36 percent. We eliminated all of our support services for day care, and we cut homemaker/chore services by 35 percent. These are all services to people within the safety net group. Prior to the funding cutbacks, this block grant approach might have worked rather well. It was a good idea. It certainly gave counties a great deal more control over important decisions. The block grant con- cept could work, and work well under certain conditions. Those con- ditions are: A guaranteed pass-throuoh to local units, no reduction in the appropriations, and a lessening of Federal and State regulations. In California, the experience is quite different. The State legislature has a permanent provision for only the social services block grant and has obtained only a temporary provision for the others. The tempo- rary provision requires that funding and reductions be passed through on a pro rata basis to all current providers. It also established a task force with token county representation. Many States have developed advisory councils. Not all advisory bodies are truly advisory. Some have been created because of the man- dated requirement under CDBGU and not necessarily because of an in- tense interest on behalf of the States to consult and work with local governments in the planning process. What we have seen is an in- crease in State Advisory Commissions on Intergovernmental Rela- tions, or State ACIRs. We view this as a positive outgrowth. Let me move quickly to budget cuts. Though the 1983 budget is not this morning's topic, we believe it is too intertwined with the problem to ignore. NACo continues to endorse the goal of a balanced budget. It should not, however, be achieved at the expense of domestic programs. Last year, counties sustained over a 15-percent reduction in Federal funding. The efforts that county governments made to maintain service levels despite funding cutbacks were tremendous. While the full im- pact of those cuts have not been totally realized, there is a pervasive feeling among county governments that all the fat has been eliminated. Last year's cuts forced many counties to reduce employment, to cut PAGENO="0085" Si back on service hours, and to postpone badly needed investments in the infrastructure. Many counties had to raise property or sales taxes. In Ramsey County, the share of the property tax which the commissioner levied increased 20 percent this year. The total property tax levy in the city of St. Paul went up by 40 percent this year. Counties are facing additional burdens as they strive to support the needy who are now ineligible for AFDC and food stamps. In our county, with 11,000 Indo-Chinese refugees, we face the increasing im- pact on the property tax because of Federal Government cutbacks in refugee support. Many counties foresee difficulty in maintaining the fiscal viability of county hospitals. Because of State cuts in health services for the indigent, our county had to levy additional funds to provide this care at our public hospital. Of our local county's increase in the tax levy, 75 percent was attributa- ble to those cuts. Mr. Chairman, we do have some recommendations as to what we would suggest in the written statement. I see my time is up. Senator DURENBERGER. Whatever recommendations you have will be included in the record. We thank you for being here. Mr. Martinelli? Mr. MARTINELLI. Mr. Chairman, I appear before you today on be- half of the U.S. Conference of Mayors, where I chair the Subcom- mittee on Human Services. I have with me Laura Waxman, who is the assistant executive director of the Conference. We are very pleased to have this opportunity to discuss block grants because they are a matter of great concern to my fellow mayors across the country. Last June at the annual meeting of the Conference of Mayors, we adopted a comprehensive policy on block grants. While mayors have supported the concept of block grants and grant consolidation for many years, there are certain provisions which we feel block grant legislation should contain. These include: 1. The granting of funds directly or through the States to local gov- ernments of appropriate size, with a demonstrated service delivery capacity, which wish to receive them; 2. The involvement of local governments in the planning and re- source allocation process so that locally identified needs can be taken into account; 3. An adequate level of funding; 4. Maintenance of effort requirements and measures to avoid signif- icant disruption of existing programs; 5. The allocation of funds among and within the States based not just on population, but targeted to need and the population in need of service; 6. Eligibility requirements to insure that the people served through the block grants are in need; 7. Assurances that State administrative requirements will not be onerous, and a 5-10 percent limit on the administrative costs that can be incurred; 8. A transition period during which the block grants can be imple- mented; PAGENO="0086" 82 9. The collection of data to enable annual monitoring and evaluation of the block grants by the Federal Government to assure that the funds are properly spent; and 10. A logical grouping of programs which, at a minimum, combines programs whose purposes are related and will maintain a Federal re- sponse to particular national problems. It is the feeling of the U.S. Conference of Mayors that provisions such as these will make it more likely that block grants will adeauately address the needs of urban residents, particularly those in need. Tjnfor- tunately, the block grants enacted through the Reconciliation Act last summer contained only a few of these provisions. The Uniform Block Grant Management Act which you have pro- posed, Mr. Chairman, does contain a number of *these provisions, however. We intend to continue working with you on that legislation. Let me make several comments on your legislation. While we applaud the consultation requirements in the legislation, we feel they could be strengthened to assure that local government of- ficials have an opportunity to take part in the State decisionmaking process governing the allocation of funds. There should be direct funding to local governments or strong pass- through provisions. Funds should be targeted to areas and populations in need. There should be eligibility requirements to assure that those people who receive the services are themselves in need. We support the proposed cap on State administrative costs. There should be assurances that multiyear funding projects will be continued for as long as the local government has made a commitment to the project. This is especially important under the "Small Cities" portion of the Community Development Block Grant program. The Housing and Community Development Amendments of 1981 included carefully-developed transition provisions which reflect the unique his- tory of the small cities program. These provisions would be superseded by your bill. We feel that they should be specifically exempted. Indeed, the 1981 amendments include a number of solid provisions which define the State-local relationship. We feel it would be advantageous to exempt the Community De- velopment Block Grant program entirely from the Uniform Block Grant Management Act. What we have been able to learn about the implementation of the block grants so far convinces us of the need for many of these pro- visions. In a survey done of 100 cities, by the U.S. Conference of Mayors in November, we learned that: Of the cities responding. 55 nercent said that the State had neither consulted with them nor offered an opportunity to participate in the State's decisionmaking process. And 38 percent said that they had not been able to get information from their States about the imple- mentation of the block grants. Since November, we have not had an opportunity to get systematic information from cities on block grant implementation, but we have a general sense of what has been happening. Things have not been all that different than they were before block grants. The program cuts have not been as severe as expected. Differences in funding cycles made more funds available in the current fiscal year than had been antici- pafed. PAGENO="0087" 83 Many city officials had little opportunity to be involved in State programs, like title XX, prior to the block grants, and have had little opportunity since their enactment. Cities often had trouble getting information from the States before, and they still have trouble. Although the first year of block grant implementation saw little change, more is anticipated in future years. The community services block grant is a case in point. The legisla- tion requires that the States continue to fund designated community action agencies during the first year of implementation, but then it opens up the possibilities to other local governments and agencies for the succeeding years. There was little change recorded during the first year. Indeed, a survey done by the Institute for Local Self- Government in Berkeley showed that the local character of community action agencies is basically being retained. The States are still funding community action agencies, and are not mandating program priorities or particular services. There is a definite trend, however, toward dis- tributing the community services block grant funds throughout the State, rather than targeting them to needy areas. The requirements for administration and reporting are still up in the air. We understand that a number of States are considering legislation, such as what has been enacted in Montana, which would pass through the community services block grant to all counties primarily on the basis of population, but also of economic need. While this does repre- sent the pass-through which we always call for, it is one that is not targeted and one that would spread the funds around so thinly that little could be accomplished with them in any one community. Our main concern is that the needs of urban residents be met. While it is still too early to evaluate the block grants which have been enacted, little has happened to allay our concerns. For this reason, it is the position of the U.S. Conference of Mayors that action on the addi- tional block grants proposed for fiscal year 1983 be deferred until the block grants already enacted can be evaluated. In addition, we feel it does not make sense to enact another series of block grants until basic decisions regarding the turnback and trust bond proposals are made. It would make little sense from either a managerial or a service delivery standpoint to make major programmatic changes and then make them again 1 or 2 years later. Mr. Chairman, the mayors are grateful to you for the significant effort you have made to try to rationalize our Federal system. We appreciate the opportunities afforded us so far to take part in this process. We are anxious to continue to work with you. Senator DURENBERGER. Thank you for your statement. Let me ask you both two general questions. One, I am getting the impression that, if it weren't for many of the Governors and some other people who got involved in this process. It might have been facing a real disaster in looking back over block grant implementation. It seems to me that we, in O~ngress, did everything in our power to make it almost impossible to adequately implement the block grants. We pronosed them ba.ck in March; we passed them in July; we made them effective in October; we appropriated the money in December; then we changed some of the appronriations. Lord knows how any- body. did any good with any of it. However, a lot of good has been accomplished which is evidenced by the fact that, in your testimony PAGENO="0088" 84 today, both of you can indicate some successes. The Governors' con- fer~nce report also indicates that some good was accomplished. Would it be fair to say that, generally, at the State level, sincere, good-faith efforts were made to do a good job of implementing the block grants? Or, were people just sitting on their hands? Wasn't there an awful lot of activity out there, with people trying to do a good job in implementing the block grants? Mr. MARTINELLI. I am not going to comment with regards to the desire to do a good job. The one thing I can tell you is basically taught from experience. Our experience has been that, if there aren't these mandated pass- through requirements by the Federal Government, it is not going to come down to our level in the proper way. Now, there may be desires to do a good job, hut by the same token-a perfect example of this is the Aging money that has come from the Federal Government to the States. It then passes on to the counties. In the city of Yonkers, which has almost 200,000 people, we have set up an office in the agency. We fund that out of our budget. Therefore, the administrative costs are already included there. Because there is no requirement to pass it directly through to the city o~F Yonkers, it goes through the State where administrative money is siphoned off. It then goes to the county, where administrative money is siphoned off. They administer the program and dole it out on a target program to the city of Yonkers. We would like that money, if it was earmarked from the Federal Government, passed through the State and the county, without being touched in regard to administrative money. We have already provided the administrative money to the local level. We have that money. We put it into our budget. We can then use the full dollars to be able to help our elderly. What we are fearful of is that it is going to operate that way, unless there are provisions in the Federal law that say, "You must pass it through." As long as we are adequately the delivery point, we can assume the delivery of those services. There are certain criteria that make sure that a local government can handle that money. I think that should be done. Senator DURENBEROER. Diane, before you respond to my first ques- tion, I would like to ask a second one which the mayor brought up. That is. there is probably a difference between blocking some formula categoricals and blocking some of the project grant programs. It is my observation that the States don't have a lot of experience in making grants to local governments or to anybody else. That experience usually lies at the county level where you do contracting for services. States do not have much experience in making grants, so the mayor may be right. In New York. they don't know how to make a grant to Yonkers or any place like that. I would like you-in reflecting on the degree to which a block grant's success is due to people working very hard to try to make it a success-to also reflect on the ability of States to take over the re- sponsibility for making grants to local governments. What faith would you have in a State like Minnesota, or any other State, being able to manage project grants and other kinds of grants to local governments? PAGENO="0089" 85 Ms. AHRENS. Mr. Chairman, in terms of your first question: yes; I think we are trying very hard on a local level. We are trying very hard on the State level. It is not a problem of trying. The problem comes where the block grant has been promulgated at a time when many other things are beginning to fall apart-and you know about the fiscal situation in the State of Minnesota and its im- pact on the counties. They couldn't levy a limitation on the human services area in the government, which is over the entitlement pro- grams. There is a levied limitation on the entitlement programs as well as on the social services programs. In order to pay our entitlement bills, we simply had to eliminate vast areas of our social services pro- grams at the same time we were cutting title XX. You can't look at any of these in isolation from what is going on around us. Unemployment is going up. We have 11,000 refugees who have moved off-not all of them, but hundreds of them-moved off of AFDC onto GA. The Federal Government-and this is not assured- will only pay 100 percent of GA for 18 months. Many of our Mon~ol members will never become job sufficient in that 3-year period because of their special problems. You just cannot talk about block grants and their success or failure in isolation from all of the other things that are happening to us. I can't think of a period in the history of local governments when we faced chaos from day to day. Yes, we are trying to assist at the State level and at the local level in terms of the whole block grant process. NACo, the U.S. Conference of Mayors, and the League of Cities have been putting on regional conferences around the country to help local administrators and local officials sift through this grant process so that they can do a better job. Yes, we are trying. Senator DURENBERGER. What we are trying to do in these hearings, if at all possible-and it may not be-is to lift the process we are going through out of the realities of current economics. We are all very fam- iliar with the unfortunate coincidence of recession, unemployment, cutbacks, and the resistance on the part of taxpayers at the various levels to pick up the gap. What I am searching for is what is good about the process and what needs to be changed. It strikes me that the other problem we have here is-and here I certainly reflect maybe on my own State-that the States, in general, have sort of become intermediaries in a lot of these areas we are talk- ing about. Generally, they have just become intermediaries between the Federal Government and the local governments. The local govern- ments do all the work and really spend the money and meet the needs. The Federal Government provides the regulations, the financing, the audits, the paperwork, and all that sort of thing. The States just sit there, in between, and shuffle things back and forth. Generally, what the States have long been doing is trying to address some of the fiscal problems of local governments. Clearly, when you talk about the levy that the Minnesota Legisla- ture put on, that levy probably contributed more to the 35 or 36 per- cent shortfall than did Reaganomics, blocking, or any of that sort of thing. We didn't cut those programs by that much. A lot of it was the way the States reacted to their traditional role of taking on more and more and more of the financial responsibility for running local PAGENO="0090" 86 government. I suppose our State is ahead of most States. However, something in the neighborhood of 75 percent of State revenues now go to local governments. You come on times of crunch, and you don't have Federal moneys to spend. You have already indexed inflation out of your income tax, and inflation is still being reflected in the high cost of services. So, your real estate tax and your local tax goes up. It isn't going up because the Federal Government is starting a blocking process for categoricals. What we are looking for in these hearings from local government is how we, in the process of making States more responsible again, can do a better job of blocking programs to or through State govern- ments. I think your observations on that is that it takes something like public participation and local government participation. I think the mayor quoted some statistics which I assume came from your November study. Mr. MARTINELLI. Yes. Senator DtTRENBERGER. I assume things have improved since then, in terms of local government participation in this whole process. Is that not correct? Mr. MARTINELLI. We haven't really determined whether or not they have improved at this point. We sense that they have improved. All we are really saying is that, somewhere along the line in the Federal regulation, we would like direct pass-through. We would like to be in- volved in the clecisionmaking of at least telling the States to consider talking to local governments. Usually you have three stages of development: the State, the county, and the local governments. Each one is politically different, in ~riost cases. Politics does play an important role in how the funds are distributed. What we are worrying about is something which you brought up before, Mr. Chairman. The fact that the States might tend to say, because they are magnanimous, "We want to provide a little bit to all the voters of the State." Therefore, they dissipate the little money we may now have, instead of sending it into areas of real need. They are dissipating it throughout the State into areas that don't really need it. That is what we are worried about. We feel that is why there should be provisions for pass-throughs and also for local government involvement-whether it be the county, the city, or such-as to exactly how they are going to work out this process. We are afraid they may feel that they know how to do it. Senator DURENBERGER. Just a second. My point there-and I probably didn't make it clear-is that States haven't much experience with targeting needs. All they have been doing is passing through money for federally targeted needs into a local community. So, they don't have much experience with that. Our choices are to continue to have us make the targeting decisions; pass it right through the State into those communities; or develop some ability on the part of the States to work with local governments to come up with a way to target needs better than we can under the present system. I think what I would ask you to say, if you can, is that you don't have any faith in the States doing that: or, that you think there are some changes in the blocking process which would facilitate this ca- pacity on the part of the States. PAGENO="0091" 87 Diane, do you want to respond to that ~ Ms. AHRENS. Yes, Mr. Chairman. First of all, there should be some sort of mandate for an association. We would like that negotiation to be forced at the State level. It would be very nice to have it at the Fed- eral level, as well, particularly in the Federal departments. I think the Department of Agriculture has come up with a 3-percent error rate regulation for food stamps, with absolutely no input-that we know of-from the local jurisdictions administering them. It is an absolutely ridiculous regulation. In Minnesota, we have a formula that was developed in a legislative process whereby the CSSA money is distributed to counties. I will go back to the mayor's point; it is a very good point. That was a political process. We fought it out with the legislature and with the rural areas. We didn't come off, we felt, as well as we should have. Perhaps some kind of a formula relationship developed at the Federal level, and suggested to the States, would be useful. We are always going to have problems. My theory is that, given the political situation with the States, the money will flow out to the areas where the needs are not the greatest. I don't know how to get around that, but that is the simple fact of life we have to deal with. I think in Minnesota we had a good process for that, and we just fought it out. I think, because we went through it 2 years ago, we don't want to open it up again. We could end up losers if we were to open that process up again. Senator DtTRENBEROER. OK. Thank you. Mr. MARTINELLI. If you want an answer as to whether we trust the States: A very loud "No." We don't trust the States. Maybe they haven't h~d the ability in the past to handle this. We just don't trust that they are going to be able to do it properly. That is why we are coming to you and asking you to implement something, somewhere in the law, which gives us a shot at making it work properly. Senator DURENBERGER. I just want to say in response to that that I don't trust the Federal Government. [Laughter.] The point of this whole discussion is to find a way in which we can develop the greatest amount of trust wherever we have the greatest access. I am very frustrated about the refugee problem. I am frustrated about a lot of other things. It is not Reaganomics, or Stockmanomics, or anything else. There have just got to be better ways of doing these things. It isn't as simple as saying the Federal Government is going to quit, that we are ~oin~ to diimn it. We nee~l to find a trustworthy relationship here, so that we aren't just spreading resources around and missing the target. I thank you very much for your contributions this morning. EThe prepared statement of Ms. Ahrens follows:) PAGENO="0092" 88 National Association of CàUntiPS Offices * 440 First Street, N.W., Washington, D.C. 20001 Bernard F. Hlltenbrand, Executive Director Telephone: (202) 393-6226 STATEMENT OF THE HONORABLE DIANE AHRENS ELECTED COUNTY COMMISSIONER, RAMSEY COUNTY, MINNESOTA ON BEHALF OF THE NATIONAL ASSOCIATION OF COUNTIES BEFORE THE SUBCOMMITTEE ON INTERGOVERNMENTAL RELATIONS COMMITTEE ON GOVERNMENTAL AFFAIRS UNITED STATES SENATE REGARDING IMPLEMENTATION OF BLOCK GRANTS ~ WASHINGTON, D. C. MAY 11, 1982 PAGENO="0093" 89 STATEMENT OF THE HONORABLE DIANE AHRENS, ELECTED COUNTY COMMISSIONER, RAMSEY COUNTY, MINNESOTA, ON BEHALF OF THE NATIONAL ASSOCIATION OF COUNTIES, BEFORE THE SUBCOMMITTEE ON INTERGOVERNMENTAL RELATIONS, COMMITTEE ON GOVERNMENTAL AFFAIRS, UNITED STATES SENATE, REGARDING IMPLEMENTATION OF BLOCK GRANTS, WASHINGTON, D.C., MAY 11, 1982. CHAIRMAN DURENBERGER, AND DISTINGUISHED MEMBERS OF THIS COMMITTEE, MY NAME IS DIANE AHRENS. I AN AN ELECTED COUNTY COMMISSIONER IN RAMSEY COUNTY, MINNESOTA, AND I SERVE AS A MEMBER OF THE HUMAN SERVICES POLICY STEERING COMMITTEE FOR THE NATIONAL ASSOCIATION OF COUNTIES* (NACo). I AM PLEASED TO APPEAR BEFORE YOU THIS MORNING ON NACo's BEHALF TO PRESENT OUR VIEWS ON THE EFFECTS OF THE NINE MOST RECENT BLOCK GRANTS TO COUNTY GOVERNMENT, IT'S OPERATION AND IT'S CAPACITY TO CONTINUE SERVICES. AS NACo STATED BEFORE THIS COMMITTEE LAST OCTOBER, COUNTIES SUPPORT WIDER USES OF THE BLOCK GRANT MECHANISM. WE CONTINUE TO SUPPORT EFFORTS TO BALANCE THE BUDGET. BUT WE DO NOT BELIEVE THAT BLOCK GRANTS SHOULD BE USED AS A BUDGET CUTTING TOOL. IN FACT, MR. CHAIRMAN, THE NATIONAL ASSOCIATION OF COUNTIES PASSED A RESOLUTION AT OUR MARCH LEGISLATIVE CONFERENCE WHICH CALLS FOR A MORATORIUM ON ALL FURTHER BUDGET CUTS INCLUDING FISCAL YEAR 1983 PROPOSALS. OUR RESOLUTION URGED A "PACING" OF THE DEVOLUTION PROCESS TO ENSURE A STABLE AND ACCEPTABLE REALIGNMENT OF OUR FEt)ERAL SYSTEM. ACCORDING TO THE NACo POLICY, SUCH A REALIGNMENT MUST PRESERVE NATIONAL EQUITY IN INCOME MAINTENANCE PROGRAMS. * The National Association of Counties is the only national organization representing county government in the United States. Its membership spans the spectrum of urban, suburban, and rural counties which have joined together for the common purpose of strengthening county government to meet the needs of all Americans. By virtue of a county's membership, all its elected and appointed officials become participants in an organization dedicated to the following goals: - improving county governments; - serving as the national spokesman for county governments; - acting as a liaison between the nation's counties and other levels of government; and - achieving public understanding of the role of counties in the federal system. PAGENO="0094" 90 EFFECTS OF BLOCK GRANTS ON STATE PROCESSES, LOCAL INVOLVEMENT AND SERVICE DELIVERY REGARDING BLOCK GRANTS, SENATORS, IT IS EXTREMELY DIFFICULT TO PROVIDE THIS COMMITTEE WITH A CLEAR AND ACCURATE RECORD OF HOW WELL BLOCK GRANTS ARE FARING THROUGHOUT THE COUNTRY. FRANKLY, IT IS JUST TOO EARLY TO ASSESS. AS THE RECENT NATIONAL GOVERNORS' ASSOCIATION REPORT SAYS, "MOST OF (THE GRANTS) WERE COMPROMISED SHARPLY IN THE CONGRESSIONAL PROCESS AND THE STATES HAD LITTLE OPPORTUNITY TO PLAN FOR THIS NEW ASSUMPTION OF RESPONSIBILITY. ALL THESE FACTORS HAVE ... REDUCED THE NUMBER OF CHANGES IN THE FIRST FOUR MONTHS." IN ADDITION, BECAUSE OF THE VARIOUS DELAYS CAUSED BY BOTH THE CONGRESSIONAL AND REGULATORY PROCESS STATE LEGISLATURES HAD LITTLE OR NO TIME TO ACT. SOME STATES SIMPLY FAILED TO ASSUME SOME OF THE BLOCK GRANTS. IT IS OUR BELIEF, SENATORS, THAT THE REAL TEST WILL BEGIN UNDER THE NEXT FISCAL YEAR. WITH MUCH TIGHTER BUDGETS, FAR FEWER FEDERAL DOLLARS, STATE ASSUMPTION OF NEW RESPONSIBILITIES, AND A YEAR OF "PLANNING TIME," THE FULL EFFECTS OF THE BLOCK GRANT EXPERINCE WILL BE BETTER KNOWN. IN THE MEANTIME, HOWEVER, WE CAN PROVIDE YOU WITH A FEW EXAMPLES OF OUR COUNTIES' ACTIVITIES. WE PREMISE THE REMARKS, HOWEVER, WITH THE CAVEAT THAT NOT ALL STATES OPERATE THE SAME. SOME STATES WILL DESIGN EXCELLENT SYSTEMS AND PROVIDE AMPLE OPPORTUNITIES FOR LOCAL GOVERNMENT TO BE INVOLVED IN THE PLANNING PROCESS. ON THE OTHER HAND, SOME STATES WILL SIMPLY PROVIDE LOCAL GOVERNMENT WITH A PLAN, FAIT ACCOMPLI. ANY PROCESS FOR CONSULTATION IS FOR SHOW ONLY, A RUBBER STAMP TO THE STATES' PREDETERMINED GOALS. PAGENO="0095" 91 HUMAN SERVICES AND HEALTH BLOCK GRANTS SENATORS, IT HAS BEEN MY EXPERIENCE THAT THE AMOUNT OF REAL INTERGOVERNMENTAL COOPERATION INVOLVING COUNTIES IN MY STATE, HAS BEEN LARGELY "WINDOW DRESSING." WHEN DONE, IT IS MORE OFTEN THAN NOT TO SUIT THE STATE'S HIDDEN OR NOT SO HIDDEN AGENDA. THIS BECOMES MORE UNDERSTANDABLE WHEN ONE CONSIDERS THAT COUNTIES ARE VIEWED AS AN ADMINISTRATIVE ARM OF STATE GOVERNMENT - PARTICULARLY THE STATE LEGISLATURE. ONLY 500 COUNTIES, NATIONWIDE, HAVE HOME RULE. VIEWED BY STATE GOVERNMENT AS THAT UNIT WHICH FUNCTIONS TO DO ITS BIDDING, COUNTIES ARE MOST OFTEN IN THE POSITION OF "REACTING." IN MINNESOTA, WE DO HAVE A HIGHLY DEVELOPED ASSOCIATION. WE COOPERATE BETWEEN AND AMONG THE SEVEN METRO COUNTIES THROUGH A JOINT POWERS AGREEMENT. THE METRO INTER COUNTY ASSOCIATION. UNDER THAT UMBRELLA, SOLID WASTE, 911, RAIL AUTHORITY, AND VARIOUS ENVIRONMENTAL ISSUES ARE TACKLED. THIS ASSOCIATION HIRES LOBBYISTS TO ADVOCATE ON OUR BEHALF AT THE STATE LEGISLATURE. WITH RESPECT TO BLOCK GRANTS, WE IN MINNESOTA HAVE LABORED UNDER A SOCIAL SERVICES BLOCK GRANT FOR OVER TWO YEARS. OUR LEGISLATURE PASSED THE COMMUNITY SOCIAL SERVICES ACT WHICH SIMPLY TOOK THE TITLE XX MONEY AND ADDED TO IT THE STATE MONEY THAT HAD FORMERLY BEEN GIVEN TO COUNTIES ON A CATEGORICAL BASIS FOR SOCIAL SERVICES. THIS ONE POT WAS THEN ALLOCATED ON A FORMULA BASIS AS A BLOCK GRANT TO COUNTIES FOR SOCIAL SERVICES ACCORDING TO A COUNTY PLAN APPROVED BY THE DEPARTMENT OF PUBLIC WELFARE. JUST WHAT SOCIAL SERVICES WERE TO BE PROVIDED WAS LEFT LARGELY TO THE COUNTIES' DISCRETION. UNDER THIS APPROACH MOST COUNTIES HAD FEWER DOLLARS THAN BEFORE. BUT THEN THE STATE LESSENED PAGENO="0096" 92 THE DOLLARS EVEN FURTHER THROUGH A LEVY LIMITATION ON HUMAN SERVICE BUDGETS. OUR TITLE XX PROGRAM WAS CUT. TO PAY OUR INCREASING ENTITLEMENT BILLS, THE COUNTY CUT SOCIAL SERVICE PROGRAMS BY ONE-THIRD. WE CUT OR ELIMINATED NINETY THREE PURCHASE OF SERVICE CONTRACTS, CUT SERVICES TO THE MENTALLY RETARDED, MENTALLY ILL AND CHEMICALLY DEPENDANT BY THIRTY-SIX PERCENT. WE ELIMINATED ALL OUR SUPPORTIVE SERVICES FOR DAY CARE AND CUT HOMEMAKER/CHORE SERVICES BY THIRTY-FIVE PERCENT. HOWEVER, PRIOR TO THE FUNDING CUTBACKS, THIS BLOCK GRANT APPROACH MIGHT HAVE WORKED RATHER WELL OVER THE LONG HAUL. IT WAS A GOOD IDEA. ALTHOUGH IT WAS ORIGINALLY THOUGHT BY MANY TO BE DEVISED TO GET THE VARIOUS ADVOCACY GROUPS OFF THE BACKS OF STATE LEGISLATORS AND ON TO COUNTY COMMISSIONERS, IT CERTAINLY GAVE COUNTIES A GREAT DEAL MORE CONTROL OVER IMPORTANT DECISIONS. DECISIONS TO CUT BACK ARE CERTAINLY NOT EASY, SENATORS, BUT WE DEVELOPED A SOUND SYSTEM WHICH INVOLVED BOTH CITIZENS AND STAFF. WE DESIGNED A CRITERIA OF NEED AND POINTS SYSTEM. PARTICIPANTS THEN ALLOTTED POINTS TO EACH PROGRAN TO RANK ITS IMPORTANCE. IT WAS A THOROUGH PROCESS. IT SHOULD SERVE TO ILLUSTRATE WHY THE BLOCK GRANT APPROACH FOR ENTITLEMENT PROGRAMS WITH REDUCED FUNDING IS SO ILL- ADVISED. WE HAVE ATTACHED A COPY OF OUR RANKING SYSTEM FOR THE RECORD. RANSEY COUNTY HAS REQUESTED THAT THE STATE USE THIS FORMULA FOR DISTRIBUTING ANY OTHER "BLOCK GRANTS" THAT THE FEDERAL GOVERNMENT MAY ENACT. YOU MIGHT SAY IN MINNESOTA WE ALREADY HAVE IN PLACE STATE- WIDE, A STRUCTURE THAT BLOCK GRANTS CAN "PLUG INTO." -4- PAGENO="0097" 93 BECAUSE THE STATE HAS NOT TAMPERED WITH THE SYSTEM ALREADY IN PLACE, THE EFFECT OF THE FEDERAL BLOCK GRANTS IN MINNESOTA HAVE NOT YET BEEN FULLY DETERMINED. IN CALIFORNIA, THE EXPERIENCE IS QUITE DIFFERENT. THE STATE LEGISLATURE HAS PERMANENT PROVISION FOR ONLY THE SOCIAL SERVICES BLOCK GRANT AND HAS OBTAINED ONLY A TEMFORARY PROVISION FOR THE OTHER BLOCK GRANTS. THE TEMPORARY PROVISION REQUIRES ALL OTHER BLOCK GRANT FUNDING AND REDUCTIONS BE PASSED THROUGH ON A PRO RATA BASIS TO ALL CURRENT PROVIDERS. IT ALSO ESTABLISHED A TASK FORCE WITH ONLY TOKEN COUNTY REPRESENTATION TO MAKE RECOMMENDATIONS REGARDING THE DECISION-MAKING RESPONSIBILITY, COMMUNITY INVOLVEMENT AND METHODS OF ALLOCATING BLOCK GRANTS. MANY STATES HAVE DEVELOPED COMMISSION OR ADVISORY COUNCILS. THE TOTAL NUMBER, HOWEVER, IS MISLEADING IN THAT NOT ALL ADVISORY BODIES ARE TRULY ADVISORY. SOME HAVE BEEN CREATED BECAUSE OF THE MANDATED REQUIREMENT UNDER THE CDBG BLOCK GRANT AND NOT NECESSARILY BECAUSE OF AN INTENSE INTEREST ON BEHALF OF ALL STATES TO CONSULT AND WORK WITH LOCAL GOVERNMENTS IN THE PLANNING PROCESSES TO DISTRIBUTE BLOCK GRANT DOLLARS. COMMUNITY DEVELOPMENT AS WITH THE HUMAN SERVICE AREA, THE STATE EXPERIENCE UNDER THE "SMALL CITIES" CDBG BLOCK GRANT IS ALSO MIXED. SOME STATES, SUCH AS NEVADA, HAVE DONE AN OUTSTANDING JOB DESPITE THE ADMINISTRATIVE PROBLEMS TO HONESTLY INVOLVE LOCAL GOVERNMENTS IN THE PLANNING PROCESS. ON THE OTHER HAND, SOME STATES SUCH AS UTAH, HAVE SUBSTANTIALLY LIMITED LOCAL GOVERNMENT INPUT. TWO STATES HAVE NOT AND DO NOT PLAN TO TAKE OVER THE PROGRAM -- COLORADO AND CALIFORNIA. COLOARDO HAS BEEN HESITANT BECAUSE IT DOES NOT WANT TO ASSUME THE PROGRAM SHOULD FEDERAL FUNDING -5- 99-965 0 - 82 - 7 PAGENO="0098" 94 CEASE AND CLAIFORNIA HAS NOT BEEN ABLE TO SUCCESFULLY RESOLVE AN INTERNAL DISPUTE OVER WHICH STATE AGENCY WOULD BE APPROPRIATE TO ADMINISTER THE PROGRAM. IN ALL CASES, HOWEVER, THE STATE-ADMINISTERED "SMALL CITIES" COMMUNITY DEVELOPMENT BLOCK GRANT PROGRAM HAS BEEN SEVERELY HAMPERED IN IMPLEMENTATION DUE TO AN INORDINATELY LONG PERIOD OF TIME IN FINALIZING REGULATIONS. THIS DELAY HAS RESULTED IN CONSIDERABLE UNCERTAINTY AND CONFUSION ON THE PART OF LOCAL GOVERNMENTS AND THE STATES WHICH MAY HAMPER SUCCESSFUL IMPLEMENTATION OF THE NEW PROGRAM. THE DELAY IN ISSUING FINAL REGULATIONS -- FROM NOVEMBER 1981 TO APRIL 1982 -- RESULTED FROM A DISPUTE BETWEEN THE ADMINISTRATION AND THE CONGRESSIONAL BANKING COMMITTEES OVER FUNDAMENTAL PHILOSOPHICAL ISSUES PERTAINING TO THE PRINCIPLE PURPOSES OF THE ACT. THE ADMINISTRATION TOOK THE VIEW THAT "MAXIMUM FEASIBLE DEFERENCE" BE GIVEN TO THE STATES TO IDENTIFY TARGET POPULATION, DEVELOP REPORTING REQUIREMENTS AND PERFORMANCE REPORTS AND APPLICABILITY OF OTHER FEDERAL LAWS. WHILE SOME ACCOMMODATION OF CONGRESSIONAL CONCERNS WAS MADE BY THE ADMINISTRATION, IT REMAINS UNSATISFACTORY TO THE HOUSE BANKING CO~1MITTEE AND ITS VERSION OF THE ANNUAL HOUSING AUTHORIZATION LEGISLATION CONTAINS A RESTATEMENT OF CONGRESSIONAL INTENT THAT STATES MUST SERVE LOW AND MODERATE INCOME PERSONS AND OPERATE UNDER FAIRLY SPECIFIC PERFORMANCE STANDARDS. WE THINK THESE CHANGES ARE ESSENTIAL WE ARE HOPEFUL THAT FURTHER DELAYS DO NOT OCCUR IN IMPLEMENTATION OF THIS PROGRAM SO THAT FUNDING CAN BE QULCKLY MADE AVAILABLE TO MEET THE PRESSING COMMUNITY DEVELOPMENT NEEDS OF THE NATION'S SMALLER COUNTIES AND CITIES. -6- PAGENO="0099" 95 BUDGET CUTS MR. CHAIRMAN, THOUGH WE REALIZE THIS HEARING WAS NOT CALLED TO DISCUSS THE FISCAL YEAR 1983 BUDGET, NEVERTHELESS, WE IN COUNTY GOVERNMENT BELIEVE THAT THE BUDGET IS TOO INTRICATELY INTERTWINED WITH THE BLOCK GRANT AND NEW FNDERALISN ISSUES. SOME DISCUSSION IS NECESSARY. NACo CONTINUES TO ENDORSE THE GOAL (`F A BALANCED BUDGET, HOWEVER, WE BELIEVE A BALANCED BUDGET SHOULD NOT BE ACHIEVED AT THE EXPENSE OF DOMESTIC PROGRAMS IN FISCAL 1983. LAST YEAR, COUNTIES SUSTAINED OVER A 15% REDUCTION IN FEDERAL FUNDING. THE EFFORTS THAT COUNTY GOVERNMENTS MADE TO MAINTAIN SERVICE LEVELS DESPITE FUNDING CUTBACKS WERE TREMENDOUS. WHILE THE FULL IMPACT OF LAST YEAR'S CUTS HAVE NOT BEEN TOTALLY REALIZED, THERE IS NOW A PERVASIVE FEELING AMONG COUNTY GOVERNMENTS THAT ALL OF THE "FAT" HAS BEEN ELIMINATED. LAST YEAR' S CUTS FORCED MANY COUNTIES TO REDUCE EMPLOYMENT, CUT BACK ON SERVICE HOURS AND SERVICES SUCH AS DAY-CARE ASSISTANCE AND POSTPONE BADLY NEEDED INVESTMENT IN INFRASTRUCTURE REPAIRS. MANY COUNTIES HAVE HAD TO RAISE PROPERTY OR SALES TAXES, A POLICY VIEWED UNFAVORABLY BY CITIZENS WHO RECEIVE, IN RETURN, A CUTBACK RATHER THAN AN INCREASE IN SERVICES. COUNTIES ARE FACING ADDITIONAL BURDENS AS THEY STRIVE TO SUPPORT THE NEEDY WHO ARE NOW INELIGIBLE FOR FEDERAL AFDC AND FOOD STAMPS. MANY COUNTIES FORESEE DIFFICULTY IN MAINTAINING THE FISCAL VIABILITY OF COUNTY HOSPITALS WHICH PROVIDE SERVICES TO MANY POOR PEOPLE WHO ARE INELIGIBLE FOR MEDICARE AND MEDICAID. FURTHER REDUCTIONS IN REVENUES WOULD SERIOUSLY AND NEGATIVELY IMPACT ON THE ABILITY OF COUNTIES TO PROVIDE BASIC AND VITAL SERVICES TO CITIZENS. WHILE WE CONTINUE TO SUPPORT BLOCK GRANTS AND TRANSFER TO THE STATES OF MANY CATEGORICAL PROGRAMS UNDER THE PRESIDENT'S PROPOSED TURNBACK, WE PAGENO="0100" MUST INSIST ON A MORATORIUM OF FURTHER REDUCTIONS IN THE FEDERAL PROGRAMS THAT AFFECT COUNTIES UNTIL WE CAN DETERMINE WHAT THE IMPACT OF THE CUTS WILL BE ON OUR CONSTITUENTS. WE HAVE NOT FOUND THAT COUNTIES ARE ABLE TO MAKE UP THE LOST FEDERAL FUNDS. ALTHOUGH MANY SERVICES ARE BEING PRESERVED BY JUGGLING FUNDS AND PROGRAMS, IN MANY CASES. HOWEVER, THE SERVICES ARE JUST DISAPPEARING. WE WILL CONTINUE TO SUPPORT THE (:ONSOLIDATION OF NARROW CATEGORICAL PROGRAMS INTO BLOCK GRANTS THAT INSURE THE PARTICIPATION OF COUNTY ELECTED OFFICIALS IN THE FUNDING AND ALLOCATIONS DECISION PROCESS, PROVIDED THAT THE FEDERAL FUNDING LEVEL OF THE BLOCK GRANTS IS NOT SUBSTANTIALLY REDUCED. SPECIFICALLY, WE OPPOSE FURTHER REDUCTIONS IN THE SOCIAL SERVICES BLOCK GRANT, THE C:OMMUNITY SERVICES BLOCK GRANT, AND THE LOW INCOME ENERGY ASSISTANCE ILOCK GRANT. FOR THE SOCIAL SERVICES BLOCK GRANT (TITLE XX), NACo SUPPORTS PROVISIONS OF H.R. 5791, INTRODUCED BY MR. FORD OF TENNESSEE, WHICH WOULD SET 1983 SPENDING AT $2.6 BILLION, AND INCREASE TO $3.0 BILLION BY 1985, WHICH IS STILL LESS THAN THE 1983 LEVEL WOULD HAVE BEEN PRIOR TO THE REC:ONCILIATION ACT LAST YEAR. THE PROPOSED CHILD WELFARE BLOCK GRANT IS ACCEPTABLE, AT 1982 FUNDING LEVELS FOR THE PROGRAMS CONTAINED WITF:IN IT, AND PROVIDED THAT FUNDS ARE APPROPRIATED SEPARATELY FOR FOSTER CARE MAINTENANCE PAYMENTS, AS PROVIDED IN THE ENTITLEMENT LANGUAGE ESTABLISHED LAST YEAR. BOILER PLATE LANGUAGE SENATORS, THE NACo POLICY PRESENTED MERE LAST OCTOBER HAS NOT CHANGED. WE SUPPORTED THEN, AND CONTINUE TO SUPPORT, THE BOILERPLATE LANGUAGE DEVELOPED BY CHAIRMAN DURENBERGER. WE HIGHLY SUPPORT LANGUAGE WHICH CALLS FOR THE STATE'S C:ONSULTATION WITH LOCAL GOVERNMENTS IN PREPARING THE STATE'S PLAN TO EXPEED BLOCK GRANT DOLLARS. -8- PAGENO="0101" 97 PASS-THROUGH PROVISION AS PREVIOUSLY REQUESTED, NACo CONTINUES TO SUPPORT A PASS-THROUGH PROVISION FOR LOCAL GOVERNMENTS. WE RECOMMEND FOR THE COMMITTEE'S CONSIDERATION THE FOLLOWING LANGUAGE: FOR ENTITLEMENT AND CATEGORICAL PROGRAMS THAT ARE WHOLLY LOCALLY FUN, A 100% PASS-THROUGH SHALL BE REQUIRED. THIS PASS-THROUGH SHALL BE FULL, DIRECT AND WITHOUT ENCUMBRANCE. FOR BLOCK GRANT PROGRAMS, SUCH AS CETA AND CDBG, WHERE FUNDING IS PRESENTLY SPLIT (i.e., ENTITLEMENT, BALANCE OF STATE OR NON-ENTITLEMENT) OR PASSED THROUGH BY THE STATES TO SOME DEGREE, THE DIRECT FEDERAL-LOCAL ENTITLEMENT FUNDING ARRANGEMENT WOULD BE MAINTAINED. TFU BALANCE DISTRIBUTED TO THE STATES WOULD THEN BE PASS THROUGH ON THE BASIS OF A PERCENTAGE THAT WAS AVAILABLE TO LOCALITIES AS THE AVERAGE OF FISCAL YEARS 1981 AND 1982 LEVELS IN THAT PARTICULAR PROGRAM. REPORTING REQUIREMENTS SENATORS, NACo RECOMMENDS AMENDING THE OMNIBUS RECONCILIATION ACT OF 1981 UNDER "ACCESS TO RECORDS BY THE COMPTROLLER GENERAL" TO INCLUDE A NEW SECTION DEALING WITH REPORTING REQUIREMENTS. THE NEW SECTION WOULD REQUIRE UNIFORM REPORTING OF DATA ON SPENDING BY THE STATES. CURRENTLY, STATES ARE REQUIRED TO SUBMIT DATA IN A FORMAT TO BE SPECIFIED BY THE SECRETARY~ UNFORTUNATELY, NO SPECIFIC FORMAT HAS BEEN ESTABLISHED. NACo BELIEVES ACCOUNTABILITY TO CONGRESS ON THE SPENDING OF FEDERAL DOLLARS CAN ONLY BE ASSURED IF REPORTING AMONG THE STATES IS CARRIED OUT ON A UNIFORM BASIS. NACo POLICY ON BLOCK GRANTS AS WE PROVIDED FOR THE COMMITTEE LAST OCTOBER, THE NATIONAL ASSOCIATION OF COUNTIES WISHES TO REPEAT OUR POLICY ON BLOCK GRANTS. OUR POLICY -9- PAGENO="0102" 98 GUIDELINES SPECIFICALLY CALL FOR THE FOLLOWING PROVISIONS IN ANY BLOCK GRANT PROGRAMS: o FIRST, A BLOCK GRANT TO CONSOLIDATE PROGRAMS MUST BE ACCOMPANIED BY AN ABSOLUTE REDUCTION IN FEDERAL MANDATES AND REGULATIONS. o THERE MUST BE A REASONABLE TRANSITION PERIOD TO ALLOW STATES AND COUNTIES TO MAKE THE NECESSARY LEGAL ADJUSTMENTS AND TO CONSOLIDATE PROGRAMS, SERVICES, AND FISCAL RESOURCES, BEFORE FUNDING IS REDUCED. FOR MOST PROGRAMS, A MINIMUM PERIOD OF TWELVE TO TWENTY-FOUR MONTHS IS NEEDED FOR ORDERLY TRANSITION. THE DIFFERING BUDGET CYCLES AND STATE LEGISLATIVE SESSIONS MAKE IMMEDIATE ADJUSTMENT TO NEW BLOCK GRANTS IMPOSSIBLE. IN MOST CASES, COUNTIES OPERATING PROGRAMS MUST WAIT FOR STATE ENABLING LEGISLATION. o A BLOCK GRANT OR OTHER SPENDING REDUCTION CANNOT SERVE MERELY TO SHIFT COSTS FROM THE FEDERAL TREASURY TO STATE AND LOCAL TAXPAYERS. NAC0 WILL VIGOROUSLY OPPOSE ANY SUCH SHIFTING. o FEDERAL BLOCK GRANT FUNDS SHOULD BE ALLOCATED DIRECTLY TO GENERAL PURPOSE LOCAL GOVERNMENTS WHERE AN EXISTING SERVICE DELIVERY SYSTEM IS IN PLACE: AND o THERE MUST BE PROVISIONS TO ASSURE PASS-THROUGH OF FUNDS TO COUNTIES THAT OPERATE THE PROGRAMS, IN ORDER TO PRESERVE THE SAFETY NET OF LIFE-SUSTAINING SERVICES THAT COUNTIES MUST OPERATE. TO FURTHER ASSURE THAT BLOCK GRANT FUNDS ARE AVAILABLE FOR LOCAL SERVICE DELIVERY, THERE SHOULD BE A CAP ON THE AMOUNT THE STATES CAN RETAIN FOR ADMINISTRATIVE COSTS, SUCH AS THE TEN PERCENT LIMIT PROVIDED IN THE SENATE PASSED HEALTH BLOCK GRANTS. -10- PAGENO="0103" 99 o FURTHER, NAC0 POLICY SPECIFIES THAT THERE SHOULD BE NO MATCHING REQUIREMENTS, MAINTENANCE OF EFFORT, OR EARMARKING OF FUNDS WITHIN BLOCK GRANTS. MOST OF THE BLOCK GRANT PROPOSALS IN THE RECONCILIATION BILLS VIOLATE SOME OR ALL OF THESE PRINCIPLES. o FINALLY, NACo OPPOSES BLOCK GRANTS FOR ENTITLEMENT PROGRAMS SUCH AS AFDC, FOOD STAMPS, AND MEDICAID, AND BELIEVES THAT THE FEDERAL GOVERNMENT SHOULD CONTINUE TO MAINTAIN PRIMARY RESPONSIBILITY FOR THE PROBLEMS OF INCOME MAINTENANCE, WHICH ARE MORE NATIONAL IN CHARACTER. CONCLUSION IN CONCLUSION, CHAIRMAN DURENBERGER, NAC0 SUPPORTS FEDERAL EFFORTS TO INCREASE THE BLOCK GRANT MECHANISM. HOWEVER, AS OUR TESTIMONY HIGHLIGHTS, WE MUST KEEP IN MIND THE FOLLOWING FACTORS AS WE MOVE TOWARD THIS END: THE VARIOUS DELAYS IN PASSING BLOCK GRANTS, DEVELOPING REGULATIONS, COUPLED WITH THE LIMITED STATE PLANNING TIME AND THE STATE LEGISLATURE'S ADJOURNMENTS, HAS NOT ALLOWED FOR A TRUE TESTING OF THE BLOCK GRANT EXPERIENCE. THE REAL TEST WILL BEGIN UNDER FISCAL YEAR 1983. COUNTIES WILL HAVE A MUCH BETTER FEELING OF HOW WELL THIS PROCESS WORKS AFTER THE `83 BUDGET HAS HAD TIME TO FILTER THROUGH THE SYSTEM. THIS COMMITTEE, MR. CHAIRMAN, SHOULD CONSIDER HOLDING HEARINGS BY MID Oft LATE 1983. THE CUMULATIVE IMPACT. OF BLOCK GRANTS, STATE GOVERNMENT FISCAL DISTRESS, FEDERAL BUDGET CUTS, AND POSSIBLY MORE STATE/LOCAL GOVERNMENT RESPONSIBILITIES UNDER NEW FEDERALISM, HAS JUST BEGUN TO IMPACT LOCAL GOVERNMENTS. WE NOW SEE THE RESURGENCE OF 1930 SOUP LINES IN NUMBERS -11- PAGENO="0104" 100 AND IN AREAS NOT KNOWN BEFORE. FISCAL YEAR 1983 WILL MOST LIKELY EXACERBATE THIS PROBLEM. THE CONSULTATION PROCESSES ESTABLISHED UNDER THE STATES NEED MORE WORK. SOME STATES MAY NEED ADDITIONAL INCENTIVES TO PROVIDE MEANINGFUL OPPORTUNITIES TO SEEK LOCAL INVOLVEMENT IN THE ACTUAL PLANNING STAGES FOR FUND EXPENDITURE. THE PASS THROUGH OF FUNDS CONTINUES TO BE A PRESSING CONCERN. BLOCK GRANT LANGUAGE SHOULD AND MUST RECOGNIZE THE ROLE GOVERNMENTS PLAY AS THE PRINCIPLE SERVICE PROVIDERS AND PROVIDE FOR THE MANDATORY PASS-THROUGH OF ADEQUATE RESOURCES. THE CONGRESS MUST RECOGNIZE THE INTENSE FISCAL STRESS ON OUR INTERGOVERNMENTAL SYSTEM AND AGREE TO A MORATORIUM ON ANY FURTHER BUDGET CUTS FOR THOSE DOMESTIC PROGRAMS FUNDED THROUGH STATE AND LOCAL GOVERNMENTS UNTIL THE SYSTEM HAS HAD TIME TO STABILIZE AND ACCESS ITS RESOURCES. SENATORS, THE NATIONAL ASSOCIATION OF COUNTIES APPRECIATES THIS OPPORTUNITY TO APPEAR BEFORE YOU THIS MORNING. WE HOPE AND URGE YOU TO CONTINUE THIS OVERSIGHT ON BLOCK GRANTS. WE ENCOURAGE THIS COMMITTEE TO TARE A CLOSE LOOK AT THIS ISSUE WHEN WE ARE WELL INTO THE FY 1983 BUDGET, AND URGE YOUR SUPPORT TO APPROPRIATE FUNDING FOR THE PRESENT BLOCK GRANT PROGRAMS AT THE FY 1982 BUDGET LEVELS. WE WILL BE HAPPY TO ANSWER ANY QUESTIONS YOU MAY HAVE REGARDING THIS STATEMENT, AND LOOK FORWARD TO CONTINUING TO WORK WITH YOU IN OUR COMMON INTEREST TO BALANCE THE BUDGET AND RESPONSIBLY IMPROVE OUR INTERGOVERNMENTAL SYSTEM. THANK YOU. -12- PAGENO="0105" 101 Senator DURENBERGER. I would like to introduce our next witness who is Charles A. Bo~ysher, Comptroller General for the U.S. Gen- eral Accounting Office. He is used to providing information to us. Prior to an assignment at the General Accounting Office, he was a partner in the international accounting firm of Arthur Andersen where he directed the government service program in Washington, D.C. Mr. Bowsher, we welcome you. Your full statement will be made part of the record. You can do whatever you please, as long as you stay within 7 minutes. TESTIMONY OP CHARLES A. BOWSHER, COMPTROLLER GENERAL, U.S. GENERAL ACCOUNTING OFFICE, ACCOMPANIED BY HARRY S. HAVENS, ASSISTANT COMPTROLLER GENERAL, AND GENE L. DODARO, SUPERVISORY GAO EVALUATOR Mr. BOWSHER. Thank you, Mr. Chairman. I welcome the opportunity to appear this morning. I would like to submit my detailed statement for the record and just highlight our ob- servations here. Shortly after the block grant legislation became effective, we began monitoring the transition process. We visited 13 States across the country and talked to over 000 State, local, and Federal officials. The State transition to block grant administration is progressing as well as could be expected, considering the short time frame for proceeding with implementation, the funding reductions accompanying the pro- grams and the uncertainty surrounding the block grant appropriations. Because implementation is still unfolding, a complete picture is not yet available, but certain facts have emerged in the States we. have visited. One important factor in the transition to most block grants was a State's considerable involvement in the predecessor programs. States had already received the vast majority of funds from these programs. To the extent this involvement existed, administrative frameworks were in place. Where State experience was not as exten- sive, more adjustments were made as necessary. During early implementation, a major concern was coping with the reduced funding levels. The scope of adjustment to the three health block grants and the community services block grants, however, was limited, in part by legislative provisions designed to insure continued funding for established services and grantees. Moreover, continued Federal outlays from awards made under the superseded categorical programs were providing States additional time and resources to adjust to the reduced funding levels. In contrast, more changes were made immediately in block grants which had no ongoing categorical outlays and fewer legislative restric- tions. For example, to cope with the funding reductions in the social services block grant, States more frequently altered previously estab- lished funding patterns and employed options to transfer funds among the block grants. Although the scope of the. block grant funding changes varied, officials in all 13 States we visited complained that planning was corn- plicated by the uncertainty of block grant appropriations. Also, offi- cials turned to non-Federal sources-such as awards, liaison officers, PAGENO="0106" 102 public interest groups, professional organizations, and grantees-to obtain data for management. While initially concentrating on obtaining information to handle budget reductions, certain States have reported~ or contemplate mak- ing, changes to take advantage of reduced Federal requirements. It was too early to make any definitive judgments on efficiencies emanat- ing from the block grants. The block grants placed great reliance on State oversight processes. In this regard, State legislatures are expected to become increasingly involved in block grant decisions. Tn 9 of the 13 States we visited, the legislatures had enacted measures influencing early block grant imple- mentation and enhancing their oversight of future block grant decisions. Additionally, 11 of the 13 States we visited held hearings for at least one block grant. The views of citizens and local entities were obtained through a variety of ways. A more definitive picture will emerge next year because the public hearings requirements will be in effect and more time will be available to obtain comments on the block grant program. Our primary vehicle for assuring accountability and assessing com- pliance with Federal law is the State audits of block grant funds. Audit strategies are being developed. Questions have arisen concern- ing such matters as the scope of audit coverage required and the reim- bursement of audit costs. To help address these concerns, the Office of Management and Budget, last month, provided States with a paper describing a framework for audits of block grants. We at the GAO believe that a standardized audit provision might be desirable for future block grants. We are in the process of develop- ing such a provision which covers both State and local government audit responsibilities. We will make this legislative language avail- able to the subcommittee when it is completed. We will be happy, at that time, to discuss how your proposed Block Grant Management Act could be modified. Because efforts to refine block grant audit legislation coincide with actions to develop the single audit concept, there is a need to promote effective implementation of this concept. I plan to provide leadership by forming an audit policy advisory committee consisting of repre- sentatives from both the public and the private sector audit and user community. This committee can focus on problems such as developing a practical and effective quality review process. We suggest that the provisions relating to a quality review process be deleted from your Uniform Block Grant Management Act pending deliberations by the audit policy advisory committee. We will keep you advised of our progress and inform you promptly when we can offer definitive recom- mendations. I would like to turn now to certain other block grant developments. The act calls for the Secretary of Health and Human Services to consult with GAO and t.he States concerning the form and content of the health block grant annual reports. The Department has decided it will not prescribe the standard form but will simply require States to develop annual reports that meet legislative requirements. The States have been working together to provide consistent information among the States, but it is too early to tell if this approach will pro- duce sufficient information needed for national policymaking. PAGENO="0107" 103 There are a number of crosscutting national policy requirements which were enacted through legislation other than the Reconciliation Act. These requirements apply to a range of activities receiving Fed- eral financial assistance. By and large, the Reconciliation Act is silent on the crosscutting requirements other than civil rights, and so are agency regulations. Given the short time available to implement the block grants, States are just now considering these issues. Some State officials are uncertain as to the applicability of these requirements and believe that Federal advice would be helpful. We believe the administration should clarify whether these requirements apply to the block grants. If the adminis- tration considers an applicable requirement to be inappropriate, then it should propose remedial legislation to the Congress. For the next few years, I plan to place a special emphasis on various aspects of the block grant program. As our work progresses, we will keep this subcommittee fully informed. My colleagues and I would be pleased to respond to any questions, Mr. Chairman. Senator DtTRENBERGER. On that last point, are you familiar with the 0MB Circular A-102? That is the basic management circular for the Federal grant. Mr. BOWSHER. Yes. Senator D1JRENBERGER. It seems to me that the adminisfration has already made a decision: 0MB has exempted block grants from the provisions of A-102. A-102 is one of the crosscutting requirements that you mentioned in your testimony. It also seems that States have been put in a rather difficult position. The Congress has said that these provisions apply to every recipient of Federal assistance, but 0MB says that they don't apply to block grants. We have 63 of these on the books covering everything from civil rights to environmental issues. I think this is a major issue that needs to be resolved quickly. I wonder if GAO has a view on how we ought to go about making the decision-they either apply or they don't; or some of the 60-plus ought to apply to certain blocks and not others. Do you have some advice for us on that ~ Mr. BOWSHER. Mr. Chairman, we agree with you about the confusion. The fact is that people are out there looking for guidance. They had not focused on these too much when we were doing our work. However, we can tell that it was beginning to be a worry. We think it will be. We believe the administration should look at these individually, and come up with decisions. Then they should come to the Congress if they doiiot believe that the requirements should apply, and ask for remedial language. Otherwise, we think some guidance, similar to that issued on the audit requirements, should be put `out. I would think 0MB should be the focal point. Senator DURENBERGER. Let me ask you aibout the audit legislation which you mentioned. Can you share with us what kinds of changes you are going to rec- ommend as to the audit requirements for the block grants? Mr. BOWSHER. I am not sure what we will be recommending. I can share with you our concerns in what we are looking at in the single- audit concept and the concept of trying to get auditing done on an over- all basis rather than on a grant-by-grant basis. PAGENO="0108" 104 The GAO did some studies a few years back and found that this grant-by-grant auditing was not getting the job done. A lot of indi- vidual grants were not being audited, and some of the individual grants were being over audited. In other words, the States were auditing; the Federal Government was auditing; and sometimes the OPAs were auditing. What we think would be better is that the States would have an overall single audit done of either the entity-which is kind of the way I prefer it-or the overall block grant or some of the major de- partments. Then any additional work-such as the detailed com- pliance or the program effectiveness and things like that-would be done, relying upon that single audit work which had already been done. The State auditors can do that, or a State can have a CPA firm do it-whichever way they would prefer, just as long as they have an independent audit performed. What we are running into are questions on definitions, who should pay for the audit, and things like that. That is why I would like to bring together-and I am planning to do it in early June-a group of people from the States and from the private sector and see if we can't get some good advice from them. Then we can come back to you with recommendations. Senator DrIRENBERGER. You recently testified before the House on grant reform. If I read your testimony correctly, you reversed the long- standing GAO position and now oppose the audit title in the grant reform bill. I think a good legislative history would show that GAO wrote most of the provisions in that title. I would be curious to know why you oppose it now. Mr. BOWSHER. We opposed the legislation at this time just be- cause we don't think we have enough of the facts and enough read- ing from the field, you might say. We might later subscribe to those features in that. Senator DURENBERGER. So you are available to returning to tradi- tion? Maybe? Mr. BOWSIJER. Maybe. That is right. Senator DURENBERGER. Thank you very much for your testimony. I appreciate your being here today. Mr. BOWSHER. Thank you, very much, Mr. Chairman. [The prepared statement of Mr. Bowsher follows:] PAGENO="0109" 105 PREPARED STATEMENT OF CHARLES A. BOWSHER, COMPTROLLER GENERAL OF THE UNITED STATES I welcome the opportunity to appear this morning to discuss our observations on block grant implementation. The Omnibus Budget Reconciliation Act of 1981 assigned States primary administrative responsibility for nine block grants, six of which became effective on October 1, 1981. Shortly thereafter, we began a study to monitor the transition process and early implementation of these grants. We visited 13 States across the country and talked to over 600 State and local officials as well as representatives of the cognizant Federal departments. The 13 States, which are listed in the attachment to my statement., account for over 45 percent of the funds and an equivalent proportion of the nations population. The State transition to block grant administration is pro- ceeding as well as could be expected considering the short time- frame between passage of the act on August 13 and implementation on October 1, the funding reductions accompanying the programs, and the uncertainties surrounding fiscal year 1982 block grant appropriations. Because block grant implementation is still un- folding, a complete picture is not yet available, but certain trends have emerged in the 13 States we visited. PRIOR STATE INVOLVEMENT HELPED EASE TRANSITION One important factor easing the initial transition to most of the block grants was the States considerable involvement in the predecessor programs. States already received the vast majority of funds from these programs and had various ties with PAGENO="0110" 106 program recipients. TO the extent this involvement existed, ad- ministrative frameworks and institutional knowledge were in place. For example, States were the exclusive recipients and were heavily involved in administering the programs preceding the Social Services and Low Income Home Energy Assistance block grants. Similarly, to varying degrees, States were involved with the cate- gorical programs which formed the Maternal and Child Health Ser- vices; preventive Health and Health Services; and Alcohol, Drug Abuse and Mental Health Services block grants, through direct program administration, developing comprehensive plans, and con- tracting for State funded programs with some of the same grantees. Because of States' previous involvement, few major organizational or administrative realignments were needed to accommodate the transition to these block grants. Where State experience was not as extensive, more adjustments were made. For example, programs merged into the Community Ser- vices block grant primarily were funded directly by the Federal Government to Community Action agencies. Although States had some program knowledge, those accepting the block grant generally have had to develop or expand an administrative framework. Such actions include acquiring personnel and developing monitoring and reporting systems. Also, to provide more time for making necessary adjust- ments, 5 of the 13 States we visited deferred assuming responsi- bility for this program. The three other block grants--Small Cities Community Develop- ment, Primary Care, and Education--were not in effect on March 1, PAGENO="0111" 107 1982, when we completed our- field work. States were determining what adjustments will be needed to implement these grants and considering whether to assume the optional Small Cities and Primary Care grants. A number of States have expressed concern over accepting the Primary Care block grant because it contains no allowance for administrative costs, requires funding of exist- ing community health centers, and includes a matching provision. SEVERAL FACTORS INFLUENCED THE SCOPE AND NUMBER OF CHANGES MADE DURING EARLY IMPLEMENTATION - During early implementation a major concern was coping with the reduced funding levels accompanying block grants. Ad just- ments were made, but factors such as ongoing outlays from pre- decessor programs and provisiens requiring continued funding of certain activities limited the scope of initial changes made in most block grants. For example, the number and scope of adjustments to the three health block grants and the community services block grant were limited in part by legislative provisions designed to ensure continued funding for established services and grantees. More- over, continued Federal outlays from awards made under the superseded categorical programs have provided States additional time and resources in adjusting to the reduced funding levels. Almost all of these programs were project grants, or had a project grant component, funded for at least a 12-month period. Because they became effective at various times in the Federal fiscal year, many in the last quarter, these projects are funded 3 PAGENO="0112" 108 well into fiscal year 1982. To illustrate, because States and local entities often have been able to provide services with 1981 categorical funds, on the average, States we visited had not yet drawn extensively upon block grant allocations made avail- able to them during the first half of fiscal year 1982. For the most part, States were developing plans for making changes to the three health block grants and the community ser- vices block grant program. A few States, however, already had made some adjustments. For example, three States we visited had developed formulas for allocating funds under the Community Ser- vices block grant. According to officials, these formulas were designed to improve targeting of funds and ensure that grantees did not receive disproportionate funding reductions. In contrast, more changes were made immediately in block grants which had no ongoing categorical outlays and fewer legis- lative restrictions. For example, to cope with funding reductions in the Social Services block grant, States more frequently altered previously established funding patterns and employed options to transfer funds among the block grants. Seven of the 13 States we visited had authorized or proposed transferring up to 10 percent of Low Income Home Energy Assistance fundstO the Social Services block grant. Also, all 13 States used their new option to set aside up to 15 percent of their Low Income Home Energy Assistance funds for weatherization. Although the scope of block grant funding changes varied, officials in all 13 States we visited complained that planning 4 PAGENO="0113" 109 was complicated by the uncertainty of block grant appropriations. Also, officials turned to non-Federal sources--such as their Washington liaison offices, public interest groups, professional organizations, and grantees--to obtain data for planning. While initially concentrating on obtaining information and handling budget reductions, certain States have reported, or contemplate making, management changes to take advantage of re- duced Federal application and reporting requirements. For ex- ample, eight States we visited noted that (1) less time was required to prepare applications, (2) monitoring activities could be combined, and/or (3) certain reports could be deleted. Although preliminary estimates were made, officials believed it was too early to make any definitive judgments on efficiencies emanating from block grants. STATE BLOCK GRANT OVERSIGHT MECHANISMS ARE EVOLVING The block grant legislation and regulations place great reliance on State oversight processes. Also, a fundamental check on the use of funds is States accountability to their citizens. Generally, States are required to obtain public com- ments on intended use reports or plans, hold public hearings on the proposed use and distribution of funds, and arrange for in- dependent audits of block grant expenditures. State legislatures are expected to become increasingly involved in block grant decisions. In 9 of the 13 States we visited the legislatures had enacted measures influencing early block grant implementatiofx and enhancing their oversight of 5 99-965 0 - 82 - 8 PAGENO="0114" 110 future block grant decisions. Such measures ranged from two legislatures restricting the State from assuming optional block grants to six legislatures increasing their ability to review block grant applications and detailed plans. Public comment was received in a number of ways. Eleven of the 13 States we visited held public hearings for at least one block grant, even though the public hearing requirements had been waived for fiscal year 1982. Also, views of citizens and local entities were obtained through such means as circulating intended use reports and'plans and establishing advisory groups. At the time our field work was completed, States were finalizing plans for obtaining future public participation. A more defini- tive picture will emerge next year because the public hearing requirements will be in effect and more time will be available to obtain comments on block grant plans. ROLE OF AUDIT A primary vehicle for assuring accountability and assessing compliance with Federal law is State audits of block grant funds. Audit strategies are being developed and questions have arisen concerning what would be required to fulfill block grant audit requirements. These questions included the scope of audit coverage required and the reimbursement of audit costs. To help address these concerns, the Office of Management and Budget last month provided States with a paper describing a frame- work for financial and compliance audits of block grants. This document discusses factors in choosing and funding the approach 6 PAGENO="0115" 111 to audit block grants. Also, it states that 0MB will be re- questing States to send their audit plans to the Inspectors General so that an early dialogue can begin on the adequacy of State audits. While this paper addresses some important concerns, we at the GAO believe that a more standardized audit provision may be desirable for future block grants. Our recent work regarding the block grant transition and developing the single audit con- cept has prompted us to consider the types of issues which need to be addressed in such legislation. As a result, we are in the process of developing a standardized block grant audit provision which we anticipate recommending that the Congress include in future grant legislation. It would cover both State and Federal Government auditresponsibilities. We will make this legisla- tive language available to the Committee when it is completed. We will be happy at that time to discuss how your proposed Block Grant Management Act could be modified to reflect this approach. Because efforts to refine block grant audit legislation coincide with actions to further develop the single audit concept there is a real need for coordination and leadership to promote effective implementation. I plan to create the mechanism to provide that broad based leadership by forming an audit policy advisory committee. It will include representatives from both the public and private sector audit and user communities such as the Office of Management and Budget, the Inspectors General, State Auditor Coordinating Committee, American Institute of 7 PAGENO="0116" 112 Certified Public Accountants, the Municipal Finance Officers Association, and users from all level.s of government. This com- mittee can provide the focus needed to address problems such as developing a practical and effective quality review process. In the meantime, we suggest that the provisions relating to a quality review process be deleted from your Block Grant Manage- ment Act pending deliberations by the audit policy advisory committee. We will be happy to keep you advised of our progress in this area, and we will inform you promptly when I am satis- fied that we are in a position to offer definitive recommenda- tions. OTHER BLOCK GRANT DEVELOPMENTS I would like to turn now to the subjects of annual reports for block grants and the applicability of crosscutting national policy requirements. The Reconciliation Act calls for the Secretary of Health and Human Services (HHS) to consult with GAO and the States con- cerning the form and content of the health block grant annual reports. The Department has decided it will not prescribe the form or content of these reports. Instead, HHS expects States to develop annual reports that meet the requirements of the law. The States have been working through the Association of State and Territorial Health Officers to modify that organization's health data system to meet the reporting requirements and provide 8 PAGENO="0117" 113 consistent information among States. ~there are some indications that States are working together in developing similar reporting approaches for other block grants as well. It is too early to tell if this approach will produce sufficient information needed for national policymaking. - There are a number of crosscutting national policy require- ments which were enacted through legislation other than the Reconciliation Act. These requirements, such as uniform relocation assistance, merit personnel systems, fair labor standards, environ- mental protection, political activities constraints, and various civil rights statutes, apply to a wide range of activities receiving Federal financial assistance. There are general references to the civil rights statutes in all but the Social Services and the Ele- mentary and Secondary Education block grant statutes. Agency regu- lations make them applicable to those programs as well. By and large the Reconciliation Act is silent on the other crosscutting requirements and so are agency regulations. HHS and the Department of Education have not clarified the applicability of these requirements in the regulations. In contrast, the Department of Housing and Urban Development regulations address the appli- cability of many crosscutting requirements and indicate that the Department is deliberating on the applicability of others. Given the short time available to plan and administer the new block grant programs, States are just now considering these issues. Some State officials are uncertain as to the applicability PAGENO="0118" 114 of these requirements to the block grants and believe that Federal advice on this matter would be helpful'. We believe the Administra- tion should clarify for th'e States whether these requirements apply to the block grants. If the Administration considers an applicable requirement to be inappropriate, then it should propose remedial legislation to the Congress. CONCLUS ION I have concentrated on what I consider to be the major issues emerging from ourefforts to monitor early block grant implementa- tion. Over the next few years I plan to place major emphasis on continuing to monitor the transition, reporting on services provided under the block grants, evaluating the effectiveness of block grant programs, and reviewing the scope and quality of State and local auditing coverage. As our work on block grants progresses, we will keep this Committee fully informed. That completes my formal statement. My colleagues and I would be pleased to respond to any questions. 10 PAGENO="0119" 115 ATTACHMENT ATTACHMENT STATES INCLUDED IN GAO REVIEW Cal ifornia Colorado Florida Iowa Kentucky Massachusetts Michigan Mississippi New York Pennsylvania Texas Vermont Washington PAGENO="0120" 116 Senator DURENBERGER. Our next witnesses will be the first of two human resources panels. Each panel will have two witnesses. The first panel will be representing advocacy groups and the other will be representing the services groups. Our first human resources panel will consist of Brenda Russell from the Child Welfare League of America and Alma Stallworth from the National Black Child Development Association. We will begin with Alma's testimony to be followed by Brenda. Both of your statements will be made a part of the record. Please proceed and stay within the 7 minutes allotted. TESTIMONY OP ALMA G. STALLWORTH, PRESIDENT, DETROIT METRO AFFILIATE OF THE NATIONAL BLACK CHILD DEVELOP- MENT INSTITUTE, DETROIT, MICH.; AND BRENDA L. RUSSELL, LEGISLATIVE ANALYST FOR CHILD WELFARE LEAGUE Ms. STALLWORTH. Thank you very much, Mr. Chairman. My name is Alma Stallworth. I am a voter and taxpayer within the State of Michi- gan. I am currently employed as a policy associate at the High/Scope Educational Research Foundation, Center for the Study of Public Policies in Ypsilanti, Mich. I have previously served in the Michigan House of Representatives, as a county charter commissioner, as well as a voluntary civic leader and advocate. My 20 years of public service have been divided equally between governmental and nongovernmental efforts to support and expand our potential as a society to respond to the needs of children and families. I am here today representing the National Black Child Development Institute (NBCDT) with its 1,000 members and 25 affiliate chapters. I currently serve as president of the Metro-Detroit affiliate. NBCDI primarily focuses its efforts within three major policy areas: child care, child welfare, and education. NBCDI at the national level, as well as the local level, is composed of a cross representation of persons and agencies who all share a commitment to the positive development of black children and families. I wish to share with you some of the grave concerns of the people of Michigan regarding the New Federalism and its impact on human services. The idea of block grants initially had been attractive to Michigan because many governmental officials and administrators saw this shift as an opportunity to distribute funds in accordance with need and with minimal restrictions, without burdensome Federal regulations. They also anticipate continued levels of funding from Washington. I will attempt to outline in the brief time allotted me the realities of this shift to block grants and its fiscal impact on the Michigan De- partment of Social Services by way of the social services block grant. My discussion will be advanced within the context of its impact on children and youth specifically. In Michigan, the State has already responded to severe revenue deficits by budget reductions throughout State departments. The De- partment of Social Services' funding shifts had already occurred with- in title XX by way of a transfer of adult home help to title XIX, virtually eliminating family services and reducing day care rates. Title IV-E and TV-B programs were also strained to funding limits; any excess beyond a 2-percent cushion in Public Law 96-272 PAGENO="0121" 117 meant a 100-percent State fuuclino~ for foster care and adoption subsidy. Further cuts in titles XX, IV-E and TV-B programs would seriously c6~mpromise service delivery to significant numbers of the Michigan population. The heaviest burden of cuts would affect the elderly and the children-and I would have to say black children. since we are disproportionately represented in the system. We feel that the reforms of Public Law 96-272 were in serious jeopardy with the proposed block grant. As you know, the act had established Fed- eral fiscal incentives to preserve families and to move children into permanency. The act also was cost-effective. It was estimated that over $4 billion in costs of out-of-home care would result over the next 5 years by reducing 30 percent of the youth in care. Our total esti- mated loss in funds was $30.4 million. The Michigan Department of Social Services (MDSS) will lose $5 million to Public Health for health services, health promotion, and disease prevention activities. Another change in administrative responsibility due to block grants is that MDSS will no longer share the work incentive program with the Department of Labor. It has been renamed the employment training program, and we wonder what that means. In terms of implementation, the State intends to participate in seven of the nine enacted block grants. We have held hearings to collect com- ments on the various proposals: alcohol, drug abuse and mental health; social services; maternal and child health care; preventive health care; and Low Income Energy Assistance. Hearings on the other two pro- posals, community services and small cities community development, will be held this fall. We have proceeded to implement our block grant proposals as out- lined in the law. The Michigan Department of Social Services had already developed and published a proposed plan for utilizing title XX funds in fiscal year 1981-82. That plan was submitted as Michi- gan's plan for social services block grant implementation. Michigan was the only State that implemented the social services block grant on October 1, 1981, as required by early Federal regulations. I cannot overemphasize the serious fiscal problems that the State was experi- encing at that time. Currently, in Detroit, our unemployment rate is 17 to 21 percent. So we have realized the options which would offset the cuts from the Federal Government. The hearings were held in several locations throughout the State: Detroit, Alpena, Marquette, Traverse City, and Grand Rapids. They were conducted by a human services cabinet which coordinated and worked out the schedule. They represented the heads of the various departments. I would have to say that in terms of the results of the hearings, it was found that the competition between advocates for children and adults and for private versus public agency funding were split down the middle. Most of the people who testified voiced a con- cern about day care cuts and adult home help. We felt that there was not an appropriate representation from the total need population. Another shortcoming of the hearings is that there was not enough time for people to be fully informed as to what kinds of information would be expected and needed. That would have an impact on the process. I would also have to say that there was a PAGENO="0122" ~118 wide range of issues presented. This made it difficult to establish spe- cific categories. We have received testimony from 242 individuals, representing both the public and the private sectors. This number includes the executive branch and the legislators. This is not many for the whole State of Michigan. In spite of our efforts to publicize, that was the response. In terms of our recommendations, we feel that the cate~rorical laws, the regulations, the funding, and the leadership provided by the Fed- eral Government for these programs-especially Public Law 96-272, the Adoption Assistance and Child Welfare Act of 1980-should stay intact. We should continue to require matching formulas so as to insure the participation and prioritization of programs at the Federal, State, and local levels. We support passage of legislation which would re- store moneys to title XX. .A FDC. and Low Income Energy Assist- arice, as conceptualized in H.R. 5791. The only other thing that I would say is that the people of Mich- igan, particularly southeastern Michigan where I reside, also have a concern that local units of government have some effective mechanism where they can have input and feel that they are having some control and effect on the decisions. Senator DURENBERGER. Thank you very much for your testimony. Ms. Russell? Ms. RUSSELL. Senator Durenberger, I am Brenda Russell. legislative analyst for the Child Welfare League of America (CWLA). As an organization that is dedicated to the improvement of the lives of chil- dren and their families, we are pleased to be invited to speak to you today regarding various block grant issues of concern to us, issues that affect the quality of life for the vulnerable children, youth, and fam- ilies of America. The League is a privately funded organization whose agencies pro- vide crosscutting services to children, youth, and families. Members and affiliated agencies of the League serve several million children nationally. We also speak for over 6.000 volunteer board members and several thousand more direct service volunteers. This, then, is the uniqueness of CWLA: We are not only an advocacy organization, but our agencies serve children and their families in every State in the country. In other words, for the past 62 years, our business has been serving children. We are pleased and grateful that von, Senator Durenberger, are also concerned about the health and welfare of our Nation's children, and that you recognize the importance of protecting our Nation's future by providing adequate care for our children today. We apnlaud you for providing this forum to be~gin to examine the issues before us now. We say "begin" not because this is the first forum that von have pro- vided, but because issues of national importance recnhire detailed analy- sis and planning before major shifts in public policy occur. We do hone this is the start of a thoughtful process. We know of your genuine concern for rational plannin~ and hope that von will do everything in your power to see that the action is slowed down enough so that a deliberative process can take place. One of the first tasks in that process is to look at what has already been enacted, how it has been implemented, and see what we can learn from that experience before we proceed any further. We should also assess PAGENO="0123" 119 how well State and local governments are implementing current cate- goricals before we consider whether or not to block those specific programs. The League shares your concern that protections for the beneficiaries of programs are lacking in the nine block grants which were enacted last year in the Reconciliation Act. We do believe that it is a step for- ward to mandate certain protections for citizens in all block grants. However, there are several problematic areas in the draft of the Uni- form Block Grant Management Act on which we are pleased to have the opportunity to provide constructive comments. We recommend that any uniform block grant language drafted address the basic requirements necessary for the input of citizens and the effectiveness of the programs. Among others, the following are a number of critical principles that must be addressed as you consider block grants, in order to protect the beneficiaries of these programs and to be responsible to the taxpayers who enable these programs to be available. Paramount is the necessity for adequate and stable Federal funding to meet the needs of our vulnerable citizens, and to allow a rational planning process to occur so that resources are expended in the most efficient manner. Self-determination for the citizenry is involved. In order to guar- antee that block grant programs are, indeed, more in touch with the needs of State and local populations, public participation must be built into the system at all levels. Accountability to the citizenry to maintain program integrity requires adequate records, auditing, and oversight. Federal oversight and enforcement of basic human rights and pro- tections such as civil rights and due process for beneficiaries must be provided. There needs to be a process at the local level which insures that scarce resources are targeted to those most in need. Uniform language should not preclude inclusion of additional safe- guards in any block grant program, nor supersede safeguards pres- ently in force. The League is only one of many, many concerned organizations and citizens who believe that these principles are an absolutely necessary requirement for human services programs. We are active participants in the Coalition on Block Grants and Human Needs. As such, we worked diligently to secure citizen protections through the provisions of title XVII of the Reconciliation Act. We have also participated in the grants and contracts task force for many years. The task force is composed of national voluntary non- profit organizations concerned with common issues which the volun- tary sector encounters with regard to government grants and con- tracts. Currently, the task force is analyzing the draft Uniform Block Grant Management Act. The specific concerns we have regarding the language of the proposed act are being drafted and will be submitted to the subcommittee on behalf of the League and other members of the task force. The work is almost complete~. We request that the hearing record remain open in order to include this important assignment.1 Senator DURENBERGER. The hearing record will remain open for 2 weeks. 1See p. 233. PAGENO="0124" 120 Ms. R.ussEI~I~. Of the nine block grants enacted under the Reconcilia- tion Act last year, we are the most familiar with the title XX social services block grant We have extensive experience with this block grant. If there is one thing we can testify to, it is that you simply can- not make quick turn-arounds of a major nature. as occurred during reconciliation. No responsible business would implement major redirec- tions without adequate assessment, planning, and lead time. Such dra- matic policy shifts can hurt the very people the program is intended to benefit. The original title XX block grant was created as part of President Nixon's "New Federalism." This block grant was created after several years of work by service providers, the voluntary sector, public admin- istrators, the States, and the administration. The result was a good bal- ance between flexibility with local control and enough program struc- ture to insure protections for the beneficiaries, and that those most in need would receive the services. Yet even with this deliberative process throughout the development of title XX, it took 2 to 3 years before the States really had their programs in place. Now is the time to stand back and take a thorough look at what works or doesn't, and how or why. Under the Reconciliation Act, title XX was amended to incorporate State and local training and social services for the territories into a new block grant. Critical provisions developed over time such as the State matching requirement and the State plan- ning and public participation requirement were wiped out. Funding was cut by 23 percent, almost $700 million, for fiscal year 1982. A major concern of CWLA is that the block granting which took place last year really amounted to cost-cutting and cost-shifting from the Federal Government to the States under the guise of increased flexibility. We are in a position to make some partial assessments about the im- plementation of title XX since last fall, as we maintain regular contacts with public and private voluntary nonprofit agencies throughout the country. We would like to share some of that information with you now. We found that the States dealt with the block grants in a varied fashion. We heard overwhelmingly from the States, with regard to title XX, that it is not the block grant per se but the cuts in funding and the lack of lead time that are hurting the States from both the plan- ning and the service standpoint. States are complaining about the diffi- culty in planning when faced with the uncertainty of Federal funding levels. States are also unable to deal with the block grants as if they existed in a vacuum. Increased demand for the services offered under title XX has been experienced now that the impact of the reductions in other programs like AFDC, medicaid, food stamps, housing, CETA, and other block grants are being felt. Social services and prevention activ- ities have given way to meeting basic survival needs. Overwhelmingly, the States have said that they are reducing purchase of services contracts. An overwhelming number of States report that their preventive services components have been cut as a result of cuts in the XX. How- ever, the national study of the incidence and severity of child abuse and neglect reports an increase in substantiated cases of over 17 per- cent in the last 2 years. The vast majority of protective services are provided for through the title XX program. Overwhelmingly, States PAGENO="0125" 121 say the real impact will be felt in fiscal year 1983 and more so, if additional cuts in title XX go through. Some of the most cost-effective services are being cut. These types of cost-effective services must give way in order to assist those in more dangerous circumstances. The major dislocations that have occurred in the title XX program-a block grant that was "block granted"-give only a sample of what may have happened in categorical programs that were turned into block grants. The transformatjon of categoricals to block grants is a major policy shift in and of itself. When that is piggy- backed on top of drastic funding reductions, with limited transition time and protections for citizens, confusion and waste result, neither of which is a goal for sound public policy. The League would be pleased to provide you with any additional in- formation that would be of assistance to you in your work. We would like to thank you again for this opportunity and for your willingness to take the time and effort to include the voluntary sector and other concerned organizations and citizens in the discussions of these critical public policy issues. Senator DIJRENBERGER. Thank you very much for your testimony. Each of you has provided us with substantial facts and figures about the implementation of the social services block grants. I think we can agree on the need to provide programs which address human needs, and on the need to back those programs up with resources. In developing the original title XX block grant-and I mean the original one, not the process we went through last year-your testi- mony pointed out that we can look at title XX somewhat differently from some of the other blocks. Not only because of the amount al- located for the block, but because special care was taken to separate in- come maintenance from social services when it got put together. Brenda, you mentioned that in New York, just as an example, they are exploring the reintegration of income maintenance and social services activities. The reason is, principally, to reduce costs. In other words, there is a lack of adequate resources. Ms. RUSSELL. That is correct. Senator DURENBEIIGER. When you look at the possibility of turnin programs over to the States-as the President and some of the rest o us are proposing to do in the sorting-out process and through the turnback process-is it fair to say that social services programs can fare better at the State level than the income maintenance programs might? Ms. RUSSELL. I think that is fair to say. We have had some experi- ence with the effects involving title XX. That is, providing adequate resources to me~t those needs, as there used to be in title XX. Income maintenance is of a very different nature. The rise and fall of that program is dependent upon so many factors outside of a specific State. We do believe that income maintenance programs are a national policy issue. Senator DURENBERGER. However, assuming there is an adequacy of resources, we might determine that the basic responsibility for the delivery of social services can be better at the State level. Is that your testimony? Ms. RUSSELL. In most instances, yes. However, there are some spe- cific programs that have service components that we do believe still PAGENO="0126" 122 need Federal oversight; the Adoption Assistance and Child Welfare Act is a classic example. We believe that there was overwhelming docu- mentation in the States that those needs were not being met. We think the block granting of that law would be just catastrophic for children. We feel very, very strongly about that. Ms. STALLWORTH. I would have to say, from my experience in the State legislature, it is difficult for the legislature to target the money to the areas where there is need. The urban centers-where you have a concentration of poor, minorities, and others-have to fight with the upper peninsula, where perhaps there are fewer people who fit into those categories. So how do you get equity in terms of distribution? That would be my problem with the Federal Government removing itself from that process. The other thing is that, in terms of the hearings being realistic as a mechanism for citizens to have input, the citizens who need to be heard rarely are there. What we have is a lot of information circulat- ing in a vacuum. It never gets down to the grassroots to the extent that they can feed back into the system and give a realistic perspective as to how the system is working. That is the problem with the block grant, as I see it. We have lots and lots of activity. Everybody is organizing the coalition. We have lots and lots of workshops~ teach-ins and so forth. But I am still not sure that people who need to be part of that process are having input into it. I don't have the answer. It is a source of frustration at this point. Maybe `as we move further along, this will resolve itself. I do feel that the urban centers do need as much support as possible politically. Senator DrIBENBERGER. In your testimony you made some comment, Ms. Stallworth, about your concern for the needs of minority children and families. Is there any evidence, of which you `are aware, that the minority groups in Michigan, or in the Nation as a whole, have been disproportionately affected by block grants-other than what you said in terms of disproportionate representation in the system itself? * Ms. STALLWORTH. That is a hard question to answer. If you mean disproportionately represented politically, I would have to say yes. We don't have near enough people representing us within the process who could renresent the minority perspective. In terms of public policy, we have very few groups that `are pro- féssional advocates. Most of our people have to work, if they are lucky enough to have a job. Those who are employed do not have the * sophistication to come to a hearing `and speak to you about their destiny. I think that this is a learning process for us. Certainly, with the block grant it becomes an educational one, as well, because we have to read and study. Personally, I think that the relationship with the Federal Govern- ment overseeing these programs as they feed into the States is a good one. I would like to see your involvement continue. * I don't know if I have answered your question, but that is how I see it. Senator DURENBERGER. One of the issues that may need further ex- ploration-not here, but in the process-is the role the voluntary sec- tor plays in the delivery of human services. I am on record many times as saying that the government is a better purchaser of services than a provider of services. PAGENO="0127" 123 Your testimony speaks to the lack of parity between the States and the voluntary sector in terms of reimbursement of administrative and other costs. In your written statement you pointed to the example in Hennepin County with which I am certainly familiar. The public employee union and contractors may not lay off State personnel in favor of a more cost-effective purchase of services from private providers. No- body wants to lay off workers. Nobody wants to lay off union mem- bers. As we look to the future, do you have any advice on how we can show a preference for private providers, especially when it can be shown that it would actually benefit children and families, as well? How do we overcome that? Ms. RUSSELL. I think there could be some language included in the bill. If you look at title XX, for instance, there is language that specifically allows, but doesn't mandate, nonprofits to conduct and provide training programs, which is a first step. You could put a perference statement in the law that, to the extent practicable, the State and local governments should opt for pur- chased service from the voluntary nonprofit private sector. It is more cost beneficial to utilize the resources of the voluntary sector. The vol- untary sector uses their resources to build the physical structure and to provide a lot of additional services for those people for which the taxpayers do not have to foot the bill. I think there could he some language drafted in the bill where the local governments were talking about the need for pass-through of funding. If so, then it should be considered for the voluntary sector also in terms of parity in the system. There is `Circular A-422, "0MB Cost Principles for Non-Profit Or- ganization", which 0MB has not yet implemented. These principles were worked on for many years and insured some parity with the non- profits and the public sector. I think that parity in the systems through purchase of services con- tracting is a critical issue that needs to be addressed. It is a sound policy decision, even more. so in light of diminishing government resources. If we want the voluntary sector to do more, we must, in fact, be very up front about supporting the voluntary sector and enabling them to do more. The will is there. You have to give them some more support in order to strengthen the public-private partnership in the delivery of human services. Ms. STALLWORTH. I don't want to be redundant. I guess I would see it as a combination. I don't see the private sector having the capability to entirely pick up these services, even if you were to pursue it through the purchase of a contract. I would think that the numbers are still so great that we don't have the resources. I am speaking of Michigan. There is the other problem with this, the variety from State to State. Some States have more resources than others. That is a consideration. I think that flexibility should be there, if we want incentives. If a State has that option, they will see where they can make it. Senator DURENBERGER. Thank you very much for your testimony. I regret that we don't have more time today. [The prepared statement, addendum, and table of Ms. Stallworth and the prepared statement of Ms. Russell follow:] PAGENO="0128" 124 PREPARED STATEMENT OF ALMA G. STALLWORTH, PRESIDENT, NATIONAL BLACK CHILD DEVELOPMENT INSTITUTE, INC., METRO-DETROIT My name is Alma Stallworth. I am a voter and tax payer within the State of Michigan. I am currently employed as a Policy Associate at the High/Scope Educational Research Foundation, Center for the Study of Public Policies for Young Children. I previously served in the Michigan House of Representatives, as a County Charter Commissioner, as well as voluntary civic leader and advocate. My 20 years of public service has been divided equally between governmental and non-governmental efforts to support and expand our potential as a society to respond to the needs of children and families. I am here today representing the National Black Child Development Institute with its thousand members and 25 affiliate chapters. I currently serve as President of the Metro-Detroit Affiliate. NBCDI primarily focuses its efforts within three major policy areas: child care, child welfare and education. NBCDI at the national level as well as at the local level is composed of a cross representation of persons and agencies who all share a commitment to the positive development of Black children and families I wish to share with you some of the grave concerns of the people of Michigan regarding the new federalism and its impacts on Human Services system. The idea of Block Grants initially had been attractive to Michigan because most governmental officials and administrators saw this shift as an opportunity to distribute funds in accordance with need and with minimal restrictions, and without burdensome federal regulations. They also antici- pated continued levels of fi~nding from Washington. I will attempt to outline in the brief time allotted the realities of this shift to Block Grants - and its fiscal impact on the Aichigan Department of Social Services via the Social Services Block Grant. My discussion will be advanced within the context of its impact on children and youth specifically. PAGENO="0129" 125 I. State Reaction to Proposed Social Services Block Grant * In Michigan, state has already responded to severe revenue deficits by budget reductions throughout state departments. * In DSS, funding shifts had already occurred within Title XX via transfer of adult home help to Title XIX, virtually eliminating family services, and reducing day care rates. * Title IV-E and IV-B programs were also strained to funding limits; any excess beyond a 2?~ cushion in PL-96-272 meant l0O~ state funding for foster care and adoption subsidy. * Further cuts in Title XX, IV-E and V-B programs would seriously compromise service delivery to significant Michigan population. * Heaviest burden of cuts would effect the elderly and children. * The reforms of PL 96-272 were in serious jeopardy with the proposed block grant. 1) act had established federal fiscal incentivies to preserve families and move children into permanency, 2) act was cost effective; estimated that over $4 billion in costs of out of home care would result over the next 5 years by reducing 3O~ of the youth in care. * Our total estimated loss in funds was $30.4 million. * As state's fiscal crises prevented picking up deficit, the following cuts were made in MDSS. 1) elimination of foster parent, adult foster parent, and day care provider training, 2) elimination of grants to universities, 3) shift day care to Title lV-A, 4) reduce appropriation to transportation to sheltered workshops, 5) redeploy field services staff in family and basic adult service programs, 6) close Wayne County BulS Division, 7) reduce donated funds and increase match to 50~. 2 99-965 0 - 82 - 9 PAGENO="0130" 126 * MDSS as administrator for Social Services and Energy Assistance Block Grant: 1) ILDSS will lose $5 million to Publitc Health for health services, health promotion and disease prevention activities. 2) another change in administration responsibilities due to block grants: MDSS no longer shares Work Incentive Program with Labor. * DSS sole administrator for program re-named Employment Training Program. II. Implementation of Block Grants in Michigan FY 82-83 * Governor indicated Michigan's intent to participate in 7 of 9 enacted block grant hearings held to collect comment on all the block grants: 1) alcohol, drug abuse and mental health, 2) Social Services, 3) maternal and child health care, 4) preventive health service, 5) low-income energy assistance. * August 31, 1981, Reagan signed Omnibus Reconciliation Act, which reduced entitlement programs by 13.4 billion and other federal pro- grams by 21.8 billion for FY 82. * Consolidated 57 separately funded programs. III. Implementing the Social Services Block Grant * The reconciliation conference committee worked out the differences between the Senate and House version. * Final version consolidated social services programs under Titles I, V-A, and XX. * Service programs for families and children under V-A and B and retained until regulations for Child Welfare Program (96-272) are rev i sed. * Transition requirements: 1) states eligible to receive funds under 6 of 7 block grant effective 10/81 (exception is primary care block grant, eff. 10/82). PAGENO="0131" 127, 2) transition period is FY 82 only, 3) four block grants allowed state to initiate operations under block grants on 10/1/81 or at beginning of any subsequent quarter, 1~) during period state not funded under block grants, state may administer existing program, 5) exceptions to transition were social services and low-income home energy since funds for these programs went directly to State in past. IV. Effect of Social Services Block Grant in Michigan, FY 1981-82 * As MDSS had already developed and published a proposed plan for utilizing Title XX funds in FY 81-82, that plan was submitted as Michigan's plan for Social Services Block Grant implementation. * Michigan was theonly state which implemented the social services block grant October 1, 1981 as required by early federal regulations. * Public hearings were held in six locations around the state (Lansing, Detroit, Alpena, Marquette, Traverse City and Grand Rapids) at the urging of the Coalition for Fair Implementation of Block Grants. 1) Governor requested Human Services Cabinet to coordinate; the Cabinet membership consists of the directors of state departments: Mental Health, Public Health, Social Services, Labor, Education and Office of Management and Budget, 2) the hearings intended to receive public input on how to use the block grant funds and the proposals contained in Executive Budget. V. Results of Hearings * Initial reaction by Cabinet and others in attendance: 1) competition between advocates for children' and adults, and private vs public agencies for funding, 2) recipients who attended voiced most concern about day care cuts and adult home help. * Input received was primarily from same people we hear from at each hearing, the knowledgeable advocate. 1) concern that they didn't reflect total need of care group, 2) advocates occasionally get too far removed from group they represent. 4 PAGENO="0132" 128 * Governor's office is to make the final decision with Human Services Cabinet as to how to use block grant funds, and the recommended implementation. * Input into process is still being accepted; coninents can be sent to Governor's office. VII. Future of Block Grants * For coming fiscal year, Reagan Administration is again proposing the inclusion of some programs into block grants: 1) Child Welfare and Adoption Assistant Programs (96-272), 2) Child Welfare Training Programs, 3) Education of the Handicapped (includes kids who are physically, mentally or emotionally handicapped). * Also proposes further funding reduction in other programs: 1) 25~ reduction in juvenile justice programs, 2) 36?~ reduction in runaway and homeless youth programs, 3) i8?~ additional reduction in child care,.totalling loss of service 250,000 families in combined fiscal years, 4) terminate WIC, supplemental food program'for women, infants by folding it into Maternal and Child Health Block Grant funding than current WIC operating levels. * Block grants are the first major step towards new federalism. * Effect of federalism seem in loss of all accountable requirements * for states. 1) loss of federal fiscal incentives could mean further cuts in health, special education and child welfare to name a few, 2) end result would be higher cost for state as prime sponsor, 3) more important would be loss of equitable services for children and families as states pull back resources to services make up for less federal dollars. PAGENO="0133" 129 On behalf of the National Black Child Development Institute, its members, its affiliates and most important the children and families that we serve, urge you to take some specific steps to help children: 1) retain the categorical laws, the regulations, the funding and the leadership provided by the federal government for these programs, especially PL 96-272, the Adoption Assistance and Child Welfare Act of 1980; 2) continue to require matching formulas, for they insure participation and prioritization of programs at the state, federal and local levels; 3) support passage of legislation which would restore monies to Title XX, AFDC, and Low-Income Energy Assistance as conceptualized in HR 5791. Ze) let the dust settle on the present structure before considering cutting any further into various programs affecting vulnerable children and their families; and 5) join House members and Congressman George Miller in their efforts to establish a Select Committee on Children, Youth and Families. I am grateful to your Chairman and the members of this Committee for allowing me the time today to share my thoughts with you. PAGENO="0134" 130 The Human Services Cabinet held a series of six public hearings around the state to gain public input to assist the state in setting priorities for the fair implementation of block grants. Testimony was taken from 242 individuals. Members of the public and private sector testified, including the Executive branch and the Legislature and also providers and consumers of services. The issues identified were: A higher priority should be placed on services for adults. (18) A need for community access to the decision making and planning process. (12) Protective services for adults should be as high a priority as protective services for children. (11) Opposition to block grants. (10) Child care services should be increased. (15) Handicappers neexiadditional educational, social and housing services. (5) Low income energy assistance eligibility criteria are too strict. (2) Community placement should be funded at a higher level. (2) Funding for mental health services should be at least equal to that of alcohol and substance abuse. 4C should be funded. Community mental health consultation and education service programs should be continued. * Fear of service cuts. Belief that there is little concern for continuity of services. Department directors need to communicate and jointly develop consistent policies. Emphasis must be placed on covering service gaps created by block grants. Block grant reductions are seriously effecting ability to deliver social services. Short notice of public hearings impeded meaningful public input. PAGENO="0135" 131 Need to develop a process for needs assessment that is the same throughout the state using demographic criteria~in addition to population. Cuts in Medicare and Medicaid/ADC, health and education cause suffering. Compensation for staff providing adult PS should equal childrens PS. More block grant money should go for low income senior housing. Support for primary health care and migrant programs. Fear lobbying will effect fund distribution and the developmentally disabled will suffer. Genetic disease testing and counseling is an essential service. Block grants do not address unemployment. Some school boards will not enforce education for all children. Regulatory enforcement tools are necessary. Migrant workers need day care. Bilingual staff must be continued. Emergency medical services must be funded. Funding should be on a regional basis. Only services that have a clear statutory mandate should be continued. Adult day care centers are necessary for people's survival. School consultation services are needed. Prevention services for children must be increased. Human services should be a priority over defense spending. Family services are an increasing need. Spouse and child abuse and prevention services are most needed. Expand the block grant process so that local agencies and local units of government are given the same discretion the federal government has given the states. Reduce or eliminate unnecessary reports and restrictions required by the state for the use of these funds. Encourage the development of human service coordinating councils on the local level which would be responsible for assessing local needs and for allocating block grant funds to meeting local priorities. -2- PAGENO="0136" 132 Eliminate the duplication of effort which current state laws and policies force upon agencies. As an example, why do we need several agencies -~ providing home help services, several agencies Involved in senior nutrition programs and several agencies doing adult community placement? Reassess the entire purchase of service contract system and determine which functions can be done better by local staff and which should be contracted. Five testified that day care should be a higher priority. Cuts in day care impact head start, working mothers and those in school. Home health care should be a priority. Cut unnecessary regulation. Indians want reccgnition by the State of tribal government. Community action agencies want the Department of Labor and Governor to inform the President that the proposed 70% funding cut would eliminate these agencies. Safeguards should be built into block grants for rural areas. Consumers should be involved in planning. State should assure that human service funds are used for human services at the local level. Outreach services need more consideration. Include public input in priority setting and consider demographic differences. Low income people in mortgage default need continued assistance. Indian tribes should be considered separately. Tribal government should speak for Indians. Alcohol and drug abuse programs need increased support as 85% of crimes committed locally involve substance abuse. Need .for increased support for in-home care for seniors to keep them out of institutions. Transportation should be a higher priority in rural areas. Make counseling a priority Consider cash and quality of service when contracting -3- PAGENO="0137" 133 Prevention should be a priority Need rural protections built into block grants Private agencies need continuing input to priorities setting Volunteers should continue to be used to make programs cost effective Support the need for home help services for seniors to allow them to remain at home More coordination is needed for Human Service Programs on state and local level Prevention of rape and domestic violence programs need to be a higher priority Need more home care services for elderly with training for providers (4). Day care, mental health, substance abuse services needed for seniors. Need psychiatric care for kids and additional community placement (3). Control administrative costs at state level (2). Citizens should provide oversight to grant distribution. Eligibility for low income energy assistance too restrictive (2). Need services to keep mentally ill and developmentally disabled persons out of institutions. More attention needed for protective services to adults - more staff -24--hour service (2). Youth employment programs should be funded. Job training for developmentally disabled needed. More AFC quality placements needed. - Need summer special education programs. : - -~** DMB should not set priorities. .- - Public should know services they expect can't be provided. Housing assistance should be a Priority. Need more prevention and family supportive services. - -4-- PAGENO="0138" 134 After care services needed for mentally ill. Rural communities should not be forgotten. Day care activity for severely physically handicapped should be a higher priority. Indians need their own service system; need n~ore substance abuse service. Need nutrition services for children. There should be increased collaborative efforts between public and private sector. Partnership of state and county government important. Local coordinating councils a good mechanism. (8) Federal government hiding massive cuts with block grants-oppose block grants. (2) State must assume responsibility for adequate funding levels. State cannot tolerate additional human service cuts. Governor must lobby the president and congress to restore cuts. (4) Lansing school district cannot maintain minimum education standards or support services. Protections previously provided by categorical funding no longer available at the state level. (2) Programs should not have to compete for funds. Public needs access to department plans in developmental stage. Legislature oversight needed. Need more hearings. Creative efforts need to be sustained. More information regarding specific programs should be made available. Prioirty should be placed on prevention - HMO's, reduce hospital beds, no additional nursing home beds for DD/MI, set rates for physician insurance. Mental health prevention services should be statewide. -5- PAGENO="0139" 135 Reduce administrative costs. Program priorities should be set according to need. Only fund those programs with a statutory base. Eliminate low priority programs. Balance service delivery between public and private agencies. Civil Service should allow private long term contract when they are more cost effective. Adult home help and personal care are needed for physicafly handicapped. * Community Action Agencies provide needed services. Con~ider non-profit agencies as a resource. Weatherization programs are cost effective and valuable. Diminishing services to older people have put them at risk. Office of Services to Aging should participate in priority setting. Migrants need continued services. Indians should be included in planning for block grant funds. (2) Aftercare services for mental health needed most in rural counties. Services should be targeted for need rather than to continue with established priorities. CMH services are inadequate. Housing services need a higher priority. Energy and weatherization programs are cost effective and should be a state r&ponsibility. (3) In home services to elderly physically and mentally handicapped needed day care for elderly also important to avoid institutionalization. (8) Local government should have control and accountability. (2) Block grant expenditures rhould be monitored independently. There are too many forms. Process to obtain government funds is too complicated; rules too restrictive. Fathers need equal consideration with maternal and child care funds. -6- PAGENO="0140" 136 Infant mortality rate is increasing, more attention needed to health services. Military spending should be cut to fund human services. Basic human needs are not being met. (3) Indians need health care fund from the state. Fear those able to lobby for funds will be considered rather than those in real need. (3) Comprehensive rat control should be a priority. - Local coordinating councils are needed to avoid duplication. (5) Standards and regulations should be developed for the fair implementation of block grants - limit administrative costs. Should be monitored arid evaluated. Reduced funds should be targeted to high density areas of unemployment. Day care for children should be increased. Specific allocations for community economic development are needed. Substance abuse programs in Detroit are in trouble - problem growing rapidly. Prevention programs needed. (3) Employment and training programs need a higher priority. Services to single mothers should not be cut. - Citizens should be allowed to assess need. Federal program protection need to be implemented by state. Lead poisionirig program should be continued. Records of each public hearing are available upon request. -7- PAGENO="0141" 137 ADDENDUM TO TESTIMONY OF ALMA G. STALLWOBTE The magnitude of our concern over the continued adequate funding of services to children and youth is greater than ever before. The current uncertainty of the negotiation of the 1983 Federal budget and the economic crisis in Michigan, recently ceased to a degree by the State income tax increase, does little to ease th~ concern. We have been fortunate in maintaining our services to children and youth, to date. However, as Federal fiscal participation declines, Michigan finds it increasingly more difficult to assume the added cost. Michigan's proposed Executive Budget is based upon projected revenues and upon expected Federal participation and we are all aware of the varied opinions regarding the legiti- macy of such projection and expectation. Michigan, even with the approved income tax increase, is facing a budget reduction of an estimated $630 million for this fiscal year. Children and Youth Services have been fortunate so far, when compared to other State government services, because the Title XX block grant was not cut as deeply as originally proposed for fiscal year 1981-82 and because Public Law 96-272, the Adoption Assistance and Child Welfare Act of 1980, survived. Rowever, proposals are currently pending before Congress for an 18 percent. cut in Title XX, amounting to $426 million, and a 30 percent cut (in block grant form) in Public Law 96-272 funding amounting to $170 million. Michigan's budget director estimated that the fiscal year 1982-83 Federal budget as proposed would result in a net loss to this State of $1.7 billion. Of this amount, $210 million would be lost by the Department of Social Services in AFDO, Medicaid, food stamps, SSI, and other programs. In addition, Federal aid to education would be reduced by $80 million. Predicted reductions in the Department of Social Services are: AFDC, $78 million; Food Stamps, $66,800,000; Medicaid, $45,100,000. Reductions in other State departments that would effect children and youth either directly or indirectly are estimated to be: Trade Readjustment Assistance, $40,200,000 (directly effecting ADO-U and GA caseloads) ; Education-general, $53,200,000; Vocational Education, $14,500,000. It is inconceivable that Michigan can achieve sufficient economic recovery that would enable adequate supplementation of such a reduced level of Federal funds. Federal revenues will decline because of the already approved 10 percent in- come tax reductions in 1982 and 1983 and the growing rate of national unemploy- ment (9.4 percent). Federal defense spending will accelerate at the expense of domestic programs. Proposed block grants to States are funded at a lower level. Michigan continues to experience reduced revenues because of unemployment (15.4 percent) and the creeping economy of commerce and industry. The malaise of recession is nationwide and, unfortunately, Michigan appears to be hardest hit. The current condition of the economy, when reduced to the human level, con- tributes to the disintegration of individuals and families and the need for serv- ices increases as resources decrease. We have experienced a reduction of staff through attrition and a hiring freeze and this has placed added burdens on field service delivery staff as client numbers and needs have increased. This can only result in less service, despite the best efforts of the service providers. Within the Department of Social Services, Adult and Family Services Field Staff numbered 1,744 as authorized by the fiscal year 1981-82 budget. Currently there are 1,532 positions and this current number is recommended in the Execu- tive Budget for fiscal year 1982-83. Children and Youth Services Field Staff, administered by Field Services Administration, was authorized at 1,221.5 full time positions for fiscal year 1981-82. Currently there are 1,112 positions and this number is recommended for fiscal year 1982-83. Neither the Federal nor the State budgets for fiscal year 1982-83 have been acted upon at this time. We must endeavor to maintain the integrity of human services and to influence the decisions effecting those services by whatever legitimate means possible. Following are recommended levels of funding for fiscal year 1983 as compared to fiscal year 1982 funds and proposed fiscal year 1983 Federal budget cuts. PAGENO="0142" 1~1+ +~ ~gc~cC) ~ ~ tC) -)~ -~ z~00~_)c~ - C-4C)J C,) ~ LU 00 -~ c_) ~ `-~c--J C) - = ~ -~ C) C) C) C) C) C) C) 00 C) C) C) C) C) C) 0) C) C~4 0) C) C) Cl) C) C)) C) C) 0000 ~ C) C) a~oo C) = C~4 00 CC) C) C) C) CC-J C)4 C) C)) C)4 C) CC) C) C) 0) C-~ 0~ ~ C)~ - ,- C ~ C) -~ >- cx~ -~ cY~ L.LJ - 2 -~ ~ = C-, CD u-i ~- E22 LU. EE CD E C 20 :~U i~i ~ PAGENO="0143" 139 PREPARED STATEMENT OF BRENDA L. RUSSELL, LEGISLATIVE ANALYST, CHILD WELFARE LEAGUE OF AMERICA, INC. Mr. Chairman, I am Brenda L. Russell, Legislative Analyst for-the Child Welfare League-of America's Center for Governmental Affairs. As an organi- zation that is dedicated to the improvement of the lives of children and their families, we are pleased to be invited to speak to you today regarding various block grant issues of concern to us, issues that affect the quality of life for *the vulnerable children, youth and families of America. The Child Welfare League of America was established at the request of the delegates to the White House Conference on Children in 1920. It was the first, and continues to be, the only national, not-for~prof it, voluntary membership organization which sets- standards for child welfare services in the United States. The League is a privately supportea organization comprised of 400 child welfare agencies in North America whose efforts are directed tO the improvement of care and services for children. Our agencies provide adoption services, day care, day treatment, foster care, residential treatment, mater- nity home care, protective services, homemaker services, emergency shelter care, services for children in their own homes and services for children and families under stress. The agencies affiliated with the League include all religious groups as well as non-sectarian public and private nonprofit agen~ cies. Through the Office of Regional, Provincial and State Child Care Asso- ciations, the Child Welfare League also represents 1,600 child care agencies affiliated with. 27 State Child Care Associations. This means that members and affiliated agencies of the League serve several million children nationally. It also means we speak for over 6,000 volunteer board members and several thousand more direct service volunteers. This then is the uniqueness of CWL/l: we -are not only an advocacy organization, but our agencies serve children- and their families in every state in the country. In other words, for the past sixty-two years our business has been serving children. We are pleased and grateful that you, Senator Durenberger, are also concerned about the health and welfare of our nation's children, that you recognize the importance of protecting our nation's future by providing adequate care for our children today. We applaud you for providing this forum to begin to examine the issues before us now: we say "begin not because this is the first forum that you have provided, but because issues of national importance -require detailed analysis and planning before major shifts in public policy occur. We do hope this is the start of a thoughtful process. While we would relish the opportunity to engage the issue of new federalism from the perspective of wh-at the appropriate role of each level of -government is in a rational and planned manner, the current economic conditions and poli- tical climate have prevented that from occurring. We know of your genuine concern for rational planning and hope you will do everything in your power to see that the action is slowed down enough so that a deliberative process can take place. One of the first tasks in that process is to look at what has already beerL enacted, how it has been implemented, and see what we can learn from that experience before we proceed any further. PAGENO="0144" 140 The League shares your concern that protections for the beneficiaries of prog- rams are lacking in the nine block grants enacted last year in the Omnibus Budget Reconciliation Act. We ao believe it is a step forward to mandate certain protections for citizens in all block grants. However, there are several problematic areas in the craft Uniform Block Grant Management Act on. which. we are pleased to have the opportunity to provide constructive comments. We recommend that any uniform block grant language drafted address the basic requirements necessary. for the input of citizens and the effectiveness of the programs. Among others, the following are a number of critical principles that must be addressed as yqu consider block grant programs, in order to protect the bene- ficiaries of these programs and be responsible to the taxpayers who enable these programs to.be available: * Paramount isthe necessity for adequate ~fld stable federal funding to meet the needs of our vulnerable citizens, and to allow a rational planning process to occur so that resources * are expended in the most efficient manner. * Self-determination for the citizenry is ir~volved. in oroer to guar~fltee that block grant programs are indeed more in touch with the needs of state and local populat~ons, public partici- pation must be built into the system at afl levels. If the government that is closest to the people-at all levels is to be truly responsive to local needs, clear pãths~into the decision- * making process are a minimum requirement. Accountability to the citizenry to maintain program integrity requires adequate records, auditing, and oversight. * Federal oversight and enforcement of basic human rights and protections such as civil rights and due process for bene- ficiaries must be provided. o There needs to be a process at the local level which ensures that scarce resources are targeted tO those most in need. * Uniform language should not preclude inclusion of additional safeguards in any block grant program, nor supercede safeguards presently in force. The League is only one of-many, many concerned organizations and citizens that believe these principles are an absolutely necessary requirement for human service programs. We are active participants in the Coalition on Block Grants and Human Needs, and as such worked diligently to secure some citizen protec- tions through the provisions of Title XVI1 of the Omnibus Budget Reconciliation Act last year. The League still believes that the citizen partipation in the planning process of that Title is critical to effective planning and service delivery. The League maintains its strong commitment to the improvement of care and services for our nations vulnerable chilaren, youth and tneir fami- lies, and we welcome the opportunity to work with you and your staff in any way possible in meeting that goal. -2- PAGENO="0145" 141 CWLA has also participated in tne Grants ano Contracts Task Force for many years. The Task Force is composed of national voluntary nonprofit organiza- tions concerned with common issues which the voluntary sector encounters with regard to government grants and contracts. Currently the Task Force is analyzing the draft Uniform Block Grant Management Act. The specific concerns we have regarding the language of the proposed Act are being drafted and will be submitted to the Subcommittee on behalf of the League and other members of the Task Force. The work is almost complete, and we request that the hearing record remain open in order t9 include.this im~ortant assessment. Of the nine block grants enacted under the Reconciliation Act last year, we are the most familiar with the Title XX Social Services Block Grant. In fact the Hecht Institute for State Child Welfare Planning, a division of the League, was created in 1975 to assist in the implementation of the original Title XX Block Grant. We have extensive experience with this block grant and if there is one thing we can testify to, it is that you simply cannot make quick turn- arounds of a major nature, as occurred during the 1981 Reconciliation process. No responsible business would implement major redirections without adequate assessment, planning and lead time. Such shifts can hurt children. When .the original Title XX was created as part of President Nixon's "New Fed- eralism', social services programs formerly under AFDC and Aid to the Aging, Blind, and Disabled (Titles I, IV-A, X, XIV and XVL of the Social Security Act) were consolidated in a single block grant to the states, with a federal funding level of $2.5 billion. This block grant was created after several years of work by service providers, the voluntary sector, public administra- tors, the states and the Administration. There was tne opportunity for a great deal of give ~an~ take among those con- cerned through a deliberative process. The result was a gooa balance betwe~fl flexibility, local control, anc yet enough program structure to ensure protec- tions for the beneficiaries and that those most in need would receive the * services. Social serviceswere separated from income maintenance and assigned * a primary goal of reducing dependency and promoting self-sufficiency. States were given responsibility for aetermining their own social services needs and for allocating resources to provide social services, with a condition that there be broad public participatiqn in the decision-making process. Citizen involvement includea needs assessment, a state social services plan that included a public comment process, public hearings and advisory councils to ensure voluntary citizen access in the decision-making process. Yet even with this deliberative process throughout, it took two to three years before the states really had their programs in place. Much confusion accompanied the major programmatic changes; Now is the time to stand back and take a thorough look at what, works or doesn't, and how or why. Looking historically at the Title XX program is use- ful and provides a lesson we should not ignore. We should be strengthening our successful programs instead of stripping them of safeguards. -3- 99-965 0 - 82 - 10 PAGENO="0146" 142 `Under the 1981 Omnibus Budget Reconciliation Act, Title XX was amended to incorporate state and local training and social services for the territories into a new block grant program to the states; Critical provisions developed over time such as the state matching requirement and the state planning and public participation requirement were wiped out. Funding was cut by 23 percent (almost $700'mill.ion) for F? 198?. The current funding level.for F? 1982 is $2.4 billion as compared to the ~3.O99 billion it would have been * before Reconciliation. A major concern of CWLA is that `the bloc~k granting which took place last year really amounted to cost-cutting and cost-shifting from the federal government to the states under the guise of increased flexibility. Title XX was already a' block grant program that the states had been administering for over six years. The increased flexibility' (loss of citizen protections) given them under Reconciflation did little to assist in meeting increased demands f or services with dramatically reduced funding. CWLA is in a position, to make some partial assessments about the implemen- tation' of Title XX since last fall. CWLA's Child Welfare Planning Notes is a newsletter which reports on the latest news from Washington and the states. We maintain regular contact with public and voluntary nonprof it agencies throughout the country in order to share information in a timely fashion, and hopefully, to "prevent the wheel from being reinvented" on a state-by-state basis. Second, through our State Child Care Associations, we are provided with information on what is occurring at the State and local level on a regular basis. Finally, CWLA is conducting a "Survey of Impact of Reduced Public Funding of Human Services and Local Agencies," otherwise known as the "Human Fact Sheet." The League worked in conjunction with the Council of Jewish Federations, the Family Service Association,' and the National Confer- ence of Catholic Charities to develop the survey form. The responses are coming in and the results are being tallied. We would now like to share informationgleaned from these sources with the Subcommittee, and also briefly run through the results of the American Public Welfare Association's report, "A Study of the Implementation of the. Social Service Block Grant in State Human Service Agencies with a Primary Focus on Ten Key Issue Areas." CWLA found that the way in which states dealt with the block grants varied on a state-by-state basis. Our "Human Fact Sheet" survey, which went to public and voluntary nonprofit CWLA members and affiliates, showed that out of a total of 78 voluntary agency respondents to the question on public participa- tion, 59 had some means of input to the state's process, and 18 had none. Most importantly, there were a variety of methods used for the input includ- ing: the establishment of an association (child care association, b'ock grant coalition, fair budget coalition, etc.) at the state level, coalition acti- vities, participation in formal advisory committees, and testifying in state hearings. None of our respondents had any contact with the Governor's office. Finally, 40 respondents utilized more than one mechanism for input. We are hearing overwhelmingly from the states with regard to Title XX that it is not the block grant per se but the cuts in funding that are hurting states from both a planning and service standpoint. This was also the bottom line of APWA's survey. Some additional themes were regularly reported to us that show the following trends emerging in the states. -4- PAGENO="0147" 143 States are complaining about the difficulty in planning when faced with `the uncertainty of federal funding levels. In order for states to plan their programs in a responsible manner, stabilization, of federal funding is needed. * . States are unable to deal with the block grants as if they existed in a vacuum. For example, increased demand for the services offered under `Title XX has been experienced now that the impact of reductions in other programs like AFDC, Medicaid, food.stamps, housing, CETA, and low-income home energy assistance is being felt. Social services and prevention activity give way to basic survival issues: -- For instance, a child-serving agency in Qklahoma is seeing children whose parents are able to parent properly, but who simply cannot feed their children. -- New York is using Title XX monies to provide housing for indigent clients under the rubric of prevention services. -- Day care programs are being curtailed in most states to pay for more basic, sustenance services. For state human' service agencies, the issue is money, not New Federalism. So concludes APWAs report, submitted to the Department. of Health arid Human Services. The states were polled to obtain information about how they are dealing with issues related to the implementation of the new social services block grants `Thirty-three states completed the questionnaire. The study reports some fascinating, if random, facts: * ` California has reduced the number of social service programs by 4~0 percent and has modified 30 percent of those remaining. * Idaho has identified three major service areas and plans to ~TT~inate one in its entirety rather than reduce services in each. * Providers in West Virginia will be asked to sustain cuts pro- * portionate to departmental cuts. * In Alabama, funds used to purchase services are being shifted to support in-house departmental programs. o Many states see a potential for savings in public participation costs due to the~easing of federal regulations in this area. o Overwhelmingly states agree that training and staff development activities will be seriously curtailed. * New York will explore reintegration of income maintenance and social service activities. * Colorado and Florida are considering increased utilization of contractual service providers. -5- PAGENO="0148" 144 * On the other hand, Kentuck~ and North Carolina are cancelling many service contracts. Random facts notwithstanding, the study's conclusion is clear: "The most common and expected trend that appears in the state respon- ses is the emphasis on how the states are absorbing the budget cuts in social services. Few comments are specifically directed at the new block grant mechanism itself.". * The American Public Welfare Association study found that some states will increase their use of purchase of service contracts while other states will decrease use of contractual services. But overwhelmingly the states reported on in our newsletter have said they are reducing purchase of service contracts. For example: -- Hennepin County, Minnesota reports reduced options: although private provlders may be more cost effective, the county has a union contract which says it may not lay off state personnel in favor of purchased services from private providers. -- In Memphis, Tennessee, dollars for contact services with private nonprofit agencies were cut ~2 million as.a result of cuts in Title XX. As a result, 782 people lost services, most 6f whom were children. For example, the Porter-Leath Children's Center in Memphis will serve 50 fewer children in its Protective Service Emergency Shelter (for abused, neglected and dependent children). Porter-Leath reports that kids and the working poor are hit hardest. - * In almost all states, training and staff development have been the first to be cut out as a result of the Title XX Block Grant and funding cuts. Loss of these program components will affect the quality of services and therefore the efficacy of the program. * In terms of service, an overwhelming number of states report that their preventive service components have been cut as a result of cuts in Title XX. An overwhelming number report cuts in day care, cuts in family support services, cuts in foster care services, and cuts in protective services. As a result of the Title XX Block Grant and funding cuts: -- Maryland has reduced foster care staffing and has reduced ser- vices to children leaving foster care. Maryland reports that the heaviest impact has been on the preventive component of their services. -- The recently completed National Study of the Incidence and Severity of Child Abuse and Neglect projects an incidence rate of approximately one million children who are seriously abused or neglected in this country each year. The number of these children who are reported to public child protection agencies for investigation and child protection action continues to increase, with the rate of substantiated cases increasing over -6- PAGENO="0149" 145 * 17 percent in the last two reporting years. The vast majority of protective services are provided foTtl~rough the Title XX program. -- Ohio has reduced foster family special services for children, ~ell as special services to the blind and comunThatively disabled, psychotherapeutic services, and developmental services for children. Day care was cut by 15 percent in Ohio. -- In Washington state, the Bureau of Children's Services reports cuts in fañffly support services, seasonal day care for farm- worker families and foster care service funds. -- In Sacramento County, California, staffing is down 43 percent; preventive services are out; even the highest priority pro- * tective services have been hurt; and child day care licensing ana foster home licensing staffs were cut by 50 percent. -- Colorado has dropped its child abuse service component for families at risk, and now service will be provided only after abuse has occurred. In fact, there is a policy now that any child 12 years or older who was voluntarily placed will auto- matically be returned to the parents -- regardless of the home situation, Colorado has also had to cut day care, homerfaker services for the elderly, and WIN. Ten private agencies have closed in Colorado. -- Texas, like Colorado, has eliminated services to families at higtl risk of abuse and neglect (i.e., prevention). It has also had to cut day care (there are now 8,816 fewer children in day care) and has eliminated services to unmarried and school-age parents at risk of abuse and neglect. -- In Alabama, 2,000 children lost day care services. Preventive services and family counseling services were also cut. * As a result of cutbacks in staff and cuts in the above kinds of services, we may see the following trends: longer stays in foster care, less move- * ment of children into permanent homes, inability to respond to reported incidents of child abuse and increased incidences of child abuse. * Overwhelmingly, states say the real impact will be felt in FY 1983 and more so, if additional cuts in Title XX go throug~i. Some states such as New York and New Hampshire see themselves having to get a release from. their statutory responsibifities if additional cuts in Title XX are enacted. As you can see, some of the most cost-effective services are being cut, such as protective services in (hopefully) non-life endangering situations, pre- placement preventive services, and family strengthening services. This is occurring not because the decision makers are heartless, but because they are *engaging in "damage control" and "survival techniques." These types of cost- effective services must give way in order to assist those in more dangerous circumstances. The major dislocations that have occurred in the Title XX PAGENO="0150" 146 program -- a block grant that was tiblock granted -- give only sample of what may have happened in categorical programs that were turned into block grants. The transformation of categoricals to block grants is a major policy shift in and of itself. When that is piggy-backed onto d~astic funding reductions, * with limited transition time and protections for citizens, confusion and waste result -- neither of which *is a goal for: sound public policy. The Child Welfare League believes that a mix of funding sources and program structures is the best way to meet the-needs of our vulnerable children, youth and families. For example, the original Title XX program allowed the states complete flexibility in determining what constituted a social service and which services to provide. That allowed the flexibility to create new service technologies within the existing social service structure. Some very creative programs were developed in that context. Yet there are other areas of service delivery that experience has demonstrated require specificity. The Adoption Assistance and Child Welfare Act, P.L. 96-272, is just such a program. After five years of intensive work and over- whelming documentation as to the need, Congress enacted this family strengthen- ing law in 1980. The cuts in Title XX coupled with the threatened repeal of this law mean that dollars for system reform and family reunification will, of necessity, be used for sheer survival. The authorization level for the block grant would be only $380 million for FY 1983 and thereafter, a sum that. represents a 25 percent funding cut oelow actual FY 1982 levels and a 47 percent reduction from the full implementation funding level as recommended in the law. Repeal of this law will create increased demand for Title XX dollars. . - The League is opposed to this block grant proposal, as we know children will not be well served by removing the specificity which took five years to be crafted into this legislation. A strong federal role is necessary in this instance to ensure that the.child welfare system receives the systematic improvements it needs to enable it to-adequately care for neglected, abandoned and abused children and their families. Joyce Black, President of the CWLA. Board of Directors, presented extensive testimony on behalf of the League on March 16,- 1982 before the Senate Finance Committee regarding our intense support for this cost-effective legislation. Therefore we will not present you with the detailed analysis at this time of why a block grant would be inappropriate. This law, being proposed for elimination by the Administration, - is a classic example of the lack of assessment and thoughtful process that is absolutely necessary if new federalism is seriously addressed and programs are appropriately sorted out. We would be pleased to provide any additional information that would be of assistance to you in your work, and we would like to thank you again for your willingness to take the time and effort to include the voluntary sector and other concerned organizations and citizens in the discussion of these critical public policy issues. -8- PAGENO="0151" 147 Senator DURENBERGER. Our next witness is Senator Paul Hess, chairman of the Kansas Senate Committee on Ways and Means. He will testify today on behalf of the National Conference of State Legislatures. Senator, we are pleased to have you with us today, all the way from the State of Kansas. We are looking forward to your testimony on behalf of the National Conference of State Legislatures and, in par- ticular, on the subject of block grant implementation. TESTIMONY OF PAUL HESS, KANSAS STATE SENATOR AND CHAIR- MAN OP THE KANSAS SENATE COMMITTEE ON WAYS AND MEANS, ON BEHALF OP THE NATIONAL CONFERENCE OP STATE LEGIS- LATURES, ACCOMPANIED BY GARY PALLE, STAFF ASSOCIATE, NCSL Mr. HESS. Mr. Chairman, I am delighted to be here to spend just a few minutes with you and the subcommittee. I appreciate the oppor- tunity. I am here to represent the National Conference of State Leg- islatures. I am going to simply highlight certain words and phrases in the testimony and go through the 11 pages very quickly. Then I will make some personal remarks. Mr. Chairman, I want to assure you of something that you already know. State legislators are warm, compassionate, responsive, intelli- gent, capable individuals just as Members of the 11.5. Senate and the U.S. House of Representatives are. We are aware of our system of government. That not only includesthe Federal Government, but also the local units of government, which, I might add, we create cities and counties. I want to assure not only you, Mr. Chairman, but those individuals and groups that have been represented this morning to whom I have listened. State legislatures are not in the backwaters of American policies. We do have computers, staff, and, more important, the will to make the New Federalism work. We are willing to accept that responsibility. I want to say that I have served in the legislature for 12 years. I was one of those kids who got elected at 21, at the height of the Vietnam war. I have grown and matured through the process. It seems to me that, in my present position as chairman of the Senate Ways and Means `Committee in Kansas-a better name for that would be appro- priations-I feel like an umpire at a World Series game. It is ex- tremely delightful for interest groups to realize that all roads do not lead to Washington. There are roads to St. Paul, Topeka, Sacramento, Dover, Albany, and other State capitals in the United States. Mr. Chairman, before I walk you through our statement~-so that we have some specifics; then I will go through the statement-let me simply say that in Kansas, concerning the human services area, with which most of the block grants are involved, we made up two-thirds of those funds that were lost. We took that responsibility. We didn't make all of them up. In the area of day care, we replaced every dollar in the State of Kansas. In some other areas, we decided that those dollars could be lost and could be better spent. I want to compliment you and this subcommittee for this sorting- out, the turnback process as you call it. The National Conference of State Legislatures has long believed that the Federal grants-in-aid system needs a serious overhaul. We PAGENO="0152" 148 are not here lamenting the cuts. We accept them. We don't agree with all of them. We simply want increased flexibility in the use of funds at the State level so that we can target and have more efficient use of those funds. Let me just touch on the effects of the recently enacted block grants. We applaud the intent. We are concerned about the timing-you mentioned that a moment ago better than I can-of the reconciliation process in August and then of the continuing resolutions. We had a great amount of difficulty planning. Believe it or not, it still worked in spite of that. The only thing that we regret is that we did not have the opportunity to have more time to really get into the different block grants. Many legislatures were out of session. I also want to say, concerning the legislation you are working on, we feel very strongly that there should be as few requirements as possible. In other words, take the strings off the money and give us that management flexibility with the funds. On the top of page 3 of my statement you can see that most States did accept or did participate with these particular block grants. You can see some of the processes that were used. In the State of Montana, they had. to have a specia~l session; and in Iowa, they set up a special fund. In Kansas, we used our State Finance Council, which is chaired by the Governor and has eight members of the legislature on it, to deal with the block grants. The block grants came down in the fall, when we were out of session. Mr. Chairman, let me g~ over, our five key points. I will do this in closing. We have encountered several problems. One is insufficient leadtime for legislative review. We document that on page 6 of my statement. The second item is, "Please, take the strings off of the grants." We feel that we have the ability to manage them. We have documented on pages 7 and 8 the different strings there are under the different block grants. I won't read all of that to you today, but we feel that they tie our hands. Certainly, they are probably in response to the fears that have been expressed in this room: That you cannot trust those rascals in the State capitals because they will not allocate those moneys where they are needed. Mr. Chairman, I can assure you that, in most cases-although, you can cite some horror stories-that is not correct. The third point concerns the cuts in the block grants. Certainly, we are not here to chastise you or the Congress for the cuts. We accept them. We simply hope that if additional cuts are made, we will have sufficient leadtime to respond. Our fourth point deals with the uncertainty of Federal funding levels. I don't need to dwell on that. Fifth is the State matching re- quirements. We feel that in the maternal and child health, primary care, and community development block grants those State matching requirements really are not necessary. It indicates, I believe, that you feel we will not put sufficient State moneys into those programs. In most cases, we are doing that. Mr. Chairman, in summary, I want to compliment you on the Uni- form Block Grant Management Act that you are working on, and ~vhich is really the reason for these hearings. We strongly oppose the pass-through. We have established, I believe, many healthy relation- ships between State legislatures and local units of government. I PAGENO="0153" 149 think that the Greek Oities-State concept which has developed in this country is not a healthy concept. We have 50 sovereign States; and tha't is where the buck really should stop. We should have this kind of dialog with the local units of government at the State level. I want to thank you for this opportunity. I will submit myself at this time to any questions. Senator DURENBERGER. Thank you very much for your testimony. What do I do about the fact that, an hour ago, the National Associa- tion of Counties and the U.S. Conference of Mayors were here basical- ly disagreeing with what you have just said about the warm, wonder- fill, compassionate relationships that exist between the State and local governments in this country? In a couple of questions, I tried to explore with them the problems in the relationship. Were they problems of inadequate resources, or problems that States have had, for the last 10 or 12 years, of just being a funnel through which Federal money pours into local government? Or, was it an issue of the States-particularly with regard to project grants-just not ever having been in that business, so being inept in this brief period of time they have had to demonstrate an ability in that area? I would have to admit that, considering the short time we have had to demonstrate these new relationships between State and local govern- ments in these blocked areas, it may be the right of the national as- sociations to say, "The proof still is in the pudding, and we haven't seen the pudding yet." Is that correct? Mr. HESS. Mr. Chairman, I certainly don't want to imply that everything is sweetness and light. However, I believe that the process we are going through is a healthy one. I think the only way you are going to measure whether or not it works is to allow a flexible block grant program to continue and expand. I think we will be worthy of the confidence you have, simply by taking these steps. I don't want to say that there won't be some serious disagreements and problems. Let me say two things. One is, every State legislature in the United States, to the best of my knowledge, is apportioned on the basis of one person and one vote because of Baker v. Carr in the early 1960's. So to say that the urban centers are not represented-I note that in your State, in the Minneapolis-St. Paul area, they have proportional representation in the legislature. In Wichita, Topeka, and Kansas City in my State of Kansas their representation in the legislature is nearly 45 percent. I have one of the most urban delegations in a rural State. I chair the Appropriations Committee. I can assure you that the cities and counties are not bypassed. It may occur in some States but, by and large, I think that it is a myth which is continually perpetuated by local units of government, It is easier to come straight to Senator Durenberger and ask for money than it is to work with the 6 State senators and the 18 representatives in Wichita and work out our prob- lems back home. I feel very strongly about that. That is the position of our associa- tion. We are thoughtful about it. We are not, in any way, trying to be arrogant or saying that we have all knowledge. I think it is a part- nership. We just want the opportunity to make it work. I think we will be responsive. PAGENO="0154" 150 Senator DUBENBERGER. The concern that was expressed, as I read it, about the adequacy of urban representation goes beyond the issue of whether or not we have proportional representation. It probably rec- ognizes the reality that, in some of the major metropolitan areas in our country, the core city-the Detroit or the Chicago-is underrepre- sented when it comes to making decisions which affect the unique fiscal and human problems of that city. The metropolitan area may be well represented vis-a-vis the rural area, but those suburban interests usual- ly are quite different from the core city-although they shouldn't be different. There wouldn't be any suburbs if there weren't a core city. One of the frustrations people will experience for a couple of years in this whole process is with the need for State legislatures to come to grips with metropolitan area representation. They need to recognize sOme of the common concerns that suburban and urban officials need to have for the good of the larger area. That is probably one of the things that concerns people who have to serve the needs of residents of a core city in a large metropolitan area. I wanted to ask you about one of the blocks. You indicated some experience iii Kansas with the Low Income' Energy Assistance block grant. That is one of the blocks in which we have permitted transfer- ability up to 10 percent. Earlier this morning, Dr. Rubin indicated that 33 States pulled out $92 million of Low Income Energy Assistance for another program. Your testimony indicated that Kansas was one of those States. You moved it out for title XX which you felt was a higher priority need. Was there much public opposition in Kansas to this transfer? Mr. HEss. Senator, there was not. I think that the title XX consti- tuencies had much more clout in the legislature and convinced us that those Were the more primary needs. I also think the legislature feels that the whole question of energy is one area in which we are going to have to begin to assume more of a role in terms of funding. In response to that, in our State-and I know in a couple of other States-we are getting a little tired of sim- ply pouring $16 million of your money into houses that leak-in other words, that don't have insulation. We did three things. We diverted money to titleXX; No.2, we took hundreds of thousands of dollars to our energy office from the United States Department of Energy and said, "We are tired of spending it on all these demonstration projects. We are going to give the money to our Department of Social and Rehabilitation Services and use it for energy audits and weatherization." No. 3, we are going to deal with the energy area not through our State structures but with Federal moneys which will be supplemented with State money. What I am trying to say is that this is an illustration of how we took the flexibility you gave us and tailored it to a program-not the type of program that all the solar people wanted or the oil and gas industry may have wanted, but where we thought the greatest needs were in the State. We are dealing with the elderly and the poor in terms of their homes. We thought it was better and cost-wise to try to take some positive steps, and. to link energy audits up with weatherization, with money to pay utility bills. We will still be able to divert some of it to the title XX area. Senator DURENBERGER. I think this is an initiative we are going to have to address-if not this year, then next year. PAGENO="0155" 151 When we designed the Low Income Energy Assistance program, it was to recognize the economic burden that was being put on people in this country by decontrol. We decided it was very, very important to go through decontrol. We had made mistakes 10 years ago in putting controls on oil. While we recognized the reality of the disruption, we set up a program that would return the money, for 3 years, to some of the folks who were paying higher heating or air-conditioning bills. Now, we have gotten ourselves saddled with some form of a welfare program. This Congress, despite the efforts of some of us, has been very ret- icent to provide flexibility for weatherization, even though it makes so much commonsense. I can't understand why we resist it. It seems as though we are now trapped with a new welfare program. As long as prices continue to rise in the energy area-as I'm sure they will-and we don't adequately address some of the other income maintenance pro- grams, we will put ourselves in kind of a box down here. I think that it will be very~ very difficult to get out of it. We have put that 10-percent transfer into the block grant, and 33 States have used it. Then, in January, we did a supplemental and said, "No, you can't transfer it." In other words, we said to 33 States, "We are smarter than you are." it is just getting to the point where somebody is going to have to give us-you Senators and others who are involved in this process-some advice on where the most appropriate needs can be met with that portion of the windfall profits tax. If you have any more advice for us, other than what you have already said, you might as well. get it in the record. Mr. HESS. Senator, I think that trying to respond by illustration sometimes maybe misses the key point. We deeply appreciate the con- fidence you have placed in us to make those kinds of tough decisions at the local level. To show you that we are wiley and cunning, in terms of what you may do in the future, we do recognize that you have gotten yourself into a box. We .get $16 million in Kansas for that program. To be honest with you, we have never been able to quite spend it all. That was one of the reasons we diverted 10 percent of it. We always had a little left over. However, we are afraid that, one of these days, the U.S. Congress may cut back on that money, although you have developed a con- sistency in our State.. We are afraid that we will then be stuck with that social problem. However, we recognize that we have a responsi- bility to those people in need. What we are doing is shoveling as much Federal dollars as we can into weatherizing homes. So, if in 1984 or 1986 you say "OK, States, you assume all or part of that responsibility," we will be putting money into homes that are insulated. We will not be losing so .much of it out the window and out the roof. This may be a little simplistic, but we try to think ahead. Senator DURENBERGER. That is an appropriate response. I regret that time doesn't permit more questions. I do appreciate your coming here on behalf of yourself and the National Conference of State Le~is1atures. Thank you. Mr. Hzss. Thank you. [The prepared statement of Mr. Hess, with attachment, follows:] PAGENO="0156" 152 National Office of 444 PresIdent State North Capitol Ross 0. Dayen, President of Conference Federal Street, NW. The Kansas Senate Relations 2nd Floor of State Washington, D.C. Executive Director 20001 Earl S. Mackey Legislatures 2oV624~540O TEST I NON? OF SFNATOR PAUL HESS FOR THE KANSAS I EGISLATURE ON BEHALF OF THE NATIONAL CONFERENCE OF STATE LEGISLATURES ON BLOCK GRANT JMPLENEN1ATION 9:30 AM 357 RUSSLLL SENATE OFFICE BUiLDING MAY 11~ 1982 SUBLOMMI TTEE ON I NTERGOVERNMENTAL RELATIONS OF THE SENATE GOVERNMENTAL AFFAIRS COMMITTEE PAGENO="0157" 153 MR. CHAIRMAN AND MEMBERS OF THE SUBCOMMITTEE, I THANK YOU FOR THIS OPPORTUNITY TO ADDRESS THE IMPLEMENTATION OF BLOCK GRANTS AND TO BRING TO YOU NOT ONLY MY CONCERNS BUT ALSO THE CONCERNS AND SUGGESTIONS OF THE NATIONAL CONFERENCE OF STATE LEGISLATURES (NCSL.), flY NAME IS PAUL HESS, I AM A MEMBER OF THE KANSAS SENATE AND SERVE AS CHAIRMAN OF THE SENATE WAYS AND MEANS COMMITTEE, I HAVE BEEN ACTIVE WITH THE NATIONAL CONFERENCE OF STATE LEGISLATURES FOR SEVERAL YEARS AND NOW SERVE ON THE GOVERNMENT OPERATIONS COM~ITTEE NCSL HAS LONG SUPPORTED THE CONSOLIDATION OF FEDERAL GRANT-IN-AID PROGRAMS, THE CONFEREJ4CE BELIEVES THAT INCREASED FLEXIBILITY IN THE USE OF FUNDS AT THE STATE LEVEL CAN LEAD TO BETTER TARGETING AND THUS MORE EFFICIENT USE OF FUNDS, CONSOLIDA- TION CAN ALSO GREATLY LESSEN ADMINSTRATIVE COSTS THROUGH SIMPLIFIED FUNDING, REPORTING AND AUDITING PROCEDURES, IN MY TESTIMONY TODAY I WILL ATTEMPT TO OUTLINE THE EFFECTS OF THE RECENTLY ENACTED BLOCK GRANTS, INCLUDING STATE IMPLEMENTATION PROCEDURES AND PROVIDE SUGGESTIONS FOR IMPROVEMENTS TO BE MADE TO EXISTING BLOCK GRANTS AND TO ANY ADDITIONAL ONES THAT MAY BE PROPOSED BY REVIEWING THE PROBLEMS ENCOUNTERED BY STATE LEGISLATURES WITH THE FIRST ROUND OF NEW BLOCK GRANTS, / GREAT DEAL OF MY TESTIMONY IS FROM A STUDY NCSL DID IN FEBRUARY OF THIS YEAR ENTITLED, "BLOCK GRANTS: A ~EW CHANCE FOR STATE LEGISLATURES TO OVERSEE FEDERAL Fut~Ds" I HAVE COPIES OF THIS STUDY WITH ME AND WILL MAKE IT AVAILABLE TO THE SUBCOMMITTEE MEMBERS, PAGENO="0158" 154 WITH THE PROLIFERATION OF NARROWLY DEFINED CATEGORICAL GRANTS, STATE AND LOCAL GOVERNMENTS HAVE BECOME DISENCHANTED WITH THE FEDERAL GRANT-IN-AID SYSTEM THESE CATEGORICAL GRANTS LACK THE FLEXIBILITY NEEDED BY STATES TO TAILOR PROGRAMS FOR THEIR BEST USE) THEY OFTEN INCLUDE - ONEROUS BUREAUCRATIC REQUIRE- MENT FOR PROGRAM ADMINISTRATION. THESE GRANTS ALSO HAVE THE TENDENCY TO REMOVE THE AUTHORITY FOR ESTABLISHING PROGRAM PRIORITIES -FROM STATE LEGISLATURESBYMAKING AGENCY GRANTEES MORE ACCOUNTABLE TO WASHINGTON THAN TO STATE AND LOCALLY ELECTED OFFICIALS. STATE LEGISLATURES HAVE FOUND THEMSELVES BY-PASSED BY STATE AGENcIES AND LOCAL GOVERNMENTS DIRECTLY APPLYING TO THE FEDERAL GOVERNMENT FOR AID, DUE TO THE REQUIREMENTS ASSOCIATED WITH MANY OF THESE CATEGORICAL GRANTS, THESE FEDEFAL FUNDS HAVE FUNNELLED THROUGH STATE BUDGETS WITHOUT A GREAT DEAL OF STATE DISCRETION. IDEALLY, FROM THE VIEW OF STATE AND LOCAL GOVERNMENTS, ThIE.BLOCK GRANTS FROM THE FEDERAL GOVERNMENT SHOULD ATTACH FEW REQUIREMENTS OR "STRINGS" TO THE MONEY SO THAT STATES WOULD BE GIVEN WIDE DISCRETION IN FUND DISTRIBUTION, - THE BLOCK GRANTS IN FY 19~2 GAVE. STATE LEGISLATURES A NEW OPPORTUNITY TO APPROPRIATE FEDERAL FUNDS AND ASSURE PROPER EXPENDI- TURE. SOME STATE LEGISLATURES ALREADY HAD IN PLACE A MECHANISM FOR APPROPRIATING FEDERAL FUNDS AND BLOCK GRANT IMPLEMENTATION WAS EASILY ACCOMMODATED INTO THIS PROCESS. OTHER STATES ARE USING THE OPPORTUNITY PRESENTED BY BLOCK GRANTS TO TAKE THE FIRST STEP IN DEVELOPING OVERSIGHT OF THESE FUNDS. THE MAJORITY OF STATES HAVE CHOSEN TO ADMINISTER THE BLOCK GRANTS THEMSELVES IN 1~2 RATHER THAN HAVE THE FEDERAL AGENCIES WHICH WERE RESPONSIBLE FOR THE CATEGORICAL GRANTS MAINTAIN PRO- PAGENO="0159" 155 (RAM MANAGEMENT. As OF JANUARY 1.. 1982, THE TALLY OF PARTICIPATING STATES WAS: 149 STATES ACCEPTED THE ALCOHOL, DRUG ABUSE AND MENTAL HEALTH BLOCK) 148 STATES TOOK OVER THE MATERNAL AND CHILD HEALTH SERVICES BLOCK) 148 STATES OPTED FOR THE PREVENTIVE HEALTH AND HEALTH SERVICES BLOCK) AND ONLY 38 STATES ELECTED TO TAKE THE COMMUNITY SERVICES BLOCK GRANT. DURING NOVEMBER 1981.. NCSL SURVEYED THE 50 STATES TO FIND OUT WHAT MECHANISM THE STATE LEGISLATURES HAVE IN PLACE TO IMPLEMENT THE EXPENDITURE OF BLOCK GRANT FUNDS, THE SURVEY RESPONSES INDICATED THAT 23 STATES HAD INSTITUTED NEW OR SPECIAL LEGISLATIVE ~?OcF"URES TO DEAL WITH BLOCK GRANTS, ATTACHED TO MY STATEMENT IS A DESCRIPTION OF LEGISLATIVE PROCEDURES ADOPTED IN RESPONSE TO BLOCK GRANTS AND/OR FEDERAL FUND CUTBACKS, BY STATE, DURING 1981. MOST COMMONLY, STATES PASSED LEGISLATION REQUIRING SOME FORM OF LEGISLATIVE SIGN-OFF AS A PREREQUISITE TO THE EXPENDITURE OF BLOCK GRANT FUNDS. THE SURVEY ALSO SHOWED THAT THE FOLLOWING ARE THE MAJOR WAYS IN WHICH STATE LEGISLATURES ARE EXERCISING THEIR RESPONSIBILITIES OVER BLOCK GRANT DISTRIBUTIONS: * THROUGH THE APPROPRIATION PROCESS) * BY REQUIRING FORMAL LEGISLATIVE APPROVAL PRIOR TO EXPENDITURE OF BLOCK GRANT FUNDS) * THROUGH INTERIM CONTROL OVER THE RECEIPT OR EXPENDITURE OF FEDERAL FUNDS) * THROUGH LEGISLATIVE REVIEW OF FEDERAL GRANT APPLICATIONS) AND * THROUGH SPECIAL LEGISLATIVE COMMITTEES SET UP TO MONITOR BLOCK GRANT IMPLEMENTATION, PAGENO="0160" 156 I WOULD LIKE TO TAKE THIS TIME TO DESCRIBE A FEW OF THE STATE PROCEDURES USED TO IMPLEMENT BLOCK GRANT FUNDS. FOR THE MOST PART, STATE LEGISLATURES ARE USING THESE MECHANISMS AS A WAY TO DEVELOP STATE PROGRAM PRIORITIES AND BECOME MORE INVOLVED IN THE DISTRIBUTION OF ALL FUNDS AT THE STATE LEVEL. IN MONTANA, DURING ITS LAST REGULAR SESSION, THE LEGISLATURE DIRECTED THAT ALL BLOCK GRANT FUNDS RECEIVED PRIOR TO JANUARY 3. 1983 REQUIRE A SPECIAL SESSION OF THE LEGISLATURE PRIOR TO EXPENDITURE. A SPECIAL SESSION WAS SUBSEQUENTLY HELD IN NOVEMBER OF 1981 AT WHICH TIME THE LEGISLATURE REVIEWED DETAILED BUDGET PLANS FOR THE EXPENDITURE OF BLOCK GRANT FUNDS AND APPROPRIATED BLOCK GRANTS ON AN AGENCY BASIS. IN ORDER TO MAiNTAiN ITS CONTROL OVER ANY FURTHER BLOCK GRANTS THAT MIGHT BE AVAILABLE TO THE STATES BEFORE THE LEGISLATURE~S NEXT REGULAR SESSION, THE LEGISLATURE RECESSED RATHER THAN ADJOURN- ING AFTER ITS NOVEMBER SPECIAL SESSION. IOWA PASSED LEGISLATION IN 1~S1 REQUIRING THAT BLOCK GRANTS BE DEPOSITED IN A SPECIAL FUND SUBJECT TO APPROPRIATION BY THE LEGISLATURE, AND THAT THE LEGISLATURE RECEIVE NOTIFICATION OF ALL APPLICATIONS FOR FEDERAL FUNDS AT LEAST Sfl DAYS PRIOR TO SUBMISSION OF THE APPLICATION. IN KANSAS, WHERE THE LEGISLATURE APPROPRIATES ALL FEDERAL FUWDS, WE USED OUR FINANCE COUNCIL (A JOINT LEGISLATIVE/EXECUTIVE BODY) TO REVIEW THE INITIAL PROPOSALS FOR THE BLOCK GRANTS, ~URING / THIS YEAR'S LEGISLATIVE SESSION, THE ENTIRE LEGISLATURE THROUGH THE APPROPRIATIONS PROCESS PARTICIPATED IN THE FULL REVIEW OF PAGENO="0161" 157 OUR STATE AGENCY PROPOSALS FOR USE OF THE FUNDS, WHERE ALTERNATIVE OR DISCRETIONARY USES WERE AVAILABLEJ WE MADE OUR BEST JUDGEMENT ON THE MOST EFFECTIVE AND EFFICIENT USE OF THE FUNDS, LET ME ADD THAT WITH THE PRESENT STATE OF THE ECONOMY AND THE SIZE OF THE REDUCTIONS IN FEDERAL AID, THERE WAS LITTLE DISCUSSION OF NEW PROGRAMS OR INNOVATIVE SERVICE DELIVERY, WE FOCUSED AS MUCH AS POSSIBLE ON TRYING TO REDUCE THE IMPACT OF THE FEDERAL CUTS, IN THE FUTURE, ESPECIALLY AS THE DISCRETION AVAILABLE TO US IN THE STATE EXPANDS, I'M CERTAIN THAT THESE WILL AGAIN BE POPULAR TOPICS FOR DEBATE, KANSAS CHOSE TO PARTICIPATE IN ALL THE BLOCK GRANTS) AND WE ARE WORKING NOW TO ESTABLISH A PROGRAM FOR THE ADMINISTRATION OF THE CPBG SMALL CITIES BLOCK GRANT WHICH BECOMES AVAILABLE IN flCTOBER, WE'RE IN A HOLDING PATTERN AT PRESENT REGARDING THAT FINAL DECISION, WE DID OPT TO TRANSFER SOME OF THE BLOCK DOLLARS BECAUSE OF THE IMPORTANCE OF MANY OF THE TITLE XX PROGRAMS IN OUR STATE, ~!E ALSO SUPPLEMENTED THIS BLOCK GRANT WITH SOME STATE FUNDS, BLOCK GRANTS AND STATE LEGISLATIVE INVOLVEMENT IN THEIR DIS- TRIBUTION HAS ALLEVIATED SOME OF THE PROBLEMS IN THE CURRENT GRANT-IN-AID SYSTEM, `MOST OF THE IMPROVEMENTS ARE THE RESULT OF THE INCREASED FLEXIBILITY THAT THE BLOCK GRANTS PROVIDE, I BELIEVE THAT IT IS SAFE TO SAY THAT THE BLOCK GRANTS HAVE CREATED A GREATER DEGREE OF PARTICIPATION BY ALL GROUPS, THE BLOCKED PROGRAMS THAT HAD BEEN DIRECTED TO INDIVIDUAL CON- STITUENCIES ARE NOW RECEIVING ATTENTION AND REVIEW BY A VARIETY OF PEOPLE CONCERNED, THE PUBLIC) THE STATES' LEGISLATIVE AND EXECUTIVE BRANCHES AND LOCAL POLICY MAKERS ARE ALL BECOMING INVOLVED IN THE PROCESS, 99-965 0 - 82 - 11 PAGENO="0162" 158 BLOCY. GRAMTS ALSO PROVIDE A GREATER DEGREE OF ADMINISTRATIVE FLEXIBILITY, MOST STATES WILL BE ABLE TO STREAMLINE PROCEDURES AND REDUCE THE RED TAPE THAT WAS ASSOCIATED WITH MANY OF THE BLOCKED PROGRAMS, THIS ADMINISTRATIVE SIMPLIFICATION IS ONE OF THE MOST IMPORTANT POSITIVE RESULTS OF THE BLOCK GRANTS. ANOTHER OUTCOME OF BLOCK GRANTS IS THE IMPROVEMENT IN EACH STATE'S CAPABILITY TO BETTER COORDINATE FEDERAL, STATE AND LOCAL DOLLARS, IT PROVIDES THE STATES WITH A MEANS TO INSURE THAT DOLLARS ARE BEING SPENT EFFECTIVELY AND PROGRAMS AND POLICIES ARE NOT BEING DUPLICATED. WHILE NCSL ENDORSES THE BLOCK GRANT APPROACH, STATE LEGISLATURES HAVE ENCOUNTERED SEVERAL PROBLEMS WITH THE FIRST ROUND OF MEW BLOCK GRANTS. I WOULD LIKE TO SPEND SOME TIME DISCUSSING THOSE PROBLEMS. FIRST IS INSUFFICIENT LEAD TIME FOR LEGISLATIVE REVIEW AND APPROPRIATION, SIX BLOCK GRANTS WERE MADE AVAILABLE FOR STATE ADMINISTRATION ON OCTOBER 1.. 1981,. THE BEGINNING OF THE FEDERAL FISCAL YEAR, MOST STATE LEGISLATURES WERE NOT IN SESSION AT THAT TIME, AND, IN FACT, WERE WELL INTO THEIR FY 1982 FISCAL YEARS. FORTY-SIX STATES BEGIN THEIR FISCAL YEAR ON JULY 1~ SEVEN ~TATE LEGISLATURES W!TH BIENNIAL SESSIONS WERE NOT SCHEDULED TO CONVENE AGAIN UNTIL 1983 CONSEQUENTLY. STATE LEGISL~TIVE INVOLVEMENT IN THE FIRST ROUND OF STATE ADMINISTRATION OF THE ~EV BLOCK GRANTS HAS BEEN DIFFiCULT. PAGENO="0163" 159 SECOND ARE THE "STRINGS" ATTACHED TO THE BLOCK GRANTS, BLOCK GRANTS WERE INTENDED TO TAKE THE FORM OF FLEXIBLE FEDERAL AID WITH THE UNDERSTANDING THAT STATES COULD DISTRIBUTE THE FUNDS ACCORDING TO PROGRAM PRIORITIES SET BY THE STATES, THE FINAL LEGISLATIVE VERSION ATTACHED NUMEROUS STRINGS TO SOME OF THE BLOCKS--MAINTAINING THEIR CATEGORICAL NATURE. FOR EXAMPLE: * THE ALCOHOLJ DRUG ABUSE AND MENTAL HEALTH SERVICES BLOCK GRANTJ REQUIRED THAT EVERY COMMUNITY MENTAL HEALTH CENTER THAT WAS FUNDED IN FY 1980 ALSO RECEIVE BLOCK GRANT FUNDING IN FY 1982, IN ADDITIONJ THE FEDERAL REGULATION REQUIRE THAT 35 PERCENT OF THE FUNDS RECEIVED BY THE STATE BE EARMARKED FOR ALCOHOLISM PROGRAMS AND 35 PERCENT FOR DRUG ABUSE PROGRAMS THE REMAINING FUNDS ARE DISCRETIONARY. * THE PREVENTIVE HEALTH AND HEALTH SERVICES BLOCK GRANT MANDATES STATE FUNDING OF ALL FY 1983 GRANTEES: THAT PROVIDE EMERGENCY MEDICAL SERVICES. THE GRANT ALSO STIPULATES THAT: FY 1982 STATE FUNDING FOR THE HYPERTENSION. CONTROL PROGRAM (ONE OF THE FORMER CATEGORICAL GRANTS MERGED INTO THIS BLOCK) BE AT LEAST 75 PERCENT OF THE 1981 FUNDING LEVEL~ FY 1983 STATE FUNDING AT LEAST 70 PERCENT OF THE 1981 LEVEL' AND FY198'4 STATE FUNDING AT LEAST bU PERCENT OF THE 1981 TOTAL, PAGENO="0164" 160 o THE MATERNAL AND CHILD HEALTH BLOCK GRANT STIPULATES A SET ASIDE OF 15 PERCEJT OF THE AMOUNT APPROPRIATED FOR 1982. AND 10-15 PERCENT FOR FY 1983 TO BE USED BY THE DEPARTMENT OF HEALTH AND HUMAN SERVICES FOR "SPECIAL PROJECTS." THESE ARE IDENTIFIED AS THE HEMOPHILIA AND GENETIC DISEASE PROGRAMS THAT WILL BE FUNDED DIRECTLY BY HHS. THE STATES COULD APPLY TO RECEIVE THE FUNDS BUT WOULD HAVE MINIMAL DISCRETION IN AWARDING THE SUBGRANTS. * THE COMMUNITY SERVICES BLOCK GRANT REQUIRED THAT AT LEAST 90 PERCENT OF THE FUNDS BE DISTRIBUTED TO POLITICAL SUBDIVISIONS, NONPROFIT COMMUNITY. ORGANIZA- TIONS OR MIGRANT AND SEASONAL FARM WORKER ORGANIZA- TIONS. FIVE PERCENT IS ALLOWED FOR PROGRAM TRANSFER AND 5 PERCENT IS ALLOWED FOR ADMINISTRATIVE EXPENSES. ~ A MAXIMUM CAP OF 15 PERCENT IS SET FOR RESIDENTIAL WEATHERIZATION PROGRAMS FOR FUNDS RECEiVED THROUGH THE Low INCOME ENERGY ASSISTANCE BLOCK GRANT. * UNDER THE EDUCATION BLOCKI AT LEAST 80 PERCENT MUST BE COMMITTED TO THE LOCAL LEVEL AND 20 PERCENT CAN BE RESERVED FOR STATE USE. BLOCK GRANTS WERE INITIALLY CREATED TO PROVIDE BROAD PROGRAM DISCRETION, IN MAr~Y CASES THEY INSTEAD EARMARK THE FUNDiNG TO HiGHLY SPECIFIC PROGRAM AREAS PAGENO="0165" 161 THIRD ARE THE CUTS IN BLOCK GRANT FUNDING LEVELS. STATE GOVERN- MENT LEADERS OFFERED TO ACCEPT SOME REDUCTIONS IN BLOCK GRANT FUNDING IN RETURN FOR GREATLY INCREASED STATE CONTROL OVER THE ALLOCATION OF FEDERAL FUNDS. IT WAS REASONED THAT SUCH A REDUCTION COULD BE ABSORBED BECAUSE OF SAVINGS ARISING FROM A REDUCTION IN THE FEDERAL BUREACRACY. HOWEVER, STATES WERE GIVEN A 22.7 PERCENT REAL REDUCTION WHICH MEANT CUTTING INTO THE SUBSTANCE OF THE PROGRAMS. MOST STATES ARE CURRENTLY DEALING WITH BUDGET REDUCTIONS AND REVENUE SHORT- FALLS AND ARE IN NO POSITION TO SUBSIDIZE PROGRAMS THAT WERE ORIGINALLY INITIATED ON THE FEDERAL LEVEL AND ARE NOW BEING SHIFTED TO THE STATES. FOURTH IS THE UNCERTAINTY IN FEDERAL FUNDING LEVELS. WE DO NOT KNOW IF THE FY 19~3 FEDERAL BUDGET WILL CONTAIN FURTHER REDUCTIONS IN BLOCK GRANT FUNDING, UNCERTAINTY ABOUT THE AMOUNT, TIMING AND AVAILABILITY OF FEDERAL FUNDS MAKE IT DIFFICULT FOR THE STATES TO PREPARE THEIR OWN BUDGETS. DIFFERENT BLOCK GRANT FUNDING LEVELS HAVE APPEARED IN THE RECONCILIATION ACT THAT WAS PASSED IN AUGUSTJ AND THE FOUR CON- TINUiNG RESOLUTIONS THAT WERE PASSED IN OCTOBER, NOVEMBER.. DECEMBER.. AND MARCH. THIS UNCERTAINTY AT THE FEDERAL LEVEL CREATES SERIOUS PLANNING PROBLEMS FOR THE STATES AND FORCES THEM TO GUESS. AT WHAT THE ~FINAL FEDERAL AID FIGURES WILL BE. IDEALLY, THE STATES SHOULD BE ABLE TO HAVE FEDERAL BUDGET FIGURES AT OI~E YEAR I~ ADVANCE SC THAT THE STATES COULD ADAPT THEIR EJDGET~ ACCORDiNGLY. PAGENO="0166" 162 THE CYCLE WiLL BEGIN AGAIN THIS SUMMER AS MOST STATE LEGISLATURES COMPLETE THEIR FY 1983 BUDGET WORK BEFORE CONGRESS RELEASES THE FEDERAL FY 1983 BUDGET. FIFTH ARE THE STATE MATCH REQUIREMENTS, THREE BLOCK GRANTS RE- QUIRE A STATE MATCH WHICH HAS BEEN A TYPICAL CHARACTERISTIC OF CATEGORICAL GRANTS. THE MATCH REQUIREMENTS DETRACT FROM THE INTENT OF BLOCK GRANTS AND CREATE ADDITIONAL FINANCIAL OBLIGA- TIONS FOR THE STATES. THE REQUIREMENTS ARE AS FOLLOWS: I I~lATERNAL AND CHILD HEALTH: THE STATE MATCH REQUIRE- MENT IS THREE SEVENTHS OF THE FEDERAL FUNDING LEVEL. * PRIMARY CARE: IN FY 1983~ THE STATE MATCH IS 20 PERCENT OF THE FEDERAL FUNDING LEVEL AND IN FY 198~~ THE STATE MATCH IS 33 PERCENT. ~ COMMUNITY DEVELOPMENT: A STATE MATCH OF 10 PERCENT IS REQUIRED. (THIS MATCH CAN BE MADE WITH IN-KIND CONTRIBUTIONS,) PRESIDENT REAGAN'S ORIGINAL OBJECTIVE IN HIS BLOCK GRANT PROPOSAL WAS TO CREATE A NEW NATIONAL PUBLIC POLICY INITIATIVE WHICH WOULD ALLOW STATES TO DIRECT THE ALLOCATION OF FEDERAL AID TO PROGRAMS IDENTIFIED BY THE STATES AS ESSENTIAL SERVICES. FOR THE STATES TO DO THIS, FUNDING FLEXIBILITY WAS A CRITICAL ELEMENT, THE BLOCK GRANT PROGRAM THAT EMERGED FROM CONGRESS FAILED TO PROVIDE THIS NEW PARTNERSHIP ROLE FOR STATE GOVERNMENTS. THE CONGRESS PAGENO="0167" 163 INSISTED ON E1~RMARKING A LARGE PERCENTAGE OF THE CLOCK GRANT FUNDS WHiCH LIMITED THE DISCRETIONARY POWERS THAT WERE TO BE TRANSFERRED TO THE STATES. NEVERTHELESS) BLOCK GRANTS ARE A STEP IN THE RIGHT DIRECTiON IN SHIFTING RESPONSIBILITIES TO THE STATES. 11R.CHAIRMANJ IT IS MY UNDERSTANDING THAT YOUR STAFF AND THE NCSL STAFF HAVE BEEN WORKING ON MODEL BLOCK GRANT LEGISLATION TO BE INCLUDED IN EACH AND EVERY FUTURE BLOCK GRANT-PROPOSAL, I ALSO UNDERSTAND THAT NCSL HAS ALREADY TESTIFIED BEFORE THE SUBCOMMITTEE WITH REGARD TO THIS LANGUAGE SO I WON'T COMMENT ON THE SPECIFICS. I WOULD JUST LIKE TO POINT OUT THAT REGULATIONS THAT ARE AS SIMPLE AS POSSIBLE ARE VERY IMPORTANT TO THE SUCCESS OF BLOCK GRANT IMPLEMENTATION. YOUR BOILER PLATE LANGUAGE CAN PROVIDE DIRECTION TO OTHER CONGRESSIONAL COMMITTEES IN ESTABLISHING THE NECESSARY BASIC RELATIONSHIPS THAT SHOULD EXIST IN ANY FEDERAL LEGISLATION CREATING BLOCK GRANTS AND CAN SET THE BASIC RjSPONSIBILITIES AND UNIFORM REQUIREMENTS TO BE FOLLOWED BY THOSE INVOLVED. THE SUBCOMMITTEE CLEARLY DESERVES PRAISE FOR THESE EFFORTS. IN CLOSING, I BELIEVE THAT A BLOCK GRANT APPROACH CAN PROVIDE STATES WITH THE FLEXIBILITY NEEDED TO PROVIDE SERVICES TO ITS CITIZENS IN A MORE EFFICIENT AND EFFECTIVE WAY, STATE LEGISLATIVE INVOLVEMENT IN THE PROCESS DEMONSTRATES THAT THE STATES ARE WILLING AND ABLE TO ACCEPT THIS GREATER RESPONSIBILITY, BLOCK GRANTS CAN PROVIDE STATES WITH A MEANS TO BETTER TARGET FUNDS TO WHERE THEY ARE MOST NEEDED, REDUCE DUPLICATION OF SERVICES AND ELIMINATE WASTE THROUGH SIMPLIFIED ADMINISTRATIVE PROCEDURES, AGAIN, THANK YOU FOR THIS OPPORTUNITY TO TESTIFY AND I WOULD BE HAPPY TO RESPOND TO ANY QUESTIONS YOU MAY HAVE. PAGENO="0168" 164 Descriotion of Legislative Procedures Adopted in Response to BlocK Grants and/or Feceral Funo Cutbacks, During 1981, By State Alabama. During its 1981 session, the Alabama legislature passed two joint resolutions which dealt with block grants. SJR 19 created an interim legislative committee to study federal block grants and SJR 215 expanded the scope of one of the legislatures select joint committees, `to study the state medicaid programs so as to provide that said committee shall investigate and report on the impending impact of federal block grants to operate state health and welfare programs." California. Legislation was passed in California which established a joint legislative-executive advisory committee f or the allocation of block grant funds, *not to go out of existence until July 1984. Connecticut. To assure its involvement in the allocation of block grant funds, Connecticut passed PA 81-449 which stated that, during FY `81-82: - State funds may not replace cut federal funds without legislative approval. - Legislative approval is required before the expenditure of block gran~ funds. - Any modification of funding for programs necessitated by reduction in federal funds can occuronly if there is legislation that allows this. Florida. During 1981, the Florida legislature formed a Select Committee on Federal STudget Cutbacks and developed a general policy statement and detailed guidelines which were used by the Senate Appropriations Committee in writing the 1982 Senate Appropriations Bill. `Illinois. A legislative resolution directed the Commission on Intergovernmental Cooperation to hold public hearings during this past summer to advise the legislature on block grant implementations. The Commission submitted a report to the General Assembly in October which made the following recommendations: - Creating a trust fund for each block grant so that program growth or decline can be monitored and evaluated. - Creating a permanent new Block Grant Board to address long-range programmatic and administrative oversight responsibilities of block grants. PAGENO="0169" 165 - For :ne interim, until the oversight board is eStablishec, the Commission on intergovernmental Cooperation will suomit monthly reports to :ne General Assemoly on the status of all block grants. Until these recommendations are acted on by the legislature, block grants will be handled through the normal appropriations process. Iowa. In passing SF 563, the Iowa legislature made clear its intention to an active role in the control of federal block grant funds. SF 563 requires the following: - Block grants must be depositec in a special fund subject to appropriation by the legislature. - The governor must include with the budget a statement of federal funds not included in the budget for the previous biennium and anticipated block and categorical grants. - The buaget must indicate federal fLmnds to be used, tne programs to which they will apply, and the necessary state match. - The legislature must be alerted to all federal grant applications at least 60 days prior to submission of the application. Kansas. The legislature appropriated ~0 for health and social services block graiiti. By establishing such a limitation the Kansas Finance Council (a joint legislative/executive body) can increase expenditure limitations if block grants occur. Louisiana. The Louisiana legislature instituted a requirement that federal funas ~i~eived in the form of blocks be reviewed by the Joint Legislative Committee on the budget, where federal funds are newly incorporated into the state budget. The Louisiana House Appropriations Corrrnittee also established a subcommittee to review block grants. Maine. In 1981, the Maine legislature enacted a law under which any change ~~feoeral categorical grants to federal block grants cannot be implemented on the state level without recommendations from the committee having jurisdiction over appropriations and financial affairs and approval by the legislative branch of state government. ~ Standing committees in the Maryland legislature have held hearings on reaeral fund cutbacks and the legislature has been involved in the review of changes in state regulations resulting from federal funo reductions. Massachusetts. Unoer a law passed in 1981, the Massachusetts legislature ~y1ncreased its oversight of federal funds. All feceral funds received by the state must now be deposited in a special General Federal Grants Fund, Suoject to appropriation by the legislature, exceot under certain :ir:umstances. Accitionaliy, the legislature must be notified of all feceral PAGENO="0170" 166 crant apolications at least 30 days prior to submission. Among other things, the notification must include a aetailed fiscal statement and a aescription cf the substance of the applications. Finally, the legislation specifies reports that state agencies must regularly make to the legislature concerning feceral funds. Michi an. Three bills were passed last year in Michigan dealing with egis ative oversight of block grants. 5CR 355 required that all state agencies inform the legislature of applications for and the receipt of federal block grants and directed the governor to set forth in detail in the budget the proposed expenditures of federal block grant funds. Under PA 30, the department of management and budget must submit to the legislature an annual report on federal assistance. And PA 18 declared that, if appropriations are made from feceral revenues, the amount expended shall not exceed the amount appropriated in the budget act or the amount paia in, whicnever is the lesser. Minnesota. The Minnesota legislature passed a bill requiring one-quarter of F'S2bTock grant monies to be allocated according to prior categorical uses, with the remainder to be appropriated by the legislature when it reconvened. During the interim, a full appropriations committee meeting was held on federal cuts and block grant legislation. Missouri. The 1981 appropriation for the Department of Social Services i~i~iuoed the following directive: ". . . Federal block grants receivea by the Department of Social Services shall be administered unoer the oyersight of a (joint legislative-executive) committee." Montana. KB 500 passed in 1981, specifically prohibited the expenditure of i~i~rant funds without legislative appropriation. The bill stated, "Any feaerai funds received by or allocated to the state of Montana prior to January 3, 1983, as a block grant as defined by an act of Congress enacted subsequent to April 1, 1981, and specifically designated as a block grant shall require a special session of the legislature for appropriation by the legislature prior to distribution of these funds among agencies and programs." Subsequently a special session was held in November at which the legislature appropriated all block grants. The legislature then recessed but did not adjourn in order to maintain appropriations control over any additional block grants that might come to the state before the legislature's next regular session. Nevada. SB 619, passed in 1981, required that, When~ver federal funding in the form of a categorical grant of a specific program administered by a state agency . . . is terminated and incorporated into a block grant . . . the agency must obtain the approval of the interim finance committee in order to allocate the money received from any block grant." New Mamoshire. A bill was passed by the legislature requiring the Governor to notify the presiding officers of the Senate ana House of Representatives of PAGENO="0171" 167 any block grant awaros ~y the fe~eral government. Any allocation of these grants must be approvea oy :ne General Court. New Jersey. The legislature formec a subco~ittee on Feceral Aid and tne Joint Appropriations or~nittee intensified to oversight of federal funds. New Mexico. An interim Feceral Funds Reduction Study Comittee was set up by tne legislature to monitor the federal budget process, determine state and local impact, and draft legislation. New York. This state passed a comprehensive bill, the Accounting, Financial Reporting and Budget Accountability Reform Act of 1981, which revamped the budgeting and accounting process in New York, giving the legislature greatly increased control over appropriations and expenditures. The following brief description of the bill is taken from New Yorks September 1981, "The Ways and Means Report': The new legislation requires that no state moneys may be expended except pursuant to an aopropriation, and generally prohibits transfers of money between funds unless specifically authorized by statute. The Governor must alter the budgetary process to provide for the appropriation of. feceral funds and all other funds that were heretofore exempt, make substantial changes to the financial plan, begin a new "key item" reporting system to monitor program performance, and operate within a more restricted environment as a result of increased legislative oversight. These changes are designed to parallel the shift in accounting and reporting practices to conform with GAAP (generally accepted accounting principles). North Carolina. Under MB 1392, the North Carolina legislature asserted its authority tO control the appropriation of block grant monies. The bill states: - ". . . All federal block grant funcs received by the State between August 31, 1981, and July 1983, shall be received by the General Assembly . . - "There is established the Joint Legislative Corrsnittee to Review Federal Block Grant Funds. The Cormnittee shall review acceptance anc use of all feceral block grant funds received by the State between August 31, 1981, and July 1, 1983. . . Ohio. HJR No. 39 created a Joint Legislative Cometittee on Federal Funds to ~~Ttor the receipt and expenditure of federal funds and to review all new federal grant programs. The bill also directed the corrumittee to serve in an advisory capacity to the Ohio General Assembly in all matters related to federal grant programs. Oklahoma. SB 326, passed in 1981, created a Joint Committee on Federal Funds wltfl authority to approve/disapprove federal fund applications and make recommenoations concerning feceral funds to the legislature. It also directec that claims by state agencies for federal funds may not be processed without PAGENO="0172" 168 written authorization from the president of tne senate and speaker of tne nouse. Tennessee. SB 997, passed during 1981, established several new procecures Tf~Jnrespect to the appropriation and expenditure of state funds, including: - "In the event federal and departmental revenues . . . are less than the amount estimated to be available under the allotments then and to the extent the spending authorizations are hereby reduced; to the extent that federal or departmental revenues in excess of the amounts alloted are realized, such excess shall not constitute increased spending authorizations, except under the conditions herein specified. - "No state agency shall establish new programs or expand programs, including any programs involving federal or other funds . . . until the program anc the availability of the money is submitted to the - Finance, Ways and Means Coriinittee chairmen and until said chairmen have acknowledged in writing receipt thereof . . . - `The Cormiiissioner of Finance and Administration shall submit a plan for implementing the federal block grants proposec by the President." Texas. The legislature attached a rider to its appropriations bill which requires that if block grants replace categorical grants, the funds should be allocated to state departments and agencies as they were under categorical grants. Virginia. Under the 1981 amendments to the Virginia appropriations act, the Governor must produce quarterly reports summarizing the implications of approvals of federal fund grants. The implications to be identified induce significant and anticipated budgetary, policy, and administrative impacts of feceral requirements. PAGENO="0173" 19 Senator DETRENBERGER. Our next panel is composed of representa- tives of the human resources community. We have two witnesses: Delores Delahanty from the National Asso- ciation of Social Workers and Sandy Solomon who is representing the Coalition on Block Grants. We will start first with testimony front Ms. Delahanty. TESTIMONY OF DELORES S. DELAHANTY, BOARD MEMBER OF THE NATIONAL ASSOCIATION OF SOCIAL WORKERS, LOUISVILLE, KY., ACCOMPANIED BY SUSAN E. REES, DIRECTOR, NASW, PROJ~ECT BLOCK GRANT; AND SANDY SOLOMON, EXECUTIVE DIRECTOR, COALITION ON BLOCK GRANTS, WASHINGTON, D.C., ACCOM- PANIED BY NANCY EBB, SENIOR STAFF ATTORNEY, CHILDREN'S DEFENSE FUND Ms. DELAHANTY. Mr. Chairman, my name is Delores Delahanty. I am testifying today on behalf of the National Association of Social Workers (NASW), whose 90,000 members and their clients have an interest in each of the block grants enacted last year and many of the programs proposed for swap and turnback. I would like to thank you for this opportunity to testify. We know that negotiations on the New Federalism are continuing. However, consumer groups and professional organizations have been excluded from these discussions, even though we believe~ we have a historical perspective and a good deal of hands-on experience to contribute. We appreciate your recognition of that fact. We wish to commend you for your thoughtful approach to this issue, your commitment to hear- ing from all sides and for the field hearings which you have conducted. While NASW supports your efforts to sort out Federal, State, and local responsibilities, we are concerned about some of the language in your proposed legislation. To wit, we are concerned about the abandon- ment, perhaps, of a commitment to national goals and purpose in favor of flexibility for the States. We feel that some of the language negates more detailed provisions in the individual block grants. We also feel that it excludes public interest groups. consumers, and pro- fessional and provider organizations from consultation on State appli- cations and commenting on regulations. We hope that the sorting-out can be done in a way that will make social programs more effective, helpful to people, and responsive to the needs of local communities. Our association has long believed in the desirability of locally con- trolled social services delivery systems. However, there is a great deal that concerns us about the administration's proposal. Primarily it is that they are clearly a subterfuge for abandoning the Federal role altogether. This morning it appeared, and you can see from prior testi- mony, that the abandonment appears to be fostering an adversarial relationship among the various tiers of government rather than pro- moting constructive, intergovernmental collaboration. The programs we are talking about represent the government's in- vestment in human capital. From child protection to employment and training, these programs improve the quality of life of our citizens and thus the productivity of the Nation. Although these programs can be simplified and made more manageable, there is a continuing Federal PAGENO="0174" 170 responsibility in all of them. When we are finished sorting-out, I be- lieve the product should look more like a marble cake than a layer cake. It is obvious from the budget which was presented in February that the administration is planning a phaseout. The transfer proposal is an even more apparent abandonment, with the constantly declining trust fund disappearing altogether after 8 years. This is not sorting-out; it is retreat. You cannot expect creativity from the States and the local communities when we are under siege. The contribution of Federal funds, which are raised more efficiently and progressively than any State or local revenues, is one responsibil- ity that we believe must be continued. Besides funding, there are other Federal imperatives which I will discuss in a moment in the context of your proposed generic language. I also will refer to information which NASW has obtained from Project Block Grant, a special 2-year effort by which we are assisting social workers in nine States to monitor and to encourage the most rational, open and fair implemen- tation possible under block grants. Kentucky is one of those project States. We have been heavily involved in the activities there. Our project is linked to the Kentucky Alliance for Human Needs in my State, which is similar to the broad- based coalitions in the other ei~ht States and the Coalition on Block Grants and Human Needs in Washington. Events of the last few days; namely, the indication that the National Governors' Association is ready to accept the notion of State respon- sibility for AFDO, force me to address the issue. Frankly, it makes it nearly impossible for the social welfare community to talk about any sorting-out. We find it more than curious that the administration can agree to keep SSI, food stamps, and medicaid-programs that either totally or in large part serve tight~ popular disadvanta~ed groups- the elderly, blind, and disabled-while throwing off AFDC. Nearly half of the AFDC families are not white, 69 percent of the recipients are children, and 85 percent of the families are headed by women. Why is it so important that the one cash assistance program in the country wh~ch mainly aids minorities, children, and women be left to State control? We know from a study by Martha Ozawa of Washington tiniver- sity in St. Louis that there is a relationship between low-benefit levels and the size of a State's minority population. We know that many States with great wealth have some of the lowest AFDC benefit levels. Texas, for example, which ranked fourth in tax capacity on the ACIR index, in 1981 had the second smallest AFDC benefit among all States. We also know that uniform, national systems like SSI are much more efficient to administer and less prone to errors than the complicated State ad'ninistered AFDC program. NASW believes that health and welfare entitlement programs should be a Federal responsibility. The needs they address are tied too closely to the national economy. In times of economic stress, the States which most need programs like AFDC and food stamps will be least able to afford them. We feel that there are some major programs which are impacted by national policy. Among these are the Low Income Energy Assist- ance, migrant health, refugee programs, AFDC, foster care and so PAGENO="0175" 171 forth. I would like to be able to address Low Income Energy Assist- ance in a response after my prepared remarks. Finally, we feel that there are six major principles which must be imbedded in any concept of New Federalism, and particularly in the legislation which you propose: 1. The Federal Government must insure an adequate, progressive, permanent funding base for investment in human capital programs; 2. Federal resources must be distributed in a way that takes into account varying State resources and needs; 3. The national purpose of any block grant must be clearly defined; 4. The Federal Government must insure nondiscrimination in the use of Federal funds by States; 5. Federal legislation must require planning, reporting and public procedures that insure accountability at both the State and the na~ tional level. There is no way that one can monitor the State and local levels for specific programs unless there is basic uniform data avail- able, not simply for planning but for reporting on the effects of the block grant legislation. These would include: Information about needs assessment, objectives, activities, method of distribution, categories of individuals served, and effectiveness indicators. 6. Some services must be guaranteed to be publicly provided and universally available. These are not strings which should be attached, but they are guarantees of an equitable, just and responsive service delivery system. Thank you for this opportunity to testify. Senator DURENBERGER. Ms. Solomon. Ms. Sor~oMoN. Mr. Chairman, I am Sandy Solomon, executive di- rector of the Coalition on Block Grants and Human Needs. I have ~for you a copy of a briefing book on block grants which we will make avail- able to other members of the subcommittee later.' The Coalition is an alliance of over 100 national organizations, including a wide range of constituencies. We work with over 15 similarly diverse statewide coali- tions. I know the proponents of the New Federalism like to draw a clear line between block grants and budget cifts. However, it is an inescap- able fact that these block grants are inextricably linked to budget cuts as part of a strategy to eliminate virtually all support for domestic programs. State governments are discovering that they have been given responsibility for poverty; and that they now have, to quote Governor Lainm's testimony last week, "More authority to do less." Nonethe- less, they continue to suggest that the authority part of the equation is worth pursuing. I d~ubt, especially in this decade, whether the ques- tion of resources can ever be separated from that of authority. The block grant theory assumes that States will draw upon their own resources to compensate for lost Federal funds, or that they will continue to contribute the maixthing funds no longer required by Fed- eral law. It is clear that the latitude States have to make these choices is diminishing as the demands upon their resources increase. We are finding that, because block grants were thrown so rapidly to the States this year, many States have simply imposed straight pro 1 See p. 472. PAGENO="0176" 172 rata cuts on funded programs. For example, three-quarters of the States have simply passed along the cuts in the community services block grants to community action agencies. What we are able to com- ment upon today, therefore, is only a limited kind of block grant implementation. Most States did not take the time to rethink relation- ships between programs or to evaluate program priorities before ac- cepting the funding. The block grant story this year is essentially a budget-cut story. For this reason, we urge the subcommittee to make this hearing just the first in a series of block grant implementation hearings, and that in the future you call representatives of community-based organiza- tions to comment on how block grants look from their perspective. Good information will be the first thing to disappear as federally man- dated data collection ceases and funds are channeled to other functions. As little as we know now, we will know less next year, according to one researcher who has been studying this problem. I should note that, at the outset, we are finding the record from State to State, and from program to program within each State, to be extraordinarily varied. This year, some States were able to shield block grants from funding reductions because they had a carryover from last year, but many States were forced to make service reduc- tions. Those reductions often came at the expense of people least able to afford increased fees or of groups excluded from eligibility. This is a budget story, but it is also a block grant story since the States must decide to institute a copayment scheme or to try some other cost-saving strategy. As budget pressures increase, State gov- ernments are increasingly tempted to use block grant funds for pur- poses only remotely related to the specific purposes of the block grant programs. I give an example in my statement of one State in which the county health department is making a claim for next year's pre- ventive health care block grant funds. We are in danger of seeing these once-targeted resources disappear down the gullet of the State budget deficit. We are also in danger of seeing targeting lost as more politically powerful constituencies demand a share of funds once designated ac- cording to specific need. The most glaring example of this trend is the example already cited today by Mayor Martinelli about the dis- tribution of community services block grant funds. If targeting is in jeopardy in some States because of budgetary pressures, it is also in jeopardy because of political pressures. One example comes from New England where a mayor stated that, as soon as the grandfather clause was removed, he intended to use community services block grant funds for snow removal. He said maybe he would hire some low-income people to do the job, but he had to consider the immediate political necessities. We can begin to comment on the way in which the public was able to participate in planning for the use of block grant funds. The Na- tional Governors' Association is very enthusiastic about the record. The range of quality in the hearings is worth noting. One study found that, for the community services block grant, Washington and Min- nesota appear to be the only States that systematically sought out and involved the recipients of services in the implementation planning. Contrast the case of Michigan, which had six hearings in six cities publicized by a coalition of citizen groups, with the case of Georgia. PAGENO="0177" 173 There is a letter attached to my statement which notes: 1 Even people who regularly monitor the State's activities on these issues were unaware there was to be a hearing until 3 days before the scheduled meeting. Legislators we greeted in the hallway on the day of this "legthlative" hearing. were unaware that it was about to take place. * * * This was the only hearing scheduled by the State. On next year's plan, Georgia will be holding one meeting on May 19 in one city to discuss all the block grants. There will be inadequate time for the citizens to review the plan because it has not yet been released. There will be no apparent time for citizen comment. I have other examples in my statement, including the case of Ohio in which the citizens first asked the State agency and then had to force the State legislature to hold a hearing. When the legislature did hold a hearing, the State agency counted it as its legislative hearing. The agency representatives both interrogated witnesses and presented testi- mony. The result of the hearing was that the citizens were able to point out that the formula the State was using would exclude certain cate- gories of recipients, categories which everyone agreed were legitimate recipients of the program. The bottom line is that this kind of exchange and accountability improved the program. I will go on to your block grant language very quickly, since I know we are about out of time. We appreciate the opportunity to comment on your draft legislation. Our basic commitment is to see that the princi- ples of targeting and accountability, openness and endorsement of basic rights and protections which are incorporated in any block grant are enacted by Congress. However, we must strongly caution you that any such uniform lan- guage must be a floor, and not a ceiling, for Federal standards and guidelines. Title XVII of the Omnibus Reconciliation Act, as inade- quate as we felt it was, provided minimum, not maximum, standards. We be.lieve that the Congress must have the discretion to enact tougher provisions where, in its judgment, those provisions are necessary to meet the national goals and objectives embodied in particular pro- grams. In fact, given that many of the specific protections in the block grants which Congress passed last year are more rigorous than those in the superseding provisions of your bill-given that even the provisions of title XVII are more rigorous-we would adamantly oppose this bill if you were to submit it in its present form. We are happy to discuss the specific ways in which your proposal can be improved, but only if its purpose is changed to offer basic minimum Federal standards for block grant administration. We commend your desire to provide States with clear and uniform guidelines. We feel that your goal can best be achieved by offering guidelines so superior to those already on the books, so inclusive, that Congress will have little need to amend them in its authorizing committees. If your bill could reaffirm strong Federal expectations for these principles of accounta- bility, openness, and enforcement of basic rights and protections, it would, in fact, become a national model and one that we would be pleased to endorse. Our specific comments are attached. Senator DURENBERGER. Good. I See p. 223. 99-965 0 - 82 - 12 PAGENO="0178" 174 Thank you very much. Both of your statements will be made part of the record. Ms. Delahanty said that we can't expect creativity from State and local governments when they are "under siege." I will turn that around and ask both of you whether we can expect creativity from someone who is not "under siege." Ms. DELAHANTY. I would like to respond in this way: I think that the abrupt and radical changes in the responsibility for social services delivery and other human services programs we have witnessed in the last 2 years have really placed us in a very difficult position to respond. I feel that in the last 10 years, we have made considerable progress- when not "under siege"-in helping to eliminate problems with re- gard to nutrition, working and striving for better provision of day care, et cetera. I do think that you can contrast the progress of the last 10 years with the chaos of the last 2 years. You can come to some con- clusions based on those observations. Senator DURENBERGER. What conclusions are you talking about? Ms. DELAHANTY. Our conclusion is this: That there appears to be the case of throwing the baby out with the bathwater. There was some need for economy, efflciency, transfer of responsibility. ~nd perhaps, a restructuring of services. To suddenly say that the Feleral Govern- ment is going to reduce funds and leave the administration to the States which are ill prepared to receive it-although State and local governments have been increasing their management capacity-has disrupted the delicate ecology of intergovernmental relations. I think this action has been very disruptive for people, coupled with the econ- omy and the pressures and strains on American families today. Ms. SoLoMoN. Times were never better than in the sixties. In recent history, when the S hates had unrivaled responsibility in most of these program areas, a lot of needs were going unmet-especially in the area of civil rights. Today if you ask a black or Hispanic leader in this country which level of jurisdiction he or she would prefer, the answer is very clear. The answer would come out of the memory of earlier State inattention. The answer is not only that federally mandated pro- grams have made important improvements in the lives of people, but also that State remedies were not forthcoming before. Senator DURENBERGER. The issues that were given here are equity issues. However, we are dealing principally with using the word "creativity"-creativity in the delivery of a variety of social services, including health, education, and nutritional programs. It seems to me that we did not create any unique responses here at the Federal level. Much of that creativity came from the local level. Somebody started programs, usually on a nonprofit basis, in States like my own and eventually got them funded by the State legislature. Then they brought the programs to Washington as something that would be good for the rest of the country. I really am curious to get an honest appraisal from both of you, who have been involved for some period of time in meeting the needs of people out there, as to where you believe real creativity lies. Let's leave out the temporary siege that we are under and deal with creative responses to human need. Where can we find the most creativity in this country? Ms. DELAHANTY. Let me amplify on my previous remarks. I come from a background of working in the local community. The involve- PAGENO="0179" 175 ment of churches, the local public sector and the voluntary sector in the development and provision of human services, which occurs at the local level, is guaranteed by certain guidelines or national require- ments for fairness, equity and adequacy. I think we are not expecting prescriptions from the national level. We are concerned about the assurance of equity. There are certain national policies which impact the local level. Take, for example, what is happening with the refugee problem. The Governor of Florida is saying, "Go to Minnesota." Let me give you another example which, I think, is probably illustrative of what can happen with block grants. You are concerned about Low Income Energy Assistance. In our State, 10 percent of those moneys were transferred to local health care without any public hearing, without any input from local government or anybody at the local level. There was a 15-percent set-aside for the weatherization program. The eligibility requirements were so restrictive that individuals were prohibited from taking advantage of both the fuel assistance pay- ments and the heating equipment provisions. We, at the local level, had to add an additional $500,000 of local tax money to help people with fuel assistance payments. In addition to that, we established a voluntary program for energy audits and obtained money from the local utility company to pay for weatherization-materials for caulk- ing and weather stripping, et cetera. We are creating at the local level. However, when you don't have anything at the local level with which to create, sometimes it gets pretty hard. Senator DURENBERGER. That gets us to the heart of the problem here. Whether we are talking about the blocks or about the proposals for sorting out responsibilities through the New Federalism proposal, we are dealing with the issues of basic responsibility for economic access. We are talking about who has the ultimate responsibility and the principal responsibility for income security. Who has the respon- sibility for arming people with the ability to make decisions about how best to meet their needs? I don't think there is any disagreement among the three of us about that being primarily a Federal responsibility. We are not doing a very good job of discharging it at the present time because everybody is under economic siege. Part of the process of coming to grips with the New Federalism is addressing, head-on, this whole issue of income maintenance, income security. There is another side of it, though, that deals with administering programs and delivering services. When I asked the creativity ques- tion, I was not addressing the income security side. I have addressed that to the administration. Ms. D~lahanty, when you say that health and welfare should be a Federal responsibility, I have to put on my Health Subcommittee hat and say, "Yes; health, in the broadest sense, is a nationai responsibil- ity." However, I would not trust this Federal Government any farther than we have trusted them to date to do the kind of job that the people of this country need in accessing themselves to health care. Where they have had the opportunity, the States have done a much better job. This includes the cognizance of home health care which was in the little illustration you gave us. Where there are economies, where they are broadening the access to the system, where there is an early PAGENO="0180" 176 recognition of the needs of long-term care, I have seen a lot of that in place at the State level. It seems important, as we go through this discussion, to kind of pull apart the issues of service delivery from the issues of economic access. We must keep in mind another important issue that one of you raised about information. Under our current welfare system, people might have an average of $12,000 per family of four. Even if we gave them that in a check-as some people would suggest as an alternative to the current system, and with which, of course, I would not agree-in this society, there still are people without information. Ms. SOLOMON. There are times, Senator, when we wish you were from a different State. Minnesota is so extraordinary in its level of citizen participation. I have been working with neighborhood groups for the last couple of years. I am firmly convinced that the community is a level at which there is an extraordinary amount of creativity. But the point that must be made is that, among community groups as well as among people or among jurisdictions, there is an inequality of resources, even if the group works on housing or economic develop- ment issues. If you are in the South Bronx kind trying to put together a commercial development, there are limits on your ability to achieve self-help. I would like to turn now to one block grant we talked about today quite a bit, the Low Income Energy Assistance block grant, as a dem- onstration of how poorly this kind of 50-State system works. You could move across the top of the United States through some cold States and find a $365 average benefit in Vermont, a $120 average benefit in Michigan, and a $410 average benefit in Minnesota. The diversity in benefit levels and in eligibility requirements has been so extreme in this particular block grant as to be mind-boggling. Imagine the consequences for the Nation if eligible families were to take literally President Reagan's charge that they vote with their feet. As Ms. Delahanty said, the consequences would be quite serious. But the consequences involved of such a system are also serious for the people, especially if you are the person trying to make it on $120 in Michigan. There is no telling what political and fiscal circumstances in Michigan produced the decision to set the $120 benefit level. I feel I have to come to the defense of the program itself; States were in a bad situation on this one. They were taking a really big cut in title XX social services. There were demands for that money from providers who had much more clout than the individual recipients of the Low Income Energy Assistance funds. So they often shifted money from energy assistance to social services and they were trying to be responsible. In some instances, they were holding onto the money because they were expecting a diminished allocation in the coming year. Some of them held money back, as a result, expecting they would have higher service requirements on less money in fiscal year 1983. Now, they are being condemned for trying to plan ahead and husband their resources and they are being told that shows they really didn't need the Low Income Energy Assistance money anyway. The problem with block grants-and this instance is a good example-is that by removing the targeting, you remove the constitu- ency for funding. Pretty soon you can pretend that there was no need for funding at all, and by removing the information, you remove any PAGENO="0181" 177 ground for demonstrating that need or commenting on what has happened. We are entering a year where we are going to be able to say very little, with certainty, about what has happened in any one of the States. We can sympathize with the economic circumstances and the fiscal circumstances in which the States have found themselves. How- ever, that will not minimize the fact that people are not faring very well under this new system. There are innumerable effects of the budget cuts under the block grants that we didn't mention today because they look like budget cut stories. In fact, they are both and that is very serious for people in need. Senator DURENBERGER. Thank you very much. I wish I had more time for questions, but our hearing has come to an end. [The prepared statements of Ms. Delahanty and Ms. Solomon follow:] PAGENO="0182" 178 ~ NAT1ONAL ASSOCIATION OF SOCIAL WORKERS ~ .j 1425 H St., N.W., Suite 600, Washington, D.C. 20005 (202) S2~3-3Ci3 TESTIMONY OF DELORES S. DELAMANTY, ACSW Executive Director of the Human Services Coordination Alliance, Louisville, Kentucky On Behalf of The National Association of Social Workers Before The SUBCOMMITTEE ON INTERGOVERNMENTAL RELATIONS Of The COMMITTEE ON GOVERNMENTAL AFFAIRS U.S. SENATE May 11, 1982 PAGENO="0183" .179 Mr. Chairman, members of the subcommittee, my name is Delores Delahanty and I am testifying today on behalf of the National Association of Social Workers, whose 90,000 members and their clients have an interest in each of the block grants enacted last year and many of the programs proposed for "swap and turnback." I would like to thank you, Mr. Chairman, for this opportunity to testify. We know that negotiations on new federalism are continuing, even as we talk, between the Administration and state and local elected officials. Consumer groups and professional organizations have been excluded from those discussions even though we believe we have a historical perspective and a good deal of hands-on experience to contribute. We appreciate your recognition of that fact. Whether or not the Administration soon introduces its federalism legislation and whether or not the Governmental Affairs Committee retains jurisdiction, we wish to commend the chairman for his sincere, thoughtful approach to the issue, his commitment to hearing all sides and the field hearings he has held. We hope, Mr. Chairman, that you will continue to play a leading role in whatever legislation may be developed. NASW supports your efforts to "sort out" federal, state and local responsibilities. We hope that can be done in a way that will make social programs more effective, helpful to people and responsive to the needs of local communities. Our Association has long believed PAGENO="0184" 180 2 in the desirability of locally controlled social service delivery systems. However, there is a great deal that concerns us about the Administration's proposals. Primarily it is that they are clearly a subtrefuge for abandoning the federal role altogether. The programs we are talking about represent the government's investment in human capital. From child protection to employment and training, these programs improve the quality of life of our citizens and, thus, the productivity of the nation. Although these programs can be simplified and made more manageable, there is a continuing federal responsibility in all of them. When we are finished sorting out, I believe the product should look more like a marble cake than a layer cake. That the Administration is planning a phase-out is obvious from the budget it presented in February: Between fiscal years 1982 and 1985, the school improvement block grant would fall from $666 to $335 million; the social services block grant, from $2.9 to $1.9 billion; the community services block grant, from $508 to $103 million. The transfer proposal is an even more apparent abandonment with the constantly declining trust fund disappearing altogether after eight years. This is not sorting out; it's retreat. You cannot expect creativity from the states when we are under seize. The contribution of federal funds which are raised more efficiently and progressively than any state or local revenues, is one responsibility that we believe must continue. Besides funding, there are other federal PAGENO="0185" 181 3 imperatives which I will discuss in a moment in the context of your proposed generic, or "boilerplate," language. I also will refer to information NASW has obtained from Project Block Grant, a special, two-year effort by which we are assisting social workers in nine states to monitor and encourage the most rational, open and fair implementation possible under block grants. Kentucky is one of the project states, and I have been heavily involved in the activities there. Our project is linked to the Kentucky Alliance for Human Needs in my state, similar broad-based coalitions in the other eight states and the Coalition on Block Grants and Human Needs in Washington. Events of the last few days, namely, the indication that the National Governors Association is ready to accept the notion of state responsibility for AFDC, force me to address the issue that, frankly, makes it nearly impossible for the social welfare community to talk about any "sorting out." We find it more than curious that the Administration can agree to "keep' SSI, food stamps and Medicaid, programs that either totally or in large part serve "popular" disadvantaged groups--the elderly, blind and disabled--while throwing off AFDC. Nearly half of AFDC families are non-white. Sixty-nine percent of the recipients are children. And 81 percent of the families are headed by women. Why is it so important that the one cash assistance program in the country that aids mainly minorities, children and women be left to state control? PAGENO="0186" 182 4 We know from a study by Martha Ozawa of Washington University in St. Louis that there is a relationship between low benefit levels and the size of a state's minority population. We know that many states with great wealth have some of the lowest AFDC benefit levels. Texas, for example, which ranks fourth in tax capacity on the Advisory Commission on Intergovernmental Relations index, in 1981 had the second smallest AFDC benefit among all states. The tax capacity was 22 percent higher than the national average while the maximum monthly benefit for a four-person family was only $140. We know also that uniform, national systems like SSI are more efficient to administer arid less prone to errors than the complicated, state-administered AFDC program. The -pattern in western industrialized nations has been for cash support programs to emanate from the national government. The Administration's proposal would signal a break from this tradition and head us back in the direction of the Elizabethan poor laws. Why, then, does the Administration continue to insist on shifting responsibility for AFDC to the states? We cannot fathom the irrational intransigence of some high Administration officials on this point - and can only conclude that it is based on some ideology that flies in the face of history. It certainly runs counter to the goals of equity and efficiency. NASW believes that health and welfare entitlement programs should be a federal responsibility. The needs they address are tied too closely to the national economy. In times of economic stress, the states which most need programs like AFDC and Food Stamps will be least able to afford them. PAGENO="0187" 183 5 them. Furthermore, the nature of an entitlement assures that any person who qualifies will be treated similarly regardless of which state he or she is in. In our monitoring project, we have observed that high levels of unemployment give rise to transciency, even entire families moving from state to state to find work. Meanwhile, our members are fearful that archaic state and county residency requirements will re-emerge as elected officials grapple with budget cuts. AFDC foster care is also an entitlement that, by its' very nature, should not be left to state prerogative. Other programs, like refugee assistance, should not be turned over to states because they arise from problems created by national policy. Low-income energy assistance, similarly, was created largely in response to the national policy of oil de-regulation which simultaneously resulted in windfall profits for producers and dramatically higher prices for consumers. Although the program isnow a state block grant,' the President's proposal to turn financial responsibility over to the states violates the principle that the federal government must shoulder responsibility for individual and regional inequities caused by its policies. Programs like migrant health should remain a federal responsibility because their target populations will not be claimed by any single state. And, finally, the federal government should retain at least temporary responsibility for programs that strive to establish innovative approaches to old problems. The Adoption Assistance and Child Welfare Services Act of 1980, for instance, establishes a system of sticks and carrots for states to reduce the use of expensive foster care in favor of adoption or returning children to their natural families aided by supportive services. Until such a system has a chance to work and PAGENO="0188" 184 6 become ingrained at the state level, the federal government should provide direction. Now, with regard to the devolution of programs to states--whether via block grants or "new federalism"--I would like to outline six principles which NASW believes must be adhered to by the federal government. Mr. Chairman, I hope you will recognize these principles in your generic language. They are discussed in further detail, along with documentation from our project, in additional material I would like to submit for the record. 1. The federal government must ensure an adequate, progressive and permanent funding base for investment in human capital programs. We are referring here to all of the current block grants and the social, health, nutrition, education and training programs proposed for transfer. It would not be inappropriate for Congress to guarantee to maintain the current percentage of the federal budget, or GNP, as a continuing funding base for these programs. The regressive and declining trust fund proposed by the Administration should be rejected. I don't want to confuse federalism with funding issues, but the two are inescapably intertwined since the only way states have been able to use their new-found flexibility has been in deciding how to allocate cuts. We know of only two states--Iowa and Idaho--that made a commitment this year to make up for lost federal funds. Some, like Florida and Minnesota, partially filled the gap with tax increases, especially in the regressive sales tax. Many states, however, are making parallel * reductions in human service programs, saying that if the feds don't care neither do they. PAGENO="0189" 185 NASW's Project Block Grant has observed that states, by and large, are trying to absorb federal cuts in ways that may not be immediately felt by clients. However, we know that across-the-board reductions in personnel, travel and purchase of service contracts are resulting in fewer inspections of licensed facilities; the inability of child protective workers to aake as many home visits as before; a greater reliance on paperwork and crisis intervention rather than counseling and prevention in dealing with child abuse; the abandonment of information-referral and outreach services; and the institution of fee scales that may bar some from needed services. The direct impact on clients may never be discernible because of the lack of data. But we have begun to see, as in St. Louis and Milwaukee, what appears to be an increase of child deaths from abuse or neglect that may be at least partially attributable to case overload. In Pennsylvania, the number of verified abuse-related deaths has increased 28 percent in the past year. Most states have cut back on administration, planning and evaluation, which, we believe, will lead ultimately to wastefulness, inefficiency and less innovation. We have also found that states and agencies are spending very cautiously due to the uncertainty of this year's Continuing Resolution anc~, now, the FY 83 budget. In some cases, for example, fuel assistance funds have gone unspent as a hedge while poor people have gone cold in their homes. All of this "absorption," if you wish to call it that, cannot go on forever. I believe we will reach another telling PAGENO="0190" 186 8 point this July when many new state budgets go into effect. The toll on society will become more apparent as time goes by. All of this is to say that we hope that any federalism legislation will recognize the need for what the Advisory Commission on Intergovernmental Regulations has called the "critical mass" of federal funding necessary to make block grants meaningful. We also hope for provisions that will help leverage state and local resources. In addition, we believe this subcommittee could take the initiative in promoting the use of more progressive tax measures at the state and local level, for example, by enabling them to use IRS to collect state income tax. 2. Federal resources must be distributed in a way that takes account of varying state resources and needs. The current block grant distribution mechanism locks in the historic patterns and biases of categorical grants. Straight population is also a poor indicator of special needs and differing state revenue capacities. NASW believes a formula taking into account poverty and some specific factors relating to specific block grants (such as indicators of at-risk population or infant mortality rates) should be developed for each block grant. Similarly, states should be required, or at least encouraged, to use such- formulae in any pass-through scheme. 3. The national purpose of any block grant must be clearly defined. We know that the Administration, for example, has been using Title XX social services as a sort of dumping ground by suggesting that legal services, criminal justice and economic development be provided under it. So far, we have not heard of any such moves in the states. The potential remains, however, with the broadly written purposes in most of the block grant legislation and the absence of definitions of allowable uses. PAGENO="0191" 187 Most of the human service block grants generally prohibit the use of funds for real estate or improvements. Any federalism bill or generic language should, we believe, also prohibit the use of what we call human capital funds for projects that only heighten the competition between states for new industry and thus, result in no net gain for the nation. 4. The federal government must ensure non-disrlmination in the use of federal funds by states. Ultimately, the only systematic way to ensure this is to require reports of such data as the race, ethnicity, age, sex, handicapping condition and income level of service recipients. We do not think such reporting would be unduly burdensome, and it can be recorded in the aggregate apart from individual client files. This is the only way that citizens groups, like KAHN in Kentucky, will be able to monitor this aspect of block grants. In addition, we believe the non-discrimination section in the generic language should include protection against discrimination due to citizenship, residency and political affiliation. Title VI of the Civil Rights Act, Section 504, Title IX and the Age Discrimination Act should be specifically stated as applying to the block grants. And, finally, a procedure should be authorized for citizen complaints to the Secretary with a specified time period for determination. We also believe states shbuld be required to provide complaint and impartial hearing procedures. 5. Federal legislation must require planning, reporting and public p~rocedures that ensure accountability at both the state and national levels. Neither Congressional oversight nor grass-roots monitoring can take place without basic, uniform data. For each block grant, we suggest PAGENO="0192" 188 10 authorization of a national, unbiased study to identify the minimum number of data elements required to assess a state's performance against the stated purpose of the block grant. We think this information should parallel the data that should be required in each state plan and report, namely, needs assessment, objectives, activities, method of distribution, categories of individuals served and effectiveness indicators. States should then be required to follow this minimum level of planning and reporting. Ironically, both Title XVII of the Reconciliation Act and the proposed generic language require more detail in state plans or applications than in reports. From our point of view as monitors, a plan is only a plan, but the report is what will tell us what is actually done. We suggest that reports be required to relate back to the original plan. Regarding public hearings, we believe they should be held by the executive agency responsible for developing the plan. They should be held at least 30 days prior to the time the plan is to go into effect with the potential for amendment as a result of the hearing. Prior to the hearing, the agency should consult with representatives of advocacy, community and provider groups as well as elected officials and planners. All of this will be very expensive. And it does not even include the cost of establishing new mechanisms in state legislatures, many of which have been part-time, minimally staffed and uneducated in the area of human services. Some states, like my own, Kentucky, have already set up legislative study comissions. Ours will take up to one percent off the top of the block grants to finance its work. The principal purpose of most of these bodies is to determine the effectiveness, including the PAGENO="0193" 189 11 cost-effectiveness, of agencies receiving funds. Any of you familiar with the difficulties of evaluation research will understand the scope and possible pitfalls of such a task, as well as the fears of many service providers that they will be judged unfairly. NASW in the past year has insisted that every possible dollar be devoted to services to people, even at the expense of administration. As I mentioned before, however, this is not a sound course for the long term. We believe that Congress must, if it wants block grants to succeed, create a new pool of funds for planning, administration and evaluation. 6. Some services must be guaranteed to be publicly provided and some universally available. On this final point, I am speaking primarily of the social services block grant, which perhaps offers more lattitude to states in this regard than the other block grants. NASW has traditionally held the view that certain services are a public responsibility and should be carried out by public agencies. Children's protective services is a prime example because they have historically represented society's commitment to the health and safety of our children. This responsibility should not be delegated to the private sector. We also believe that administration and planning should be carried out by officials who are accountable to the public. Block grants, with their reduced level of funding, have posed a dilemma between the obvious necessity to target funds on those with the lowest income and the desirability, from a social point of view, to make some services universally available at no cost. Information and referral, the starting point for most people with any sort of problem, is such a service and was formerly mandated under Title XX. Crisis intervention and 99-965 0 - 82 - 13 PAGENO="0194" 190 12 certain public health services are other clear examples. We believe Congress has a duty to determine which services must be maintained for all people regardless of income as a public good. We also recommend concerted Congressional oversight on the impact of changes in eligibility standards and the inauguration of fee scales, both of which can act to deny these kinds of services to people who require then. Mr. Chairman, this concludes my statement on behalf of the National Association of Social Workers. I reiterate my appreciation for your affording us this opportunity and would be happy to answer any questions about my experience with block grants in Kentucky. Staff here with me from our national office would be glad to answer your questions about our national project. PAGENO="0195" 191 NATIONAL ASSOCIATION OF SOCIAL WORKERS, INC. 1425 H St., N.W., Suite 600, Washington, D.C. 20005 (202) 628~6800 Contact: Susan Rees or Al Gonzalez, NASW Legislative Staff TO: Subcoimnittee on Intergovernmental Relations of the Committee on Governmental Affairs, U.S. Senate DATE; May 11, 1982 SUBJECT: COMMENTS ON PROPOSED UNIFORM BLOCK GRANT MANAGEMENT ACT The following comments address uniform language regarding the cross-cutting issues of block grant management drafted by Senator Dave Durenberger, chairman of the Subcommittee on Intergovernmental Relations. They should not be regarded as an exhaustive analysis, but as preliminary comments reflecting the general concerns of NASW. NASW's primary disagreements with the draft are: * It negates all more detailed provisions for such items as applications, hearings, earmarking and priority services contained in individual block grant legislation, both current and future (sections 1741 and 17481. * It subordinates the. goal of achieving national purposes to the goal of increased flexibility for states (section 1742). * It excludes consumer, public interest, professional and provider organizations, and .the general public, from consultation on the preparation of state applications (section 17441 and from commenting on proposed federal regulations (section 1753). * It leaves enforcement of non-discrimination requirements entirely to the discretion of federal agency heads ~~section 17451. Sec. 1741 Applicability Uniform language pertaining to management should not supercede provisions of specific block grant programs.. Langusga in the specific programs should take precedence because it has had the benefit of the study, expertise and experience of the Congressional committees which. draftedit PAGENO="0196" 192 COMMENTS ON PROPOSED UNIFORM BLOCK GRANT MANAGEMENT ACT Nay 11, 1982 Page 2 (as well as the approval of Congress~ and, therefore, can be presumed to better reflect what is required to achieve the programst stated purposes. The requirements for hearings, applications and other matters in sev~ral of the block grants are more detailed than those in the draft language. The Health Prevention and Health Services Block Grant, for example, requires the application to identify those tpopulations, areas and localities in the state with. a need for the services't provided under the program. The uniform language could be construed to eliminate that requirement. We believe the uniform language should specify that the Act shall not supercede any provisions of law authorizing block grant programs. Sec. 1742 Statement of Purpose Flexibility, in and of itself, should not be the purpose of the Act. We believe the purpose should be to "foster sound administration, including through the provision of greater flexibility to recipients, in order to better ensure the achievement of national purpose." Sec. 1744 Application and Coordinatiqp It is imperative that state applications and reports contain sufficient data to allow, meaningful analysis by citizens in the states who, tinder the rationale for block grants, are supposed to replace federal agencies as the watchdogs and monitors of state performance. This is truly a bold experiment, since most private citizens lack the expertise, time and access to state documents to carry out this duty. We believe the Congress can assist them by assuring the availability of pertinent information without placing great burdens on state government. Reports on the actual use of funds must relate directly back to intended uses stated in the original application. In other words, the report must report on how' all elements of the plan were satisfied. We recommend that both annual applications and reports contain the information specified in Sec. 1742 of the 1981 Reconciliation Act (goals and objectives; types of activities to be supported, geographic areas served, categories or characteristics of individuals served; criteria and method for distribution of funds, including targeting on the basis of need). Furthermore, we believe that to enable citizens to assess compliance with targeting and non-discrimination provisions, states should be required to report in the aggregate the percentage of beneficiaries of block grant funds by race, ethnicity, religion, sex, age, handicapping conditions and income level. subsection (c~ regarding applications and reports should PAGENO="0197" 193 CONNENTS ON PROPOSED UNIFORN BLOCK GRANT MANAGEMENT ACT May 11, 1982 Page 3 be specifically documented as a response to the goal of citizen participation and as a guard against the repet~.tion of historic patterns of neglect of human services and inequities on the part of some states. In subsection (d), in addition to consulting with elected officials and planning agencies, states should be required to consult with representatives of "provider, community and advocacy groups" whose members are the beneficiaries or potential beneficiaries of block grant programs. No application should be accepted by the federal agency head unless the state certifies that such consultation has taken place. To make such consultation manageable, meaningful and fair, the legislation should authorize advisory committees which will meet regularly during the planning process. In subsection (e) regarding public hearings, legislation must ensure that notice be published and the application or plan be available throughout the state at least 30 days prior to the hearing. In addition, notice should be provided to provider, consumer and advocacy groups as well as to units of local government. Hearings should be held well enough in advance that it is possible to amend the application or plan before it goes into effect. Hearing officers should be required to make a written response to the major points expressed at each hearing. Because the public hearing should be an adjunct to the planning process, we believe it should be conducted by executive agencies or departments. This does not preclude legislative hearings. In subsection (g), the agency head should be required to withhold funds from any recipient who has been shown to have failed to meet the requirements of this section. Sec. 1745 Nondiscrimination "Citizenship, residency and political affiliation" should be added to the grounds for possible discrimination in subsection (a) (2). Citizenship and residency were formerly protected under Title XX. Especially in times of restricted resources, local officials are tempted to conserve funds by denying services to persons on the basis of citizenship and residency. This is particularly abhorent to the public interest when, for example, certain public health and protective services are withheld. Since these are federal funds, they should be available to serve all people. With the apparently growing trend of states to pass block grants through to counties, we are also concerned that even residents of the state will be denied services by technicalities regarding their county of residency. The legislation should require the establishment of a procedure within the state for the filing and impartial determination of discrimination complaints from individuals. Individuals should also have the explicit PAGENO="0198" 194 COMMENTS ON PROPOSED UNIFORM BLOCK GRANT MANAGEMENT ACT Nay 11, 1982 Page 4 right to bring complaints to the attention of the agency head. The agency should be required to issue a determination on such complaints within a limited period of time. A finding of failure to comply by the agency head should require referral to the Attorney General, exercise o~ federal non-discrimination laws and the withholding of block grant funds from the state. Sec. 1746 Transition Provision During the first transition year, all projects formerly funded under federal categorical programs should receive a pro-rata share of the block grant. The purpose of this provision is to avoid the unnecessary closing of agencies or disruption of services until proper evaluation has been made. Sec. 1747 Agency Reports The act should authorize and set aside additional funds for a study attached to each. block grant that will identify and define a minimal set of data to indicate, the progress of states in meeting national purposes. Such. study should be conducted by.an independent research organization and should be reported to Congress within two years. Based on the results of the studies, Congress.should require states to report to the agency head annually using the uniform data base. The agency head's annual report to Congress should be in writing and available to the public. Oversight hearings should be held annually by Congress. Sec. 1748 Use of Funds Subsection (a), in combination with Sec. 1741 (providing that all provisions of the Act supercede the individual block grant Acts), is greatly disturbing in that it allows states to unilaterally abandon specific services or programs that Congress has already decided must be maintained, at least to some degree, under block grants. The Alcohol, Drug Abuse and Mental Health Block Grant, for example, requires the continued funding of community outpatient services, including specialized services for children, the elderly, chronically mentally ill and former mental hospital patients; 24-hour emergency care services; day treatment of partial hospitalization services; screening for patients being considered for admission to state mental health facilities, and consultation and education services. States formerly did nQt administer community mental health centers. The Mental Health Systems Act of 1980, after years of study, authorized a transition to greater state involvement, but established special grant PAGENO="0199" 195 COMMENTS ON PROPOSED TJNIFORN BLOCK GRANT MANAGEMENT ACT May 11, 1982 Page 5 programs to encourage the achievement of nationally identified goals such as the mental health needs of the elderly and other previously underserved groups. The Mental Health. Systems Act never had a chance to work, but the ADMH Block Grant preserved some of its priorities by mandating certain services. Furthermore, we believe subsection (a) is unnecessary since states are already able to use block grant funds for any activity or service consistent with the purpose of the program. The only effect of this subsection, then, would be to overturn specific provisions, such. as the one mentioned above, which, only serve to further define the purpose of Congress in enacting block grants. The legislation should require that, in all services and programs funded under block grants, priority address first the needs of low-income individuals. Hearings should be held by Congress to determine which services intended to be funded under block grants should be universally available regardless of income and which should be mandated to be provided by public authorities. NASW believes that some services, such as child protection, represent a public good and, therefore, cannot be restricted by any eligibility standard or delegated to private entities which are not directly accountable to the public. Planning for the use of block grant funds is another function which, we believe, must be performed by a public entity. Block grants, whose purpose is the improvement of the health, education, training and social well-being of people, should be restricted from use in programs (such as economic development) which fail to serve the overall goal of improving the nation's human capital. Sec. 1749 Audits NASW is greatly concerned about the potential for co-mingling block grant funds with state resources and the possible result that federal dollars would be diverted to uses outside the parameters of the purpose intended by Congress. For this reason, we believe any audit should be programmatic as well as financial. We are pleased that the draft language recognizes most of the recommendations of the Comptroller General in his letter to the Subcommittee on Intergovernmetal Relations dated November 13, 1981. One recommendation that has not been taken, however, is that audits be required of sub-recipients as well as recipients. We point out that, in a review of 98 Title XX contracts with "sub-recipients," the Comptroller General's Office found 12 percent of the value of the contracts in 60 of the 98 contracts to be "improper and unjustified." PAGENO="0200" 196 COMMENTS ON PROPOSED 1JNIFQRM ELOCK GRANT 1'5ANAGEMENT ACT May 11, 1982 Page 6 In subsection (hi, we believe the one. percent, $1 million, earmark for auditing expenses either be eliminated as arbitrary and unrelated to actual cost or be funded separately from the block grants.. Sec. 1751 National Policy Assistance Standards The legislation should specifically permit an individual or group of individuals to challenge any certification by a recipient or sub-recipient. Such a challenger should be permitted to be a party to any hearing or appeal and to submit evidence of non-compliance. We disagree with the provision that evidence of a recipient's compliance with requirements under ~gy assistance program~ he considered and given "great weight" as evidence of compliance with the requirement under question. Sec. 1752 Oversight of Funds This section should be deleted. To say that state and local procedures should take precedence over any conflicting provision of this Act negates any reason for the Act and, in effect, gives recipients veto power over federal requirements~ Sec. 1753 Regulatory Provisions In addition to recipients, the public should be given advance notice and the opportunity to comment and submit recommendations on proposed regulations. Consultation prior to promulgation should be afforded to national and state organizations representing potential consumers and providers of the typical services under the block grant in question. The proposed language's restriction of such input to states, local governments and former recipients in this section ignores the interest of the wider public in federal programs. It also systematically excludes the. ultimate beneficiaries of services from having any voice whatsoever in the regulation of programs that affect their lives. PAGENO="0201" 197 NATIONAL ASSOCIATION OF SOCIAL WORKERS, INC. ~ SW 1425 H St, N.W., Suite 600, Washington, D.C. 20005 (202) 628-6800 May 11, 1982 Contact: Susan Rees or Al Gonzalez, NASW Legislative Staff INTERIM REPORT ON IMPACT OF BLOCK GRANTS Through NASW~s Project Block Grant, human service advocates have been monitoring the implementation of block grants in nine states 1 which represent approximately 33 percent of the nat~onts population. This summary is based upon the return of questionnaires from project participants- in five states (Florida, Mississippi, Missouri, Kentucky and California), informal information from other states and reports from other national monitoring projects-. The project will continue through June 30, 1983. This report, therefore, represents a very preliminary analysis. Because the Admini~tration has done away wtth most, if not all, uniform reporting requirements under block grants, and because block grants intentionally produce great diversity in the way states implement them, we doubt that any research will ever be conclusive on the impact on clIents nationally. Findings on the following points indicate that, in the first seven months of block grants, implementation has been highly uneven from state to state. Most of the impact of transition to state control probably will not become apparent for several years, arguing against further changes or additions to block grants until more conclus-ive patterns can be discerned. We do know that states have not rushed to fill the federal funding gap and, in fact, are continuing to withdraw their own resources. They are also reducing or eliminating services that had been given priority by Congress before passage of the 2981 Reconciliation Act. Only two of the five states had enacted comprehensive block grant legislation. Kentucky established a legislative research~ commission and block grant oversight process; California, a block grant advisory task force, consisting of executive and legislative branch appointments, to study all aspects of the block grants and make recommendations to the governor and legislature. ~The states are Pennsylvania, Florida, Kentucky, Mississippi, Missouri, Illinois, Minnesota, Colorado and California. PAGENO="0202" 198 INTERIM REPORT ON IMPACT OF BLOCK GRANTS May 11, 1982 Page 2 * In two of the five states, the executive branch held public hearings. In Missouri, state officials were ranked as having most influence at hearings that were largely to explain block grants. In Mississippi, where some 1,000 persons attended each of seven hearings around the state, service providers were ranked as being most influential. * Three of the five states had legislative branch hearings as part of the regular appropriations process. Florida, in additIon, had a special legislative hearing on block grants. * Three of the five states (California, Florida and Missouri) reduced state contributions to programs funded under block grants. * One of the five states, Florida, passed a (sales) tax increase, part of which is to help offset federal budget cuts. The other four states did not increase taxes. * One of the five states, Kentucky, adopted a new procedure for handling complaints. The rule establishes a policy for civil rights discrimination and service complaints in social services programs and covers procedures for informing clients of their rights, the filing of complaints and the conduct of evidentiary hearings and appeals. * In the Social Services Block Grant, purchase of service contracts, especially day care, information- ref erral, adult protective services and alcohol-drug abuse were mentIoned as having been cut more than the average by the three states answering the question. Generally, states have used two basic methods of allocating federal funding reductions: across-the-board and priority ranking. Prioritization appears to have been more prevalent in the Social Services Block Grant, with which states have prior administrative experience and which has traditionally provided a wide range of services. An example of the pro-rata method came in Mississippi where, after the intention to cut popular elderly programs was announced, the resulting outcry prompted officials to make across-the--board cuts in all purchase of service contracts. The public agency, meanwhile, suffered mainly "paper cuts." PAGENO="0203" 199 INTERIM REPORT ON IMPACT OF BlOCK GRANTS May 11,1982 Page 3 Even when states have prioritized, cuts in general administration, maintenance, travel and personnel have affected services across-the-board. For example, in California, the state continued to mandate that county social service offices provide child protective services (which other states have also recognized as meeting a "life-threatening" need) under prescriptive state regulations. Nevertheless, due to general personnel cuts, the state department predicted: "This.will generally result in increased caseloads and a decreased ability to provide direct services to clients.,.We will see more paperwork--less services." California also continued the mandates and regulations for in-home supportive services and out-of-home care services for children. The mandate, but not the regulations, continued for adult protective services, adult out-of-home care and information-referral. Both the mandate and regulations were dropped for child day care case management, family planning services and health- and employment-related services. Texas is another state which gave high priority to protective services, cutting it only 9.6 percent compared to a 12.4 percent average for all social services. Nevertheless, traditionally high-risk groups (unmarried/school age parents, truants, runaways and children in high risk home situations) were planned to be eliminated as recipients of contract a~id direct child protective services. When states rank priorities, preventive services, information-referral and outreach of all types tend to come out at the bottom. Some CAP agencies receiving funds from the Community Services Block Grant have been advised to stop outreach into poor communities they serve. Some Community Health Centers have eliminated their social service components which assisted clients in obtaining transportation, food, clothing and income support as an adjunct to health services, PAGENO="0204" 200 COALITION ON BLOCK GRANTS* AND HUMAN NEEDS PROJECT BOARD ANDREW MO1T,Ch~i~ C,nt,,f,rCo"~'u'~ityCh~!~ge ADELE BLONG ~ Sxi~I Welf&~ P~Ii~y ~d L~ JANET CANTERBURY N,tk~I C~ci1 S~k~ Citi~s JOHN CARR A,chdi~c~~ W~hi~gW~ KATE CRAWFORD Nah~I ~ ~ C~IitH~ SHANNON FERGUSON R~IA'~i~ BOB GREENSTEIN CeM~ fo~ B~dg~t ,nd IWicy P,ioñSes BILL KAMELA N~t,o~I Uth~ Cc,hscn Jcb~ Roc,,d~bI&NELP KATHRYN LAVRIHA ~ Vctc,~ NWo~I Ccc~cil of L~Booo SARA MORAN 1982 BLOCK GRANTS NoSoocl U,b,o Loogoo JANE MOTZ S tVIFORI BlOCK G~Ab7P I~N~GE Child,eoo Dcfooco Food MARA I'ATERMASTER Notioool Poo,tc Rican 5c,onc SUSAN BEES Natianal Anoccialico of Soci,IWotkotc JANICE ROBINSON ~ SOI.~~ of moodvHeaShCctaets C~IJITI(1~ (1~ BLOCK ~AI~PS 2~ND HIW~N NEELE KATHY ROY UoitndCntnbtal `cIty Axiation DEBBIE SISON National Edocatict" Aciation SANDY SOLOMON Noighbothood Coalition BUS SYKES Fact Bodgot AoSo,t Catttpatg&FRAC MURIEL VAUGHN National Black Child Docolop toot Inntilctto MELANNE VERVEER U.S. Catholic Coofotettce BARBARA WARDEN Tho Badgot CoaIiIott JUDY WAXMAN National H~alth Latc Ptogtattt SANDY SOLOMON Ectoctatico Ditocton 1000 Wisconsin Avenue, N.W., Washington, D.C. 20007 (202) 333-0822 PAGENO="0205" 201 Mr. (bainnan, m~ders of the Subcxminittee, I am Sandy Solomon, E~cecutive Director of the Coalition on Block Grants and Himian Needs. Cri behalf of the Coaltion I want to cczmiend you for your attention to the way in which federal authority is being transferred to the states at a time when the more pressing concern is the devastating effect the budget cuts are having on our nation's people and on the state and local jurisdictions that serve then. The questions you raise in these hearings may be less irrmadiately canpelling, but they are no less crucial to the fair and equitable distribu- tion of çublic resources. The Coalition on Block Grants and Human Needs is an alliance of over 100 national organizations that includes many religious denominations; civil rights groups; organizations representing poor and working people, the disabled, the elderly, watem and children; atlrEnunity-based employment, housing, education and economic devel- o~inent networks; any many others. We are working with more than 15 similarly diverse state-wide coalitions, most of them fonr~d out of a cat~ron concern over the canbined iupact of block grants and budget cuts. last year we were deeply concerned that Congress' precipitous approval of block grants and budget cuts would result in an ill- conceived transfer of the budget deficit to state and local government, the indirect elimination of many programs addressing PAGENO="0206" 202 important national needs, and a threat to accountable, accesible government procedures. It is as yet too early to offer a systanatic evaluation of the cxinbined effects of block grants and budget cuts, but the preliminary indications are that we were right to be werried. I should note that we are not opposed to all block grants nor to aU moves to decentralize public authority, but we strongly believe that the federal government has a role to play in providing standards for and oversight of the expenditure of ~federal funds. The Coalition, in its evaluation of block grants and other `new federalist" proposals, applies four principles. We look for: - * adequate federal funding for human needs and incone maintenance prcxrarns; * federal standards to ensure that such funds are targeted to those people with greatest need; * federal enforcesent of civil rights and other protections for Anericans with special circumstances; and * federal guidelines to ensure that local, state and federal agencies follcM open, derrocratic decision-making processes and adhere to basic standards for public accountability, including adequate record-keeping, auditing and oversight. Since Andy Matt appeared before this Subccmnittee last March on behalf of the Coalition, we have begun to gather information on the nine block grants enacted last year in order to evaluate the effectiveness with which states are assuming their new responsibilities. PAGENO="0207" 203 This task is by no neans xitiplete -- we intend to cxntinue and intensify our efforts through the swrrner - but we want to share with you sane tentative observations by way of raising again our concern that these four basic principles guide federal, state and local practices. For us it is a question of equity ~ng citizens and ~rong jurisdictions. If poor citizens are the irost underserved medically, or nest in need of fuel assistance, they should receive the bulk of the federal assistance which the Congress approves. If one state has a disproportionately high nuaber of people in poverty and disproportionately low fiscal capacity and effort, it is the propert rdle of the federal government to bridge the disparity between that state and its neighbors. Links Between Budget Cuts and Block Grants I know proponents of "ne~i federalism" like to draw a clear line bet~en the block grants an~ budget cuts, but it is an inescapable fact that these block grants are one of the principle devices in a campaign to eliminate virtually all federal support for danestic programs. State goverrinents are discovering that they have been given responsibility for poverty, that they i~ have, to quote Governor Lanin's testimneny last week, "sore authority to do less." Nevertheless, they continue to insist that the authority part of the equation is ~orth pursuing. I doubt whether especially in this decade the qj~iestion of resources ~an every be separated fran that of authority. States are hardly in an enviable position these days. A National Council of State Logislatures survey at the end of last year found that 30 of the 50 ~tates expected either year-end PAGENO="0208" 204 budget deficits or surpluses of less than one percent of the general fund. At the same time, as of xnid-~arch, 26 states were considering legislation to increase taxes by $6.8 billion, a sum that may, in the end, top last year's ten-year-record~ high increases. Block grant theory ass~mes that states will draw upon their a~n resources to compensate for lost federal funds or that they win continue to contribute the matching funds no longer mandated by federal law. While there is sane encouragement for this theory from the fact that many states are continuing their match for the Social Services Block Grant, it is clear that the latitude that states have to make these choices is diminishing as the demands upon their resources increase. There are many examples of Ixm~i these pressures will build up, strengthening the already intimate interelationships between budget cuts and block grants. When,for example, at the beginning of the 1983 fiscal year sane states assume administration of canmunity health centers under the Primary Health Block Grant they will be required to support: a rapidly grc~iing clientele because cuts in mean-s tested entitlement programs are prompting increasing numbers of people to use the centers to meet their basic health needs. Similarly, cuts in the federal irrrrrunization programs (which have led to a 32 percent drop in vaccine purchases) are putting increased pressures on the state inmunization programs funded under the Maternal and Child Health Block. Sane states -- Michigan and idaho arrong them -- are reporting reductions in their own programs; Idaho has closed sane of its public health centers, reduced the hours of those still remaining and discon- tinued distribution of vaccine to private physicians. There are similar examples in virtuaily every block grant area. PAGENO="0209" 205 We are finding that because the block grants were thra~n so rapidly to the states, and possibly also because this is an election year, many states simply imposed straight pro-rata cuts on funded programs. For example, three quarters of the states simply passed along the cuts in the Carsiunity Services Block Grant to arumunity action agencies. I~at we are able to carrr~nt upon today, therefore, is only a limited kind of block grant implanentation - most states did not take the tire to rethink relationships between programs or to evaluate program priorities before accepting funding. The block grant story this year is especially a budget cut story. For this reason, we urge the Subcorrmittee. to make this just the first in a series of block grant inple~entation hearings. MDst states begin their 1982 fiscal years in July, and there will be more to report about block grant impleitentation thereafter. It is especially important that you continue to request this information into fiscal 1983 since gpod information will be the first thing to disappear as federally mandated data collection ceases and funds are channeled to other functions. ~s little as we know now, wet U know less next year, according to one researcher who is studying. this problan. Targeting We can nonetheless offer certain cbservations about the crmbined impact of budget cuts and block grants. I should note at the outset that we are finding the record fran state to state -5- gg-965 0 - 82 - 1)4 PAGENO="0210" 206 and from program to program within each state to be extraordinarily varied. We've been iirpressed with the way sane states have managed to absorb the block grant cuts this year. We've also learned of instances in which targeting yielded to political or fiscal exped- iency. This year sane states were able to shield block-granted programs fran funding reductions because they had sane carryover fran last year. Colorado had enough 1981 categorical rroney, for example, so that it was able to fund its Preventive Health Block Grant programs at full level. Others made administrative changes; many states - Illinois, New Jersey, Kansas, Wisconsin, and Michigan anong then - reduced staff under the Social Services Block Grant, for exarr~p1e. But many states were also forced to make service reductions and those service reductions often came at the expense of people least able to afford increased fees or of groups who were excluded from eligibility (as, for exan~le, under the Lew-Incxmie Energy Assistance Block grant). A survey of roughly 150 public and private social service agencies conducted by the Missouri Assoc- iation on Social Welfare found that agencies were using four methods to iinplanent block grant cuts: * providing less services/ providing only crises services * raising eligibility reguiranents/ instituting or increasing fees for subsidized services; * extending the waiting time for services * or eliminating services cxsipletely. -6- PAGENO="0211" 207 All of these strategies have potentially harmful effects, but same are more likely to exclude the poorest recipients. For exanple, a irother workIng at rnininaim wage has a weekly take-hone pay of $120. If a day care center institutes a "copayment" or increased fee systen, the impact on that mother may be significant. In Missouri, the average payment is $3 per day or $15 per week per child, more than 10 percent of that mother's wages if she only has one child. This is a budget story but it is also a block grant story since states must decide to institute a cq)a~nt sch~ne or to try some other cost saving strategy. The further point, hc~.iever, is that as budget pressures increase, state goverments are increasingly tempted to use block grant funds for purposes only ro~tely related to the specific purposes of block-granted programs. In the interests of avoiding elimination of basic public functions, v~ fear that states quickly come to view block grant funds as supplemental to general purpose funds, and populations or programs~ of explicit concern to Congress will of necessity receive that much less support. For example, one state official predicts a stream of small demands on block grant funds in the area of health care; his county health department is r~uestfrg that one-third of its general budget support be drawn from the Preventive Health Block. Grmnt~ Those block grant funds, if so designated, will be supporting hypertension or health education or rape crisis or emergency medical services only indirectly, if at all. We are in danger of seeing these once-targeted resources disappear dc~qn the* gullet of* the state budget deficit. -7- PAGENO="0212" 208 We are also in danger of seeing targeting lost as more politically pc~ierful ccnstituencies dEnand a share of funds once desiqnated accord ing to specific need. The most glaring example of this trend is that in many instances states are designating counties as recipients of Ccrsnunity Services Block Grant funds and are using general population instead of lew-incnrre polulation as a critereon for resource allocation. For example, for fiscal 1983 the Montana legislature passed a law transferring all $1.2 million in CSBG funds to the state's 56 counties under a formula based primarily on total county population; roughly half of these counties will receive less than $10,000 each. There are two points to be made here: 1) not only will the state no longer target resources to areas with high concentrations of poor people, but it will provide a meaningful level of funding to few areas at all; 2) with counties involved either as designated recipients or as intermediaries between the state and designated recipients, not only will less support reach cairnunity- based agencies, but county administrative costs will also drain whatever support does cone to then. If targeting is in -jeopardy in sane states because of budgetary pressures it is also in jeopardy becuase of political pressures. The person who administers the Social Services Block Grant in one Southwestern state, for example, proposes a 95 percent cut in Title XX family planning services for fiscal 1983, dcr~in fran nearly $260,000 to $12,500. If the cut is approved, 4 clinics will close. PAGENO="0213" 209 This person is on recxrd as being adamantly opposed to family planning services whatever the budget level. I~nother example cares fran N~i England where one n~ayor announced that as soon as the grandfather clause was renoved, he intended to use Carmunity Services Block Grant funds for snow renoval; he said maybe he would hire low-incx~re people to do the job, but he had to consider the irrinediate political necessities. Ccxrmunity groups with which we work point to the caning year as a tine of mare extensive change and based on the budget trends they see now, urge us to watch for the following: * block grant funds being shifted away fran the poorest recipients and away fran low-incane camnunities; * block grant funds being shifted away f ran specific program areas to support mare general state functions; * block grant funds being shifted away fran smaller scale, ccnimunity-based delivery systens and towards larger, established delivery systens that may actually be less effective at reaching into the ccrrnunity; * block grant funds being treated as general revenue sharing to local governments, thus making available resources mare diffuse and potentially less effective; * block grant funds being channeled away fran the specific program areas because of political pressures. PAGENO="0214" 210 C~en, Democratic Decision-Making Qie aspect of block grant isplanentation we can begin to cxxrrnent on is the way in which the public was able to participate in planning for use of block grant funds. The National Governor' s Association has reported: The decision-making process typically involved the federal administering agency, a limited nur±er of state administra- tors, and the target population. In sane of the programa the federal agency alone made most of the key decisions re- garding funding allocations and program priorities with little of no state/ local government or public involvement. We w~.ild agree on the basis of our preliminary findings, that this kind of range in quality did exist for the hearings held .on the 1982 block grants. But, the range was enormous, much wider than the NG~ report would indicate when it claims that "if nothing else, the data provided by the states clearly and enphatically show that citizens were provided a multiplicity of opportunities to participate in the process of human services program development arxl decision- making." While Title XVII of the Qunibus Peconciliation Aot provided that states conduct "a public hearing, after adequate notice, on the use and distribution of the funds," the Secretary of Health and Human Services decided that states were exenVt fran those requirements in fiscal 1982. As a result, what hearings occmred this year for the HHS block grants occured at state initiative. The range is worth noting., An Institute for Local Self-Government study found that for the Cczrmunity Services Block Grant, Washington and Minnesota appear to be the only states that systematically sought out and involved recipients of services in irrplernentation planning." PAGENO="0215" 211 It observed that most states held a one-day hearing, us~ally ~n all block grants, and that only one fourth of then provided the opportunity for local governments, agencies and public interest groups to participate. In Michigan where the block grants went into effect without any public hearings, pressure fran a state-wide coalition on block grants praipted the state to hold consolidated hearings in six different cities on all the block grants. The citizens coalition agreed to handle public notice and other arrangenents and so was able to reach out to a variety of constituencies. Contrast that case with the case of Georgia described in the attached letter sent to meabers of Congress fran a nuirber of citizens incleding representatives of the Georgia Poverty Rights Organization and the League of Wanen Voters. It notes, "Even people who regularly monitor the state' s activities on these issues were unaware that there was to be a hearing until three days before the scheduled meeting... Legislators we met in the hallway on the day of this "legislative" hearing were unaware that it was to take place... This was the only hearing scheduled by the State. "Next year the state is preparing one plan for all block grants to be described at a May 19 hearing in Atlanta. Participants in a state-wide coalition cxi block grants were not sure when we spoke with then last week whether they would have th~ opportunity to testify at that time nor whether they would be able to see the plan beforehand. Here, then, is an exasple of a hearing procedure involving one meeting in one city to discuss all the block grants with inadequate time for citizens to revi~ the plan and no apparent system for responding to citizen cclTrrent. PAGENO="0216" 212 Fran the reports we have, many other block grant hearings were held on short notice, with no release of state plans and little clarity of purpose. The public had less than one week's notice in Pennsylvania where testimony at the two hearings was by invitation only and invitations went to only one public interest group per hearing and to not consuners ô~ programs or services included in the eight block grants. The public also had one week's notice in Texas. In North Carolina there were mare than 1,000 people at each of five out of six regional hearings on block grants, but because the state agencies had not widely distributed their plans for the caning fiscal year, few present were able to cairnent on the prcposals. In Rhode Island, public hearings were held two weeks ago on state block grant plans approved seven months before, in September. Participants in the state-wide coalition pointed this fact out to state officials whe pranise to convene another hearing shortly. In Tennessee, the state used its hearings mare as. a way to inform the public of expected cuts than as a way of soliciting crinrnents on block grant implementation. These anecdotes are cause for concern about fiscal 1983 planning and public participation. For citizens groups in Georgia the the minimal language in Title XVII was a standard against which they could measure their state's performance. Gengress and the federal agencies ought to be providing better standards and mare detailed guidelines. C~ie mare story, this time fran Ctiio where sane people when to the Department of Econcnic and Catrnunity Developuent to inquire about PAGENO="0217" 213 about plans for ~nall cities funding under the Ccxrmunity L~velo~xrent Block Grant. They knew the agency was soliciting reactions to its plan, but were told nothing was going on, so they went to the legislature to request hearings. The appropriate subcarrnittee held a hearing at which the state agency both testified arid then joined the panel to ask questions of the withesses. They also requested and received a full corrmittee hearing which the state later claimed as its public hearing. In the case of Chio, as bad as these procedures sound, citizen involvement forced the agency to focus on aspects of its plan that needed definition or irrproverrent. Nost important, they got the agency to correct a proposed formula for eccnonic distress that weuld have made catrnunities which had always been distressed ineligible to receive block grant funds. Citizen involvement like this can substantially improve block grant planning and administration and that, finally, is the bottan line. Accountability The Ohio groups were also successful in getting the state to establish an evaluation cairnittee caiposed of peeple affected by the program an~ of representatives of independent grcups. The cairnittee is charged to use a series of criteria including a break- down of expenditures and of beneficiaries to evaluate the proqrams effectiveness. It is worth noting this kind of effort at the state level since federal regulations on the point of record-keeping and performance evaluation are so weak as to invite discontinuation of most data collection. - 13 - PAGENO="0218" 214 This laissez-faire stance in the HUD regulations for Small Cities is repeated in the HHS regulations for the 7 block grants in its bailiwick. There are no requirextents that any data be collected on whe was served, what services they received, no requirenents that there be any data on which to base evaluation of program effectiveness. Past experience with block grant and revenue sharing programs has shcx~in the difficulty of tracking block grant funds in the absence of adequate data. This is one of the most serious problens inherent in these block grants - it will be inpossible to trace the expenditure of funds and to evaluate their impact. State data collection has historically been none to good. A recent G.A.O. study on state A. F. D.C. administation found that three of the fo~ir states studied did not have sufficient data on which to base valid decisions on program budgets or to assess c~erational efficiency. Federal data requirenents often make it easier for the state to conduct its ~n work. For exarrple, though its record keeping had been improving, the officials in the state of Maryland did not knci.~i ho~r many children were in state care until a national law required then to conduct a state inventory in 1980. Since then, one official notes, the information has provided the basis for inproved state program planning and evaluation and the ireans by which resource needs can be justified to the state legis- lature. The state would not have conducted this inventory on its ovi initiative. - PAGENO="0219" 215 We have similar concerns about the application and reporting requirements, about the anditing and o~plaint procedures and about the nondiscrimination protections in the federal regulations. It is too soon to tell hcM well individual states are managing the block grants this year, given these relaxed guidelines. The recent G.A.O. report on management and administrative controls under Title XX in four states found problems canton to all four: * States financial management and internal controls had been largely ineffective in protecting against fraud, waste, and abuse, * many of the problems appeared to be the "normal way of doing business", * sane of the conditions not only violated federal regula- tions, but also violated the states' ovn policies and procedures, * sane states failed to audit all or a vast majority of their contractor~, and * aixlits generally failed to meet the G.A.O. yellc~ book criteria for acceptable financial and catpliance auditing. The anens do not look good. State plans sukinitted to H.H.S. foi~ the Lc~ Incane Energy Assistance Block Grant varied fran 2 to several hundred pages. The least impressive plans merely parrotted the federal regulations; saying, for exanple, we will do outreach. If that's all that is required at the outset, then we would hope to see sane foundation being laid for thorough oversight ~nd performance review. We have no evidence that this is happening. PAGENO="0220" 216 Uniform language for Block Grants Senator Durenberger, we appreciate the opportunity to ~mient on the draft of your `tUniform Block Grant NanagenEnt Act" because of our basic ccnuuitment to see the principles of targeting, account- ability, openness, and enforcement of basic rights and protections incorporated into any block grant enacted by Congress. But we nn~ist strongly caution that any such uniform language must be a floor and not a ceiling for federal standards and guidelines. Title XVII of the Qnnibus Reconcilation Act, as inadequate as we felt it was, provided minimum, not maximum, standards. We believe that Congress must have the discretion to enact tougher provisions where those provisions are in its judgement necessary to maet the national goals and objectives embodied in particular programs. In fact, given that many of the specific protections in the block grants Congress passed last year are mare rigorous than those in the superceding provisions of your bill - given that even the provisions of Title XVII are mare rigorous - we weuld adamantly oppose this bill if you were to suhnit it in its present form. We are happy to discuss specific ways in which your proposal can be improved, but only if its purpose is changed to offer basic minimum federal standards for block grant administratiOnS We cxrrinend your desire to provide states with clear and uniform guide- lines, but we feel your goal can best be achieved by offering guidelines so superior to others already on the books, so inclusive, that the Congress will have little need to aimend them. If your bill could reaffirm strong federal expectations for state targeting, PAGENO="0221" 217 accountability, openness, and enforcenent of basic rights and protections, it would in fact becane a national ncdel, and one that we would be pleased to endorse. One other general ccmnent before I turn to particular provisions of this proposal. I could not help thinking as I was reviewing the draft, where are the people who live in these jurisdictions, the people who are to receive services funded under these block grants? Should not the purpose of this legislation also have something to do with than and their needs? It is finally citizens who will hold states accountable for their administration of block grants; insofar as the federal government does so it is only acting on their behalf. This proposal should begin with than and their interests: good, accessible information aoout programs states are administering, meaningful public participation in program planning and operation, effective citizen caiplaint procedures and civil rights protections. Let me turn to the proposal itself and review sane of our particular concerns. 1. Elimination of targeted funding for special programs or populations Last year Congress determined that some programs were too irportant or sane populations too vulnerable to leave adequate support for than to state discretion alone, so it explicitly designated those programs or populations for particular eligibility under the block grants. For example, rape crisis services under Preventive Health Block Grant received a set-aside of $3 million each year to be distributed on a population-based formula. PAGENO="0222" 218 Or, for example, the Lew-Incane Energy Assistance Block Grant was limited so that federal funds could be spent only on households which had a recipient of public assistance, a recipient of certain veteran's benefits or scineone whose income was beloc*i either 150 percent of the poverty level or 60 percent of the median state income. This proposal by superceding earlier legislation, would allew states "to provide for any activity or serviCe consistent with the purpose of the program," thereby allowing states to ignore those national priorities Congress considered worthy of special attention. We think this is an inappropriate limitation on Congressional discretion, and we see it as an attack on these special programs and populations already designated for assistance. Targeting on the basis of need -- or incane of special condition - &)es not lend itself to uniformity. Each block grant should be targeted to be most effective at meeting the most serious rEeds it addresses, not spread so thinly that it has no impact at all. For example, primary care funds should be concentrated on the nedically needy. Without this targeting critics will legitimately be able to say that block grant serve no .ide~itifiäble purpose and that their continued existence should be reviewed. .2. Elimination of targeted funding for former grantees Not only does Title XVII provide minimal protection for grantees under block-granted programs by mandating that grantees with track records of proven effectiveness be considered for PAGENO="0223" 219 continued funding, but several of the block grants include far sore specific guarantees for continued support of programs serving low-incxzne populations or populations with special needs. This proposal would appear to supercede language on fundIng guarantees in block grant legislation passed last year and to limit Congressional discretion to set such guarantees in future block grants. It would affect such agencies as corrmunity health centers under the Primary Care Block Grant and mental health centers under the 14~ntal Health Block Grant -- danand for their services is dramatically increasing. We think this is an inappropriate limitation on the authorizing corrmittees and their ability to identify effective vehicles to deliver program assistance. 3. Weakening of program assurances protecting beneficiaries Sczne of the block grants passed last year require recipients to make important program assurances to qualify for federal funding. For example, the Naternal and Child Health Block Grant (Title V) reguires assurances regarding fair methods of allocation, substan- tial provision of health care services to nothers and children, continuation of special projects crucial to maternal and child health, reasonable charges, and effective coordination with other programs on which children depend. This proposal under Section 1744 (f) would eliminate the reguir~nent of accountability. Pecipients would be entitled to federal fund~. so long as their applications assured that "the proposed use of the funds is consistent with the purposes of the program." Under thIs proposal a federal agency would PAGENO="0224" 220 have virtually no information about the fundamental nature.~of :a recipient's program before ruling on its application. Last year, authorizing asimittees determined that guarantees and assurances were essential to certain programs. This language wipes out those guarantees and assurances wholesale. 4. weakening of public hearing requirements Even Title XVII centained sane public hearing requireients giving citizens the right to participate in the design and imple- nentation of block grant programs. We have already noted hcM groups in Georgia depended upon its provisions to make their case for adequate notice, timely prior release of state plans, and other state outreach efforts. This proposal ~ould weaken these already irmdest requirements under Section l~44 (e) by eliminating timely notice provisions. It should be replaced by a provision assuring public hearings that give the public an opportunty to assess program needs, revi~1 program priorities and evaluate program effectiveness. As we have already noted, this process can yield enonr~us benefits. Block grant theory makes its case for close-to-hane government based on this kind of citizen insxlvement; public participation sheuld be explicitly mandated. 5 Presumption of civil rights emmpliance Recipients of federal funds are subject to civil rights requirements, including protections for the handicapped, prohi- bitions against age and sex-based discrimination and Title VI provisions under the Civil Rights Act of 1964. PAGENO="0225" 221 This proposal under Section l~5l would make these civil rights protections virtually unenforceable by presuming that the recipient is in caupliance with civil rights guarantees and other cross-cutting requirements. MDreover, a recipient~ s ccatipliance reports and assurances would be given undue weight in any crmipliance proceeding. Once the lead agency on a cross-cutting requirement had certified a recipient to be in ccaipliance the agency administer- ing the funds would be unable to reverse that certification, even if an intended beneficiary were to prove the recipient to be in violation of federal civil rights requirements. Civil rights protections are only as meaningful as their enforcement;the provisions of Section l~5l make a irockery of the vigorous pursuit of civil rights enforcement. 6. Other guarantees needed Reports If the public and the legislature are to kncM what impact block grant\ funds are having they must have access to adequate reports listing projects funded, their locations, arrount of project grants and their primary beneficiaries. They must have that inforamtion at both the beginning and the end of the year in order to evaluate the effectiveness of that block grant and determine whether changes ought to be made in its desigu. Record keeping ~Eb produce such reports and nDnitor targeting, states should be keeping the necessary data to describe populations and areas served. 99-965 0 - 82 - 15 PAGENO="0226" 222 These reports should be open to public scrutiny in a central location. Cczr~laints Experience with past block grant and revenue sharing programs has shc~n that the mDst effective, tmbureaucratic way to ensure ~npliance with national legislation is to provide a fair, thorough hearing for citizen ccxnplaints. Several of last year' s block grants provide for ca~plaint procedures, in fact they place the heavy burden of proof on citizens by presuming cxirpliance. We urge the Subooninittee to set up a process whereby such cceplaints iray be given thorough hearing. *** *** In conclusion, I want to thank this Subcorrrnittee for its attention to all of these issues. In continuing to examine the record on state administration of last year' s block grants it is performing a valuable oversight function, one that is badly wanting in other quarters. In continuing to encourage discussion about uniform federal standards for state administration of block grants it is raising a vitally irr~ortant set of questions. Finally, Senator Durenberger, I want to express irw appreciation to you in particular for your open-minded inquiry into these subjects. Your insistence on a "neW federalism" that recognizes differenáes in fiscal capacity and effort among states has been an ixportant contribution to the debate this year, since they are differences that go to the heart of these proposals. We think they are differences that make it incurrhant upon the federal government to continue playing a predaninant role in addressing national problans like poverty, unaxployment, and discrimination. PAGENO="0227" 223 Marôh 8, 1982 We are writing to express to you our dismay and dissatisfaction with the State of Georgia's record so far in handling the block grants created by Congress. A rec~nt `public" hearing on the Preventive Health and Health Services Program and the Mental Health, Alcohol and Drug Abuse Program reflects the State's apparent unwillingness to give the public a meaningful opportunity to participate in decision making, or even to know what decisions have already been reached. The State's actions certainly show contempt for the opinions of the public and possibly even violate the requirements of the Omnibus Budget Reconciliation Act of 1981. Titles IX and XVII of the Omnibus Budget Reconciliation Act require the `State to follow certain procedures in accepting the block grants. According to Section 1905 of Title IX, Subtitle A, Part A, regarding the Preventive Health and Health Services Block Grant, the State must submit an application which contains assurances that the legislature of the state has conducted public hearings (emphasis added) on the proposed use and distribution of funds. The section further requires that the chief executive officer of the state furnish, as a part of the application, information on the programs and activities to be supported and services to be provided. The description is to have been made public within the state in such manner as to facilitate comment from any person during the development of the description and after its transmittal. Part 13, Section 1915 imposes exactly the same requirements for the Alcohol and Drug Abuse and Mental health Services Block Grant. Title XVII, Subtitle C, Section 1741 further requires that each State prepare a report on the proposed use of block grant funds, including (1) a statement of goals and objectives, (2) information on the types of activities to be supported, geographic areas to he served, and categories or characteristics of individunis to be served, and (3) the criteria and method estttblished for the distribution of the funds, including details on how the distribution of funds will be targeted on the basis of need to achieve the purposes of the block grant funds. Beginning in the fiscal year 1983, the report must include a description of how the State has met the goals, objectives, and needs for the previous fiscal year as identified in the report prepared for that previous fiscal year. The report must be made public within the State on a timely basis and in such manner as to facilitate comments from interested local governments and persons. No State may receive block grant funds for any fiscal year until the State has conducted a public hearing, after adequate public notice, on the State's proposal as set forth in the report. Georgia's response to these requirements has, in our view, been totally inadequate: The hearing `was inadequate as to notice, ti in and accessibility to most Georgians. Even people who regularly monitor the State's activities on these issues were unaware that there was to be a hearing until three days before the scheduled meeting. The only notice of the hearing was a legal notice in two newspapers two weeks prior to the hearing. One of the notices appeared in the obituary section, and one appeared in the sports section. (Copies of these notices are attached for your information). Notices were not sent to advocacy groups known to have an interest in these matters. Legislators that we met in the hallway on the day of this "legislative" hearing were unaware that it was to take place. In fact, it had been scheduled for Friday afternoon after adjournment, a time when most of them have already left the Capitol for the weekend. The result was that only one legislator, the one who chaired the hearing, attended. This was the only hearIng scheduled by the State despite the fact that Georgia encompasses a very large geographical area and that many people concerned about the use of. the block grant funds would be unable to reach Atlanta for the hearing. PAGENO="0228" 224 Participation in the hearing was hampered for those lucky enough to learn of it by the fact that the information alleged in the notice to be available through the health departments was not, in fact, available. A call to the Fulton County Health Department the week of the hearing revealed that the Commissioner was not even aware that such a hearing was to occur and did not have available any information for distribution to the public. Attempting to obtain the information directly from the Department of Human Resources, Mrs. Frances Pauley went first to DI-IR's Budget Officer, who was in a meeting, then to the Director of the Physical Health Division. She was told by the J)ircctor to go back to the Budget Officer. Upon her return to that office, she finally received a six-page document. Other advocates experienced similar difficulties in tracking down the information which had been prepared. The information prepared by the St to was insufficient to allow meaningful comment on its plans. We invite your attention to the attached document. As you can see, it gives only the sketchiest descriptions of the programs, provides little information as to exactly what services will be provided, givcs no statistics on numbers and characteristics of clients served, or actual costs of providing services, no goals and objectives, and scanty information on the details of how funds will be targeted on the basis of need. In addition, the budget figures given were disembodied numbers apparently reflecting a nine-month federal share allocation, with no information on the numbers of state dollars allocated to each area. The previous years budget was not given, so the public could not know whether a greater or smaller share of resources was allocated for an activity in 1983. When Mrs. Pauley asked for additional information, she was told by the Budget Officer that there was no other information readily available and that it would take a computer print-out three feet high to provide what she wanted. Only two other efforts have been made l)y the State to provide the public ami opportunity to participate in the decision making on the block grants. One was a hearing held before the Department of human Resources Board subcommittees in June of 1981 before there was very much information as to what the block grants would look like on the federal level. The ether was a meeting held by l)llR in September of 1981 during which the Department presented only broad outlines of its plans for use of the funds. In summary, we believe the State has failed to provide adequate opportunity for participation by the public in decisions on the block grants. Information has not been made public in such a manner as to `facilitate comment from any person". In fact, the State might as well have tried to preclude comment from the public. Even today, we do not have meaningful information on what the State intends to do with the funds. We urge you to take action to assure that this abuse is corrected so that we and our elected representatives can have a voice in the decisions. Thank you for your attention to our concerns. Sincerely, Attachments PAGENO="0229" 225 [From the Atlanta Constitution, Feb. 5, 1982] NOTICE OF PUBLIC HEARING In accordance with the Omnibus Budget Reconciliation Act of 1981, the public is hereby notified that: (1) A public hearing by the Georgia General Assembly on the proposed use of the Alcohol, Drug Abuse and Mental Health Services Block Grant and the Preventive Health and Health Services Block Grant for Fiscal 1983 will be held at 1:00 P.M. in Room 341 of the State Capitol on Friday, February 19, 1982. (2) At such hearing, citizens shall have the opportunity to provide written and oral comments to members of the Georgia General Assembly concerning such proposed use. (3) The Georgia Department of Human Resources has been designated as the single State agency to administer these programs in Georgia and has prepared its report on the proposed use of these block grants. A copy of the summary report on Preventive Health and Health Services will be available in county and district health offices and the summary on Alcohol, Drug Abuse and Mental Health will be available in community mental health centers and district health offices. These reports will be available for review by Wednesday, February 10, 1982. (4) Citizens desiring to submit written comments may mail such submissions to: LEGISLATIvE BUDGET OFFICE, Atlanta, Georgia. Senator DURENBERGER. We appreciate all the witnesses who have made contributions to this hearing. The hearing is now adjourned. [Whereupon, at 12:20 p.m., the subcommittee recessed, to reconvene at the call of the Chair.] PAGENO="0230" PAGENO="0231" ADDITIONAL MATERIAL SUBMITTED FOR THE RECORD American 77b Pvtdssachusetts Ave. NW Planning WaThington, DC 20036 Association Phone 202.872.0611 June 15, 1982 Senator David Durenberger Chairman Subcommittee on Intergovernmental Relations Senate Governmental Affairs Committee Washington, D.C. 20510~ ATTN: `Ms. Velora Washington and Ms. Pam Hess Dear Senator Durenberger: We are grateful for the opportunity to comment on the tJniforrn Block Grant Management Act of 1981, still under review and consideration. We are supportive of the provisIons of the Act and wish to make some recommendations which we believe will strengthen it. The American Planning Association (APA)is a nationa). organization of 2l,000~members including city, regional and state planners, elected and appointed officials at all levels of government, professional practitioners, educators, interested citizens and students. Our membership belongs to 46 Chapters covering virtually every state and Congressional district. In addition, within APA are fourteen divisions that bring together members with interest and expertise in particular aspects of planning; such as the metropolitan and regional planning division, which I head and on whose behalf I wish to conuhent on the Block Grant Act. The American Planning Association at its annual meeting in Dallas last month, adopted a policy statement in regard to New Federalism which is pertinent to Block Grant programs. The following are APA's policies on New Federalism: I.. Framework The mission of the American Planning. Association is to advance the art and science of planning and the use of planning procedures at local, regional, state and national levels. The objective is to improve the decisions that are made by the many publics which establish goals to be reached in physical, economic and social develo~nent of the community, devise means to reach those goals, and use their resources to implement decisions. The measures of good planning.are effectiveness in resolving conflict among goals and reco.nciling competing priorities, the creativity of plans toward achieving goals, effectiveness of the means employed and economy in the use of resources. (~27) PAGENO="0232" 228 Senator David Durenberger June 15, 1982 Page 2 Good planning in our democratic societyrequires that necessary public actions must respect private and individual preferences;: that necessary state and national actions must respect local decisions; that necessary action by majorities must respect minority interests; thgt the necessity of a free market must respect the limited public regulation that makes it possible. This mission of APA is the foundation for the foll~zing framework for policy in regard to New Feder4ism: 1. The New Federalism must recognize, require and provide for the role of planning and new planning initiatives at all levels of government. These are made necessary by the reallocation of responsibilities and are essential in order to ensure a rational process for needs identification and resource allocation. 2. The enhanced role of states under the New Federalism requires a strong state planning function institutionalized within state government and structured for the benefit of the governor, state agencies, and the legislature. State plannij~g should provide for a rational framework to deal with the nation's domestic problems by integrating adopted local, regional1 state and national gqals. 3. ~Phe New Federalism recognizes the issue of the relative roles of state and local governments and provides for a pass- through system to ensure that local governments continue to have the responsibility for delitrering services ,~n those states where they had had ~that responsibility. (~`he New Federalism is silent, however, on the role of metropolitan and regional agencies in providing an~ important forum for coordinating planning among various levels and units of governments, operating authorities and citizen groups~> Recognition must he extended to metropolitan and regional planning as well. 4. Federal legislation and regulations to implement the New Federalism must include requirements that maintain the Congressional intent o~ programs to be transferred. This calls for the establishment of standards for health care, for income maintenance, for public transportation, for housing and other urban needs to be provided by states and localities. These standards should be built into the planning components by Congressional mandates. II. APA's Policy on the New Federalism The Board of Directors has adopted Ihe following positions and recommendations regarding the New Federalism: PAGENO="0233" 229 Senator David flurenberger - June 15, 1982 Page 3 1. The planning community is committed to help to define the appropriate roles of government, inciudi~g: * a clear and equitable assignment of governmental functions and of authority to perform them; * shared responsibilities, duties, and authority; * interaction to achieve improved functional program performance as well as overall governmental performance; and * interaction to enable programs to meet the needs of geographic areas and groups of people across governmental boundaties, economically and effectively. As much as possible, each level and unit of government should be allocated sufficient powers and resources to carry out its responsibilities. 2. The di~vision of governmental responsibilities should he done in a carefully planned manner, using a well considered set of criteria establishing the federal role. The New Federalism must not relieve the Congress and the Federal government from their responsibility of maintaining the national interest, including: * economic and social equity; * energy and resource development and conservation; * education; * employment and a sound economy; and * preservation and enhancement of the quality of the environment. The Federal government mus~t maintain an active role and continue programs that recognize these issues of national interest. 3. New Federalism is not a sub~titute for national urban policy. A strong national urban policy requires long-range, interrelated national goals and policies in regard to growth, settlement, land use, energy, environment, transportation and economic, social and cultural concerns. A national urban policy is an essential framework for state and local actions in implementing urban programs under the New Federalism. PAGENO="0234" 230 Senator David Durenberger June 15, 1982 Page 4 4. ~4~uate resources must be provided as an integral part of the New Federalism to ens~ire ~he capacity of institutions, state and local, public and private, to cope.with the addeç] demands for urban services they are now asked to provide. This is even more essential in light of recent cuts in Federal funding for such services. 5. The American Planning Association supports Federal responsibility for all public assistance programs. This is generally consistent with the concept of Feöeral responsibility for a sodial safety net, although it would expand the current Admihistration's own definition of that net. specifically, food stamps and Aid to Families with Dependent Children (AFDC) would be added to the list of Fu] l.y Federal responsibilities, as well as, perhaps, housing assistance payments to individuals. The welfare system, today, has become much more than just the traditional "welfare check." Medicaid, proposed by the President for full. Federal responsibility under the program swap proposal in the 1982 State of the Union Address, also is part of the social safety net concept along with basic social security benefits, supplemental security income, Medicare, unemployment, and Federal pensions. Nationwide equity among individuals and the importance of these major income flows in the national economy make these safety net programs essential national responsibilities. 6. The Federal aid system has becom~ a major source of revenue for state and local governments in the United States, mildly equalizing the capacities among states to undertake the many programs and meet the many standards established by the Federal government. As this major source of revenue is withdrawn, the differences in fiscal capacities among the states will increase substantially. Thus, in line with its policy that each level of government should have the authority and capacity to perform the functions assigned to it, the American Planning Association supports the concept of a permanent federalism trust fund designed to help equalize tax wealth among the states. From the point of view of metropolitan and regional planning, I wish to elaborate on the policy statement in two subject matters, the role of government in block grant management and the issue of block grant funding: 1. The Role of Government in Block Grant Management a) The roles of state and local governments in the administration and financial management of block grants should be determined jointly by them. PAGENO="0235" 231 Senator David Durenberger June 15, 1982 Page 5 b) State and local agreements on block grant~management should recognize the impOrtant role that ~egionai councils can play in relating local interest to state programs. Federal legislation should recognize and encourage the role of regional councils iii the manaqemont of block grants. C) State and local governments should be ez)couraged to develop cooperative efforts and funding for interstate metropolitan areas. d) Federal legislation should give preference to local general purpose govern~nents and regional councils as the channels for planning and implementing block grant programs, in contrast to special agencies not acountahie to the electorate. 2. Block Grant Management a) ~p~ss-through or similar formula should be required to maintain direct federal funding to local governments and I~egional councils for existing categorical programs. b) Funding allocations should be determined jointly by the states, the local governments and the regional councils. c) The relative size of local governments should be recognized in albocat~ing block grants to these governments. d) Technical assistance should be an eligible activity in state block grants. Thank you for the opportunity to comment on this important legislation. If the APA can provide additional information, please do not hesitate to call George T. Marcou, AICP, Director of National Planning Policy. S~ncerely rs, J rr A Coursey Metropolitan and Regional Planning Division PAGENO="0236" 232 AMERICAN PUBLIC HEALTH ASSOCIATION 1015 Fifteenth Street N.W., Washington D.C. 20005 * (202) 789-5600 Stanley J. Matek, MS., President Nay 18, 1982 The Honorable David Durenberger Chairnan Subcommittee on Intergovernmental Affairs Senate Committee on Governmental Affairs 507 Carroll Arms Building 301 First Street, N.W. Washington, D.C. 20510 Dear Senator Durenberger: As an organization representing a combined national and affiliate membership of over 50,000 public health profes- sionals and community health care leaders, we ask that our opposition to the "Uniform Block Grant Management Act of 1982" be recorded as part of the testimony for the public hearing of the Subcommittee on Intergovernmental Affairs held on Hay 11, 1982. As members of the Coalition on Block Grants and Human Needs, we support the testimony given by Ms. Sandy Solomon before the Subcommittee. APHA concurrs with the concerns expressed by the Coalition with regard to the use of block grant funding as a mechanism for indiscriminate reduction of non-military domestic program funds. We feel that states should be held accountable to meet federal performance standards and that local health agencies must be systematically involved in the development of state plans for the utilization of federal block grant monies. In addi- tion, enforcement of basic rights and protections should be included into any block grant enacted by Congress. Finally, we are opposed to any effort which would wipe out in one step the targeting provisions which have carefully specified needy populations, and have been developed after much public debate and long Congressional study. The approach of this proposed legislation is put forth in the name of increasing state flexibility, but reveals an ignorance of the complexity of our nation's health and human problems.. It would contribute to the further blurring of the specific federal responsibilities for assuring that critical services meet the needs of those who truly need them. Very truly yours, Stanley J. Matek, MS President 2 Enc osur'e PAGENO="0237" WALD, HARKRADER & ROSS 233 ZACCARS C. FASRAN LEWIS A. COWER CHARLES A. ZIELISSAI June 1, 1982 Ruth Doerflein, Chief Clerk Subcommittee on Intergovernmental Relations Committee on Governmental Affairs U. S. Senate Room 507, Carroll Arms Building 301 First Street, N.W. Washington, D.C. 20510 WASHINGTON, 0. C. 20036-1697 (200 $28-WOO (R5I) 886333 SALAWG Re: Statement for the Hearing Record on May 11, 1982 Hearing on Implementation and Management of Block Grants by the Senate Governmental Affairs Subcom- mittee on Intergovernmental Relations Dear Ms. Doerflein: - This letter is to transmit the enclosed copy of a Statement on the proposed draft Uniform Block Grant Management Act of 1981 on behalf of the undersigned national private, nonprofit voluntary human services sector organizations for inclusion in the hearing record of the May 11, 1982 hearing on implementation and management of block grants, held by the Subcommittee on Intergovernmental Relations of the Senate Committee on Governmental Affairs. As noted, this Statement is being submitted for inclusion in the hearing record and upon the specific agreement by the Subcom- mittee Chairman to hold the hearing record open for receipt of PAGENO="0238" 234 Ruth Doerflein, Chief Clerk June 1, 1982 Page Two this Statement in response to the request for this purpose of The Child Welfare League of America made in its oral testimony presented at the hearing. If you have any questions or need any further information, please do not hesitate to let me know. ~ Laurence . Hewes, III WALD, HARKRADER & ROSS Attorneys for Boy Scouts of America, Boys' Clubs of America, National Board, YWCA of the USA, The Child Welfare League of America, The Salvation Army LIH/elg Enclosure PAGENO="0239" 235 WALD, HARKRADER & ROSS 300 NINETEENTH STREET,N.w., WASHINGTON,D.C. 20036 (6C~3: Statement on the Proposed Draft Uniform Block Grant Management Act of 1981 by the Undersigned Grants and Contracts PrOject Members for Inclusion in the Hearing Record on Implementation and Management of Block Grants Senate Committee on Governmental Affairs Subcommittee on Intergovernmental Relations Hearing Held on May 11, 1982 - Room 357, Russell Senate Office Building Washington, D.C. Boy Scouts of America Boys' Clubs of America National Board, YWCA of the USA The Child Welfare League of America The Salvation Army By:_________________________________ Laurei'fce ~. Hewes, III WALD, HARKRADER & ROSS June 1, 1982 PAGENO="0240" 236 TABLE OF CONTENTS I. INTRODUCTION 1 II. OVERALL ASSESSMENT OF THE DRAFT UNIFORM BLOCK GRANT MANAGEMENT ACT OF 1981 3 III. DISCUSSION OF THE BASIC ISSUES IN THE DRAFT UNIFORM BLOCK GRANT MANAGEMENT ACT OF 1981 1. Use of Funds 4 2. Public Involvement 5 3. Federal Reporting Requirements 7 4. Audit 5. Administrative Expenses 9 6. Federal Uniform Administrative Requirements and Cost Principles 10 a. In General 10 b. Enforcement of National Policy Assistance Standards 11 IV. SUMMARY 11 PAGENO="0241" 237 WALD, HARKRADER & ROSS 1300 NINCTSENTH STREET,N.W., WASHINGTON, DC. 20036 June 1, 1982 ssesg (Ass) Statement on the Proposed Draft Uniform Block Grant Management Act of 1981 by the Undersigned Grants and Contracts Project Members for Inclusion in the Hearing Record on Implementation and Management of Block Grants Senate Committee on Governmental Affairs Subcommittee on Intergovernmental Relations Hearing Held on May 11, 1982 Room 357, Russell Senate Office Building Washington, D.C. I. INTRODUCTION This Statement is submitted on behalf of the undersigned national voluntary organizations for inclusion in the hearing record of the hearing held on Tuesday, May 11, 1982 in Room 357 of the Russell Senate Office Building concerning the implementation and management of block grants1! and consolidation programs,~! by the Subcommittee on Intergovernmental Relations of the Senate Committee on Governmental Affairs. In addition, the Child Welfare 1/ Sec. 1741(b) (1) of the Omnibus Budget Reconciliation Act of 1981, Pub. Law 97-35 (Aug. 13, 1981) defines a block grant. Some programs popularly called block grants may be interpreted (and have been by HHS, for example) as not being block grants for purposes of the Act but of being, instead, consolidation programs. 2/ Sec. 2352(a) of the Act, Pub. Law 97-35 (Aug. 13, 1981) defines the so-called social services "block grant" as a consolidation program. Sec. 2192 does about the same thing for programs consoli- dated into what is now popularly called the maternal and child health services block grant. 99-965 0 - 82 - 16 PAGENO="0242" 238 WALD. HARKRADER & ROSS Statement on Proposed Uniform Block Grant Management Act of 1981 Page Two League of America, Inc., in its testimony, asked that the hearing record be kept open for inclusion of this analysis of Sen. Dave Durenberger's proposed draft Uniform Block Grant Management Act of 1981. Chairman Durenberger generously agreed to that request. The undersigned national nonprofit, voluntary, social and human service organizations have a record of involvement in federal financial assistance and are deeply involved in a wide variety of social and human program research and service delivery. These private, nonprofit, charitable organizations and their members constitute an important portion- of the voluntary nonprofit sector ("voluntary sector'), have scores of local, community based corporate members and chapters, and millions of individual members. Many of the local nonprofit corporate members and chapters operate grass roots programs which are financed privately and publicly.~/ These national membership organizations are: Boy Scouts of America Boys' Clubs of America National Board, YWCA of the USA - The Child Welfare League of America The Salvation Army 3/ Issues and Problems Associated with the Administration of Federal Financial Assistance Programs by Non-Profit, Voluntary Social Service Organizations, June 14, 1965 (hereinafter `1976 Report"), p. 1. PAGENO="0243" 239 WALD. HARKRADER & ROSS Statement on Proposed Uniform Block Grant Management Act of 1981 Page Three The need for the services provided by such organizations is greater than the funds available. With the retrenchment of govern- ment, both federal and state, in these areas, it is even more critical for the voluntary sector, and the rest of the nonprofit sector, to expand existing programs to meet the increased needs of the public which are no longer being met by the federal govern- ment. II. OVERALL ASSESSMENT OF THE DRAFT UNIFORM BLOCK GRANT MANAGEMENT ACT OF 1981 We commend the Subcommittee and its Chairman, Sen. Durenberger, for interest in improving the management and implementation of block grants and related programs. We believe this subject needs further study, as shown by the experience with block grants and consolidation programs thus far.Y The current draft bill should, and we are sure, will, be used for discussion purposes with respect to such central block grant issues as use of funds; public involvement and participation in the planning, use, management and administration of block grants and consolidation programs; federal reporting; audit require- ments; administrative expenses and enforcement matters. With respect to a number of these issues, the current block grant management provisions of Title XVII of the Omnibus Budget 4/ See Statements for the hearing record by the Child Welfare League of America, National Conference of State Legislatures, U.S. Conference of Mayors, National Association of Counties, National Association of Social Workers and Coalition on Block Grants and Human Needs and others on May 11, 1982 before the Subcommittee. See also GAO Report 8-206864, `Allocation of Funds for Block Grants with Optional Transition Periods (GGD-82-65)". PAGENO="0244" 240 WALD. HARKRADER & ROSS Statement on Proposed Uniform Block Grant Management Act of 1981 Page Four Reconciliation Act of 1981, P. Law 97-35 (Aug. 13, 1981) ("Title XVII" and "The Act") are stronger, clearer and, in our judgment, more desirable than those in the draft legislation. Implementation provisions of the block grants and related programs coupled with Title XVII provide a better system of protection for beneficiaries of services than does the draft bill. Both, however, need strengthening. The Project could not support the draft if it were introduced in its present form, but understands that the draft is open for discussion. With this in mind as a starting point, this Statement deals with some of the basic issues concerning the draft bill. III. DISCUSSION OF THE BASIC ISSUES IN THE DRAFT UNIFORM BLOCK GRANT MANAGEMENT ACT OF 1981 In the recent enthusiasm for achieving budget reduction goals and turning federal responsibilities over to the states, not enough focus has remained on the critical role of local nonprofit service providers, needy individuals and the role of the federal government. 1. Use of Funds Authorizations and appropriations for the block grants and consolidation programs, albeit less than needed, should be used to help solve the problems which gave rise to the categorical grant programs in the first place. With such a provision added to the block- grant law, voluntary sector and other nonprofit organizations which provide these critical services will be able PAGENO="0245" 241 WALD, HARKRADER & ROSS Statement on Proposed Uniform Block Grant Management Act of 1981 Page Five to continue to function to help meet critical needs. One problem the draft bill does not address has been the creation of great uncertainty as to funds to be provided, to whom they will be provided and who will provide them. The result has been to disrupt the nonprofit voluntary, human services sector at the very time it is being called upon to shoulder a greater burden. 2. Public Involvement Title XVII defines block grants and requires that public hearings be held by states regarding their plans for use of block grant funds and program development. However, some of the consoli- dation programs popularly called block grants, such as social services, appear to be defined by the Act, and treated by agencies, such as HHS, as not being block grants and therefore not subject to the Act's hearing requirement.~/ Title XVII also requires that each state develop and publish for public comment a report setting forth its proposed use of block grant funds. This requirement, unlike the public hearing requirement, is applicable to all the new so-called "block grants," including social services and other of the Act's consoli- dation programs. The draft bill's provisions which purport to deal with these subjects of hearings and report for public comment are 5/ Sec. l741(b)91), P. Law 97-35 (Aug. 31, 1980); 46 Fed. Reg. 48582 at 48583 (Oct. 1, 1981). See Comment on U.S. Department of Health and Human Services Interim Final Rules on Seven Block Grant Programs, Nov. 30, 1981, on behalf of organizations in the voluntary sector, in HHS's files submitted in response to request for such comments in HHS's Interim Final Regulations, 46 Fed. Req. 48582 (Oct. 1, 1981). PAGENO="0246" 242 WALD HARKRADER & ROSS Statement on Proposed Uniform Block Grant Management Act of 1981 Page Six found in proposed section 1744. These provisions are more general than those in Title XVII and do not expressly require public hearings and reports subject to public comment. In one sense the draft bill's provisions in this regard are superior to Title XVII in that they apply to all the so-called block grants, including consolidation programs like social services. Ultimately, though, the draft bill is weaker in this area than Title XVII because the draft bill does not expressly require hearings and reports for comment. Whether or not they occur is up to the states. This is a deficiency which should be corrected. Testimony at this Subcom- mittee heating has also demonstrated that tighter federal control is needed over the hearing process as presently conducted by states, which in a number of instanc&s has been represented as being perfunctory and otherwise inadequate. Public involvement requirements in Title XVII and in the draft bill should be strengthened to make sure that the voluntary sector beneficiaries and the public generally are thoroughly consulted and heard concerning use of block grants and consolidation funds. This effort should be made to go beyond formal public hearings and publication of reports for comment, to include formation of advisory committees from among all those interested and affected as well as informal, continuous consultations and involvement of those concerned in planning from the earliest stages. PAGENO="0247" 243 WALD, HARKRADER & ROSS Statement on Proposed Uniform Block Grant Management Act of 1981 Page Seven These kinds of requirements should be included in Title XVII (and even if not there,in agency regulations, such as HHS's), and in the draft bill. State and local officials traditionally rely heavily on local voluntary sector organizations to deliver the services financed by the programs in question. Involvement from the earliest stages on is easy and makes for better implementa- tion and cooperation. 3. Federal Reporting Requirements The requirements for reporting by the states to the federal government on utilization of block grant and consolidation funds is inadequate in both the existing law and in the draft bill and should be strengthened. Without solid, detailed basic uniform reporting requirements, no common, usable data will be generated and the extent of need and whether and to what extent the block grant and consolidation program funds meet that need will not be known. 4. Audit The audit provision in the draft bill is unnecessarily long and complex. The provision in Title XVII, sec. 1745, is somewhat more adequate. The cost of audits required by Title XVII and by the draft bill should be allowable, as is the case under normal federal cost principles in 0MB Circulars A-llO, A-2l and A-l22 (and agency implementing regulations), government contracting and application of generally accepted accounting principles. PAGENO="0248" 244 WALD HARKRADER & ROSS Statement on Proposed Uniform Block Grant Management Act of 1981 Page Eight Because of the uncertainties and weaknesses in this provision of the draft bill, we urge deletion of it until more research has been done on the audit issue, including the report of the new GAO Audit Policy Advisory Committee. Proposed sec. 1748(b) of the draft bill limits adminis- trative costs to recipients (states) to 10% of the amounts they receive (a separate problem discussed below), and then, in proposed sec. 1748(c), defines administrative costs to exclude the cost of the proposed bill's required independent audit. Thus, administrative cost funds cannot be used to pay for independent audits required by the draft bill. The funds set aside to cover the costs of such audits by sec. 1749(h) of the draft bill are insufficient and will be exhausted. When that occurs, the only sources remaining to pay for such audits will be program funds or other internal funds of the organization, thus further weakening such organizations financially. Although this audit requirement and the associated cost restrictions are difficult enough problems, subrecipients, many of whom are members of the voluntary sector and who are given no voice in the draft bill, can also be asked to undertake and pay* for audits out of their pockets under the draft bill. While an audit to be undertaken anyway may be acceptable under the draft bill, this is an uncertain procedure. PAGENO="0249" 245 WALD. HARKRADER & ROSS Statement on Proposed Uniform Block Grant Management Act of 1981 Page Nine 5. Administrative Expenses As noted above, proposed sec. 1748(b) of the draft bill, limits administrative expenses for state and local govern- ment recipients to 10% of the amounts they receive. We urge that this provision be removed and replaced with normal, uniform cost principles provisions or generally accepted accounting principles concerning administrative costs. If, however, a ceiling is felt to be necessary, such necessity ought to be justified and, if justified, an allowable administrative cost ceiling established of at least 25%, which ought to be fully and separately funded. Many carefully operated public and voluntary sector and other nonprofit organizations operate within or close to such a 25% ceiling. Before deciding on any ceiling, though, it should be remembered that no such ceilings are imposed on commercial organiza- tions when doing business with the government and that such organi- zations usually have administrative costs in excess of 60%. Experience with the few other federal programs with arbitrary administrative cost ceilings for states and local govern- ments and others, such as existed in certain CETA Public Service Employment programs, shows that such state and local governments limit subrecipients to the same or lower administrative cost ceilings, or provide them only with what, if anything, may be left from the original funds allocated for such costs within the PAGENO="0250" 246 WALD. HARKRADER & ROSS Statement on Proposed Uniform Block Grant Management Act of 1981 Page Ten original percentage. Administrative costs of the most prudently and conservatively managed voluntary organizations are more than 10%. Limiting administrative costs to 10% puts public and private organizations in the position of having to reduce essential manage- ment, pay inadequate salaries and of not being able to attract or keep top people. The net result is to weaken management. The approach of placing a ceiling on administrative costs has a certain initial cost savings appeal but, in the end, is counter-productive and should be eliminated from the draft bill, or, if found to be essential, such ceiling should be increased to at least 25% as noted above. 6. Federal Uniform Administrative Requirements and Cost Principle~ a. In General The block grants and conslidation programs in the Act should be subject to the basic rules of management and cost found in 0MB Circulars A-l02, A-llo, A-122 and A-87, among others and the agency implementing regulations issued thereunder. These uniform rules, have been worked out over time with state and local governments and with the voluntary sector and other nonprofit organizations, are based on experience and reflect a fundamentallY fair way of operating, under standards that are uniform and predictable. These circulars and implementing regulations provide basic protection for all parties and create the basis for sound, uniform and efficient management. Best of all, they result in less, not more, regulation. The method proposed in the draft bill (and in the Act and agency PAGENO="0251" 247 WALD, HARKRADER & ROSS Statement on Proposed Uniform Block Grant Management Act of 1981 Page Eleven regulations) will result in a crazy quilt of differing, incomplete and conflicting regulations. b. Enforcement of National Policy Assistance Standards Proposed section 1751 of the draft bill presumes recipients to be in compliance with the range of basic national policy standards, including those prohibiting discrimination on the basis of sex, race, handicap, religion, national origin and others. First, substantial evidence built up over time, led to enactment of these standards and the need to enforce them by the federal government. This situation has not changed. The problems these standards address are truly national problems and should continue to be dealt with by the federal government, especially when federal funds are involved. While, in some situations, private individual or class actions can be brought, it is too onerous a burden to expect individual citizens to try to enforce national law to achieve national policy goals. Second, this sort of provision is not essential to the draft bill and is likely to create unnecessary opposition to it. IV. SUMMARY The undersigned agencies cannot support the draft bill in its present form for the reasons stated above. However, we wish to express our appreciation to the Subcommittee for the opportunity to present our views. As expressed throughout this Statement, we PAGENO="0252" 248 WALD HARKRADER & ROSS Statement on Proposed Uniform Block Grant Management Act of 1981 Page Twelve believe that effective use of block grant and consolidation programs must require involvement of the voluntary sector and other nonprofit service providers and related organizations and affected citizens from the start. This has not been the case thus far. We urge the Subcommittee to involve the voluntary sector in addressing the utilization, effectiveness and efficiency of block grants and similar programs. Respectfully submitted, Laurence I. ewes, III, Esq. Wald, Harkrader & Ross 1300 Nineteenth Street, N.W. Washington, DC 20036 (202) 828-1200 Attorneys for Boy Scouts of America, Boys' Clubs of America, National Board, YWCA of the USA, The Child Welfare League of America and The Salvation Army PAGENO="0253" 249 BLOCK GRANTS: A NEW CHANCE FOR STATE LEGISLATURES TO OVERSEE FEDERAL FUNDS Legislative Finance Paper #15 February 1982 Barbara Yondorf, Staff Associate Karen Beriker, Research Analyst National Conference of State Legislatures 1125 Seventeenth Street, Suite 1500 Denver, Colorado 80202 303/623 -~66OO PAGENO="0254" 250 TABLE OF CONTENTS INTRODUCTION 1 I. CONSOLIDATED FEDERAL AID PROGRAMS (BLOCK GRANTS): BACKGROUND AND DESCRIPTION 3 A. Background 3 B. Features of Block Grants 6 II. CONSOLIDATED FEDERAL AID PROGRAMS (BLOCK GRANTS) AND STATE LEGISLATURES 10 A. Legislatures in a Strong Position to Control Block Grants 11 B. Legislative Mechanism to Control Block Grants 14 C. RecormnendatiOns Concerning Legislative Oversight of Block Grants 25 III. PROBLEMS STATE LEGISLATURES HAVE WITH BLOCK GRANTS 27 IV. BLOCK GRANT OUTLOOK FOR FY 83 32 Appendix 1 34 Appendix 2 PAGENO="0255" 251 INTRODUCTION The primary objective of this ~~gislative Finance Paper is to provide a review of state legislative activity regarding the new consolidated federal aid programs (commonly called block grants), which were enacted in 1981. The paper also: 1) reviews the general features and requirements of the block grants; 2) discusses the present issues and problems that state legislators have identified regarding block grants; and, 3) outlines the new FY `83 Administration budget proposals consolidating some existing programs into eight new block grants and modifying other existing programs. While we prefer to call them consolidated federal aid programs rather than block grants, we lapse into the more commonly used "block grants" because of ease of usage. The issues and problems section of this paper explains some of the reasons why "block grants" may be a misnomer for these programs. The information in this paper regarding individual state actions about the 1981 consolidated federal aid programs was gathered through two NCSL fiscal surveys during November and December of 1981. The written survey information was supplemented by telephone calls as necessary. We did not include actions by any state executive branch regarding block grants, and 1982 state legislative action is being monitored and will be reported later. The NCSL Fiscal Affairs Program staff thank all of the state legislative fiscal officers and their staffs for contributing the information presented herein. In addition, we appreciate the assistance of our NCSL Washington, D.C., colleagues. PAGENO="0256" 252 We encourage the reacers of this paper, especially state legislators and legislative staff, to comment on the contents of this paper so that any further research might better address stats legislative needs. If recent legislative action has altered what we depict as your state legislative role regarding block grants, please forward that information to us. PAGENO="0257" 253 I. CONSOLIDATED FEDERAL AID PROGRAMS (BLOCK GRANTS): BACKGROUND AND DESCkIPTION A. Background Federal aid to state and local governments has taken several forms over the past two decades--from categorical grants to general revenue sharing to block grants. Until recently, whatever the form of federal aid, the amount of money flowing to the states from Washington, D.C., increased on the average by 15 percent each year. As a consequence, state and local governments became increasingly dependent on federal resources, especially for the funding of social programs even though own source income grew significantly and accounts for about 75 percent of all state government revenues. In the late seventies, the rate of growth in federal aid to state and local governments began to slow and in 1982 state and local governments will actually receive less federal aid than they did in 1981. The era of rapidly growing federal grants-in-aid began in the l960s with the proliferation of categorical grants designed by Congress to provide state and local governments with federal funds earmarked for a wide variety of narrowly defined programs. Both state and local governments became increasingly disenchanted with the federal grant-in-aid program, complaining about: 1) the lack of flexibility to tailor programs to local needs; 2) the onerous bureacratic requirements of program administration; 3) the federal government `luring state and local government into starting programs by providing 100 percent federal funding in the earlier years, but then adding -3- 99-965 0 - 82 - 17 PAGENO="0258" 254 state match requirements later; 4) increasingly, agency grantees were in the position of being held accountable to Washington, D.C., more than to state and local elected officials, 5) state legislatures found themselves by-passed by state agencies; and, 6) local governments were applying directly to the federal government for aid. In an effort to improve state-federal relations the Nixon Administra- tion, in 1972, introduced General Revenue Sharing (GRS) to provide state and local governments with federal aid that could go directly into their general fund and be appropriated at their discretion. State and local government considered GRS to be the most effective form of federal assistance. In 1980, however, the program was eliminated for states. - Coupled with the GRS initiative was the block grant concept. Block grants can be defined as federal funds which are distributed to state and local governments to. accomplish a broad range of program objectives. Ideally, from the view of state and local government, the federal government would attach few requirements or "strings' to the money so that state and local governments would be given wide discretion in block grant distribution. HUD's Community Development Block Grant was one of the first to be formulated, and continues to be a model of an effective and popular federal grant program. I. The New Federalism Approach In ~l98l, the Reagan Administration drafted another alternative f or states called the "New FederalismTM with the objective to redefine federalism by providing states with a stronger role in the federal process. Reagan initially proposed to cor~solidate 85 categorical grants into seven olock grants, giving the states complete control and responsibility over block grant PAGENO="0259" 255 expenditures and allowing them the flexibility to identify and address specific state needs. Nevertheless, block grants are seen by legislatures as a step backward when compared to the General Revenue Sharing initiative. 2. Federal Aid as a Portion of a State Budget. According to Census Bureau reports, 1980 combined revenue for the 50 states amounted to $234 billion, and federal aid to state governments was $62 billion. Thus, federal aid to state governments comprises about 25 percent of a st4te's total budget. This percentage tends to be misleading because it includes direct payments to individuals, like medicaid and AFDC, and payments that pass through state governments to local governments. If these pass-through payments are deducted, federal aid constitutes about 10 percent of an average state budget. Block grant monies amount to between 2 to 3 percent of that budget, and therefore, represent a very small portion of state revenue. (However, these percentages vary depending on the fiscal structure of each state.) 3. Funding Levels. The National Conference of State Legislatures and the National Governors Association formulated a policy position that endorsed a 10 percent program funding reduction f or block grants. This reduction would be acceptable because federal program administration and overhead would be virtually eliminated. The actual FY 82 funding level for block grants was reduced overall by 13 percent, or 22.7 percent if inflation is taken into account. The original FY `82 funding level designated by the August 13, 1981, Omnibus Budget Reconciliation Act (P.L. 97-35) was $10.2 billion, which is down from -3- PAGENO="0260" 256 the FY `81 level of ~1O.9 billion. However, this amount was changed in December in the third continuing resolution (P.L. 97-92) to a level of ~.5 billion. This figure may change again when the continuing resolution expires March 31. It is quite likely that the figure will be lowered since President Reagan is asking for another ~2.4 billion in cuts in the FY `82 buaget. (Refer to Table 1 for a block grant sumary.) 3. Features of Block Grants 1. Description The final block grant product that emerged from Congress and was signed by the President in August fell short of the expectations of state legislatures. Reagan's initial proposal was to merge 85 categorical grants into seven Dlocks, but the final result was the consolidation of only 57 categoricals into nine blocks. For example, according to OMB's national budget account system there are 33 categoricals consolidated in one block grant program, nine consolidatec in another block, and four block grants that each contain only one program. Three block grants have not yet been handed over to the states to administer. The nine block grants are: 1. Alcohol, Drug Abuse and Mental Health 2. Comunity Services 3. Corrmunity Development 4. El~nentary and Secondary Education 5. Maternal and Child Health Services 6. Low tncome Energy Assistance 7. Primary Care -6- PAGENO="0261" Ithie 1 l1CO~K 1310111 SIIMIIAIIY luck Grant ___________ Alcohol, 11mg Ahusg & lIental health1 Cuxiiuinity Services1 Coiiuxun ity i)eveiopment [lementary & Secondary [dncat ion liaternal & Child health Services low income Inergy Assistance FY02 Funding Level ions) $ 432.0 $ 3411.0 $3455 ~2 $ 410.4 $ 341.5 $1152.0 . S Oifference 1081 ~s. FY82 thIlmh)er of Funding Consolidated Available Programs States Par- ticpating Match Required Expense Limit -21.3% Oct. 1, 1981 3 49 tin 10% -26.4% Oct. 1. 1981 I * 311 thu 5% late Feb. 19112 1 25-30 est. Yes 2% 0% July 1, 1982 33 Sot Yet Avai table Ho Ito limit 0% Oct. 1, 1981 6 48 Yes Ito limit (1% Oct. 1, 1981 1 AutomatIc Ho 10% Transfer- able 1% to Health grants 5% to ilmergy. lead Start & Older Aver Act - (.5% -10.5% -26.9% - 5.3% cJ1 1(10 to (on. Sn Soc. Svc. I lea Ith Primary Care $ 248.4 -23.6% Oct. 1. 19(12 1 Hot Yet Yes Hone 11% Available Allowed Prevent ive teal th & (heal Ut 111 .6 - 11.8% Oct. 1 * 191(1 9 411 No 10% 11 to (hat lb Set vices1 Social Scm ices $2400.0 -19.11% lit. I * 19(11 2 Automatic tin Ho limit hto( to lb~a I tIm iransfer .01(1 I omrqy I. A set-as ide is stipulated ranging from IX to ISO of the Iota I block grant funds (percentage rate helmeuls on the block grant) wIt hi will me mlistributcd by the federal govenmnnt. 2. States cm administer 30% of toi.aI ammnmont provided. PAGENO="0262" 258 8. Preventive Health and Health Services 9. Social Services The individual funding level for the nine blocks ranges from $82 million to $2.4 billion. Six of the blocks are below $500 million, and when that amount is allocated among the 50 states the final grant to each state is small. The Reconciliation Act purposely side-stepped specifying which branch of state government would have administrative authority over block grants, allowing each state to make that determination. General features shared by block grants are: . An annual report or application must be filed by the state with the appropriate federal agency outlining program objectives and methods for distribution of funds. * Public hearings must be held providing input into the state block grant application prior to submission. This requirement was waived for FY `82 because of the short notice given to states to implement the programs. * Audits must be performed at least every.two years by the states, ana federal auditors must be allowed access to financial records. The federal government is not mandating any federal audit management practices; instead, they are allowing the states to formulate their own audit procedures. * A 5 to 10 percent fund transfer is allowed among five of the block grants. * A state administrative exoense limit is set for five of the block grants, ranging between 2 to 10 percent of the funding level. In the case of the Primary Care Block Grant, no federal monies can be used to cover administrative expenditures. 2. State Implementation A significant feature of block grants is that state legislatures have a new opportunity to appropriate all federal funds. Some state legislatures already had in place a mechanism appropriating federal funds and block grant implementation was easily accommodated into this process. Other states are PAGENO="0263" 259 using the opportunity presented by block grants to take the first step in developing oversight of federal funds. Few states have been involved in appropriating categorical monies. Part II of this paper describes state legislative action regarding block grants to date. The majority of states have chosen to administer the block grants themselves in 1982, rather than have the federal agencies which were responsibile for the categorical grants maintain program management. Two programs--the Social Services Block Grant and the Low Income Energy Assistance Block Grant--were automatically transferred to state governments on October 1, 1981, bypassing state program acceptance. The Community Development grant is expected to be available in late February 1982, and at this point 25 to 30 states have expressed an interest in participation. It should be noted that of the total funding figure shown in Table 1 for the Community Development Block, the states can administer only 30 percent of this amount. Two other programs, the Primary Care and Education Block Grants will not be available for state implementation until FY 83. States which did not elect to accept any particular block grant by October 1, 1981, could take over the programs at the beginning of the three remaining quarters of FY82--January 1, April 1, or July 1. As of January 1, 1982, the tally of participating states was: 49 states accepted the Alcohol, Drug Abuse and Mental Health Block; 48 states took over the Maternal and Child Health Services Block; 48 states opted for the Preventive Health and Health Services Block; and only 38 states elected to take on the Community Services Block Grant. -9- PAGENO="0264" 260 II. CONSOLIDATED FEDERAL AID PROGRAMS (BLOCK GRANTS) AND STATE LEGISLATURES During 1981, almost half the 50 state legislatures enacted laws increasing their involvement in the oversight of federal funds. While most of these leg~slatures were acting because of federal grant consolidations, (block grants) legislatures in New York, Massachusetts, Iowa, and Oklahoma moved to comprehensively strengthen their roles regarding incoming federal funds.* Even before 1981, many legislatures were involved in some oversight of federal funds, but only a handful were aggressively active in the appropriation of federal monies. Clearly, legislatures in 1982 find a new opportunity for involvement in the consolidated federal grants programs because of grant discretionand the lack of long-standing procedures developed by federal agencies and state executive offices. During November 1981, NCSL surveyed the 50 states to find out what mechanisms the state legislatures have in place to control the expenditure of block grant funds. The survey responses indicated that 23 states had instituted new or special legislative procedures to deal with block grants (see Appendix 1). Most coimrnnly, states passed legislation requiring some form of legislative sign off as a prerequisite to the expenditure of block grant funds. *The laws enacted in New York, Massachusetts, Iowa, and Oklahoma are discussed in a limited way in this paper. More details are available from those legislatures or from NCSL Fiscal Affairs staff. -10- PAGENO="0265" 261 The survey also showed that the following are the major ways in which state legislatures are exercising control over block grant distributions (see Table 2): * through the appropriations process; * by requiring formal legislative "approval' (as opposed to appropriation) prior to the expenditure of block grant funds; * through interim control over the receipt and expenditure of federal funds; * through legislative review of federal grant applications; an~ * through special legislative corruiiittees set up to monitor block grant * implementation. Only four states reported that their legislatures did not use any of these mechanisms to control block grant distributions. A. Legislatures in a Strong Position to Control Block Grants A number of states appear to be in a particularly good position to oversee and direct block grant distributions. Michigan, Louisiana, and Maine not only have a tradition of active legislative involvement in the appropriation of federal funds, but also have recently passed legislation to assure legislative participation in the block grant implementation process. In 1981, Michigan passed legislation mandating that the legislature be provided with detailed information on the application for and receipt of federal funds, and also directed that expenditures from federal revenues be the lesser of the amount appropriated in the budget act or the amount paid in. Louisiana established a process whereby all block grants must be reviewed by a Joint Legislative Corrznittee on the Budget and set up a subcommittee on block grants. In its 1981 session, the Maine legislature enacted a law under which any change from federal categorical to block grants cannot be implemented at the state level without approval by the legislative branch of government. -. -11- PAGENO="0266" 262 MAJOR LEGISLATIVE BLOCK GRANT OVERSIGHT MECHANISMS* __________ ______________ (November 1981) ____________ ___________ Appropriation of Fed. Funds Requiring Interim Special State (Other than Legislative Legislative Grant Block Grant Open-Ended `Approval of Control of Application Oversight _________ Appropriations) Block Grants Fed. Funds Review Committees: AMA ________________ _______________ _____________ __________ ~KA ____________ ___________ __________ ________ DNA _______________ ______________ ____________ __________ NSAS _______________ ______________ ____________ __________ FORNIA J ______________ _____________ ___________ _________ RADO _____________ ____________ L__________ _________ IECTICUT _______________ x T x __________ I4ARE ______________ x x IDA j~ - x x GIA - x _________ II _________________ _______________ ____________ p - _____________ ____________ _________ NOLS I ______________ x __________ ANA ____________ x x ______ ________ x x AS _____________ x _________ liCK? ______________ x x SIANA - ___________ ________ _____ x x ____ LAND - - ____________ - -r ________ ACHUSETTS _____________ (F I x IGAN ______ (F _____ ESOTA _____________ I x _________ ISSIPPI - ] x _________ OURI - _____________ 3 ____________ _________ ANA -- j x ____ ASK.A _______ ______ 3 x x DA x x x _________ NAMPSM IRE x ______________ ____________ __________ JERSEY _______________ ______________ ____________ x MEXICO _______________ ______________ j x x YORK x ______________ 3 (F) x H CAROLINA x x x _________ H DAKOTA x _____________ ____________ _________ ____ .1 ______ _____ x ____ HOMA _______ x x x ON x ______________ x x SYLVANIA x _____________ (F) _________ E ISLAND _______________ ______________ ____________ x H CAROLINA x _____________ x x HOAKOTA j x ________ _______ ______ ESSEE j _______________ x x __________ S x ____ ___ ___ ONT ______________ _____________ ____________ _________ INIA ______________ _____________ ___________ _________ INGTON I ________________ _______________ x __________ VIRGINIA I ______________ _____________ ____________ _________ ONSIN I _______________ ______________ ____________ __________ ING ~ x ______________ ____________ __________ TOTAL I 36 7 27 16 *For further clarification 01' column headings, see accompanying text. (F) Full-time legislature -12- PAGENO="0267" 263 The Montana legislature has already demonstrated its determination to be a full partner with the executive branch in the control of federal funds. During its last regular session, the legislature directed that all olock grant funds received prior to January 3, 1983, require a special session of the legislature prior to expenditure. A special session was subsequently held In November 1981, at which time the legislature reviewed detailed budget plans for the expenditure of block grant funds and appropriated block grants on an agency basis. In order to maintain its control over any further block grants that might be made available to the state before the legislature's next regular session, the legislature recessed rather than adjourning after its November special session. Several states have only recently put themselves In a position to exert a high degree of control over federal (including block grant). funds. New York, for instance, passed legislation in 1981 that allows the legislature to make subprogram specific appropriations of federal funds in a separate federal funds appropriations bill and requires the state comptroller to publish detailed monthly, quarterly, and annual reports on the sources and uses of funds, including federal funds. Massachusetts also passed sweeping legislation last year dealing with its budget procedures. As a result, for the first time this year, the Massachusetts legislature Is appropriating federal funds and has binding review authority over federal grant applications. Iowa, which has never been actively Involved In the oversight of federal funds, passed legislation in 1981 requIring that block grants be deposited In - a special fund subject to appropriation by the legislature, and that the legislature receive notification of all applications for federal funds at least 60 days prior to submission of the application. Texas attached a rider -13- PAGENO="0268" 264 to its FY `81-83 appropriations bill requiring block grant funds to oe allocated as they were under categorical grants. And specific appropriations of federal block grant monies were made to programs by the Washington legislature during its last regular session, although more flexibility *was provided to the executive in special session. Several legislatures that have not passed any special legislation dealing with their ability to control block grants are nonetheless in a good position to exercise aggressive oversight. Alaska, Florida, and Oregon are examples of states that have had a relatively long tradition of legislative involvement in the oversight of federal funds. All three states appropriate federal funds. Additionally, the Alaska legislature has, for many years, played a strong advisory role during the interim with respect to the expenditure of federal funds, Florida has a statewide accounting system to track and organize federal funds information, and Oregon's legislative Emergency Board has had the statutory authority, since 1963, to approve/disapprove grant applications and appropriate unanticipated federal funds. B. Legislative Mechanisms to Control Block Grants The sections that follow look in greater detail at the five primary legislative mechanisms used to oversee block grant distributions: 1) appropriation of federal funds; 2) approval/disapproval authority over block grant expenditures; 3)~ interim control over federal funds; 4) binding review of grant applications; and 5) special block grant oversight committees. 1. Legislative Appropriation of Federal Funds The appropriations process can be used by state legislatures as a powerful -14- PAGENO="0269" 265 tool to control block grant distributions. Using this mechanism, legislatures may specify in their appropriations bills or in accompanying documents exactly how block grant funds are to be spent, or may hold off on appropriating block grant funds until the executive branch makes specific commitments regarding expenditure plans. Unfortunately, uncertainty regarding the nature, amounts, and timing of block grants because of the Congressional budget process has somewhat frustrated attempts by legislatures to use the appropriations process as an effective means of directing block grant distributions. Part-time legislatures and states with biennial budgets have found themselves in the position of having to pass major appropriations bills in the absence of reliable information about how much money their states can expect over the next year or two, when funds will be available, and for what purposes the funds may be spent. Responses to the NCSL survey indicated that 36 state legislatures appropriate federal funds on either a lump sum or program specific basis; the other 14 either do not appropriate federal funds or make open-ended appropriations (see Table 1). To what extent those states with federal funds appropriations authority will choose to appropriate specific amounts of each block grant for designated purposes is as yet unknown. Many of these states have in the past, however, earmarked incoming federal funds for specified programs and/or prohibited the use of federal funds for certain ourposes. Presented below are excerpts from the recent appropriations bills of several states that suggest different ways in which legislatures have used the appropriations process as a means of directing federal funds expenditures. California's 1981 appropriations act includes a number of provisions that -15- PAGENO="0270" 266 detail legislative directives as to how federal as well as general revenue funds are to be spent. The following excerpt is from SB 100 (1981), page 239: 518-001--For support of Department of Social Services 46,130,498 Schedule: (a) 100000--Personal Services . . . 88,497,668 (b) 300000--Operating Expenses and Equipment 40,097,733 (c) 443613--Tort Payment (Attorney Fees) 17,174 (d) For Transfer to the Health Care Deposit Fund 3,031,136 (e) Amount Payable from the Health Care Deposit Fund -7,397,334 (f) Reimbursements -839,199 (g) Amount payable from the Social Welfare Federal Fund (Item 518- 001-866) -76,538,060 (h) Unallocated reduction -738,620 518-001-866--For support of Department of Social Services to be transferred to Item 518-001-001, payable from the Social Welfare Federal Fund after transfer from the Federal Trust Fund 76, 538,060 3. Provided further, that $1,779,558 of $2,372,744 in General Fund, $4,163,895 of $5,550,527 in federal funds, and $156,707 of $208,942 in reimbursements appropriated by this act in support of the Statewide Public Assistance Network (SPAN) shall not be expended sooner than 30 days after submission to the Chairperson of the Joint Legislative Budget Committee and the chairperson of the committee in each house which considers appropriations . . . of an amended feasibility study report (FSR) . . . which does each of the following: . . d) Contains a detailed plan for recouping the state and federal share of anticipated savings. . . Missouri makes specific federal funds appropriation.s to programs and often includes special directives within its appropriations acts as to how funds are to be administered. The following is taken from HB 9 (1981), page 50: -16- PAGENO="0271" 267 Michi~gan also makes subprogram specific appropriations of federal funds an~ includes special provisions in its appropriations act. Additional ly, within each appropriation, line items are separately funded, although federal funds are not broken out at this level from other sources. The following excerpts are taken from Act No. 35 (1981), pages 9 and 20.(?): ASSISTANCE PAYMENTS FIELD STAFF Full..time equated classified positions 5,625.0 Salaries and wages..~5,525.o FTE positions Longevity and insurance Contractual services, supplies, and materials. . Federal audit adjustment GROSS APPROPRIATION For Fiscal Year Ending Sept. 30, 1982 $106, 979 ,900 7,994,0O0 7,946,000 3,500,000 $1 26,420,000 Section 9.565. To the Department of Social Services For the Division of Family Services For the purpose of funding benefits except hospital and nursing facility care under Title XIX of the Social Security Act as provided by law and with the intent to adjust fees. to insure maximum provider participation, including professional fees for pharmacists of $2.50 per transaction. federal block 9rants received by the Department of Social Services, snail be administereø under the oversight of~i ccnm~ittee composec of five memoers of the House of Represencat,ve~, . . . five memoers of the Senate . Director of the Depa~ment of Social Services ana ~e Director of the Division of Family Services, one of wnich ~1i act as cnairman. (Emphasis ad~ea.) From General Revenue Fund . . . $36,834,064 From Federal Funds 51 332 952 Total (0 F.T.E.) PAGENO="0272" 268 Appropriated from: Federal Revenues: HHS--social security act (titles IV, XIX, and XX) 43,341,300 AGR--food and nutrition service, food stamp program 6,202,900 State general fund/general purpose 76,875,800 Sec. 78. The department of social services shall seek federal approval to implement a work program for recipients of aid to families with dependent children in addition to the requirements of the federal work incentive program. The work program requirements shall include comunity work projects, education, and job training programs. Pennsylvania appropriates federal funds in a separate, federal appropriations act. In its 1981-82 appropriations act, the legislature chose to make lump sum appropriations of block grant funds. This can be seen in the following excerpt taken from HB 1290 (1981), page 50: VI. Primary Care Block Grant (1) To the Department of Health - For planning and determining the applicability of assuming the administration of allotments and other health services delivery responsibilities associated with the Corrmiunity Health Centers, October 1, 1982 $150,000 VII. Low Income Emergency Energy Assistance Block Grant To help lessen the impact of the high cost of energy on low income families and individuals. (1) To the Department of Public Welfare to help lessen the impact of the high cost of energy on low income families and individuals . . . . $119,000,000 Ohio also appropriated block grants as blocks in the schedule of federal grants that was included in HB No. 552 (1981). The example below is taken from page 102: -18- PAGENO="0273" 269 Department of Economic and Community Development. Administration D Action FY 1980 2,500,000 10-604 `Mini-Computer' MIS 9,168 10-604 Statistical Analysis Center 43,750 10-611 Rome Energy Assistance Block Grant 61,070,800 10-612 Comunity Services Block Grant 9,103,500 10-613 Coimnunity Development Block Grant 20,240,000 10-614 REAP Weatherization 10,777,200 Total Department of Economic and Community Development $111,173,470 Although the Maryland legislature is constitutionally prohibited from increasing the Governor's budget recommendations, within this constraint Maryland has been active in the oversight of federal funds appropriations. In reducing the Governor's budget, the Maryland legislature details exactly which programs should be cut and how. An example of this is seen in the following excerpt from the 1981 `Report of the Chairman of the Senate Budget and Taxation Committee and Rouse Appropriations Committee," page 85: 32.01 .04. 06--Corrinunicable Disease GE 1,273 FE 5,759 .09 Supplies and Materials 1,273 Off ice Supplies--Reduction of funds to FY 1980 actual plus 10% inflation. Venereal Disease--Project 606 5,759 Reduction in allowance based upon lack of justification f or large increase in medicine and drugs (agreed to by the Department). Total General Fund Reduction Total Federal Fund Reduction Total Reduction, All Funds Total Position Reduction FE 167,797 15,262 183, 059 3 -19- 99-965 0 - 82 - 18 PAGENO="0274" 270 2. Legislative Approval of Block Grant Expenditures Seven states passed legislation in 1981 requiring some form of legislative "approval (as opposed to appropriation) of block grant funds as a prerequisite to their expenditure. In most states where such legislation was passed, it passed because of concern about how the executive might distribute block grant monies received while the legislature was not in session. Where legislative approval is a prerequisite to the expenditure of block grant funds, the executive branch is usually being asked to supply the legislature with a detailed plan for block grant implementation. Nevada passed SB 619 in 1981, whIch requires Interim Finance Committee approval before block grants may be allocated. Maine also now requires, under a law passed in 1981, that any change from federal categorical grants to federal block grants cannot be implemented on the state level without legislative approval. Oklahoma's SB 326 (passed over the Governor's veto in 1981) states that "the Director of State Finance shall not process any warrants or claims on any federal financial assistance received by a state agency, board or commission unless or until the Director of State Finance has received a written authorization from the Speaker of the House of Representatives and the President Pro Tempore of the Senate approving the federal financial assistance. . ." Louisiana established a procedure whereby all federal funds received in the form of block grants must be reviewed by the Joint Legislative Committee on the Budget where federal funds are newly incorporated in the state budget. Connecticut's PA 81-449 (1981) requires legislative approval for expenditure of block grants. -. -20- PAGENO="0275" 271 North Carolinas MB 1392 (1981) directed that all federal block grant funds received by the state between August 31, 1981, and July 1, 1983, be received by the General Assembly. Finally, Tennessee passed SB 997 in 1981, which requires the Comissioner of Finance and Administration to submit to the Finance, Ways and Means ConTnittee chairmen a plan f or their acknowledgement for implementing block grants. 3. Interim Control of Federal Funds Most state legislatures are part time and a number have biennial budgets. Thus, the question of control over block grant funds received during the interim arises, especially where the grant was either unanticipated or came in an amount significantly above or below that anticipated by the legislature during its last regular session. Clearly, the seven states discussed in the previous section have the means to exercise strong oversight during the interim through the requirement of legislative approval of block grants prior.. to expenditure. In addition, the NCSL survey showed that ten states have in place procedures under which the legislature has binding control over the receipt of unanticipated federal funds. In seven states-..Oelaware, Oregon, South Carolina, Vermont, Kansas, Mississippi, and Ohio--either a legislative comittee or a joint legislative-executive committee has approval/disapproval authority over the receipt of federal funds during the interim. Iowa's requirement under SF 563 (1981) that all block grants must be appropriated gives it interim control over block grant funds, as did Montana's MB 500 (1981), which required a special session of the legislature for block grant appropriations during the 1981-83 interim. Illinois controls interim PAGENO="0276" 272 federal funds receipts through a provision that requires an agency to seek a supplemental appropriation except under specified circumstances. Ten state legislatures reported in the NCSL survey that tney play an advisory role during the interim in reviewing the receipt and expenditure. of federal funds, including Arkansas, New Mexico, Florida, Alaska, Nebraska, Kentuc~ç~, Washington, Minnesota, Indiana, ar~d ~ (Pennsylvania,: Massachusetts, New York and Michigan do not have special interim procedures as they are full-time legislatures.) Control over the receipt and expenditure of block grant funos during the interim is increasingly important to legislatures in the face of the continuing uncertainty about which block grants will oe made available to the states when and for what purposes. 4. Grant Application Review by the Legislature Legislative involvement in the review and approval/disapproval of grant applications can provide state legislators with an `early-warning system" concerning problems which may arise over the receipt and expenditure of federal grants. As part of the NCSL survey, state legislatures involved in grant application review were asked to cite the benefits of such involvement. Some of the benefits cited were: "Allows the legislative staff to identify potential problems with changes in federal funding before they occur.' "Gives the legislature prior knowledge of any obligations of state funds." "Increases awareness by the legislative fiscal officers of where the money is going." "Assures the legislature that federal grants are consistent with state priorities." -22- PAGENO="0277" 273 Specific grants objectionable to the legislature have been refused by the governor. The continued ability of state legislatures to use grant application review as an early-warning system in the block grant process will depend on the level of detail required by the federal government in block grant applications and/or the kind 0f information regarding expenditure plans legislatures can require the executive branch to provide curing grant application review. Six states reported in the NCSL Survey that they have approval/disapproval authority-over the federal fund grant applications of state agencies. In Oklahoma, Oregon, Massachusetts, South Carolina, and Vermont the legislature has its own committee which approves/disapproves grant applications. In Delaware it is a joint executive-legislative committee which has this responsibility. Under an Oklahoma bill passed in 1981, a newly created Joint Committee on Federal Funds has approval/disapproval authority over federal fund applications. By law, along with the actual application, agencies must submit to the committee a one-page notice of intent that details program objectives, the agencies and/or program(s) affected by the application, the agencies' intentions should federal funds be reduced or terminated, and what the state is obligated to do in accepting federal funds. Other state legislatures have review and comment, but not approval/disapproval authority over federal funds, including Florida, Iowa, Indiana, Kentucky, Nebraska, New Jersey, New Mexico, New York, Rhode Island, and Utah. -23- PAGENO="0278" 274 5. Special Legislative Committee Overs~g~ During 1981, ten states created legislative committees or subcommittees solely for the purpose of monitoring feaeral funds in general and block grants in particular. Florida set up a Select Committee on Federal Budget Cutbacks; Louisiana's House Appropriations Committee established a subcommittee to review block grants; New Jers!y's Joint Appropriations Committee established a Subcommittee on Federal Aid; and Oklahoma created a Joint Committee on Federal Funds. In Missouri, the 1981 appropriations bill for social services included a directive that block grants received by the Department of Social Services be administered under the oversight of a joint legislative-executive committee. Alabama and New Mexico set up interim committees. California created an advisory committee for the allocation of block grants, and North Carolina established a Joint Legislative Committee to Review Federal Block Grants. Finally, Ohio created a Joint Legislative Committee on Federal Funds to monitor the receipt and expenditure of federal funds and to review all federal grant programs. How effective these special committees will be in overseeing and influencing the distribution of block grant funds will undoubtedly vary from state to state. What is already clear, however, is that those states which have established special block grant committees have created for themselves an opportunity to focus attention, in one committee, on the problems associated with block grant implementation. The foregoing review shows that a number of legislatures have mechanisms/procedures in place to allow them to exercise control over block -24- PAGENO="0279" 275 grant expenditure decisions at the state level. It remains to be seen, however, to what extent legislatures will choose to become active in the block grant allocation process. Moreover, the ability of legislatures to play a significant role in the process will be dependent not only upon the mechanisms/~rocedures they have in place for block grant oversight, but also on the timing of block grant receipts in relation to legislative sessions, the access legislators have to detailed information concerning potential block grant uses, the sophistication of existing in-state systems for tracking the flow of funds, ano the time available to legislators and their staffs to analyze and oversee block grants. C. Recommendations Concerning Legislative Oversight of Block Grants In the 1980 publication, A Legislator's Guide to Oversight of Federal Funds, NCSL's Fiscal Affairs and Oversight Committee made a series of recommendations for state legislative oversight of federal funds. These recommendations are reproduced in Appendix 2. The Fiscal Affairs and Oversight Committee recommendations were primarily designed to address problems associated with legislative control over categorical grants. In addition to these recommended actions, legislatures may also wish to consider some of the following alternatives in order to deal with the special oversight problems raised by block grants: 1. Making six or nine month appropriations which would allow legislators to appropriate the balance of funds in a subsequent session when they know exactly what funds are available. (Minnesota did exactly this in 1981; see Appendix A for discussion of Minnesota's actions.) 2. Passing legislation which requires that where actual program funding comes in at some given percentage (say 5 or 10 percent) less than appropriatec, the executive shall receive legislative approVäTfor a plan for handling such a funding reduction. -25- PAGENO="0280" 276 3. Including contingency plans for budget cuts in appropriation bill footnotes or in other documents expressing legislative intent. 4. Upon receipt of a block, requiring legislative approval of an expenditure plan for that block, as a precondition to expenditure. 5. Delegating to an interim committee appropriations authority over block grants that are anticipated but for which federal funding levels are undetermined, or requiring a special session for the appropriation of such funds. . 6. Creating joint legislative-executive committees for the administra- tion of block grants. -26- PAGENO="0281" 277 III. PROBLEMS STATE LEGISLATURES HAVE WITH BLOCK GRANTS The Reagan Administration's original block grant proposal offered the states more discretion in program administration and fund distribution than did the blocks actually passed by Congress. Some critics contend that several of the block grants were misnamed and are in~ fact better termed categorical grants because of the strings" that remain attached to them. In the first round of new block grants, state legislatures encountered several problems. Specifically: 1. Insufficient lead time for legislative review and appropriation of block grants; 2. "Strings" attached to block grants; 3. Reduced funding levels; 4. Uncertainty in federal funding levels; 5. State match requirements; 6. Redefining the federal-state relationship. 1. Insufficient Lead Time for Legislative Review and Appropriation. Six block grants were made available for state administration on October 1, 1981, the beginning of the federal fiscal year. Most state legislatures were not in session at that time, and, in fact, were well into their FY `82 fiscal years. Forty-six states begin their fiscal year on July 1; seven state legislatures with biennial sessions do not convene again until 1983. Consequently, state legislative involvement in the first round of state administration of the new block grants tended to be limited or nonexistant. This meant that the door -27- PAGENO="0282" 278 was open for the governors to accept the block grants on behalf of the states and to take the lead in block grant implementation. 2. "Strings' Attached to Block Grants. Block grants were sold to the states as a form of flexible federal aid with the understanding that states could distribute the funds according to program priorities ~~et by the states. The final legislative version attached numerous strings to some of the blocks--maintaining their categorical nature. For example: * The Alcohol, Drug Abuse and Mental Health Services Block Grant, required that every conmnunity mental health center that was funded in FY `80 also receive block grant funding in F? `82. In addition, the federal regulations require that 35 percent of the funds received by the state be earmarked for alcoholism programs - and 35 percent for drug abuse programs. The remaining funds are discretionary. ~ The Preventive Health and Health Sevices Block Grant mandates state. funding of all FY `81 grantees that provided emergency medical services. The grant also stipulates that: FY `82 state funding for the hypertension control program (one of the former categorical grants merged into this block) be at least 75 percent of the 1981 funding level; FY `83 state funding at least 70 percent of the 1981 level; and FY `84 state funding at least 60 percent of the 1981 total. ~ The Maternal and Child Health block grant stipulates a set aside of 15 percent of the amount appropriated for 1982, and 10-15 percent for F? `83 to be used by the Department of Health and Human Services for "special projects." These are identified as the Hemophilia and Genetic Disease programs that will be funded directly by HHS. The states could apply to receive the funds but would have minimal discretion in awardfng the subgrants. * The Coninunity Services Block Grant requires that at least 90 percent of the funds be distributed to political subdivisions, nonprofit con~nunity organizations. or migrant and seasonal farm worker organizations. Five percent is allowed for program transfer and 5 percent is allowed for administrative expenses. . A maximum cap of 15 percent is set for residential weatherization programs for funds received through the Low Income Energy Assistance Block Grant. -28- PAGENO="0283" 279 * Under the Education Block, at least 80 percent must! be committed to the local level and 20 percent can be reserved for state use. The examples provided demonstrate the misnomer of block grants: initially created to provide broad program discretion, they instead earmark the funding to highly specific program areas. 3. Cuts in Block Grant Funding Levels. State government leaders offered to accept a 10 percent across-~the..board cut in block grant funding in return for greatly increased state control over the allocation of federal funds. It was reasoned that a 10 percent cut could be absorbed because of savings arising from a reduction in the federal bureacracy. But states were given a 22.7 percent real reduction which meant cutting into the substance of the programs. Most states are currently dealing with budget reductions and revenue shortfalls and are in no position to subsidize programs that were originally initiated on the federal level and are now being shifted to the states. 4. Uncertainty in Federal Funding Levels. The President and Congress are continuing to talk about further reductions in block grant funding. Uncertainty about the amount, timing and availability of federal funds make it difficult for the states to prepare their own budgets. The federal government has not yet passed a final budget bill for FY `82. Different block grant funding levels have appeared in the Reconciliation Act that was passed in August, and the three continuing resolutions that were passed in October, November, and December. The funding level may change again when the third continuing resolution expires at the end of March. This -29- PAGENO="0284" 280 uncertainty at the federal level creates serious planning problems for state fiscal officers and forces them to guess at what the final feceral aic figures will be. ideally, the states should be able to have federal budget figures at least one year in advance so that the states could adapt their budgets accordingly. The cycle will begin again this summer as most state legislatures complete their FY. `83 budget work before Congress releases the federal FY `83 budget. 5. State Match Requirements. Three block grants require a state match which has been a typical characteristic of categorical grants. The match requirements detract from the intent of block grants and create additional financial obligations for the states. The requirements are as follows: * Maternal and Child Health: the state match requirement is three sevenths of the federal funding level. * Primary Care: in FY `83, the state match is 20 percent of the federal funding level and in FY `84, the state match is 33 percent. * Community Development: a state match of 10 percent is required. (This match can be made with in-kind contributions.) 6. Redefining the Federal-State Relationship. President Reagan's original objective in his block grant proposal was to create a new national public policy initiative which would allow states to direct the allocation of federal aid to programs identified by the states as essential services. For the states to do this,. funding flexibility was a critical element. The block grant program that emerged from Congress failed to provide this new partnership role for state governments. The federal government insisted on earmarking a large percentage of the block funds which limited the discretionary powers that were to be transferred to the states. Nevertheless, block grants are a step in the right direction in shifting responsibility to-~states, but as the block grant program presently stands, it falls short of a new comprehensive state-federal policy. -30- PAGENO="0285" 281 IV. BLOCK GRANT OUTLOOK FOR FY `83 The FY t82 block grant initiative added five newly created block grants to the four block grants already in existence to form a new public policy on state-federal relations. In the Presidents FY `83 budget, changes are proposea in three existing block grants. In addition, there are eight totally new blocks which consolidate over 40 categorical grants. The three block grants that will be consolidating additional categorical programs are: - 1. Low Income Energy Assistance. (Adds Emergency Assistance.) 2. Primary Care. (Adds migrant health, black lung clinics, and family planning.) 3. Services for Women, Inf ants and Children. (Formerly Maternal and Child Health--adds Women, Infants, and Children program (WIC)). The eight new proposed block grants are: 1. Child Welfare 2. Combined Welfare Administration 3. Vocational and Adult Education 4. Education for the Handicapped 5. Training and Employment 6. Rehabilitation Services 7. Rental Rehabilitation Grants 8. Food and Nutrition (only available for U.S. Territories) -32- PAGENO="0286" 282 The funding level for all 17 proposea and actual block grants was $18.4 billion for FY `82, while the FY `83 proposed funding level is $15.5 billion. This represents a funding reduction of 15.7 percent, ignoring the purchasing power lost to inflation. Just comparing the funding levels of the present nine block grants from F? `81 prior to Reagan's "New Federalism" to the proposed F? `83 levels, shows a decrease of 17.4 percent, or 34 percent with inflation factored in. This means that to maintain current services, states will be forced to supplement the programs with state revenues~ As a recent NCSL fiscal survey points out, 30 states in F? `82 are facing a balance of 1 percent or less, indicating that state budgets are in poor shape to be able to pick up new programs. President Reagan also proposed a "Revenue Turnback' program for the states which would "turn back" to state governments over 125 categorical and entitlement programs along with a federal funding source over a transition period from 1984 to 1991. As it currently stands, block grants would be included in this transfer. The problem that arises is that all these programs will face the federal budget axe before being released to state administration. This will put political pressure on state governments to maintain the current service levels since prior federal aid practices created a large constituency for these social programs which now will be inherited by the states. This federalism proposal could have serious consequences for the health of state budgets. .33... PAGENO="0287" 283 APPENDIX 1 Description of Legislative Procedures Adopted in Response to Block Grants and/or Federal Fund Cutbacks, During 1981, By State Alabama. During its 1981 session, the Alabama legislature passed two joint resolutions which dealt with block grants. SJR 19 created an interim legislative committee to study federal block grants and SJR 215 expanded the scope of one of the legislature's select joint committees, "to study the state medicaid programs so as to provide that said committee shall investigate and report on the impending impact of federal block grants to operate state health and welfare programs." California. Legislation was passed in California which established a joint T~j1s1atT~ie-executjve advisory committee for the allocation of block grant funds, not to go out of existence until July 1984. Connecticut. To assure its involvement in the allocation of block grant funds, Connecticut passed PA 81-449 which stated that, during FY `81-82: - State funds may not replace cut federal funds without legislative approval. - Legislative approval is required before the expenditure of block grant funds. - Any modification of funding for programs necessitated by reduction in federal funds can occur only if there is legislation that allows this. Florida. During 1981, the Florida legislature formed a Select Committee on Fedei~ãT Budget Cutbacks and developed a general policy statement and detailed guidelines which were used by the Senate Appropriations Committee in writing the 1982 Senate Appropriations Bill. Illinois. A legislative resolution directed the Commission on Intergovernmental Cooperation to hold public hearings during this past summer to advise the legislature on block grant implementations. The Comission submitted a report to the General Assembly in October which made the following recommendations: - Creating a trust fund for each block grant so that program growth or decline can be monitored and evaluated. - Creating a permanent new Block Grant Board to address long-range programmatic and administrative oversight responsibilities of block grants. -34- PAGENO="0288" 284 - For the interim, until the oversight boaro is established, the Commission on Intergovernmental Cooperation will submit monthly reports to the General Assembly on the status of all block grants. Until these recommendations are acted on by the legislature, block grants will be handled through the normal appropriations process. Iowa. In passing SF 563, the Iowa legislature made clear its intention to take an active role in the control of federal block grant funds. SF 563 requires the following: - Block grants must be deposited in a special fund subject to appropriation by the legislature. - The governor must include with the budget a statement of federal funds not included in the budget for the previous biennium and anticipated block and categorical grants. The budget must indicate federal funds to be used, the programs to which they will apply, and the necessary state match. - The legislature must be alerted to all federal grant applications at least 60 days prior to submission of the application. Kansas. The legislature appropriated ~0 for health and social services block grants. By establishing such a *limitatipn the Kansas Finance Council (a joint legislative/executive body) can increase expenditure limitations if block grants occur. Louisiana. The Louisiana legislature instituted a requirement that federal funds received in the form of blocks be reviewed by the Joint Legislative Committee on the budget, where federal funds are newly incorporated into the state budget. The Louisiana House Appropriations Committee also established a subcommittee to review block grants. Maine. In 1981, the Maine legislature enacted a law under which any change rrom federal categorical grants to federal block grants cannot be implemented on the state level without recommendations from the committee having jurisdiction over appropriations and financial affairs and approval by the legislative branch of state government. Maryland. Standing committees in the Maryland legislature have held hearings on federal fund cutbacks and the legislature has been involved in the review of changes in state regulations resulting from federal fund reductions. Massachusett~. Unoer a law passed in 1981, the MassachusettS legislature ~iä~tly increased its oversight of federal funds. All federal funds received by the state must now be deposited in a special General Federal Grants Fund, subject to appropriation by the legislature, except under certain circumstances. ~dditional1y, the legislature must be notified of all federal -35- PAGENO="0289" 285 grant applications at least 30 days prior to submission. Among other things, the notification must include a detailed fiscal statement and a description of the substance of the applications. Finally, the legislation specifies reports that state agencies must regularly make to the legislature concerning federal funds. Michigan. Three bills were passed last year in Michigan dealing with legislative oversight of block grants. SCR 355 required that all state agencies inform the legislature of applications for and the receipt of federal block grants and directed the governor to set forth in detail in the budget the proposed expenditures of federal block grant funds. Under PA 30, the department of management and budget must submit to the legislature an annual report on federal assistance. And PA 18 declared that, if appropriations are made from federal revenues, the amount expended shall not exceed the amount appropriated in the budget act or the amount paid in, whichever is the lesser. Minnesota. The Minnesota legislature passed a bill requiring one-quarter of ~Y~'~»= block grant monies to be allocated according to prior categorical uses, with the remainder to be appropriated by the legislature when it reconvened. During the interim, a full appropriations committee meeting was held on federal cuts and block grant legislation. Missouri. The 1981 appropriation for the Department of Social Services included the following directive: ". . . Federal block grants received by the Department of Social Services shall be administered unoer the oversight of a (joint legislative-executive) committee." Montana. HB .500 passed in 1981, specifically prohibited the expenditure of block grant funds without legislative appropriation. The bill stated, "Any federal funds received by or allocated to the state of Montana prior to ,January 3, 1.983, as a block grant as defined by an act of Congress enacted subsequent to April 1, 1981, and specifically designated as a block grant shall require a special session of the legislature for appropriation by the legislature prior to distribution of these funds among agencies and programs." Subsequently a special session was held in November at which the legislature appropriated all block grants. The legislature then recessed but did not adjourn in order to maintain appropriations control over any additional block grants that might come to the state before the legislature's next regular session. Nevada. SB 619, passed in 1981, required that, Whenever federal funding in the form of a categorical grant of a specffic program administered by a state agency . . . is terminated and incorporated into a block grant . . . the agency must obtain the approval of the interim finance committee in order to allocate the money received from any block grant." New Hampshire. A bill was passed by the legislature requiring the Governor to notify the presiding officers of the Senate and House of Representatives of -36- 99-965 0 - 82 - 19 PAGENO="0290" 286 any block grant awards by the federal government. Any allocation of these grants must be approved by the General Court. New Jersey. The legislature formed a subcommittee on Federal Aid and the Joint Appropriations Committee intensified to oversight of federal fujies. New Mexico. An interim Federal Funds Reduction Study Committee was set up by the legislature to monitor the federal budget process, determine state and local impact, and draft legislation. New York. This state passed a comprehensive bill, the `Accounting, Financial Reporting and Budget Accountability Reform Act of 1981,u which revamped the budgeting and accounting process in New York, giving the legislature greatly increased control over appropriations and expenditures. The following brief description of the bill is taken from New York's September 1981, `The Ways and Means Report": -. The new legislation requires that no state moneys may be expended except pursuant to an appropriation, and generally prohibits transfers of money between funds unless specifically authorized by statute. The Governor must alter the budgetary process to provide for the appropriation of. federal funds and all other funds that were heretofore exempt, make substantial changes to the financial plan, begin a ne~ "key item" reporting system to monitor program performance, and operate within a more restricted environment as a result of increased legislative oversight. These changes are designed to parallel the shift in accounting and reporting practices to conform with GAAP (generally accepted accounting principles). North Carolina. Under HB 1392, the North Carolina legislature asserted *its authority to control the appropriation of block grant monies. The bill states: - ". . . All federal block grant funds received by the State between August 31, 1981, and July 1983, shall be received by the General Assembly . . . "There is established the Joint Legislative Committee to Review Federal Block Grant Funds. The Committee shall review acceptance and use of all federal block grant funds received by the State between August 31, 1981, and July 1, 1983. . Ohio. HJR No. 39 created a Joint Legislative Committee on Federal Funds to ~~Ttor the receipt and expenditure of federal funds and to review all new federal grant programs. The bill also directed the committee to serve in an advisory capacity to the Ohio General Assembly in all matters related to federal grant programs. Oklahoma. 58 326, passed in 1981, created a Joint Committee on Federal Funds with authority to approve/disapprove federal fund applications and make recormnenaations concerning federal funds to the legislature. It also directed that claims by state agencies for federal funds may not be processed without PAGENO="0291" 287 written authorization from the president of the senate and speaker of the house. Tennessee. SB 997, passed during 1981, established several new procedures with respect to the appropriation and expenditure of state funds, including: `In the event federal and departmental revenues . . . are less than the amount estimated to be available under the allotments then and to the extent the spending authorizations are hereby reduced; to the extent that federal or departmental revenues in excess of the amounts alloted are realized, such excess shall not constitute increased spending authorizations, except under the conditions herein specified." "No state agency shall establish new programs or expand programs, including any programs involving federal or other funds . . . until the program and the availability of the money is submitted to the Finance, Ways and Means Committee chairmen and until said chairmen have acknowledged in writing receipt thereof . . "The Commissioner of Finance and Administration shall submit a plan for implementing the federal block grants proposed by the President." Texas. The legislature attached a rider to its appropriations bill which requires that if block grants replace categorical grants, the funds should be allocated to state departments and agencies as they were under categorical grants. Vir~inia. Under the 1981 amendments to the Virginia appropriations act, the Governor must produce quarterly reports summarizing the implications of approvals of federal fund grants. The implications to be identified include significant and anticipated budgetary, policy, and administrative impacts of federal requirements. PAGENO="0292" 288 APPENDIX 2 RECOMMENDATIONS FOR IMPROVING STATE LEGISLATIVE OVERSiGHT OF FEDERAL FUNDS (The following recommendations were developed by NCSL's Fiscal Affairs and Oversight Committee and were published in "A Legislator's Guide to Oversight of Federal Funds,' NCSL, June 1980.) The Fiscal Affairs and Oversight Corr~nittee of the National Conference of State Legislatures feels that a stronger state legislative role in the federal grant-in..aid system will alleviate many . .~ . problems. The following are the Committee's suggestions for activities which could improve state legislative oversight of federal funds. RECOMMENDATION #1: Necessary Background Info~mation on State Environment. Prior to establishing, changing, or augmenting mechanisms to oversee federal funds, state legislatures should conduct a review of: * the extent of legislative appropriations authority, both in and out of session; * existing appropriations practices, including informational flow between the governor, the agencies, and the legislature; * existing treatment of federal funds in the legislative budget process, including any differences in the way revenue sharing, block grants, and categoricals are treated; * current legislative involvement in existing review, control, and reporting processes (such as the A~95 process); * existing interim mechanisms to deal with unanticipated federal funds, such as automatic appropriation, gubernatorial approval or action by body authorized to overview these funds; * existing technical and accounting processes to identify and track funds in the state treasury; * trends and amounts of state expenditures and appropriations; and * if possible, federal assistance to state agencies by program. RECOMMENDATION #2 Review and Determination of Appropriate Procedures. The Fiscal Affairs and -39- PAGENO="0293" 289 Oversight Committee recornmenos that state legislatures consider various oversight mechanisms such as: tracking and information activities; grant application and state plan review; and legislative appropriation of federal funds to determine which, if any, of these approaches will lead to more effective legislative oversight of federal funds. A. TRACKING AND INFORMATION RECOMMENDATION #3 Tracking and Information on Use of Federal Funds by State Agencies. State legislatures should procure timely, oetailed, and accurate information about the amount and use of federal funds by state agencies. This data should be incorporated into the legislative budget document to provide a total picture of state/federal program expenditures and estimated future obligations. RECOMMENDATION #4: Legislative Utilization of Existing Federal Fund. Information Sources. The Committee recommends that state legislatures automatically receive all A-95 grant application and TC-1O82 award information data provioed by the federal government. Legislatures should establish a cooperative agreement with state executive offices to share and amass such data. RECOMMENDATION #5: Budget Display of Federal Fund Information. For all block grant and categorical assistance receivea oy state agencies for support of agency operations, the Committee recommends that the budget document display this information in as detailed a manner as possible (subprogram allocation). Information should also reflect the number and type of personnel funded by this federal aid. RECOMMENDATION #6: Accounting Procedures.. The Committee recommends that state legislatures, in conjunction with their executive branch, establish accounting procedures to identify and track federal funds coming into the state treasury. RECOMMENDATION #7: Itemization of In-Kind Sources of State Match. The Committee recommends that state legislatures require state agencies to itemize both direct and indirect funding sources for state match required by federal grant programs in the budget document. RECOMMENDATION #8: Information on Federal Reimbursements. The Committee recommends that state legislatures establish procedures to receive full information on all federal reimbursement funds received by state agencies. -40- PAGENO="0294" 290 B. GRANT APPLICATION AND STATE PLAN REVIEW RECOMMENDATION #9: Grant Application and State Plan Review. The Committee recommends that state legislatures should participate in the review of state plans and grant applications submitted by state agencies. Legislatures should have a strong role in determining whether these applications: * are consistent with state"policy; S * duplicate any on-going state programs; and/or * commit the state to future expenditures it cannot or elects not to support. RECOMMENDATION #10: Focusing Application Review Activities. The Committee recommends that state legislatures establish criteria, such as a minimum funding level or operational support, to focus their state plan and grant application review efforts on proposed activities they consider significant to state fiscal planning. C. STATE LEGISLATIVE APPROPRIATION OF FEDERAL FUNDS RECOMMENDATION #11: State Legislative Appropriation of Federal Funds. The Fiscal Affairs and Oversight Committee recommends that state legisratures should appropriate federal funds in the usual manner of state appropriation. RECOMMENDATION #12: Coordination with Federal Budget Cycle. The Committee recommends that to the extent possible, state legislaturej should establish state budgetary information and hearing processes flexible enough to coordinate with the federal budget cycle so federal fund information is as comprehensive and accurate as possible. RECOMMENDATION #13: Adjustment of' State Matching Funds to Shortfall or Increase in Federal Funds. The Committee recommends that. state legislatures establish mechanisms to reduce the level of state matching funds in the event the federal participation rate is higher than anticipated; if the amount of federal funds received is less than anticipated, state mathcing funds should be adjusted accordingly c~Tstent with federal maintenance of effort provisions. -41- PAGENO="0295" 291 ~. EXEMPTIONS RECOMMENDATION #14: Federal Funds Exemoted From the Legislative Oversioht Process. The Fiscal ~fa~rs arm Oversignt Corrmnttee recormnenas that: indivIdual~ijisfer payment to recipients; research grants to individuals and institutians of higher education; and federal/local assistance passed through state agencies for which there is no subsequent financial obligation for the state, be exempt from formal and specific legislative oversight. It further recomends, however, that the legislature receive as accurate and comprehensive information on these funds as it determines is necessary. INTERIM ACTIVITY RECOMMENDATION #15: Interim Activit~ For those states with legislative interims, the Conrnittee recorm~enas that the state legislature or its designees review and authorize the receipt and expenditure of any unanticipated federal funds, the transfer of federal funds between programs and agencies, and the reduction in any state programs due to a reduction in federal funds. The Committee hopes that legislatures will adapt these recommendations to their unique state environments. This report and these recommendations are a product of the Fiscal Affairs and Oversight Committees continuing efforts to stuay and evaluate all the various mechanisms of legislative oversight. -42- PAGENO="0296" 292 I - Federalism Information Center PAGENO="0297" 293 BLOCK GRANTS 1982 GOVERNORS' GUIDE TO BLOCK GRANT IMPLEMENTATION February 1982 Prepared by: National Governors' Association Center for Policy Research Council of State Community Affairs Agencies Council of State Planning Agencies National Association of State Budget Officers PAGENO="0298" 294 THE FEDERALISM INFORMATION CENTER is a two-year effort by the National Governors' Association (NGA) Center for Policy Research and the NGA Office of Research and Development to track the states activities during the implementation of the new block grant series--the first round of which was passed in 1981 This effort is in concert with NGA's Office of State Services, Council of State Community Affairs Agencies, Council of State Planning Agencies, and the National Association of State Budget Officers. ThE 1982 GOVERNORS' GUIDE TO BLOCK GRANT IMPLEMENTATION has been prepared to allow Govemors the opportunity to share what has taken place in implementing block grants and to assist states in further refining that process. The survey used to gather the data for the Guide and preparation of this document is a joint effort of the National Governors' Association Center for Policy Research, Council of State Community Affairs Agencies, Council of State Planning Agencies and the National Association of State Budget Officers. PAGENO="0299" 295 FOREWORD With the enactment of the nine block grants contained in the Omnibus Reconciliation Act, there have been notable changes in the intergovern- mental system. During the National Governors' Association (NGA) 1981 summer meeting in Atlantic City, a special workshop was held for Governors to begin to discuss these changes and share innovative strategies for state management of block grants. The Council of State Planning Agencies and NGA jointly published the Governors' Guide to Block Grant Implementation as a. resource for the workshop. The Guide contained information on what each state was doing to prepare for administration of the block grants. Due to the popularity of both the workshop and the Guide, the NGA Executive Committee decided to prepare this follow-up report, 1982 Governors' Guide to Block Grant Implementation. While this new report continues to have a focus on state implementation of block grants, it also contains information on other innovations that are being used to improve management in state government. As states assume greater responsibility for management of their own programs, it is critically important that new ideas and best practices be shared. Collection of information for this report is part of a two-year cooperative effort between NGA, the Council of State Planning Agencies, the National Association of State Budget Officers, and the Council of State Community Affairs Agencies to follow state responses to changes in the intergovernmental system. This report provides information on such questions as how many states have accepted block grants, how they have used the option of funding transfer between block grants, in what ways they have obtained public participation, and what role state legislatures have assumed in block grant implementation. The report also contains a series of programmatic and administrative innovations which states already have undertaken. As more information is obtained and particular issues become important, additional reports wil be published. The NGA Center for Policy Research (202/624-5359) will be coordinating the collection of these data and will be able to respond to specific information requests that you may have. Governor Lamar Alexander Governor James B. Hunt, Jr. Chairman, Committee on . Chairman, Committee on Executive Management and Fiscal Affairs Human Resources 1 PAGENO="0300" 296 TABLE OF CONTENTS FOREWORD ABBREVIATIONS USED IN THIS REPORT V EXECUTIVE SUMMARY Vii FINDINGS OF THE BLOCK GRANT IMPLEMENTATION SURVEY 1 BLOCK GRANT SURVEY HIGHLIGHTS 3 FISCAL IMPACT OF FFY 1982 BLOCK GRANTS 37 STATE NARRATIVES 39 Introduction 41 General Observations 41 State Progress in Implementing Block Grants 41 Conclusions 43 States Alabama 45 Alaska 46 Arizona 48 Arkansas 50 California 51 Colorado 52 Connecticut 54 Delaware 57 Florida 58 Hawaii 61 Idaho 62 Illinois 63 Indiana 64 Iowa 65 Kansas 66 Kentucky 69 Louisiana 70 Maine 71 Maryland 73 Massachusetts 74 Michigan 75 Minnesota 75 Mississippi 76 Missouri 77 Montana 78 11]~ PAGENO="0301" 297 TABLE OF CONTENTS lcont inued) States (continued) Nebraska 79 Nevada 81 New Hampshire 81 New Jersey 83 New Mexico 84 New York 86 North Carolina 89 North Dakota 91 Ohio 92 Oregon 93 Pennsylvania 96 Rhode Is land 98 South Carolina 99 South Dakota 102 Tennessee 103 Texas 104 Utah 105 Vermont 107 Virginia 109 Washington 110 West Virginia 115 Wisconsin 116 Wyoming 118 APPENDIX A Block Grant Contacts Designated by Governors 123 APPENDIX B Organizations Conducting Block Grant Surveys/Studies 129 iv PAGENO="0302" 298 ABBREVIATIONS USED IN THIS REPORT ADAMHA Alcohol, Drug Abuse and Mental Health Block Grant CDBG Community Development Block Grant CSBG Community Services Block Grant ESEA Elementary and Secondary Education Block Grant FFY Federal Fiscal Year LIEAP Home Energy Assistance Block Grant MCH Maternal and Child Health Care Block Grant PHSBG Preventive Health Services Block Grant PCBG Primary Care Block Grant SSBG Social Services Block Grant V PAGENO="0303" 299 EXECUTIVE SUMMARY A new chapter in the history of intergovernmental relations in the United States is being written as states take up the challenge handed to them late last year by Congress when it converted categorical federal programs into nine major block grants. The questionnaire circulated by the National Governors' Association (NGA) in January and February 1982 provides the first early returns on how this experiment is working at the state and local levels. This special publication, prepared for the NGA 1982 winter meeting contains the answers to that questionnaire, along with special reports from each state highlighting particularly noteworthy developments that are accompanying the transition to block grants. Block grants have stirred great expectations in some and great concern in others. As a result, there is intense interest in determining, as quickly as possible, how implementation is proceeding. How are decisions being made? What is the role of the Governor, the legislature, the local units of government? Is the voice of the public being heard? Are the claims of greater flexibility and efficiency a reality? Will there be less paperwork, or more? Obviously, conclusive answers to those questions must await the passage of time. But you will find at least the beginnings of some interesting answers in the pages that follow. All of the above questions are, at the very least, confronted, if not resolved; even the tentative replies contained herein should be of great value to states that wish to benefit by the experience of other states, and that are concerned for the future of these programs and their intended beneficiaries. It should be noted that this publication deals primarily with the questions of administrative process, as opposed to addressing in-depth the question of fiscal impact of block grant transition. Most of the programs discussed in this document have experienced substantial reductions in federal funding concurrent with the transition to state administration of block grants. In most cases, these funding cutbacks themselves have forced major changes in state operations and many sharp reductions in services provided to target groups. Although a preliminary glimpse of fiscal impact is provided herein by the National Association of State Budget Officers (NASBO), this very important issue is being addressed in a separate survey on which NGA is working closely with NASBO. vii PAGENO="0304" 300 FINDINGS OF BLOCK GRANT IMPLEMENTATION SURVEY The following section of this report describes the findings of the NGA questionnaire on block grant implementation and is presented in both narrative and tabular forms. The data contained in this section are based on information provided by every state. The first part of this section highlights the major themes that appear to emerge from all of the information elicited by the fourteen items in the questionnaire. The second part of the section is a question by-question presentation of the data provided by the states. To assist the reader, the original questions precede the narrative or tabular presentation of materials. PAGENO="0305" 301 BLOCK GRANT SURVEY HIGHLIGHTS It is clear from this first comprehensive survey of how states are administering the nine new block grant programs that many changes in policy and procedure are underway. But it still is too early to predict the extent or even the exact direction of those changes. Although most states have moved quickly to assume the responsibilities and opportunities in block grants, for various reasons, some states have elected to delay taking over their administration, and some of the block grants still have not been made fully available to the states. Nevertheless, a number of interesting changes can be identified in this early survey: * Public participation in these programs is increasing, and an interesting variety of techniques is being used to achieve this participation. * Legislatures and local units of government also are being drawn more fully into the program decisionmaking process. * Administrative flexibility is being tested, with states indicating so far that they are unsure whether the present course will lead to greater simplification or complication. * Transferability-the limited power in the legislation to shift funds from one program to another to meet state priorities-is being used, but not yet on a significant scale. The nine block grants approved in 1981 represent only a fraction of the total number of federal grants-in-aid to state and local governments. Most of them were compromised sharply in the Congressional process, thereby limiting the likelihood for dramatic changes in procedure or policy, and most had their funding substantially reduced. Also, states had little opportunity to plan for this new assumption of responsibility. All these factors have tended to reduce the number of changes which have occurred in the first four months. 99-965 0 - 82 - 20 PAGENO="0306" 302 Participation Increasing The clearest indication of change emerging from this survey is the increased involvement in these programs of the general public, local government officials, and the legislature. Some of the block grants require public notification, local government involvement, and legislative hearings. New techniques are being used to reach potentially interested parties, particularly regional and statewide meetings and televised conferences. Whether it is required or not, states seem to be making a determined effort to increase participation. Previously, most of these programs were administered with a minimum of participation from the public, the legislature, and local policymakers. The decisionmaking process typically involved the) federal administering agency, a limited number of state administrators who sometimes dealt with a limited number of local administrators, and the target population. In some of the programs, the federal agency alone made most of the key decisions regarding funding allocations and program priorities with little or no state/local government or public involvement. While the increase in involvement on the part of the public, local officials, and the legislature is documented in the survey, the full impact of this development remains to be seen. Administrative Flexibility One of the greatest theoretical appeals of block grants for states was the opportunity for increased flexibility in administration. Although states are moving to utilize this increased flexibility, the short time span does not permit conclusions to be drawn as yet. While most states indicate that there will be efforts to streamline procedures and generally reduce red tape in the future, only a few say they have seen effective changes at this stage. What is clear is that it is too early to determine which burdens will be decreased. By Federal Fiscal Year (FFY) 1983, the states hope to have some idea of what amount of administrative detail can be eliminated, reduced, or transferred to local government agencies. There may be cases of increased administrative burdens as contracting and appropriations rules change, especially since fewer dollars are available for programs. There may have to be increased monitoring of some programs, particularly for those that have been totally federally-administered in the past. As one state reports in the survey: "A preliminary review of the social service reporting system will result in changes that either complicate or simplify matters." 4 PAGENO="0307" 303 Block grants carry special audit requirements. More than half of the states do not think that there will be any effect as the audit requirements are eased. Six of those states say that there may be an increase in the administrative responsibility as certain programs become a state focus as opposed to federal. Several states say that there will be standard auditing procedures for all block grants. These procedures, as well as the elimination of auditing requirements for federal purposes, should save the states both time and money. Intergovernmental Changes Governors' offices have been expected to play an important role in the block grant administration process. To date, it appears there has been little measurable shift in the role of the Governor or the Governor's staff as a result of the new block grant responsibilities. There will be more activity in the oversight of how the block grants are administered, and Governors' staffs will be more involved in planning and resource allocations. Because of the flexibility of block grants, Governors' offices and state legislatures will be working to develop new resource allocation guidelines. At least initially, there has been some increased interaction between the Governors' offices and Congressional delegations and executive branch organizations. This may be temporary as the states become more accustomed to the administration of block grants. Most state legislatures tried to anticipate the procedures that would be necessary to carry out the responsibilities of block grant implementation. Fourteen states thus far have made no special legislative provisions for dealing with the block grants. Many of the remaining states will use some sort of advisory group to review the acceptance and monitor the use of block grants.. These groups will advise Governors' offices and state agencies and make recommendations on block grant implementation. In some states, the advisory groups will have approval authority on block grant allocations. These advisory groups vary in composition from specially created task forces to legislative standing committees on appropriations, finance, or fiscal affairs. Required legislative action varies among twenty-four of the responding states. In three states, a state agency must have the legislature's approval before applying for or receiving a federal block grant. Some states require that block grants be subject to the legislative appropriations process, while others mandate that agency and program funding be the same proportionately as categorical grants from the previous year. Two states have found it necessary to create legislation allowing for the application and administration of the CDBG by a state agency. 5 PAGENO="0308" 304 It is not certain how much increased responsibility there will be for Governors' staffs and state legislatures or how the relationship will be; however, in most states the role of each branch has begun to evolve. In addition, it is apparent that a majority of the states will be increasing the role of local government in the administration of block grants. More flexibility to develop programs, as well as the reduction of mandates and the increase of authority of local government to prioritize funding needs, will play a part in the effort to return some of the power to the local level. Transferability During the many years that block grants or the "decategorization" of federal programs has been under discussion, a central issue has been whether states should have increased "flexibility" to channel federal grants-in-aid to meet needs and priorities as developed in the individual states. Congress generally has tended to be rather specific in its authorization language and appropriations, and often has gone so far as to earmark funds very strictly for specifically named activities and target groups. This has been a difficult issue to resolve, as states have made a strong case for having maximum flexibility and Congress has countered with the importance of accounting for the use of federal tax dollars. A very small step toward limited statutory flexibility was realized in the approval of block grants in 1981. Most of the block grants allow for the transfer of a small fraction (about 15 percent) of the total, and only, as a rule, to certain identified programs. The survey shows that states are taking advantage of this flexibility, but the transfers so far mainly reflect special circumstances in the first round of block grants and therefore do not reveal a lot about the general significance of transferability for block grants. Transfers presumably will increase as time goes by and as state, local, legislative, and public involvement increases. To date, the big winner, in terms of transfers into a program, is the Social Services Block Grant (SSBG). This reflects the fact that the SSBG has broad authority with which state and local officials are experienced thoroughly and meets needs they long have rated as a high priority. It must be remembered that the SSBG experienced a substantial funding reduction as the block grant program began; thus the transfers to it can be viewed as efforts by states to make up losses in their most important social services programs. In terms of transfers out of a program, the Home Energy Assistance Block Grant (LIEAP) was utilized the most. Twenty-seven transfers have taken place reflecting a number of special circumstances: * Unlike most of the other block grants, the LIEAP was not reduced sharply for FFY 1982; also, funds have been distributed more rapidly than most of the other grants. 6 PAGENO="0309" 305 * Transfers out of energy assistance into home weatherization, done in at least five states, really are minor shifts between similar activites. * Funds have been shifted in some states that have warm climates and thus do not consider energy assistance as serious a need. Once again, while it is fairly easy to document the trend of shifting funds out of LIEAP into SSBG, it is difficult to forecast the significance of the trend. There has been some shifting of funds into the Maternal and Child Health Care (MCH) Block Grant but the dollar amounts are not large. There have been comparatively few transfers out of the Coimnunity Services Block Grant (CSBG) even though it allows transfers to other block grants. Again, the answer may lie in the fact that the amount available for transfer is restricted. The CSBG requires that 90 percent of FY 1982 funds be passed on to grantees who received Community Services Adminsitration funds in FY 1981, and 5 percent of the grant may be used for state administrative costs. PAGENO="0310" 306 1. Please indicate the block grants that will be administered by your state and the implementation date for the grant. Federal legislation required implementation of the Social Services Block Grant (SSBG) and the Home Energy Assistance Block Grant (LIEAP) at the beginning of FF1 1982 (October 1, 1981). The Primary Care Block Grant (PCBG) is not available until FF1 1983 (October 1, 1982) and the Elementary and Secondary Education Block Grant (ESEA) was forward-funded for July 1982 distribution. The following are the summaries of actual and proposed block grant implementation dates and numbers of states selecting those dates (see Table 1 for actual dates by state): IMPLEMENTATION DATE BLOCK GRANT 10-01-81 10-01-82 OTHER (sPECIFY DATE) ADANHA 42 STATES 3 STATES 01-01-82 2 STATES PCBG N.A. 8 STATES UNDECIDED 2 STATES PHSBG 42 STATES 3 STATES 01-01-82 2 STATES MCII 44 STATES 2 STATES 01-01-82 1 STATE SSBG 50 STATES CSBG 34 STATES 9 STATES 01-01-82 UNKNOWN 2 STATES 1 STATE LIEAP 50 STATES ESEA N.A. 16 STATES 30 STATES NO REPORT (see Table 1) 2 STATES CDBG 8 STATES 6 STATES 36 STATES (see Table i) 2. If your state elected not to implement a particular block grant in FF1 1982, please give a brief explanation of the reason. The preponderance of states electing not to implement certain block grants in FFY 1982 provided explanations primarily for the Community Development Block Grant (CDBG), Community Services Block Grant (CSBG), and Primary Care Block Grant (PCBG). 9 PAGENO="0311" 307 TABLE 1 Block Grant Implementation Dates By State State Block Grant -~ PHSBG MCH SSBG CSBG LIEAP ESEA2 Alabama 10-cl ~. 10-81 10-81 10-81 10-81 07-82 10-31 Alaska 10-31 8.8. 10-81 10-81 10-81 j~~1 10-81 10-32 10-82 Arizona j~~1 NA. 13-81 J~L ~±fi~_ Arkansas__ rn~ NA. rn-ci rn-~ 10-82 880. California rns~ l.A. 10-82 lO-82 jO~1 10-32 Colorado loni LA 10-01 10-81 10-01 10-82 10-81 10-32 ~jo. Connecticut JP~L UND~. 10-31 10-31 JPL~L i~Pi 10-82 ~ij~ Delaware JP~li NA. 1081 10-31 JP~i 10-81 10-81 . j~~1 Florida Georgia L 10-81 ILA. rn-02 10-81 011 10-81 j~j_ 10-81 rn-si 330. 10-82 rn-81 10-81 ~4D. REPORT ~w. rn-c2 Hawaii 01-82 ~. 10-81 10-81 10-81 ~7~2 JP~?~ Idaho ~JO~L JQ~3i. jQ31 JO~3L jQ~2 10-31 Illinois__~ 3.0. ]~o~ j~ rn-si io-ci rn-cl 07-82 rn-cl Indiana ~o-~i 3.A. jfl~ ~3j j3~l~ uij.~ Iowa 10-82 J0S3L Kansas rn-81 U.A. J1L~81_ 1a~aL JflOB] E~31 01~i32 i3iiL Kentucky JQ~L ~P? JQ~Oa_ Jfl,,3j O-8L J3~3]~ ~~OZ=E2~ j3~1 Louisiana - LA. J~~3J J~3~5j J~jfl LQ~31 J0z01 J12z32 iiliD~ Maine lru~~1 8.A. Jft~flj~ J3~5l_ J11O81 m5ci_ .jiiin~ Maryland 10-81 J~ JSL5~ Matsachusents JQZ~L JQ~8L rn~ci Jo~~i~ 0732 JIU13a Michigan 10-82 j~j JQ~J J~J j~L JQ~3j 10-32 Q~32 Minnesota JPZ~L NA. j~j JQ~5L JQ~31 JQ~3J JQ~3] OZ~i Missis~ppi J.Q.~J_ U.A. Q,,3~ J1~5I. ~.s3L~ J.D.OO1. `The Primary Care Block Grant (PCBG) is unavailable until FF81983 (October 1, 1982). 2 The Elementary and Secondary Education Block Grant (ESEA) was forward funded for July, 1982. NA. - not available 880. - undecided 10 PAGENO="0312" 308 Block Grant Implementation Dates By State (Continaed) State Block Grant ~ ADAMHA PCBG PHSBG MCH SSBG CSBG LIEAP ESEA CDBG Missouri 10-81 .8. 10-81 10-81 10-81 10-31 10-81 0782 07-82 Montana 10-32 1.8. io-oi 10-01 10-81 01-32 10-31 10-32 10-81 Nebraska 10-81 l.A. 10-81 ~-~i 10-81 10-81 09-82 04-02 Nevada 5.8. 10-Si 10-Si 10-31 10-82 10-82 New Hampshire 0-82 9.8. 01-82 01-82 10-Si 01-82 10-01 07-82 80. NewJersey IIL8~. 10-81 10-01 10-01 10-01 10-81 07-82 l.A. New Mexico New York 07-82 07-82 10-81 10-32 10-81 07-82 608. - North Carolina 10-81 10-81 1081 1081 10-31 10-81 07-82 880. North Dakota ~1 10~82 10-81 10-81 10-31 10-81 10-81 07-82 10-31 3~A~ 10-81 10-rni J~L 10-~ 07-82 04-82 Oklahoma l.A. 10-81 10-31 10-81 10-81 10-31 07-82 880. e~ l.A. 10-81 10-01 10-81 10-81 10-81 10-82 l.A. Pennsylvania LA. 10-81 10-81 10-81 10-81 10-81 07-82 8.A. Rhode Island LA. 10-81 10-81 10-81 10-81 10-81 .~. South Carolina .i~. 10-81 10-81 10-01 10-31 10-81 07-82 10-81 South Dakota 1001 ftJ9~ 10-Si 10-81 10-81 10-01 10-81 10-82 UND. Tennessee lxi 1 10-81 1081 10-81 10-81 07-82 i081 Texas 13~EL JLL.. ~8L 10-81 10-Si 1032 1031 0782 800. Utah .JDwDi_ JLA. .J.QZ.OL 10-01 iO-81 10-81 10-81 10-82 0682 Vermont JQ81_ 07-82 ~0. Virginia 8118 1081 10-82 SOD. Washington 10-Si `~lS ~10-81 10-in ~-81 iO-81 07-82 . iA. West Virginia ~1U~~a1 io~sa ~L lQwDL 108i 2 jQ~i 10 ST ~2 Wisconsin 10-.~.2 -~ J.QwD.2 JQ~ j~i ~2 ~2 Wyoming JQ~51 105i 0702 03-32 American Samoa Guam . 5UNK. - unknown tPlanning grant received 11 PAGENO="0313" 309 Block Grant Implementation Dates By State (Continued) Block Grant ~ 12 PAGENO="0314" 310 Forty-two of the responding states chose not to implement the CDBG on October 1, 1981. Their reasons include: * the majority are hampered seriously by the slow pace of Housing and Urban Development's (HUD's) regulations process; * there is a lack of sufficient planning time, particularly for local input; and * legislatures have not been in session and therefore have not authorized the acceptance of the program. It would appear that the second and perhaps third reasons above could be related to HUD's regulatory process. By and large, all twelve states electing to implement the CSBG at some later date, indicated that the basic driving forces behind that decision were the facts that the program always has been primarily a federal government-to-local agencies program, with little state control; lack of planning time because of late passage of federal legislation; and real uncertainties regarding federal funding levels. One state reported that there was heavy opposition from the local agencies against the state assuming administration of the CSBG before FFY 1983. There were very few consents about the PCBG. Those consents generally were: "the state has not decided tO administer the program yet", or "the net worth of the program, in federal dollars received by the state, does not offset the administrative burden incurred for operation of the program". 3. Block grants allow a certaim percentage of funds to be. tramsferred to other grants or programs. If your state is utilizing this provisiom, indicate the specific grant(s) or program(s) to which funds are being tramsferred~. One of the major positive features of the Omnibus Reconciliation Act of 1981 is the provision that allows states some latitude in transferring funds among block grants (see Table 2 for actual transfers by state). Of the states reporting, twenty-seven have elected not to transfer, funds during FFY 1982. The majority of these states have indicated that either there is inadequate time for decisionmaking in this area or that legislative requirements at this time preclude transfer. Significantly though, in the first year, a number of states electe~d to exercise the transferability provision. Twenty states elected to transfer funds to their SSBG with nineteen of those transferring funds from LIEAP and one from CSBG. Eleven of those transfers were for the maximum of 10 percent, with the remainder ranging from 1.4 percent to 9 percent. All of the transfers were made for the purpose of continuing essential social services to citizens and in many cases were driven by shortfalls in funds available to the states from the amount previously available under Title XX in FFY 1981. 13 PAGENO="0315" 311 TABLE 2 State Use of Transferability For Block Grants States ADAMHA PHSBG SSBG CSBG LIEAP - Transfer To % - Transfer To % Transfer To % - Transfer To % Transfer To % Alabama NA.1 NA. NA. l.A NA. NA. NA. N. A. SSBG 10% Alaska N.A. NA. t1CH 3% N.A. NA. . NA. N. A. NA. NA. Arizona NA. N.A. NA. l.A N.A. NA. N.A. N. A N.A. N.A Arkansas NA. NA NA. NA NA. NA. OLDER AFIERICANS ACT 5 SSBG 10% California * NA. N.A NA. NA. NA. NA. NA. N. A. SSBG 10% Colorado NA. N.A NA. N.A NA. N.A. NA. N. WEATHER- IZATION A. 9% Connecticut NA. NA. NA. N.A. N.A. N.A. NA. N A. NA. NA. Delaware NA. ~ NA. NA NA. NA. NA. N. A. NA. NA. Florida NA. NA. NA. NA. NA. NA. NA. N. A. SSBG 10% Georgia 11CR 3~ 11CR 3%. * NA. NA. MCH SSBG i3% % NA. N.A Hawaii N.A. NA NA. NP N.A. NA NA. N.A~ NA. NA. Idaho N.A M.~ N.A. ~ NA. IN.A NA. ~ MCFI ~iJ~ `NA. - not applicable 14 PAGENO="0316" 312 State Use of Transferability For Block Grants (Continaed) State ADAMHA PHSBG SSBG CSBG - LIEAP -- - % Transfer To % Transfer To % Transfer To % Transfer To % Transfer To Illinois NA. N. A. NA. ~. A. NA. NA. N.A. N.A. NA. N.A Indiana N A~ c.A N ~A.__ N~A. .A. N~A. SLA NA. N. A. NA. N A. N.A. NA N.A. NA ~ Kansas N.A. N. A. N.A. N. A. N.A. N.A. N.A. WEATHER- IZATION 11% NA SSBG 10% Kentucky NA. NA. N.A. NA. NA. N.A. NA. SSBG 9% PRI MARY NA CARE 10% Louisiana MCH 3% MCH 3~ N.A. NA. N.A. N.A. SSBG 10% Maine NA. N. A. N.A. N. A. NA. N.A. NA. WEATHER NA. IZATION 15% Maryland NA. NA. N.A. N.A. NA. NA. -_N.A. NA. SSBG 8% Massachusetts NA. N. A. N.A. N A. NA. NA. N.A. NA. NA. NA. Michigan N.A. N.A . NA. N A. N.A. NA. NA. NA. NA. N.A. Minnesota N.A. N. A. N.A. N. A. N.A. N.A. N.A. N.A. N.A. NA. Mississippi NA. NA . N.A. N. A. N.A. NA. N.A. NA. N.A N.A. Missouri NA. N. A. NA. N. A. N.A. NA. NA. N.A. SSBG 10% Montana NA. N. A. NA. N. A. NA. NA. NA. N.A. SSBG 10% 15 PAGENO="0317" 313 State Use of Transferability For Block Grants (Continued) State ADAMHA PHSBG SSBG CSBG LIEAP Transfer Te % Transfer To - % Transfer To % Transfer To - - % Transfer To % Nebraska N.A. N A. NA. N.A. NA. 1. A. N.A. NA. SSBG 10% Nevada N.A. N. A. N.A. NA. N.A. N. k N.A. NA. CSBG 10% New Hampshire N.A. N. A. MCH 7% N.A. N. A. NA. NA. N. A. NA. New Jersey N.A. N. - II. N.A. - NA. -~ N.A. N. - - MCH 1% A. N.A. N.A. SSBG 9% New Mexico NA. N. A. NA. NA. SUBSTANCE ABUSE! 1 5% S.S.D.D. N.A. 1 l.A. NA. N~. New York N.A. N. A. N.A. NA. N.A. N. A. NA. NA. SSBG 10% North Carolina N.A. N. A. N.A. N.A. N.A. N. - A. N.A. N - .A. N.A. NA. N oh 0 k N.A. N. A. NA. N.A. NA. N. OLDER A. AMERICANS 4 WERATHER- 0 IZATION 4% NA. N~ . NA. N~. N~ N~ N.~ N~ A. NA. NA. WEAThER- IZATION 15% Oklahoma N.A. N. - A. NA. NA. NA. N. Oregon NA. N. A. NA. NA. N.A. N. A. NA. N A. NA. NA. Pennsylvania NA. N.A NA. NA. NA. N.A NA. N .A. NA. N.A. Rhode Island NA. N.A . NA. NA. NA. N.A . - NA. N .A NA. N.A Soath Carolina NA. N.A . NA. N~. NA. N.A . N.A. N ~. NA. N~. 16 PAGENO="0318" 314 State Use of Transferability For Block Grants (Continued) ADAMHA - Transfer To % PHSBG - Transfer To % SSBG CSBG LIEAP - - - Transfer To % Transfer To % Transfer To % NA. , NA. NA. N.A. NA. . NA. NA. NA. N.A. NA. N.A. N. NA. N. A. N.A. N A. NA. N. .A. NA. N. A. SSBG 10% MCII 6% WEATHER- A IZATION 12% A N.A. NA. 2 A. SSBG NK. NA. N.A. NA. NA. N.A. N NA. NA. N.A. N. A. N.A. N. NA. NA. NA. NA. NA. NA. NA. NA NA. N.A NA. N. NA. N NA. N N NA. N P. NA. N .A NA. N .A. SSBG 1.4% .A NA. NA. .A NA. N A N~ .A NA. OLbER AMERICANS ./ ACT .A NA. N.A SS8~ NA SSBG 8% 5% 5580 10% NA. NA. ~L~_ . N.A NA. N.A N.A. N.A NA. N.A NA. N Samoa 2UNK. - unknown 17 PAGENO="0319" 315 State Use of Transferability For Blotk Grants (Continued) 18 PAGENO="0320" 316 Nine states transferred funds to MCH from ADANHA, PHSBG, LIEAP, and CSBG. These transfers ranged from 7.5 percent to 1 percent. These transfers were used primarily to offset shortfalls in critical program areas. The Community Services Block Grant (CSBG) in particular allowed for transferability to programs (non-block) under the Older Americans Act and three states decided to use this provision. Five states moved funds from LIEAP to their weatherization program, another form of energy assistance. In the majority of cases, the use of the transferability provision was from one block grant to another block grant and was not a "mixing and matching" among and between numerous block grants. The use of the transferability available in block grants indicates clearly that states take seriously even the limited flexibility provided to make decisions that best meet the human services needs of citizens. 4. All nine block grants require some degree of public `involvement in determining the use of funds. A. Please provide the requested information on the public participation process in your state for the various block grants in the first year of implementation. (The Primary Care Block Grant, omitted for FFY 1982, will not be in effect until FFY 1983.) All states provided information on public involvement processes with regard to the block grants. In many states multiple approaches were taken within a single block grant as well as among the various block grants. Public participation data was gathered in three major categories: the approach to disseminating information, method of public participation, and unit of government responsible for the process. Each of these areas was subdivided further into such categories as newspapers, meetings, written comment, Governor's office, legislature, etc. The data basically indicated that: * the two approaches for disseminating information-public meetings and newspaper ads-were used almost equally; the least frequently used method was public service announcements; * the two methods for involving public participation-taking written comment and holding statewide meetings-were nearly equal in use; conducting regional meetings throughout the state was the next most frequent choice and conducting local meetings was the least common method (although local officials and administrators clearly were involved in the written comment process and in statewide and regional meetings); and * the unit of government taking responsibility for the public participation process most frequently was that administrative agency responsible for a particular block grant; the Office of the Governor, followed closely by the State Legislature, were the units which next most frequently conducted the process. 19 PAGENO="0321" 817 Each of the major subdivisions cited previously allowed states to report other approaches used for public participation in the first year of block grant implementation. A number of different and creative approaches were being used by states: statewide teleconferencing, televised meetings, task forces, special constituency groups, and speakers for groups requesting information and/or input to the process. One frequently heard criticism of block grants in the human services area was that they would allow state government to minimize the involvement of the public in determining the needs and planning for programs. If nothing else, the data provided by the states clearly and emphatically show that citizens were provided a multiplicity of opportunities to participate in the process of human services program development and decisionmaking. B. If this process differs from that used prior to first y~r implementation of block grants, please describe these differences (by individual block grants, as necessar~ Twenty-five of the reporting states indicated that the public participation process varied from the past when the programs included in the block grants were categorical. The data from these states over- whelmingly indicate that for all of the programs (except SSBG, Title XX) this generally is the first year in which the public has been involved so heavily in the process of program decisions. Most of the states further indicated that for the first time there was legislative involvement, more meetings with citizens, coordination among and between block grants for public participation processes, and more attempts at interaction with local units of government. Again, the responses to this question, as to the one above, indicate a higher level of public involvement under block grants than in the past. C. Will the public be informed regarding the final first ~~~implementation plans? The answer was affirmative in all of the states. D. How will information be disseminated relative to the first year of operation of block grants? Forty states advised that the citizens will be informed via one or more of the following: * annual reports; * state registers; * news releases; * FFY 1983 planning process; * public meetings; * newsletters; * television announcements; and * local agency offices. 20 99-965 0 - 82 - 21 PAGENO="0322" 318 Again, the data show that the public will participate on a regular, ongoing basis in the block grants process-from planning what is to be done to reviewing reports on what actually was accomplished. E. Will the public participation process for the second ~ar of implementation differ from that in the first year? Thirty-five states reported that the public participation process for FFY 1983 will differ from the process used for FFY 1982. The majority of these states indicated that the most significant change would be the institution of public participation under the auspices of the state legislature. This primarily is a result of requirements enacted in federal legislation. The other more significant changes would be the establishment of more formal processes, greater coordination of public input for block grants, and more meetings. Some states will be having pre-plan development meetings and block grant review committees, and will include categorical programs for better coordination. The eight states indicating that major changes were not being made did indicate that they would be making some attempts at streamlining the public participation process. Other reporting states were undecided on types of future changes. Finally, the survey clearly indicates a high degree of public participation through a variety of standard and innovative approaches. This should be of interest to those persons, in and out of government, who believe that unless program prescriptions are provided, the states will not be concerned with services to citizens. 5. In what way has the easing of federal audit requirenefl.!~ for block grants alleviated financial and/or adainistrative burdens on your state, if at all? Specify any change~~ p~~edure. Seventy percent of the states (thirty-five) indicated that as yet they see no effect or that it is too early to recognize the impact of the easing of federal audit requirements for block grants on state financial and/or administrative burdens. As a matter of fact, six of the thirty five indicated that with certain programs (such as CSBG) becoming a major state reponsibility, there probably will be a direct increase in state administrative and/or financial burdens due to new auditing requirements. Some states reported that the Auditor General and/or Comptroller of Accounts will be designing standard auditing procedures for all block grants and that this, coupled with elimination of parallel auditing requirements for federal purposes, should yield a savings to the states. Overall, the states, as yet, are not seeing or feeling any alleviation of financial or administrative burdens with regard to audit and administrative requirements since enactment of the block grants. 21 PAGENO="0323" 319 6. The Primary Care, Maternal and Child Health Care, and Community Development Block Grants require some form of state matching of federal funds. (For details, see Table 3.) Since the PCBG has a delayed effective date, states have not had to fulfill the match requirements for this block grant as yet. For the Maternal and Child Health Care Block Grant, forty-five states will provide sufficient match, eighteen states will overmatch (supplement), and eighteen will require some amount of substate unit of government match. To date, approximately one-half of the states indicate that they will provide sufficient match for the CDBG and very few will supplement or require sub-state grantee match (see Table 3 for state data). 7. Has the role of the Governor's staff changed as a result of special provisions concerning the appropriation, allocation, or administration of block grant funds? If so, please explain. Major shifts in the operational responsibility of direct staffs of Governors, to date, have not occured in twenty states. In those states signifying a change, the role of the Governor's staff included: * more oversight and direction responsibilities; * more planning responsibilities; * more duties because of increased involvement with the legislature and actions inherent in block grants; * more resource allocation decisions resulting from flexibility in use of funds; and * increased activities with congressional delegation and executive branch Offices (however, this may be only a product of first year implementation problems/concerns). 8. Has your state legislature enacted any special provisions concerning the appropriation, allocation, or administration of block grant funds? If so, please explain. Legislative bodies in fourteen states have not enacted any special provisions for block grants. The vast majority of states have tried to anticipate the block grant implementation process through special block grant advisory groups and the legislative appropriations process. Advisory Groups At least twelve of the states either have created special advisory task forces, joint legislative committees, or other special block grant review committees or have delegated block grant authority to a standing committee on appropriations, finance, or fiscal affairs. The purposes and authority of these units vary, but in general, they review the acceptance and use of block grants, monitor the block grant process and serve in advisory capacities to the Governor's office and state agencies, comment and make recommendations on the implementation of block grants, and in some instances, approve block grant allocations. 22 PAGENO="0324" 1N.A. - not applicable 2UNK - unknown ~UND. - undecided 320 TABLE 3 Provision of State Matching Funds By Block Grant SO 110 YES UNK.2 * A. A. 113K. l.A. LA. UI1K. l.A. LA. YES YES YES YES U110. ~ UND. UND. LA. 011K. State PCBG MCH CDBG ~[~ul~ Require Provide Supple- Require Provide Supple- Require Sufficient mont Sub-State Sufficient mont Sub-State Sufficient mont Sub-State Match Match Match Match Match Match Match Match Match Alabama l.A. l.A. l.A. YES 110 YES YES YES hO l.A. Alaska Arizona Arkansas 110 10 YES YES YES 10 110 10 l.A. YES Elk). IA. 10 011K. 110 ONE. 110 YES YES California 110 110 YES 110 110 Colorado 110 110 NA. NO YES YES hA. YES YES NA. YES LA. NA. YES YES Connecticut Delaware YES Florida YES YES 13 YES 4) YES a.A. l.A. l.A. NA. v.A. l.A. Georgia Hawaii YES 30 10 YES 110 10 Idaho YES YES NO YES NO 110 Illinois YES YES YES YES YES YES Indiunu YES NO YES YES YES VARIES Iowa NA. NA. NA. YES 10 Kansas YES 110 YES LA. NA. NA. Kentucky Louisiana YES 110 110 10 YES USE. NO UIIE. YES USE. U11K. UNK. UNK. YES YES Maine NA. l.A. NA. YES YES 110 YES 110 30 Maryland sota l.A. IA l.A. A l.A. 1A YES ES YES 14 NO 5 YES A 10 1A 0110. 4A NA. NO NO l.A. UED N. A. 1-l.A. 11 . A. 110 YES YES NA. UND. UIiD. N A. l.A. l.A. NA. 10 110 11. A. UIID. l.A. l.A. N. A. 10 23 PAGENO="0325" 321 Provision of State Matching Funds By Block Grant (Continued) State PCBG MCH CDBG Provide Sufficient Match Supp~ mont Match Require Sub-State Match Provide Sufficient Match Supple ment Match Require Sub-State Match Provide Sufficient Match ~eRe~ire ment Sub-State Match Match Mississippi N.A. l.A. NA. YES YES 40 LA. LA. l.A. Missouri NA A. YES YES 40 YES NO NO -_Montana LA. NA. l.A. YES NO YES YES NO YES Nebraska N.Y. NA. A. SO 40 YES NA. LA. LA. Nevada NO NO NO YES YES 10 YES NO NO New Hampshire NO NO NO YES YES NO LA. NA. l.A. New Jersey YES NO YES YES NO YES YES 10 YES NewMexico NA. NA. NA. YES NO 140 NA. l.A. IA. New York N.A. l.A. NA. NA. NA. N.Y. `LA. NA. N.Y. North Carolina lAiD. lAID. UND. YES YES YES NO NO North Dakota N.Y. NA. N.Y. YES ` 110 YES YES NO NO Ohio NA. NA. N.A. YES YES - 40 YES YES 140 Oklahoma YES UNK. UNK. YES NO YES UND. SlID. IIND. Oregon N.Y. N.Y. N.Y. N.A. N.Y. l.A. N.A. N.A. NA. Pennsylvania N.A. N.A. N.Y. YES NO YES YES N.A. N.A. Rhode Island N.Y. N.A. NA. YES YES YES NA. NA. NA. South Carolina NA. N.A. NA. YES UNK. UNK. UNK. UNK. UNK. SouthDakota NA. NA. N.Y. YES NO NO NA. NA. N.A. Tennessee N.Y. NA. NA. YES YES YES 10 NO NA. Texas UND. UND. UND. YES NO YES YES NO YES Utah NA. N.A. NA. YES NO NO YES NO NO Vermont N.Y. NA. NA. YES N.Y. NA. YES YES N.Y. Virginia UND. UND. UND. YES NO N.Y. YES NO UND. Waslgington NA. l.A. NA. YES NO NO UNK. UNK. UNK. West Virginia NA. N.Y. N.Y. l.A. N.Y. NA. NA. N.Y. N.Y. Wisconsin NO NO NO YES NO YES YES NO 110 Wyoming NA. N.Y. N.Y. YES YES NO YES NO YES ~l-lave not applied 24 PAGENO="0326" 322 Provision of State Matching Funds By Block Grant (Continued) PCBG MCH CDBG Provide Sufficient Supple mutt [~~ir Sub-State Provide Sufficient Supple- meet Match Require Sub-State Match Provide Sufficient Match ment Sub-State Match Match Match Match Match Match 25 PAGENO="0327" 323 Legislative Action Legislatures in twenty-three states have approved, have pending, or have proposed one or more special measures specifically related to block grant implementation. These include: * retainment by the legislature of full authority regarding block grants (legislative approval prior to block grant acceptance; administrative agency assignment; appropria- tions; assignment of responsibility for conducting public hearings); * prohibition of centralization of block grants in one state administrative agency;~ * requirement that block grant funding to agencies be in the same proportion as the previous year categorical grants; * enactment of special provisions for administration of CDBG and CSBG (establishment of a CSBG distribution formula); and * creation of a block grant trust fund and establishment of a block grant legislative review committee. Other In one state, the legislature twice placed language in the state fiscal appropriations act to approve block grant expenditures. The lan- guage first was "line-item" vetoed by the Governor and six months later it was "pocket" vetoed. 9. Have you taken, or do you plan to take, any steps to revise the authority, or flexibility of local governments umder block grants? If so, please explain. Fifteen of the states have not revised the authority or flexibility of local governments under block grants during the current fiscal year. Steps Already Taken One state has reduced mandates; another state has given counties the flexibility to develop social service programs; two states have increased the role of local governments in CDBG by allowing then to prioritize funding needs; in one state, CDBG funds are distributed on a per capita basis for cities over 5,000 population and another state is providing CDBG flexibility in selected areas. "Mini" block grants to local governments are being distributed through the human resources committee in one `of the states. One state has involved local officials in all aspects of block grant planning. 26 PAGENO="0328" 324 Steps Pending or Proposed Flexibility for local governments has been proposed, is under advisement, or is pending in seventeen states. In two states, proposals for ADAMHA are pending with a proposal for SSBG also pending in one of these states. Five other states also have proposals pending; two states are planning to give increased flexibility in FFY 1983, with one of these~ plans being designed specifically for local health departments. Two states will emphasize different eligible activities under CDBG, thus involving local governments, and one state will provide CDBG flexibility if needed. Two states will strengthen the role of local governments in CDBG by involving them in funding decisions and in determining areas of priority needs. One state plans to "re-block" programs that have been direct federal-local programs in the past. A bill to allow local govern- ments to establish human services management boards has been introduced in one state, and in another state a negotiated approach to block grants will be implemented in the second year for SSBG, with local governments participating in the negotiation. 10. Are there pending and/or anticipated law suits resulting from block grants? If so, please describe briefly. Law suits resulting from block grants are neither pending nor anticipated in thirty-four states. The Community Services Block Grant has resulted in law suits in two states. In one of the states, there is a dispute over the interpretation of Titles VI and XVII regarding (1) whether or not a public hearing was required in FFY 1982 and (2) whether the deadline for the filing of the state plan was timely. In the other state, a suit against the state was initiated when the state chose to establish a new grantee that would meet state management/administrative standards for operation of the CSBG program. Both the state and federal courts ruled in the state's favor, giving the state the right to determine eligibility for CSBG funds under certain circumstances. The cuts in services and personnel stemming from the Social Services Block Grant have resulted in law suits in one state. The potential for law suits exists in at least two other states: (1) as a result of an overall reduction in funds and (2) as a result of disagreements over equitable services for private school pupils under ESEA. 27 PAGENO="0329" 325 11. Each block grant, at least to some degree, provides the state with additional programmatic and administrative flexi- bility (below, as necessary, specify by block grant). A. What steps, if any, have been taken to remove or simplify administrative burdens (e.g, regulations, guide lines, planning, budgetin~, management control, pro- cedures, reporting, etc.)? Twenty-five states indicated that, primarily due to the late passage of federal legislation, federal funding uncertainty, and delayed regulations, they were unable to take any major steps to remove or rimplify administrative burdens for FFY 1982. These states indicated clearly that they are actively reviewing possible changes that can be made in FFY 1983 in this area. A variety of mechanisms is being utilized for this review process: interagency task forces, Governors' offices work groups, state planning agency efforts, and citizen advisory committees. For those states that have been able to institute some change in this area, the major efforts to date have centered around: * simplifying or reducing report requirements with more uniformity across block grants; o simplifying the applications to administering federal agencies, oftentimes reducing documents as voluminous as seventy pages to three or four pages; o attempting to design uniform plan tormats across program lines; o reducing the complexity of state planning processes or requirements; and * moving to create uniform auditing and fiscal monitoring for the human services block grants. A number of the states that have instituted simplification in administrative burdens clearly have designed these changes to benefit local government units or providers of purchased services (e.g., mini- block grants for counties, grants-in-aid to providers of services as opposed to complicated contracts, and removal of federal regulations under the SSBG assigned to local level social services offices). Four states indicated that there may be a slight increase in administrative burden as they assume programs included in the block grants that previously were direct federal-local categorical programs. B. What steps have been taken to modify programs or p~pgram structures? Fifteen states currently are reviewing programs to determine what modifications may result from the implementation of block grants. 28 PAGENO="0330" 326 Ten states reported that no modifications have been made in programs or program structures. In many of these, modifications would require legislative action and the legislatures were not in session at the time block grants were passed. Other states already have administrative agency structures that encompass the majority of the block grants and thus see no need for change. At least seven states described program modifications that allow for better "targeting" of resources. This resulted from changes in federal legislation but more specifically from elimination or easing of federal regulations. Examples of this targeting approach include: * the ability to extend CSBG coverage to previously ineligible state areas and citizens; * an integration of CSBG and CDBG to focus on the objectives of employment and economic development; * the utilization of existing community resources such as school cafeterias and school buses to extend CSBG services; o an increase of local opportunities (rural particularly) to utilize CDBG funds; and * the integration of certain human services block grants for more efficient administration and coordination of services. The changes brought about by the SSBG have permitted a number of states to eliminate underutilized mandatory services, establish fee structures for certain social services, and utilize the SSBG as a base for the integration of smaller, categorical social services programs. The health block grants have allowed two states to consolidate a number of small, less effective health programs into a larger, more family-oriented approach to health services. C. Have eligible recipient groups been modified? If so, which? Thirty states report that to date there have been no changes or only minor modifications in eligible recipient groups resulting from passage of the block grant legislation. The majority of these respondents indicated that their decision not to modify eligible recipients was based on either the late date of the passage of the Omnibus Reconciliation Act of 1981 or on the continued appropriateness of current eligible recipient groups. In five states, considerations for modificatinos of eligible recipients is under review and may result in changes for FFY 1983. 29 PAGENO="0331" 327 The remaining states with modifications in place emphasized that the majority of these were made as a direct result of reductions in federal funds (e.g., a number of states made changes in day care eligibility as a result of the SSBG funding level). D.Has there been a change in grantees? If so, which? Thirty-three states have not made changes in grantees under the block grants. The majority of these stated that it would be premature to do so the first year because (1) in some instance, the changes would require legislation and the legislature was not in session and (2) the current grantees were appropriate, though funds might be reduced, not eliminated. Eight states will be studying possible options for changing grantees and, as previously indicated, are utilizing interagency task forces and advisory committees to assist in these decisions. In those states where grantees changed, the change was made for the following reasons: * poor performance by previous grantee; * ADANHA block grant funds going first to counties instead of directly to mental health centers; and * insufficient funds to continue the vast number of purchased social services providers under SSBG, particularly where services were being utilized marginally. E.Has there been a change in providers of services? If so, which? Twelve states reported changes in providers and all of these were under the SSBG. The universal reason was the reduction in federal dollar amounts as compared with FFY 1981 Title XX dollar amounts. Twenty-five states indicated that they had made very little or no change to date. One of these states advised that there will be no need for change because a single state agency presently administers the majority of the block grants passed. The remaining states are studying whether in FFY 1983 they will make changes in services providers and whether the changes will be based on expected or anticipated budget redcictions. 30 PAGENO="0332" 328 12. The Governor's office, under the Omnibus Reconciliation Act of 1981, now has responsibility to assure compliance with the non-discrimination provisions of the recently enacted block grants. A.Has a person on the Governor's staff or an administrative unit of government been designated as the contact for non-discrimination compliance issues which ~~ç~pients or providers of services may initiate? In the twenty-eight states responding "yes", a person on the Governor's staff or in an administrative unit of government has been designated the special contact for issues of non-discrimination compliance that may arise. B.If no, what plans do you have for establishing an ~pp~priate mechanism for resolving such issues initiated involving recipients and providers? In seven of the twenty-two states responding "no" to this question, existing procedures and mechanisms will be utilized to resolve issues of non-discrimination compliance. The existing procedures may involve mandates established by state law, a hearing process, a civil rights commission, or individual state agency responsibility for equal opportunity functions. In four states, it is anticipated that a state agency will be delegated the task of expediting non-discrimination compliance issues while in four other states, this question is under review. Two states do not have specific plans for responding to these issues or indicate that procedures will be established as required. One state has appointed an interagency task force which is developing plans for resolving non-discrimination compliance issues and another has requested that its Lieutenant Governor's Task Force define appropriate roles. 13. Please provide the name, address, and telephone number of ~~person on the Governor's staff to be used as the contact on all block grants. Information is provided in Appendix A. 14. Which state administrative agency has (will have) the actual implementation responsibility? ADAMHA: In forty-eight states, administrative agencies charged with sole implementation of the Alcohol, Drug Abuse and Mental Health Block Grant can be divided into six categories (list follows). In three of the states, implementation responsibility is shared with one or two other departments or agencies. 31 PAGENO="0333" 329 1. Department of Health (and various name combinations thereof, e.g., Health and Environment, Health and Human Services, Health and Mental Hygiene, Health and Welfare, Public Health, etc.)-nineteen states; 2. Department of Mental Health/Hygiene-fifteen states; 3. Department of Human Resources (Social Services; Rehabilitation; Public Welfare)-seven states; 4. Department of Alcohol and Drug Abuse (Substance Abuse)-three states; 5. Department of Public Institutions-two states; and 6. Office of the Governor (Executive Office of Human Resources)-two states. PCBG: Out of twenty responding states, administration for the Primary Care Block Grant is as follows: 1. Department of Health-sixteen states; 2. Department of Human Resources-three states; and 3. Governor's Office of Federal-State Programs-one state. PHSBG: Responsibility for administering the Preventive Health Services Block Grant in thirty-five states is as follows: 1. Department of Health-thirty states; and 2. Department of Human Resources (Social Services; Public Welfare)-five states. MCH: Implementation responsibility for the Maternal and Child Health Care Block Grant in thirty-eight states is listed below; in one of the states, the responsibility is shared by two departments. 1. Department of Health-thirty-four states; and 2. Department of Human Resources (Social Services)-four states. SSBG: Of fifty states responding, the Social Services Block Grant is being administered as follows: 1. Department of Human Resources (Social Services; Public Welfare)-forty-three states; 2. Department of Health-five states; and 3. Department of Pensions and Economic Security-two states. 32 PAGENO="0334" 330 CSBG: The Community Services Block Grant is being administered as follows: 1. Department or Office of Community Affairs (Services; Development )-twelve states; 2. Department of Human Resources (Social and Rehabilitation Services; Public Welfare)-nine states; 3. Governor's Office of Community Affairs (Federal-State Programs )-five states; 4. Office/Bureau of Planning/Programs-four states; 5. Office of Economic Opportunity-three states; 6. Department of Health and Social Services-three states; 7. Office of Economic Security-two states; 8. Department of Labor-one state; and 9. Department of Natural Resources and Community Development-one state. LIEAP: Home Energy Assistance Block Grant implementation is under the auspices of the following departments in forty-two states: 1. Department. of Human Resources (Social . Services; Public Welfare)-eighteen states; 2. Department or Office of Community Services (Development)-nine states; 3. Department of Health and Social Services-five states; 4. Office of Pensions and Security (Economic Security; Family Assistance)-four states; 5. Governor's Office of Federal-State Relations (Community Affairs)-three states; 6. Office of Policy Management-one state; 7. Office of Economic Opportunity-one state; and 8. Energy Policy Council-one state. ESEA: In forty-six states, the responsibility for implementing the Elementary and Secondary Education Block Grant falls within the Departments of Education, Public Instruction or Boards of Education, Elementary and Secondary Education. 33 PAGENO="0335" 331 CDBG: Out of thirty-seven responding states, *responsiblity for administration of the Community Development Block Grant is as follows: 1. Department of Economic Development (Urban and Community Affairs; Community Development-twenty states; 2. Department of Commerce-four states; 3. Governor's Office of Federal-State Programs (State Planning and Development)-four states; 4. Department of Finance-two states; 5. Department of Housing-two states; 6. Department of Energy, Planning and Development-one state; 7. Department of Natural Resources and Community Development-one state; 8. Office of Consumer Affairs-one state; 9. Office of Federal Aid Coordinator-one state; and 10. Office of State Planning-one state. 34 PAGENO="0336" 332 FISCAL IMPACTS OF FFY 1982 BLOCK GRANTS Changes in spending patterns caused by the 1982 federal budget and program initiatives are being tracked by the National Association of State Budget Officers (NASBO). During the initial phase of this project, the states were asked to quantify the anticipated impacts of the federal changes during state fiscal year 1982 (July 1, 1981-June 30, 1982 in all but four states). Preliminary analysis of data in block grant areas from twenty-two states reveals the following patterns: * Aggregate state expenditures will remain virtually unchanged, with an insignificant drop of 0.05 percent. The spending in nineteen states is within the range of +5.8 percent to -3.3 percent from prior year levels. South Dakota will reduce spending in block grant areas by 28.6 percent, while the State of Washington will increase spending by 17.3 percent. In these two cases, spending priorities have been examined carefully and fully offsetting increases/decreases have been made in human service programs outside of the block grant categories. o Federal funds received by the states are expected to fall by an average of 10.8 percent in the block grant programs. The difference between the 10.8 percent reduction in state receipts and the 13.2 percent reduction in federal appropriation levels represents only a very slight delay in the fiscal impact of block grant legislation. This contrasts with some expectations that the impact might be delayed due to the difference between state and federal fiscal years and due to the fact that some aid is received after the fiscal year quarter in which it became due. o Changes in federal funds compared with the prior year range from +2.3 percent to -19.8 percent. The range appears to be explained by the widely varying mix of block grants and other aid programs utilized by individual states. 37 PAGENO="0337" 333 1981-83 FISCAL SURVEY (Preliminary Partial Report from 24 States) as of February 1, 1982 GENERAL FUND SUMMARY FY 1981-83 (24 STATES) (in billions) FY 1980 FY 1981 FY 1982 FY 1983 Actual* Ac tual Estimate Estimate Available Funds 137.3 44.5 46.9 46.5 Expenses 126.0 40.6 45.4 44.3 Ending Balance 11.3 2.6 1.5 2.2 Balance as Percent of Expenses 9.0 6.4 3.4 *Fiscal Survey of the States 1980-1981 (50 states reporting, published October 1981.) This table represents sunmiary data on the fiscal condition of the twenty-four responding states combined into national totals. The important trends or conditions reflected are: 1. The fiscal year ending balance as a percentage of expenses continues to decline. From FY 1980 actual 9.0 percent to FY 1981 actual 6.4 percent is a drop of 29 percent. 2. The projected FY 1982 estimated balance as a percentage of expenses is 3.4 percent. This is a projected drop of 46 percent and may reflect the estimated continuing impact of the recession on state revenues and actual and anticipated federal fund reductions. 38 99-965 0 - 82 - 22 PAGENO="0338" 334 STATE NARRATIVES This section of the publication contains information provided by states and is for the purpose of exchanging information on "what is workingt' in changing intergovernmental relations. This material was prepared by and in cooperation with THE COUNCIL OF STATE PLANNING AGENCIES PAGENO="0339" 335 Introduction The narratives which comprise this section of the publication are the states' responses to a special request made in the survey. Recognizing the need for national exchange of information and mutual assistance among states, respondents were asked to describe briefly at least one of the following: * a policy change (underway or being contemplated) associated with human resource and community development programs folded into the block grants; * a planning or management practice being applied to block grant implementation; and * a major problem encountered during the year about which states could learn. General Observations The responses fall into roughly four types of reports: * updates on block grant implementation progress; * descriptions of tactics being employed to absorb sharp cuts in federal aid; * discussion of long-term improvements to state government planning and management systems that are being applied to immediate concerns; and * comments about program and policy changes which hold promise of long-term utility in managing and delivering human and community services. State Progress in Implementing Block Grants Though not specifically requested to do so, many states chose to report the accomplishments, as well as the barriers they encountered, in block grant implementation. The summaries contain many similarities, yet they indicate that Governors are utilizing approaches uniquely tailored to the needs of their states. The major similarities are as follows: * Governors have made use of task forces to bring about closer executive/legislative cooperation, increase par- ticipation in decisionmaking by the general public/local officials, and coordinate inter-executive agency actions. and * Governors, wherever possible, have made use of existing state mechanisms and have established committees to imple- ment block grants. 41 PAGENO="0340" 336 Descriptions of tactics being employed (and problems encountered) in absorbing federal funding reductions have been submitted by several states. It is apparent that current and proposed budget cuts are the overwhelming concern of state officials. Descriptions of state approaches to cope with the problem cover a wide range: * across-the-board reductions for FFY 1982 while preparing strategies for FFY 1983 with long-term utility; * priority-setting for more discrete targeting of state funds; * acceptance and allocation of all federal funding, regardless of funding stream; and * budget processes driven by policies and plans to be tested against FFY 1982 shortfalls. orts of improvements to state planning and management systems as applied to block grant implementation and funding reductions have been submitted by many states. The summaries describe practices that have been utilized among key actors in state ~~~j5ionmaking_executive and legis- lative branches, local governments, citizens, the private sector, and federal government. Narratives describe practices that are: * bringing about consensus among executive agencies; * improving state-local relationships; * fostering citizen participation in decisionmaking; * disseminating information on progress and achievements to the general public; * involving the private sector in government decisionmaking and program support; and * substituting state-developed processes and plans for federal requirements. These improvements have long-term implications for strengthening the state role in achieving local, state, and national domestic goals. Community and human services policies and program chat~g~~ have been noted in several state narratives, the features of which include: * increased program efficiencies and effectiveness; * shifted resources among client groups; * new methods of delivering services (new combinations of services, elimination of services); and * utilization of federal government waivers. Several states have approached policy changes from a different perspective: descriptions of conceptualizing pressing policy issues contrast with reports of developing innovative policy. One state describes the necessity for "taking off the program hats" worn by state officials in efforts to bring about health care reforms. Another respondent summarizes the need for "investing in human capital". 42 PAGENO="0341" 337 It is interesting to note the program areas in which policy and program changes are occurring. A number of states discuss approches they are taking to target state resources and move recipients off welfare roles into employment and self-sufficiency. Others describe initiatives to improve the return on public expenditure for education. Still others outline strategies to target development funds to communities most in need. One group of states offers approaches for increasing the effective- ness and efficiency of health care for citizens. A final observation regarding the narratives must be made. Without exception respondents are extremely interested in finding out about ini- tiatives underway in other states. In follow-up telephone discussion with these state officials, they have commented upon the value of a national exchange of information and mutual assistance among states in order to strengthen the states' role in the months and years ahead. Respondents indicate that the importance of making significant changes is clear, that each state is thinking through and making changes and improve- ments appropriate to its needs, and that sharing information and strategies is essential. Conclusions States are interested in and will support the creation of mechanisms to share information on human resources policy options and planning/management reforms among the states. A set of practical approaches has emerged from an analysis of thorny issues such as states describe in their narratives and it is reflective of the dynamics of actual state decisionmaking processes. At a special Governors' work session on block grant implementation during the National Governors' Association 1981 summer meeting in Atlantic City, major themes were identified and subsequently have been refined by the states during their initial stages of block grant implementation. Those themes are as follows: * building interagency consensus within the executive branch of state government; * developing executive-legislative coordination * improving state-local partnerships; * fostering citizen participation in decisionmaking * informing the public of progress and achievements * involving the private sector (for-profit, non-profit, and foundations) in decisionmaking and program support; and * substituting state-developed processes and plans for federal requirements. 43 PAGENO="0342" 338 Actions states can and should take, to further strengthen their management roles in the National Economic Recovery Program and their administrative roles in delivering essential human and community services to their citizens, need further attention. In light of this, a framework for an exchange of relevant information and for mutual assistance among states in their deliberations and actions is offered. Although it needs refinement, this framework is essential for the 1980s as this decade presents an unparalleled opportunity for states to reorder their com- munity and human service priorities. Central questions to be considered in the development of these issues are: * What is the economic and political environment in which human and community services will be set? * What will the service needs and demands be in this decade? and * What policy and program changes should be made to meet service needs within economic and political constraints? The narratives underscore that present economic considerations and political realities are forcing states more than ever before to confront the allocation of community and human resources. Furthermore, the policy changes reported by some states point to priorities that cannot continue to be advanced through narrow perspectives which pigeonhole human and community needs according to former funding formulas. 44 PAGENO="0343" 339 ALABAMA BLOCK GRANT POLICY AND MANAGEMENT The State of Alabama has sought the best possible means to implement block grants. This has meant searching for unique, innovative, cost- effective, and workable ways to accomplish this end with minimum effect from any political pressures from within or without. We believe we have been successful in devising a policy and a system to achieve both objectives. State Inter-Agency Council on Block Grants Leadership Role In August 1981, Governor Fob James, by Executive Order, created an Inter-Agency Council on Block Grants. The Council was composed of the Governor, directors of those state agencies most affected, and other interested boards or commissions. The Council studied the impact of the federal changes upon the various state agencies and programs and worked together in planning for the impact of those changes. The Council convened and for each block grant appointed a task force to: * identify programs included or proposed to be included in the block grants; * review present programs to assess the need to continue them and at what level; * estimate budget figures for fiscal years 1981-1982 and compare with previous years; * identify problems and other issues; * invite comment and participation from other interested groups, including representatives of impacted constit- uents; and * make recommendations on the distribution of the block grants, including a narrative explanation and justifica- tion by individual program. Each task force submitted its report to the Inter-Agency Council which, after comparing the results with what other states were doing or proposing to do (in terms of methodology, membership, targets, etc.), prepared a State Plan containing recommendations for the Governor and Joint Legislative Committee. Task Force Actions The task forces were most effective in coordinating funding of programs between agencies and in determining need for transfer of funds. Each task force negotiated for federal funding with the lead agencies for various programs, e.g., the Task Force on Home Energy Assistance Block Grant (LIEAP) agreed to transfer the 10 percent allowable under that particular grant to the Department of Pensions and Security to support Title XX Social Service programs. 45 PAGENO="0344" 340 To foster citizen participation, public hearings were conducted in four geographic areas of the state. Hearings were given newspaper coverage to encourage citizen participation. The meetings were chaired by members of the Legislative Committee, with member3 of the State Planning Office and staff from lead agencies assisting. Both written and oral presentations were given and ideas for procedural changes and implementation of the block grants were heard from representatives at the local, executive and legislative levels. All questions and comments were recorded, reviewed, and considered by the hearing panels and information was made available to all know interested parties. Design and administration of the Community Development Block Grant (CDBG) program was different. Two working committees were established: the Technical Advisory Committee (composed of seven members and six alternates representing all geographic areas of the state) and the Policy Committee (composed of six members representing city/county government, state legislature and administration, regional planning and development agencies, and HUD). The Policy Committee served as principal adviser to the Technical Advisory Committee which in turn made recommendations to the Policy Committee for presentation to the Governor and Legislative Committee. Close working associations on the part of these individuals resulted in a program which will implement the CDBG and benefit the state with maximum participation on the part of the public and private sectors. Success Factors In summary, the critical success factors in Alabama's implementation efforts have been: communicating effectively between all participating individuals and groups; cooperating by sharing ideas and concerns and coordinating between executive, legislative, and local officials; and, most importantly, keeping political actions and interactions to a minimum. For further information contact: Audrey Henderson Governor's Office of State Planning and Federal Programs State Capitol Montgomery, Alabama 36130 205/832-6963 ALASKA EVALUATION OF STATE DECISIONMAKING Transition Planning Effort The Governor's Office recognizes the need for well-planned, consistent, and in many cases rapid decisionmaking in response to recent and future changes in federal policy and the transition to expanded state responsibility. Such federal policy changes, particularly in the area of human services, result in a complex set of decisions fot the state encompassing short-term budgetary issues, as well as long-term planning, program mangement, and funding alternatives. 46 PAGENO="0345" 341 Therefore, the state plans to evaluate the current decision-making and planning process with an eye toward a more flexible and integrated system which will, of necessity, cut across traditional organizational structures. The anticiDated activities toward this goal include: * organizing information on the effect of recent federal policy changes on local, state, and federal programs in Alaska, including reductions in funding, changes in program restrictions, and other policy changes; * identifying decisions facing the state regarding these impacts, e.g., the administration of block grants; and * determining the options available to the state in response to these decisions and developing policy criteria for use in choosing among identified options. The Office of the Governor has applied for funds to initiate this effort, and will form a committee of Governor's budget and policy staff and affected departments to guide the project. Problems in Block Grant Administration The most vexing problem being experienced in block grant administration is the shortfall between federal promises and delivery. The President's original concept of much greater state control over programs has not materialized. Little in the way of genuine new flexibility in program administration can be found in the FFY 1982 round of block grants. The blocks generally consist of programs that: * previously were run by the states as a block (Title XX/Social Services Block); * previously were run by the states as a single program (Home Energy Assistance); * contain "hold harmless" mandates to continue funding existing grantees (Mental Health, Preventive Health and Health Services, Primary Care); or * set rigid formulas for use of the funds in order to preserve old federal priorities (Alcohol and Drug Abuse). Far fewer categorical programs were combined in the blocks than was expected, based on early rhetoric. Yet, the reduction in federal funding support of the programs that were blocked greatly exceeded the amounts that the Governors agreed could be saved under the original consolidation plan. The net result, from our state's perspective, has been a reduction in the state's ability to deliver vital health and social services. The true impact of this reduced capability will be felt as the state enters the State Fiscal Year 1983 in July 1982. 47 PAGENO="0346" 342 A related problem is the flow of misinformation resulting from promises of flexibility and discretionary funding that never materialize. Unrealisitic expectations are created in the community by federal announcements. It falls to state officials to explain the real picture, when citizens and organizations request services and a share of the federal bounty. Ironically, while releasing little federal control over block granted funds, the Omnibus Reconciliation Act requires the states to create appurtenances of local control such as public hearings and even legislative hearings. This runs up the cost to the state of administering the funds to little practical effect. The cost of increased coordination and planning in sparsely populated states such as Alaska ultimately may exceed the value of the tiny block grant allocations the state receives. For further information contact: Carole Burger Special Assistant Off ice of the Governor State Capitol Juneau, Alaska 99811 907/465-3500 ARIZONA WORK INCENTIVE DEMONSTRATION PROGRAN Program for Reducing AFDC Costs Arizona has submitted a Work Incentive Demonstration Program to the federal government that outlines approaches to reducing government expenditures for public assistance by training and placing in unsubsidized employment those persons who receive assistance under Aid to Families with Dependent Children (AFDC) and food stamps. Recent research has indicated that lack of job skills, job-finding skills, access to transportation, child care and employment opportunities have contributed toward increasing dependency on public assistance. The Arizona proposal, `which has been approved by the federal government, will provide training, job-seeking skills, and placement into unsubsidized employment for a total of 12,000 participants during the three-year demonstration program. The proposed date of full program implementation is July 1, 1982. All participants will be trained prior to placement in the private or public sector. Skills training will consist of a variety of options based upon labor market needs in Naricopa and Pima counties. The development of positive work attitudes and habits will be a key element of the program and will be accomplished through a philosophy inherent to the program that learning to work is as critical as learning a marketable skill. The program will enhance the job-seeking skills of the participants by making them self-sufficient in identifying potential job openings and effectively applying and competing for jobs, whether it would be in the public or private sector. 48 PAGENO="0347" 343 Available Job Opportunities Although Arizona currently is experiencing a slack period of employment growth, Department of Economic Security economists forecast that 66,433 new jobs will be created in 1983, and 646,865 new positions will be created between now and 1990. The majority of these job opportunities will be entry-level occupations such as salesclerks, laborers and unskilled workers, general office help, waiter or waitress, cashier, food preparation, unskilled assembler. These jobs require minimal or no previous experience, have a high turnover rate, and represent 20 percent of employment in Arizona. Program Participants A preliminary analysis of potential participants for the program indicates that 42 percent have completed twelve or more years of schooling, 78 percent are between the ages of 21-44, 95 percent are female heads of household, and 71 percent reside in Maricopa County. The average monthly payment per recipient is $63. This analysis would indicate that nearly half possess a basic education and that the monthly AFDC payment should not serve as a motivational deterrent to seek employment. Of the approximately 23,000 AFDC households in Arizona, an estimated 11,000 will be eligible to participate in the program. Of the 72,000 food stamp recipients in the state, an estimated 5,000.would be required to participate in work experience. (Most of the AFDC households are included in the food stamp total.) All new applicants for AFDC or food stamps, as well as those receiving benefits, will be required to register and move immediately into the program. Stringent criteria will be used in determining exemptions. The only exemptions will be for children under 19 who are attending school full time, people who are ill or disabled, mothers with children under 3, and the elderly. Program Components In order to insure the success of the program, Arizona Department of Economic Security will implement the following strategies: * Private Sector Partnership-job placements will be solicited in the private labor market. Employers who participate will be eligible for increased tax credits of up to $4,500 over a two-year period under the Targeted Jobs Tax Credit programs. Participants referred to the private sector already will have received appropriate intensified skills training. * Government Productivity Program-state government agencies will be requested to identify entry-level positions and participants will be trained to compete for those positions. * Contractor Incentive Program-contractors with the Department of Economic Security in the area of day care, residential homes, maintenance and aid to the elderly will be encouraged to employ some of the participants in their operations. 49 PAGENO="0348" 344 * Private Business Development-the Department of Economic Security will assist community-based organizations in the development of private businesses which could become self- support ing with the understanding that these businesses will employ work incentive participants. Initial efforts will focus on day care. * Employment Service Potential-a concentrated training system utilizing community colleges and existing training institutions will be developed to prepare a pool of job- ready individuals in occupational areas identified by growth industries. * Job Search Workshops-participants will be provided classroom training and information on self-help job- seeking skills, such as how to conduct a job interview, use of yellow pages to identify potential employers, use of telephone in obtaining job interview appointments, and how to complete an application or develop a resume. * Hard-To-Place Clients-the existing resources of the Department of Economic Security's Employment and Training and the Vocational Rehabilitation programs wil be used to develop a training system for those individuals who have little or no employable skills and those with other exceptional problems which will assist them in becoming self-sufficient, job-ready, or productive in a workfare situation. For further information contact: Mr. Joe Coto Assistant Director Divison of Employment and Rehabilitation Services Arizona Department of Economic Security 1300 West Washington Street (Site Code 9OlA) Phoenix, Arizona 85007 602/255-4333 ARKANSAS MISCELLANEOUS FEDERAL GRANT ACT In Arkansas, block grant implementation has made use of existing mechanisms and government structure to ease the task of transition. Since all of the affected programs are administered from a state level and federal monies are appropriated in the normal budget process, it has not been necessary to develop special strategies for responding to the major block grant issues experienced across the nation. Of note to others, however, is state legislation-The Miscellaneous Federal Grant Act-already in place that allows the state to receive unanticipated federal funds during an interim between legislative sessions. Through provisions of the act, the state is able to set up the Alcohol and Drug and Mental Health Block Grant and the Community Services Block Grant with no additional legislation needed,' and the Office of the Governor and the Department of Finance and Administration can review and act upon the grants. 50 PAGENO="0349" 345 For further information contact: Linda Garner Office of the Governor State Capitol, Room 250 Little Rock, Arkansas 72201 501/3 71-2345 CALIFORNIA INVESTMENT IN HUMAN RESOURCES Long-term Needs for State Economic Growth Perhaps the federal budget cuts which will be most harmful for California over the long-run are those in education and job-training. Education cuts impede the state's ability to equip its youth for the increasingly sophisticated economy and society they are entering. Job- training cuts make it harder to retrain workers displaced by automation and/or the national recession, to consign welfare recipients and youth from areas of high unemployment, and others indefinitely to the dole. California Human Investment Initiatives California, therefore, is looking more closely at its need to invest in human capital for a changing economy. Despite a $2 billion shortfall in revenues needed to keep state spending at an inflation-adjusted 1981- 82 level, the Governor's budget for 1982-83 proposes several new initiatives and some program redirections designed to enhance California's investment in education, science, and job-training. The major components of this effort are: * $11 million for the California community colleges to expand employment-based job-training through the California Worksite Education and Training Act (CWETA) and to train teachers for the new technical careers of the future; * $20 million for training elementary and secondary math and science teachers and providing instructional materials, including computers for instructional use; * $7 million for expanding engineering education at the University of California and the state university; * $8 million for intensive job search assistance and job- training for welfare recipients; * $2 million for special job placement and retraining for workers displaced by layoffs and plant closings; * $1 million to improve business and labor involvement in vocational education programs. 51 PAGENO="0350" 346 In addition to these new initiatives, existing programs will be enhanced and redirected. The state's CWETA program has proved highly successful over the past two years. Building from instructional resources of the community colleges, CWETA trains companies' existing staffs for higher skilled jobs, thereby opening up entry-level jobs for the unemployed. CWETA also provides training for these entry jobs. Currently, CWETA trains more than 4,000 persons per year. The CWETA program is just one of the ways in which California is recognizing the changing structure of the world economy brought about by high technology. Last year, a Commission on Industrial Innovation was established, composed of prominent business, labor, and academic leaders. This commission will point the state toward some of the changes to be made in adapting to a more technologically advanced economy. New Partnerships Needed All of these initiatives are based upon a central tenet-California's employment needs can be met only through a partnership of government, industry, and labor. Only in this way can the skills needed for tomorrow's jobs be developed. Ultimately, it must be through this investment in our human capital that states find solutions to today's human resources problems. For further information contact: Ben Williams Chief, Administrative Services 1400 Tenth Street, Room 150 Sacramento, California 95814 916/322-3170 COLORADO STRATEGIES FOR RESPONDING TO REDUCED FUNDING Many Factors Limit Scope of State-Initiated Changes To date, Colorado actions to respond to federal block grant initiatives have been limited by the large budget cuts incorporated into the block grants, the short time frame allowed for implementation of the block grants, the generally restrictive nature of the block grants, and the large budget cuts in related categorical grant programs. The state, however, has taken advantage of reduced administrative requirements such as: simplified application procedures, limited planning requirements, and reduced nonfinancial reporting. In addition, certain initiatives currently are under consideration: reduction of state licensing and regulatory requirements; development of needs analyses to equitably distribute more limited resources; and increased local flexibility over discretionary services. 52 PAGENO="0351" 347 Broader state/local issues under discussion by the Colorado Commission on State and Local Government Finance and other forums range from state assumption of income maintenance and social services programs to block granting certain funds directly to local governments. Creative Responses to Funding Reductions In reality, the block grants, while providing some reduction in administrative requirements, have acted primarily as a mechanism for reducing funding to state and local governments. Accordingly, Colorado's primary response has been in developing creative responses to funding reductions in order to preserve critical services to the most needy and disabled populations in the State. Those responses include the following: * AFDC-the state moved to adopt the rateable reduction method of calculating AFDC benefits. This action, coupled with increasing the state's need standard, was used to maintain a work incentive in the AFDC program. In addition, child care services for AFDC recipients formerly funded under Title XX became an income disregard under AFDC. This action shifted a portion of the day care program from reduced Title XX funding to open-ended AFDC funding. * Homemaker Services-a Medicaid waiver has been requested which would allow homemaker services to the elderly and disabled to be funded under Medicaid home health care provisions. This initiative will further reduce Title XX requirements while maintaining services to clients who otherwise might require more costly nursing home care. * Medically Needy Program-the Governor has requested the addition of a Medically Needy program through Medicaid as a means of refinancing and providing additional services to the Medically Indigent population in Colorado. The program would provide essential low-cost services to a target population of mothers, children, and elderly who fall just above the Medicaid income eligibility criteria. Other Medicaid Initiatives-Medicaid waivers currently are being requested which would allow home and community- based services to be provided to the mentally ill and mentally disabled who otherwise would require nursing facility care. For further information contact: Lee White Executive Director Office of State Planning and Budget State Capitol Building, Room 102 Denver, Colorado 80203 303/866-3317 53 PAGENO="0352" 348 CONNECTICUT NEGOTIATED APPROACH TO TUE ALLOCATION OF FFY 1983 SOCIAL SERVICES BLOCK GRANT FUNDS Need for Innovative Allocation and Priority-Setting Techniques On March 26, 1981, Governor William A. O'Neill established an Interagency Task Force on Block Grants. The task force was asked to recommend methods of administering the new federal block grants and also to explore innovative allocation and priority-setting techniques. The task force recommended that a negotiated process be used for block grants involving multiple state agencies. Because of its comlexity, flexibility, and scope, the Social Services Block Grant (SSBG) (involving fourteen state agencies and a host of municipal and private human service agencies) was singled out as particularly appropriate for a test of this negotiated approach. The task force's recommendation was largely due to familiarity with the Negotiated Investment Strategy (NIS) developed by the Charles V, Kettering Foundation to implement urban policy. The NIS concept involves direct negotiation among federal, state, and local teams regarding investment decisions and regulatory actions by each to serve the needs of a particular city. The process is supervised by an impartial mediator and results in a written agreement. The foundation's NIS experiments in the cities of St. Paul, Columbus, and Gary dealt successfully with a wide array of complex issues and a wide array of interested agencies and parties, including the three levels of government and the private sector. Although the NIS focused on urban policy implementation and on individual cities, the techniques involved are applicable to a wider range of intra- and inter-governmental issues. Concurrent with Connecticut's interest, the Kettering Foundation also became interested in adapting the negotiation techniques developed through its MIS experience to a broader variety of subject matter. The foundation explicitly recognized block grant implementation as a potential application and thus was extremely receptive when the Connecticut Office of Policy and Managemet (OPM) approached it for help in the design and imlementation of a potential negotiated allocation of Connecticut's Social Services Block Grant for FFY 1983. Negotiated Investment Strategy Goals and Objectives The goal of the negotiated process, if undertaken, would be to improve the techniques of irftergovernmental decisionmaking. The objectives would include design and testing of an innovative approach for allocation of limited block grant money which would: * demonstrate the ability of state government to make effective use of the authority to the states and provide a model~process which can be replicated by other states for a variety of purposes; * provide an opportunity to place an array of human service delivery issues on the table and obtain agreement on the relative importance of each; 54 PAGENO="0353" 349 o provide an opportunity to place individual agency program requests in the context of overall needs and subject those requests to scrutiny by peer agencies or claimants; o permit those claimants to see and understand all of the other claims on the same limited funding; * develop a block grant allocation process which permits all or most of the funding claimants to agree to the result; and * develop a more effective allocation of block grant funding than can be achieved through more conventional procedures. "Effectiveness" in this case must be judged in terms of the amount of service to be provided, the extent to which that service is consistent with the needs which the participants identify to be the most important, and the level of consensus achieved through the negotiating process. Design and Product of the Negotiated Allocation Process Design of the negotiated process for the SSBG is being explored. The description which follows is preliminary, pending further design work by OPM and the Kettering Foundation and pending selection of and input by the medi~tor, if the decision is made to proceed. The participants in the negotiations also would have an opportunity to modify and approve the procedures. The product of the negotiation, at least the first time, would be the executive branch's plan for allocation of the SSBG funding for FFY 1983. A broader goal would increase the complexity beyond feasibility in the limited time available. However, to achieve the objective of a "more effective" allocation, broad policies would have to be agreed upon, priorities would have to be set, and the relationship of block grant to other funding sources would have to be considered in the negotiations. Proposed Implementation Steps Five sequential steps would be taken to implement the negotiated approach: * affected queries would be identified and determination made of how each would be included in the negotiations, including state, local, and private agencies; ideally, no party to the negotiation should be in a position to contravene it; no party with the ability to contravene it would be outside the negotiation; * preparation for negotiation would take place and would include important tasks as follows: - selection of a mediator; impartial mediation is a critical element of the process, and early availability is desirable to help structure the negotiations; 55 99-965 0 - 82 - 23 PAGENO="0354" 350 - organization of private and municipal representation; since it would be unwieldy for every potential claimant to be represented individually, steps would be taken by municipal and private service providers to select representatives to serve, protect, defend, and negotiate their interests; - development of proposed ground rules; the scope of the block grant and range of participants require much preplanning to assure that the process will not become unwieldy; an important element is the design of a tiered process assuring orderly sequence and reducing the elements for discussion at any given time to a reasonable scale; and - provision of training sessions; the Kettering Foundation would conduct training sessions for the participants to improve the skills required for successful negotiation. * initial public hearings would be held; * draft plan would be prepared; the planning sequence and plan content could include the following, but could develop differently as negotiations proceed: * - agreement on ground rules, philosophical base, data base, objectives and priorities; - determination of appropriate state agency, private, local government percentages of the available funding; - determination of funding for each state agency; and - development of criteria for determining how much money each private and local grantee will receive (and who will decide); and public hearing and legislative review would take place. Conc lus ion The easiest approach to allocation of the SSBG would `be to accoimnodate the block grant as closely as possible to past practice. Connecticut instead proposes to use the block grant as an opportunity to reassess its position, establish its own priorities, actively involve a grassroots array of claimants, and explore the possibility of new modes of intergovernmental dec is ionmaking. For further information contact: Stephen B. Heintz Undersecretary Comprehensive Planning Division Office of Policy and Management 50 Washington Street Hartford, Connecticut 06115 203/ 566-4298 56 PAGENO="0355" 351 DELAWARE CITIZEN PARITICIPATION IN DECISONMAKING Four Citizen Committees Established to Advise on Service Priorities Governor du Pont has given the Department of Health and Social Services responsibility for planning and implementing four block grants: Alcoholism, Drug Abuse and Mental Health; Social Services; Maternal and Child Health; and Preventive Health Services. Directors of divisions who plan and/or administer the block grants (Public Health; Mental Health; and Planning, Research and Evaluation) are establishing three block grant review committees, composed entirely of citizens, to provide community participation and involvement in the block grant process. The committees will advise the divisions on service priorities and funding policiep for the block grants in a timely manner in order to utilize committee recommendations in preparing the FFY 1983 block grant plan and application. The committees also will advise on any significant changes during the year that may be necessitated by federal funding changes, and will monitor program outcomes and results. Committees' Membership Committees will be comprised entirely of community members-not of state/private agency staff with which the department contracts. There will be broad statewide representation. Staff Support Divisions of state/private agencies will provide staff support to committees and division directors will serve as "ex-officio" members. The staff will provide at the committees' request: * background and follow-up information and materials; * suggestions and alternatives; * logistics information; * report drafts; and * assistance in preparing a schedule and work plan. Committee Responsibilities The committees are charged with seven major responsibilities: * to gain knowledge and understanding of: - division-operated programs, with particular emphasis on those relevant to block grants; - federal criteria and funding for block grant programs; - FFY 1982 block grant-funded services (either funded directly or through purchase-of-service), both state- and federally-mandated; and - FFY 1982 block grant allocation. 57 PAGENO="0356" 352 * to establish priorities and criteria and make recommendations for service delivery in the state; * to recommend overall policies on the issue of contractual or direct service delivery of specific services; * to recommend what percentage of available block grant funds should be spent on various priority services areas~ (not to make specific allocations, but to recommend policies for making allocations and for "carrying over" funds to help maintain services in subsequent years; * to solicit, review, and consider public comments (by attending public and legislative hearings on block grants) prior to making its recommendations; * to review reports on the outcome of block grant programs throughout the year and to advise their respective division directors of any necessary major changes. Through the work of these committees, the State of Delaware expects to receive valuable community perspective and insight that will guide the decisionmaking process under block grants. For further information contact: Jorene Jameson Executive Assistant for Operations Office of the Governor 820 French Street Wilmingotn, Delaware 19801 302/571-3210 FLORIDA HEALTH CARE POLICY DEVELOPMENT Policy Capabilities For the past fifteen years, state governments have made major strides in developing the institutional capacity to effectively identify problems, set priorities, and implement responsive and innovative programs. The policy implications of the Reagan Administration's "New Federalism" are built on the reality of the states' increased ability to plan, manage, and allocate resources that meet the unique needs of our citizens. For state governments, the question is not whether the institutional capacity to accept more policy responsibility exists, but whether states have the fiscal capacity to do so. Honest reevaluation of all programs and creative redesign of current efforts is essential. In the health area, the challenge is to maximize the programmatic opportunities now available, in order to craft a more unified cost- efficient and effective health care system targeted on those most in need. 58 PAGENO="0357" 353 Health Care Is Not Effective The health care system presently supported by the public sector needs improvement. In most states, Medicaid represents the largest financial commitment to health care. Medicaid generally has been focused on high cost "sickness care" with few opportunities to ensure any continuum of care designed to maintain the health of our low-income population. Added to Medicaid, but generally poorly linked, are an assortment of large and small federal grant-in-aid programs, state-funded public health efforts and locally-supported services. The result is a score of programs that have one thing in common-they fund some care unnecessarily, while leaving gaps large enough to miss significant numbers of high-risk individuals and families. The long-range ramifications of the status quo are unacceptable from the perspective of both the long-term health of the community-at-large and the people in need of critical services. Florida Analysis of Health Care Financing Impact Florida has long recognized that these problems existed. Unfortunately, due to the speed with which the state has had to respond to the reconciliation actions, combined with the continued uncertainty over the specifics of funding levels and program changes incorporated in them, Florida is in risk of missing the chance to make some needed changes. Since February 1981, when the federal proposals first were announced, the Office of the Governor has been working closely with the Department of Health and Rehabilitative Services (DHRS) in order to fully understand and act upon these changes. State analysis has focused on identifying both the policy implications and the fiscal liabilities, the approach being that policy decisions drive the state "budget reconciliation". The process has underscored a long-range, comprehensive analysis of choices. In addition, Florida fully expects this to be an annual serialization. During the past six months, this exercise often has appeared to be like shooting at a moving target. It now is clear that state background work has provided Florida with an essential head start as the implementation process for block grants begins to settle down. In the Spring of 1981, the state analysis was geared toward identifying those aspects of the proposal that were totally unacceptable and which would require working with the state congressional delegation to improve. Based upon solid analysis prepared by the DHRS, the Governor publicly raised strong objection to the proposed "cap" on Medicaid. Work with other states and national groups was successful in eliminating the "cap", the results of which take on even larger proportions as Florida continues to explore the programmatic modifications incoroporated in Medicaid. 59 PAGENO="0358" 354 Since March 1981, Florida has produced four reports that have attempted to identify and refine the potential impact on the state of the Economic Recovery Program. The last in this series was published in August and is based on the final authorized funding levels for federal grant-in-aid programs included in the Omnibus Reconciliation Act. The majority of these programs require further action through Congressional appropriations bills before actual funding levels for FFY 1982 are known (with the exception of entitlement programs). Following final passage of the Omnibus Reconciliation Act in August, policy analysis efforts moved into high gear. On August 24, the DHRS and other state agencies submitted an Issue Overview Report to the Governor. The report provided: * data on critical federal reductions and revisions in policy that would have an immediate effect on the state and require a decision by the Governor; * identification of issues and policy opoprtunities that would need further analysis and an eventual decision by the Governor; and * information regarding block grant options and recommended action to be taken by state administration. Criteria Set for Policy and Budget Decisions In order to provide agencies with further direction in analyzing specific issues for the Governor, the following questions were developed: * What opportunities are available for improving the administration and delivery of services due to the a) merging of programs into block grants, and b) added flexibility in existing federal categorical and entitle- ment programs? (Specifically, how will the state be able to direct federal funds to state priority needs?) * What critical services might be cut back without significant redirection of existing revenues? * What organizational, administrative, and inter- governmental issues are inherent in the block grants and revised entitlement programs? * What options are available under the Act for programs not included in block grants? and * What would be the implications of: - absorbing the federal reductions with no additional state resources; - cutting back/redirecting state general revenue programs to provide relief in high priority programs impacted by the federal funding cutbacks; and - delaying or phasing in implementation of new and improved programs included in the state's FT 1981-82 appropriation bill? 60 PAGENO="0359" 355 Long-range Policy Implications Based on the analysis to date, the state is actively exploring opportunities to coordinate (through a centralized uniform delivery system at the local level) the provision of health services to low-income individuals and families. The options in the Medicaid revisions, to provide case management services and provide home- and community-based services to avoid institutionalization, encourage prepaid health delivery mechanisms and delete restrictive requirements for medically-indigent programs. This strongly suggests that Medicaid can provide a continuum of services supported by Maternal and Child Health, block grants, and related state/local resources for low-income and high-rise populations. The changes included in the Omnibus Reconciliation Act have required Florida to take off program hats and look at ways to more effectively link Medicaid and health services programs. The state is optimistic about the long-range possibilities but remains concerned about the appropriate role of the federal government. For further information contact: Baldwin Bunkley Office of Planning and Budgeting Carleton Building, Suite 311 Tallahassee, Florida 32301 904/487-2360 HAWAII INTEGRATION OF BLOCK GRANT IMPLEMENTATION INTO STATE BUDGETING SYSTEM The Hawaii Department of Budget and Finance has been directed by the Governor to evaluate the possibility of integrating the block grant process with the state budgeting system. It is anticipated that such an integration will serve to ensure that adequate state resources will be budgeted in critical program areas which have been negatively impacted by block grant implementation. It also is intended that such a system will foster increased coordination between the administrative agencies involved in administering the various block grants as well as categorical grants. - A major obstacle in achieving the proposed system is the timetable difference between the state budget preparation cycle and the federal block grant implementation process. This concern, as well as others, must be addressed appropriately before policies can be issued. For further information contact: Carl Takamura Special Assistant to the Governor State Capitol Honolulu, Hawaii 96813 808/548-2335 61 PAGENO="0360" 356 IDAHO NEW APPROACH TO BUDGET PROCESS Idaho has made wholesale revisions in its approach to setting the state budget and has integrated the budget hearing process into the new approach. A cabinet retreat was held in May 1981 at which department directors were asked to assign each of the more than 200 budgeted programs in the state to one of four categories: contract, expand, maintenance, or adjusted maintenance. After some massaging in the budget office, these decisions were formally communicated to departments by the Governor in the form of budget targets. In early September (when department budgets are submitted), state officials reviewed the budget decisionmaking process with the idea of involving the cabinet and general public by holding budget hearings. The concept.received mixed reactions as some cabinet members anticipated that the hearings would attract only negative comment on high taxes and big government and little in the way of constructive suggestions. Generally, however, it was felt that the hearings would serve to be productive. Two approaches were examined in deciding the manner in which the hearings would be held: a) holding a series of hearings on different topics, and b) holding a series of general topic hearings in different geographical areas of the state. Since Idaho is a big state with a small population, it was decided that eight budget hearings would be held in various regions during the Month of September. Publicity for the hearings was handled through a variety of means. In addition to normal press releases on the subject, the Governor provided oral material for the state's audio service (radio stations key into this service for their news programs) and wrote a column-"Scene from the Statehouse"-for the state's weekly newspapers. Also, departments were asked to work through their regional and local offices to make sure that interested people were informed of the hearings. Special interest groups were contacted directly. Meetings were conducted by the state budget director and members of the budget staff attended on a rotation basis to provide technical support as well as to derive benefit from hearing public sentiment. The meetings were tape-recorded for the record. The budget hearings were used as the central theme for the Governor's budget message which he delivered on prime-time television prior to the beginning of the legislative session in December. The message received excellent coverage and contained statistics and quotes garnered from the budget hearings, forming the framework for the budget process for the legislature. 62 PAGENO="0361" 357 In summary, Idaho has learned a lot about the potential benefit of conducting budget hearings, both in terms of substantively impacting the executive budget and of gaining public acceptance of the Governor's recommendations. The hearings also has provided the state with a stronger budget message and has been useful in advancing the Governor's message in the legislature. For further information contact: Steve Seward Senior Assistant Office of the Governor Statehouse Boise, Idaho 83720 208/334-2923 ILLINOIS CITIZEN TASK FORCE ON BLOCK GRANT IMPLEMENTATION Governor Thompson has created a twenty-member citizen task force to oversee the development of state agency management of the block grants in Illinois. The task force has been meeting since December 1981 and will report to the Governor in October 1982 after it has held public hearings on its report. The goals of the task force are to: * develop a comprehensive priority framework for human services delivered and funded by the state including specific recommendations relevant to block grant allocat ion; * develop guidelines for the creation of new funding mechanisms, regulations, and rules to govern grants and contracts to local service providers under the block grants; and * recommend organization changes at the state and local levels that would facilitate the delivery of services under block grants. The Governor's office is staffing the task force and has established inter-agency working groups to assist in the detailed and technical work. ILLINOIS PUBLIC AGENCY-PRIVATE GIVING: SUMMIT CONFERENCE ON HUMAN RESOURCES Governor Thompson's office is preparing for a high-level summit conference which will bring together state agency directors, regional health and human service directors, and foundation directors to develop a better understanding of the agenda for the eighties. The Governor has recognized that New Federalism, the reduction of available public resources, and the demands of the public for reduced government spending call for new initiatives to bring together organizations which have been sharing responsibilities without sharing communications. 63 PAGENO="0362" 358 The purpose of the conference is to begin to open communications, and to sketch a map of an agenda process which recognizes the related roles of the public-private giving and services system. With a fundamental change in the system it is vital that private givers and foundations understand state priorities and that the state not duplicate or overlap the private philanthropy system. The first of these meetings will be held in the late spring and will be limited to about fifty persons. For further information contact: Tom Berkshire Assistant to the Governor 202 State House Springfield, Illinois 62706 217/782-8639 INDIANA BLOCK GRANT MANAGEMENT In June 1981, Governor Robert D. Orr created a Block Grant Policy Committee and designated the Director of the State Planning Services Agency as the state's block grant coordinator. The Policy Committee was formed to include the leadership from the General Assembly to insure that maximum legislative input was achieved. In addition to the Governor and Lieutenant Governor, the Policy Committee is comprised of the President Pro Tem of the Senate, Senate Finance Committee staff persons, the Speaker of the House of Representatives, the Chairman of the House Ways and Means Committee, the Director of the State Budget Agency, the Director of the Indiana Washington Office, the Director of the State Planning Services Agency, and all of the Governor's executive and administrative assistants. It was the task of this twenty-person committee to advise the Governor on immediate decisions which had to be made and eventually to make recommendations to the Indiana General Assembly. The Governor then created four block grant task forces. The Education Task Force was created along the lines of governing federal legislation; the other three were designed to achieve a balance of legislative, local governmental, private, and state agency interests. All task forces were staffed by the State Planning Services Agency which also functioned as a clearinghouse for state agencies. Each task force was comprised of the following: * three legislative members (chosen in a bi-partisan manner); * one representative each from city, town, and county governments; and * three-four members from the general community. 64 PAGENO="0363" 359 The task forces held from five to seven public hearings through the state for the purposes of providing the public with information concerning block grants and receiving input from the public on their needs and expectations of block grants. Given the disturbing amount of misunderstanding and misinterpretation among the public, local officials, providers, and recipients, the task forces served to dispel misconceptions and explain the exact nature of the block grants. The system was organized to insure maximum public participation with wide news covereage and large-scale mailings to constitutents of the major programs. The very makeup of the task forces insured participation of all sectors affected by block grants. In January 1982, all information compiled by the task forces was presented to the Governor, at which time the Policy Committee would make recommendations for action by the General Assembly. None of the task forces was willing to recommend major changes in the operation of the system or in determining service priorities until information regarding federal appropriation becomes more stabilized. Decisions for major reprioritization would continue through regular state budgetary processes with the benefit of the information provided by the task forces. For further information contact: Susan J. Kannell Director State Planning Services Agency 117 State House Indianapolis, Indiana 46207 317/232-5601 IOWA FEDERAL BUDCET TASK FORCE STRUCTURE The Federal Budget Task Force for the State of Iowa was established in February 1981. The task force consisted of the following individual task groups: Administration Post-Secondary Education Human Resources Transportation Commerce and Industry Public Protection K-12 and Vocational Education Natural Resources The primary purpose for creation of this structure was to establish a dynamic mechanism that could rapidly assimilate and analyze information leading to assessment of fiscal impacts upon the state, identification of potentially critical areas, and recommendations for further action. The impact assessments appeared in a series of reports issued by the various task groups and the Federal Budget Task Force. The reports highlighted overall concerns in the areas of federal budget changes, tax reform, regulatory reform, and block grant development. This information was forwarded to decisionmakers within state government for further action. 65 PAGENO="0364" 360 The task force was well structured in that it could more effectively collect data from a variety of sources (including contacts in Washington and professional/trade associations) and disseminate information to individuals/groups throughout the state most affected by the various changes. With the advent of block grants, two other work groups have been formed: a Block Grant Committee, consisting of directors of agencies responsible for administering block grants (this committee functions as a separately identifiable part of the Federal Budget Task Force) and a liaison group established by Governor Ray to interface with elected officials and the legislative branch of Iowa government. For further information contact: Doug Gross Assistant to the Governor Capitol Building Des Moines, Iowa 50319 515/281-8318 KANSAS BALANCED BASE BUDGET PROCESS Among the administrative functions of state government, none is more important than the budgetary process. The budget is a plan of operation describing how, during the next fiscal year, the state will use its limited financial resources to meet the needs of the public. The plan must include an estimate of all proposed expenditures and the means of financing each disbursement from the state treasury. The Governor's fiscal year 1983 budget has been prepared through a process that is new and substantially different for Kansas. Termed the balanced base budget process, the new system incorporates three key features not used previously-base agency allocations, tn-level expenditure proposals, and a program format. Balanced Base Allocations The first phase of the new budget process involves preparation and announcement of base budget financial allocations to be used by each agency in preparing its fiscal budget. The allocations formulated by the Governor are based on a series of issue papers prepared by agencies and preliminary revenue estimates for the ensuing fiscal year. Through the issue papers, agencies are able to provide the Governor with information on critical policy questions facing the state. The base budget allocations have two essential features. First, they are balanced; i.e., when all agency base allocations are added together, the sum is balanced with the preliminary FY 1983 revenue estimate. Thus, by requiring agencies to submit budgets at the assigned allocation level, the budget is balanced from the outset. 66 PAGENO="0365" 361 Base allocations introduce revenue constraints at an early phase of the budget process and they minimize the submission of requests that simply cannot be accommodated within limited available state revenues. The timing of balanced based budget allocations have been useful particularly this past year, in that the problems presented by reduced federal funding for next year were confronted early and agencies were able to take steps to minimize the adverse effects on state-administered programs. Second, allocations are made at the agency level; i.e., assigned to a given department Lto be apportioned to various units within its jurisdiction. Agency managers and governing boards then are responsible for spreading the base allocation among their programs, thereby making program adjustments that shift resources from low to high priorities. Tn-level Expenditures Proposals The second major feature of the new budget process is the submission by agencies of tn-level expenditure proposals reflecting alternative service levels within the base allocations. The proposals are referred to as A-, B-, and C-level budgets and are submitted in September. Each level reflects an allocation assigned early by the Governor and is intended to represent an internally consistent budget request. The B-level or expenditure proposal is of primary importance because it reflects the balanced budget allocations. The A-level represents a lesser amount and is intended to depict the agency's financial plans if it receives a reduced level of resources. The C-level is intended to reflect new or enhanced activities that could be undertaken given additional revenues. This aspect of the new system affirms and reinforces the role of agency managers in assigning priorities among programs, i.e., reducing/eliminating/increasing as allocations afford. Also, the consequences of funding reductions/increases on agency programs are readily apparent to the Governor and budget decisionmakers. Because the B-level is balanced for all of state government, each addition to an agency beyond this level must be offset with a corresponding reduction elsewhere. Hence, information contained in A-and C-levels, together with agency explanations of differences in performance at each level, provides necessary data in making budget decisions. Program Budget Format The third phase of the new budget process is the adoption of a program budget format, whereby the program-a collection of similar activities and services that are directed toward a defined goal and are managed by a single identifiable authority-is the primary budgetary unit. For each of its programs, an agency is asked to prepare an operating plan that includes a program description, a statement of intended areas of emphasis, and measurable objectives (purposes to be achieved and suggested performance indicators). 67 PAGENO="0366" 362 / Program format fosters analysis of current program operations and areas of potential change, forces agencies to relate the activities to specific objectives, and enables decisionmakers to evaluate state programs in terms of costs, effectiveness, and performance on the basis of policy and program issues as opposed to the cost of individual elements of the program. Budget Review and Approval During September and October, the Divison of Budget reviews agency budget requests for technical accuracy and concurrence between agency proposals and the Governor's policy. Agency proposals are brought into balance with the revised estimate of total revenues, and detailed preliminary budget recommendations are developed for each program and agency. During November and December, the Governor makes final decisions on the budget, taking into consideration updated revenue forecast, program plans and performance measures, adherence to policy guidelines, information contained in the tn-level budget submissions together with agency explanations of the differences in service, and information derived from the agency appeal process. The Governor's budget message, comprised of approximately twenty separate appropriation measures, is submitted to the joint session of the legislature for review and approval. The new balanced base budget process is a financial plan that offers several advantages over previous budget systems in that it: * provides for gubernatorial policy directives in the initial phases of the budget process; * confronts inevitable financial resource constraints early in the process; * provides a balance of revenues and expenditures and is reflective of both the Governor's and agency directors' priorities; and * provides for better agency management and performance. For further information contact: Harley Duncan Principal Policy Analyst Divison of the Budget State House, Room 152 East Topeka, Kansas 66612 913/296-2436 68 PAGENO="0367" 363 KENTUCKY STATE-CONTROLLED COMMUNITY DEVELOPMENT BLOCK GRANT FUND DISTRIBUTION In September 1980, Kentucky and Wisconsin were the only two states chosen for a HUD demonstration program. The purpose of the demonstration was to see if greater coordination with state programs could be accomplished if a state controlled the distribution of HUD Small Cities Community Development Block Grant (CDBG) funds. The Department of Community and Regional Development DCRD) was responsible for approximately $10.5 million and funded twenty-two jurisdictions. The Reagan Administration has expanded the idea of the demonstration. Kentucky now receives the HUD Small Cities CDBG in its entirety. The new Office of Community Development will receive an allocation of $30.5 million which will allow the office to allocate approximately $15 million in the next funding cycle (difference is due to previous multi-year commitments). Kentucky's success with the demonstration on both the federal and local levels has put the state in the vanguard of the block grant wave. Information requests by phone and mail have been answered from more than thirty-five states. Kentucky has hosted two block grant seminars for interested parties from sister states. Staff have been asked to testify before the House Subcommittee concerning the state's role and numerous invitations have been received to take part in national panels. The state experience has been the subject of considerable research and reporting, and a case study has been done by the Harvard Business School. Kentucky believes its success has been to two distinct program features: (1) a training seminar involving all potential applicants; and (2) involvement and consensus of local practitioners in the design phase prior to issuing a final draft. HUD's office in Kentucky, which previously administered the program, estimated that the state-administered program saved taxpayers almost $1 million, and, after the winners were announced, 91 percent of the applicants agreed that the state-administered program was more fair than its federal counterpart. For further information contact: Rush Dozier Assistant to the Governor State Capitol Frankfort, Kentucky 40601 502/564-2611 69 PAGENO="0368" ~64 LOUISLAN~ ALTERNATIVES TO INSTITUTIONAL CARE In the face of federal funding reductions brought about by the Omnibus Reconciliation Act of 1981, Louisiana resolved to continue its current level of health and social services to its client population to the maximum extent possible. To achieve this goal, the state determined that it must provide essential services in a more efficient and economical manner. The act liberalized the Title XIX, Medicaid Program to allow payment for social services in a home- or community-based program when such services are alternatives to institutional care. Concomitantly, the Act reduced the available federal funding for Title XX Social Services which * provided resources for Louisiana's community-based programs such as adult day care, homemaker and day developmental centers. These programs were effective in maintaining individuals in their own homes or in other less restrictive and less expensive settings than a nursing home. As a result of the reduction in the Title XX Social Services Block Grant, it would have been necessary for the State to reduce services to persons receiving care in their homes or community-based programs. These persons then would have required nursing home care which is a more expensive option. In determining a strategy to maximize resources, Louisiana decided to request a waiver in accordance with Section 2176 of PL 97-35 to provide coverage for adult day health services, homemaker services, and habilitation services under the Louisiana Medicaid Program. The individuals slated to receive these services otherwise would require Skilled Nursing Facility or Intermediate Care Facility Services. By planning and managing the mixture of block grants and categorical programs, it is anticipated that Louisiana will be able to continue funding both the most essential long-term care services and c~tnnunity based alternative services. For further information contactS. Jake Canova Director, Medical Assistance Division Office of Family Security Department of Health and Human Resources P. 0. Box 44065 Baton Rouge, Louisiana 70804 504/342-3911 70 PAGENO="0369" 365 MAINE WELFARE EMPLOYMENT APPROACHES Maine has undertaken three complementary efforts within the past year to address welfare employment issues: * In December 1980, the Commissioner of Human Services, in cooperation with the Commissioner of Labor and Commissioner of Educational and Cultural Services, convened a statewide Work Opporunities Committee to examine employment, education, and training opportunities for Aid to Families with Dependent Children (AFDC) recipients. * In June 1981, the Maine State Legislature enacted Public Law 1981, Chapter 512-The Job Opportunities Act-which establishes and coordinates employment, education, and training opportunities for AFDC recipients. * In October 1981, Governor Joseph E. Brennan decided to participate in the national Work Incentive Demonstration Program, authorized by Congress in the Omnibus Budget Reconciliation Act of August 1981. Work Opportunities Committee The Work Opportunities Committee is comprised of two-dozen participants representing a wide range of interests. The work of the committee is extensive in scope: to analyze Maine's income maintenance policies; to examine the effectiveness of the WIN and CETA and vocational educational programs in helping AFDC recipients become employed; and to study possibilities for creating jobs through economic development policies and AFDC grant diversion. The committee's final report-"Women, Work and Welfare"-includes over forty recommendations for increasing and improving employment and training opportunities for AFDC recipients. Job Opportunities Act The Job Opportunities Act requires Maine to coordinate and make greater use of "available resources and institutions to provide education, training and job opportunities to qualified and eligible recipients of the Aid to Families with Dependent Children Program with the goal of enabling them to become self-sufficient and to eliminate their dependence on public assistance". The act creates an AFDC Coordinating Committee, comprised of the Commissioners of Human Services, Labor, and Educational and Cultural Services. Several public agencies are required under the act to work with and cooperate with the committee: the State Development Office, the Maine Development Foundation, the Maine Guarantee Authority, the University of Maine, and the vocational technical institutes. 71 99-965 0 - 82 - 2L~ PAGENO="0370" 366 The act also creates an Advisory Council to the AFDC Coordinating Committee and is comprised of AFDC recipients, employers and representatives of organized labor, the Maine Commission for Women, and at least one organization experienced in addressing needs of low-income women. The council consists primarily of people who participated in the Work Opportunities Committee. Finally, the act establishes a program under the jurisdiction of the State Apprenticeship and Training Council to develop apprenticeship agreements exclusively for the training and education of AFDC recipients. Demonstration Program The Work Opportunities Committee and the Job Opportunities Act set the stage for Governor Brennan's decision to participate in the national Work Incentive program, referred to in Maine as the Welfare Employment, Education and Training (WEET) program. WEET replaces the former WIN program throughout the state, and has established the following four goals: * to streamline the management of the state's work program for AFDC applicants/recipients; in Maine, as elsewhere in the states, the dual administration of the WIN program by the Departments of Labor and Human Services has not worked very well; hence, all WEET staff will work for the Department of Human Services, a factor seen as essential more than ever given the drastic cut in federal WIN funds enacted by Congress in December 1980; * to experiment with new approaches for delivering services to AFDC applicants/recipients; because staffing has been reduced by over half, AFDC applicants/recipients will need to be taught to be self-sufficient, WHET staff will be required to function more as brokers of service than as direct providers, and there will have to be much closer ties between income maintenance and WEET staff; * to work closely with other agencies and interest groups that are involved in employment, education, and training needs of low-income citizens, in order to develop essential opportunities and resources for these citizens; and * to make use of AFDC grant diversion to develop private sector job opportunities for AFDC applicants/recipients. The Future It is impossible to determine precisely what steps the federal government will take in the coming months. However, it would seem that there will be some type of AFDC work program. No matter what shape such a program will take, Maine has decided that it must, through the WHET, put into place the basic design of an approach that will be most responsive to Maine citizens. 72 PAGENO="0371" 367 For further information contact: Diana Scully Director Division of Welfare Employment 235 State Street State House, Station 11 Augusta, Maine 04333 207/289-2636 MARYLAND APPROACH TO FUNDING FORMER DIRECT FEDERAL-LOCAL GRANT PROGRAMS SUBSUMED IN BLOCK GRANTS Other than the constantly shifting estimate of block grant allotments and composition, the most difficult issue has revolved around the treatment of grantees who formerly received funds from federally funded programs that since have been incorporated into the blocks. Part of the problem has been clarifying the nature of the grant and identifying grant recipients. Of particular concern to grantees has been whether the state would absorb some of the cuts and their fear that: * a major source of their revenue now would be funneled through the state; * the state, to offset cuts, at best would take an administrative slice and at worst would divert a substantial share of local government's entitlement; and * the state would add new strings to funds passed through. The Governor decided that Maryland initially would assume management responsibility only in areas where the state had long-standing program responsibility. In these areas, the formerly federal-local direct grants represented relatively small shares of the blocks-generally under 15 percent and not more than 30 percent. The Governor further decided that, at least in the first year, the state and other grantees would share the cut in proportion to grant amounts of programs folded into the blocks. Furthermore, the state neither would take administrative cost nor add administrative strings other than those necessary for complying with state law and/or meeting new responsibilities under the block grant. The Governor and his staff conducted an intensive series of meetings with local governments and their representatives to communicate the state's sensitivity to their problems, to communicate proposed action, and to assuage their fears. The efforts appear to have been successful. For further information contact: Ejner Johnson Staff Director Office of the Governor State House Annapolis, Maryland 21404 301/269-3004 73 PAGENO="0372" 368 MASSACHUSETTS BLOCK GRANT IMPLEMENTATION In FY 1982, Massachusetts labored under severe time contraints to begin implementation of the block grant programs by October. Therefore, comment from consumer organizations, providers, and local government was limited. However, public hearings were held and notices placed in newspapers to inform the citizenry that Massachusetts was submitting the four human services block grant applications to the U. S. Department of Health and Human Services. For FY 1982, it was proposed that the appropriated funds be allocated in proportion to FY 1981 funding levels. In formulating this method of allocating funds, the state made a commitment to maintain as many currently existing services as was feasible within the available funds. The agencies were responsible for reducing their expenditure levels. This "bottoms-up' approach was favored by the Executive Office of Human Services (E0HS), because the agency program managers knew best the services provided. In December, an Advisory Task Force on Block Grant Implementation, consisting of twenty-three members of local governments, consumers, and providers, was appointed by the Secretary of Human Services to prepare recommendations for FY 1983. The Task Force will meet monthly and consider issues such as transferability, quality of services, long-term planning, needs assessment, resources analysis, and priority-setting. Task force subcommittees have been meeting regularly since December. In additon, EOHS has established a timetable for development of block grant applications which must be submitted to the federal government: February 1: Administering agencies will submit proposed criteria for needs assessment, management, and performance evaluation to the Secretary; mid-February The Secretary will conduct hearings on the draft criteria; March 1 Administering agencies will apply standards and guidelines, develop proposed applications (including spending plans), and submit them to the Secretary; May 1 The Secretary will conduct hearings on applications and draft spending'plans; and June 1 The Governor will submit final applications to the State Legislature for inclusion in the state budget. For further information contact: Randee Chafkin Executive Office of Human Services State House, Room 166 Boston, Massachusetts 02133 617/727-5516 74 PAGENO="0373" 369 MICHIGAN PUBIC HEARINGS The Governor's Human Services Cabinet is undertaking a series of six statewide public hearings on the human services block grants which will allow full public participation in the entire range of programs affected by the block grants. This information will be channeled into the departments responsible for each block grant as well as into the legislative appropriation process. Additionally, at least two of the administering agencies will be holding special hearings for their own block grant which will help them make the necessary decisions required relating to program modifications and service delivery. One department is conducting a statewide survey of non-public and public schools and intermediate school districts to solicit their input in setting program priorities for the coming year. For further information contact: Jan Bocskay Special Assistant to the Governor Executive Office State Capitol, Room 1 Lansing, Michigan 48909 517/373-3427 MINNESOTA BLOCK GRAN1~ ACTONS Prior to final Congressional action, the 1981 Minnesota Legislature enacted legislation which required agencies to continue funding services and organizations which previously had received federal funds. Each program or organization thus was guaranteed fiscal support, subject to a proportional reduction. This allowed programs to plan and continue to operate during this period of change. A task force composed of commissioners of agencies most affected by the federal budget changes was appointed by Governor Quie. This group has continued to monitor federal changes and their effect on state policies and programs, and has kept the Governor and the Legislature informed through the production of two written reports. Each commissioner also has appointed an intergovernmental task force designed to involve citizens and local government officials in the decisions which are upcoming regarding the administration of the block grants. Minnesota has only minor changes to make in state law to accommodate the block grants. In the social services area, existing law provides for distribution of federal funds on a formula basis to counties; in the health area, similar legislation exists which could be used. Each agency is pursuing plans with the legislature to use federal block funds which are appropriate to their programs in Minnesota's service delivery system which relies upon local units of government in m~Iy of the block grant program areas. 75 PAGENO="0374" 370 Changes in programs, shifting of resources to various client groups, and the utilization of new service providers are items for discussion in the future for agency heads, the intergovernmental advisory groups, and the legislature. Dramatic changes are not anticipated in the short term. For further information contact: Tom Harren Office of Local Government Department of Energy, Planning, and Development 100 Hanover Building St. Paul, Minnesota 55101 612/296-9001 MISSISSIPPI MULTI-AGENCY COORDINM~ION With the advent of block grants, the reduction of federal funds, and decreasing state monies, Governor Winter recognized the need for coordinating the efforts of the various agencies involved in providing programs/services in the area of health and human services. It was realized that, with the limited amount of time available for preparation on the part of the state to deal with these issues and the number and variety of the categoricals being blocked, very little uniformity could exist in the planning and implementation processes used by the agencies involved. Interexecutive Task Force Will Coordinate Block Grant Implementation The Governor established a Block Grant Task Force composed of directors of agencies administering the blocks, as follows: * Mississippi State Board of Health Maternal and Child Health and Preventive Health blocks * Department of Public Welfare Social Services block * Department of Mental Health Alcohol, Drug Abuse and Mental Health block and * Federal-State Programs ~Community Services and Home Energy Assistance blocks The task force was charged with the responsibility of addressing areas of common concern and arriving at coordinated solutions. Initially, the task force directed its attention to operational and mechanical issues which affected the entire group. For example, a series of public hearings for the purpose of obtaining citizen input were planned and coordinated by the group. Also, joint resolutions were adopted which provided for a uniform format for state plans, fiscal audit requirements, joint eligibility criteria, and state definitions and determinations to replace those formerly mandated by the federal funding agencies. 76 PAGENO="0375" 371 The task force now is addressing opportunities for interagency coordination and cross-cutting of programs and services for the purpose of eliminating duplicative services, filling in gaps in services, and better allocating available resources. It is~ anticipated that their efforts will result in a coordinated cross program planning and implementation process involving the block grants and related categorical programs. Advisory Board Created The Governor also appointed a Health and Human Services Block Grant Advisory Board of citizens to obtain insight from concerned sources outside of the state governmental structure. The board is composed of sixteen representatives from many concerned groups involved in the area of health and human services, as well as from local governments and local community action agencies. The board is charged with the reponsibility of advising on the development of program priorities and policy, assisting in providing information and education to the public, and adding input in presenting final state plans to the Governor and the legislature. As mentioned previously, in order to obtain public input on the development of guidelines for administering block grant funds, the Governor's Office coordinated a series of public hearings which were held in each Congressional district in the state. Individual hearings were conducted for each of the blocks which provided opportunity for educating the public on the mechanics of each block as well as for receiving comments. The hearings were well attended and the agency directors received significant input from the participants.. Following these hearings, the state plans were revised and finalized for presentation to the Governor and legislature. For further information contact: Libby Smith Governor's Office of Planning and Policy Walter Sellers Building Jackson, Mississippi 39202 601/354-7018 MISSOURI BLOCK GRANT IMPLEMENTATION An important step in Missouri's implementation of the block grants has been close involvement of the General Assembly, the public, and groups representing providers and clients. The legislature established a "Block Grant Oversight Committee", chaired by the Director of the the Department of Social Services and composed of five members of each House and the Director of the Division of Family Services. The committee had oversight on the use of all block grants received by the Department of Social Services (the Health, Social Services, and Community Services Block Grants). It met during the time the department was developing its budget requests for FY 1983, and made recommendations which were reflected in the Governor'sbudget proposals. 77 PAGENO="0376" 372 Both the Departments of Social Services and Mental Health pursued valuable efforts to ensure public awareness of and participation in the formation of block grant policy. The Department of Social Services held public meetings with local providers and advocacy groups in cities throughout Missouri, conveying information about the block grants and soliciting questions, comments, and suggestions. In addition, the department established a "Social Services Advisory Group" and a "Maternal and "Child Health Advisory Group", for consultation purposes during development of the FY 1983 bud.get requests. It also produced a block grants newsletter-Social Services Report-for distribution to the General Assembly, providers, local governments, and other interested groups. The Department of Mental Health used its statewide network of advisory councils as the primary vehicle for information and public comment. The advisory councils were supplemented, however, by locally organized public hearings in various key cities during the period when the department was preparing its FT 1983 budget requirements. Substantive issues included both the mental health allocation from the Social Services Block Grant and use of the Alcohol and Drug Abuse/Mental Health Block Grant. The Department of Consumer Affairs, Regulation, and Licensing similarly established a twenty-member advisory council, composed of local government officials, to advise the Director of the Division of Community Development on the process and criteria for allocating funds from the Community Development Block Grant. For FY 1983, the Governor's budget recommendations included funds for a twelve-person staff for the CDBG program. For further information contact: Dick King Executive Assistant Office of the Governor State Capitol Jefferson City, Missouri 314/751-3222 MONTANA INCREASED STATE PARTICIPATION IN GENERAL ASSISTANCE PROGRAMS When Montana began to see the outline of program changes that were in store for the AFDC and food stamp programs, officials began to evaluate the impact on Montana. It was determined early in the process that it was not realisitic to consider replacing these program reductions with equivalent state programs. 78 PAGENO="0377" 373 In Montana, the final base of services is provided by the County General Assistance Program. Prior to January 1, 1982, each county administered a welfare program and financed it with a special mill levy authorized by the county commissioners. If that mill levy reached 13.5 mills, any additional costs were reimbursed by the state. The majority of the counties levied less than 6 mills for welfare. Given the program changes in AFDC and food stamps, the state anticipated that there would be increases in county case loads. Therefore, in order to avoid higher mill levies, a method of increased state support had to be found. The final compromise worked out with the special session of the legislature contained three major elements: 1. The maximum required mill levy to be eligible for state support was reduced to 8 mills; from 8 to 13.5 mills, the state contributes half the cost. 2. Counties now are required to implement a "workfare" program in order to be eligible for state support. 3. The state gained authority to tighten up the rules to limit eligible county costs. This program has several advantages. First, the base of services will continue to be available for the needy; second, the program is locally administered; and finally, increased state support will limit the impact on local taxpayers. For further information contact: David M. Lewis Budget Director Office of Budget and Program Planning State Capitol Helena, Montana 59001 406/449-3616 NEBRASKA BLOCK GRANT MANAGEMENT Advisory Council and Working Committees Appointed In May 1981, Governor Thone appointed The Governor's Advisory Council on Block Grants to advise him on issues pertaining to federal block grants to states. Specifically, the council was to examine issues, obtain public input~ explore options, and ultimately make recommendations to the Governor by September 1981. Eleven committees and subcommittees were formed (each focusing on a specific block grant or ancillary program): Social Services Committee, Adult Services and Children and Family subcommittees Health Care Committee, Medicaid subcommittee Natural Resources and Energy Conimmittee, Energy subcommittee Preventative Health Care Transportation Committee Education Committee and Development Committee. 79 PAGENO="0378" 374 By July, when congressional action on block grants was clearer, the committee structure changed in order to focus on the emerging block grants. Of significance was the addition of a separate Child and Maternal Health Block Grant, a separate Alcohol and Drug Abuse and Mental Health Block Grant, and a separate Community Services Block Grant. On August 13, the President signed the Omnibus Reconciliation Act of 1981. The committees had clear guidance at this time to develop issues to be presented at public forum. Also, Governor Thone appointed an additional committee to address the implications of the Community Services Block Grant because this new block grant area did not lend itself readily to an existing committee structure. Eight public forums on block grants were held during September in key cities and were attended by approximately 1500 persons, 200 of whom offered public comment. Individuals were encouraged to submit written comments to the state. Using views expressed at public forums and their own research, the several committees submitted reports to the Governor's council, which in turn, presented its recommendations to Governor Thone. Block Grant Resource Center Established Governor Thone created a Block Grant Coordination and Planning Office that was to be a resource center for information regarding block grant legislation. The office responded to inquiries on issues from all areas of the state_private/public sectors, city/county/state governments, the legislature, and the general community. In addition, the office provided staff assistance for the Governor's Block Grant Advisory Council. Advisory Commission on Intergovernmental Relations Created In September 1981, Governor Thone, by Executive Order, created the Nebraska Advisory Commission on Intergovernmental Relations. The purpose of this commission was to develop policy recommendations on the distribution of federal block grant funds from the state to local government. The commission served as a forum for consultation between state and local officials and as a clearinghouse for information on intergovernmental relations. The commission was comprised of five each of the following: elected city officials, elected county officials, members of the legislature, members of the executive branch of state government, and representatives of the general community. Unless extended by Executive Order, the commission is scheduled to terminate July 1982. Human Services Programs Coordinated Governor Thone has recognized the important inter-relationships of state and local governments, particularly in the area of long-term planning and coordination necessary to best serve Nebraska's citizens in need. In December 1981, the Governor appointed an Administrative Coordinator for Human Services, thereby bringing under a single administration the following human services agencies: Department of Public Welfare, Department of Public Institutions, Department of Health, Department of Labor, and the Department of Veteran's Affairs. 80 PAGENO="0379" 375 For further information contact: Ed Schulenberg Director Block Grant Resource Center State Capitol, Room 1326 Lincoln, Nebraska 68501 402/47 1-2091 NEVADA USE OF EXISTING MECHANISMS TO IMPLEMENT BLOCK GRANTS In Nevada, each apropriate state agency is responsible for working with cities, counties, and organizations that are interested in the particular block grant falling under that agency's jurisdictio~i. After the agency has gathered all necessary input, it submits initial fund allocation plans to the State Department of Administration for review and approval. In turn, the department submits the plan to the Interim Finance Committee for further public review and final approval. Throughout this multi-step procedure, all interested parties are provided with adequate opportunity for offering their input in the development of block grant fund allocation plans. By implementing the block grant programs within existing administrative structure, Nevada is able to meet one of the principle objectives for this new program: reduce administrative overhead and delay, and more efficiently provide grant money to those people who truly need it. For further information contact: Howard E. Barrett Director Department of Administration Capitol Complex Carson City, Nevada 89710 702/885-4065 NEW HAMPSHIRE DEPARTMENT OF HEALTH AND WELFARE MANAGEMENT ACCOUNTABILITY SYSTEM New Hampshire is taking bold management steps to increase accountability, program efficiency, and productivity in response to recent federal cuts and increased opportunities for state control. Governor Hugh J. Gallen is holding agency heads accountable for quarterly reporting of financial and personnel data, and progress towards goals and objectives. 81 PAGENO="0380" 376 The Department of Health and Welfare (DHW) has taken the lead in responding to the Governor's mandate because of its already developed Strategic Planning Process (see Governor's Guide to Block Grant Implementation, Council of State Planning Agencies and National Governors' Association, August 1981). Commissioner Edgar J. Helms has directed the development of a monthly manual management reporting system entitled "The Management Brief". Elements of "The Management Brief" The purpose of this management accountability system is to develop a relatively simple monthly report for the commissioner that can be used as the basis for regular supervisory sessions with major division heads. For comparison across division lines the "Brief" contains information in the following areas: personnel status, funds information, client/service data, and program/agency sub-unit activities. The personnel report includes breakdowns, by specific unit for each agency, of positions authorized, vacant, and filled. These data are critical for top management to receive on a regular basis in order to evaluate the relationship between plans, resources, and outputs. The monthly funds report breaks out federal, state, and other funding sources by amount appropriated, year-to-date expended, encumbered (obligated), and balance. It should be noted that the "Brief" differentiates financial accounting from fund accounting in order to provide useable management information. Fund accounting principles are used, measuring deviance from planned expenditures and/or obligations (encumbrances). The ability to plainly see the difference between "planned and actual" is important for management for supervision and evaluation purposes. This comparison, done on a monthly basis, makes it possible for managers to establish rates and compare them to projected rates and keep them out of serious "over or under expenditure" problems-a critical process in the current environment of uncertain and shrinking resources. The client and services activities form contains unit and agency specific data on units of service, caseloads, institutional and discharges and readmissions, numbers of reported abuses, and other critical indicators of a unit's successful accomplishment of its goals and objectives. Finally, each division and office prepares a monthly narrative discussing activities of special interest for that month. The narrative also serves as an exception report for division/office directors to notify and explain to the commissioner major deviations from goals and objectives outlined in their annual operational form. 82 PAGENO="0381" 377 All reports are printed in booklet form and used for several related purposes: * as a tool for the commissioner and division directors in providing regular supervision of plan execution, program effectiveness, and fiscal control; * as a basis for regular reporting to the executive and legislative branches of state government; and * as an internal working document and important additional communication link within the department. It is hoped that the "Brief' eventually will substitute for federal compliance reporting documents in various program areas. A Management and Planning System This system is an important management tool that conceptually lies between planning and supervision. The Strategic Planning and Budget Process, "The Management Brief", operational planning, and regular supervision all work together to enable the commissioner and division directors to measure performance and results. The entire management system produces information that communicates successes and problem areas to the Governor, state legislature, and general public. For further information contact: Judith Chynoweth Director Office of Planning and Policy Development Health and Welfare Building Hazen Drive Concord, New Hampshire 03301 603/271-4601 NEW JERSEY EXECUTIVE BRANCH ROLES IN BLOCK GRANT MANAGEMENT Policy Role of the Governor's Office The block grant programs have offered an opportunity for the Governor's Office of Planning and Management to assume a pivotal, coordinating, and policy role in managing the transition to block grants. Under the administration of Governor Kean, this office will continue to play a leadership role. Office staff took the implementation initiative in July 1981 by organizing two inter-departmental meetings on block grants. Information was funneled through the staff to participating agencies, first as a result of seminars held during the National Governors' Association summer meeting, and then by communications with federal agencies. 83 PAGENO="0382" 378 In September, members of the Governor's staff met with officials of the three New Jersey departments involved in block grant implementation: Health, Human Services, and Community Affairs, as well as with the Department of the Treasury. Staff also reviewed department applications, drafted transmittal letters for the Governor's signature, and wrote appropriate press releases. Major policy issues for block grant implementation were determined by Governor's staff as follows: selection of agencies to administer the block grants; transfer of funds between grants; and coordination of programs when two or three departments would share block grant administration responsibilities. The Fiscal Management Role of the State Treasury The New Jersey Treasury has played an important role in block grant implementation by complementing the responsibilities being carried out by Governor's staff. Heretofore, the transmittal of federal funds in the state had not required strong executive presence. Typically, federal funds had been handled by each state agency which negotiated directly with the federal government and provided necessary program initiation and review staff. Prior to the advent of block grants, Treasury recorded federal funds (mainly to estimate their effects upon the state budget) and controlled their expenditures. Prior to FFY 1982, Treasury's authority in resource allocation guidance was conservative. Currently, with the FFY 1982 budget largely operating on a continuing resolution and with the constantly changing dollar figure, Treasury is allowing state officials to spend only 50 percent of their promised federal aid. If FFY 1982 funds are cut further, then state program reductions will exceed the figures with which the state is working. If, however, the appropriatons finally are made at continuing resolution level, or if they exceed those figures, then state agencies will have a "windfall" in the last quarters of the federal fiscal year. For further information contact: Gary Stein Director Governor's Office of Policy and Planning State House Trenton, New Jersey 08625 609/292-5403 NEW MEXICO COORDINATION OF PUBLIC ADMINSITRATIVE AND PROGRAM RESPONSES TO BLOCK GRANT IMPLEMENTATION New Mexico has developed a comprehensive method of coordinating the public, executive administration, and agency progratranatic responses to the formation of block grants. Each of these will be addressed separately. 84 PAGENO="0383" 379 Public Meetings Preceded by press releases to local newspapers, each of the state's seven planning districts held public meetings that were conducted by the Secretary of the Department of Finance and Adminsitration, the lead agency in coordinating the state's response to block grants. Public participation was substantial, and transcriptions of public commentary were made and broken out by block grant and geographical areas to use in developing programmatic responses. Executive Administration The Governor designated a Federal Funds Task Force to decide which block grant to administer and to comply with provisions set up by the Omnibus Reconciliation Act of 1981 in assuming control of the block grants. This task force was comprised of key aides to the Governor, including the director of New Mexico's Washington Office and the Secretary of the Department of Finance and Administration (the state's counterpart to *the Office of Management and Budget). The task force analyzed the Omnibus Reconciliation Act and information from responsible federal agencies to determine exactly what the state must do to apply for and assume control of block grants, as well as kept up with the continuous change in funding levels appropriated for each block grant. Program Administration Agencies with prior experience in categorical programs were designated to administer the same programs in their block grant form. A subtask force, chaired by the Deputy Secretary of the Department of Finance and Administration and composed of agency program directors, produced program plans and assurances necessary for completing the formal application to assume control of the block grants. The chairman served as the conduit for the Governor between programmatic people and the main task force. Problems Encountered Four main accomplishments were realized in the above-referenced operations: * the public was polled as to the needs to be met by block grants; * the Governor's Office was kept abreast of changing activities in Washington requiring state response; * program plans for the block grants were designed by agencies with "hands on" experience; and * coordination was provided by the Department of Finance and Administration, the one agency involved in all three operations, in order that a state response would incorporate the needs of the public, state government, and the federal government. 85 PAGENO="0384" 380 Planning for block grant implementation has been extremely difficult for New Mexico for the sane reasons every other state has encountered: knowing that there is less money available and that it will decrease further, but not knowing how much or how soon. For further information contact: Kathleen Marr Secretary Department of Finance and Administration 421 State Capitol Building Santa Fe, New Mexico 87503 505/827-2665 NEW YORK BLOCK GRANT IMPLEMENTATION ACTIONS Conservative Approaches to Block Grant Implementation Necessitated by External Constraints As of January 1982, New York has assumed responsibility for three block grants: Title XX Social Services, Home Energy Assistance, and Alcohol and Drug Abuse and Mental Health Services. The general rules drawn from state experience have been that the "bold and innovative approaches" desired by the federal government have proven and will continue to prove difficult to implement in the short run for a variety of reasons: * short lead time for planning and policy work; * high degree of continued uncertainty as to future funding levels; * continued mandates in the form of program regulations or, more often, legislative restrictions; and * lack of clarity about the respective responsibility under audit of the federal, state, and local governments, particularly in light of differing versions of federal program intent from the points of view of Congress, federal administering agency, and Office of Management and Budget. This is not to say that innovative approaches will not be attempted or that New York State does not possess the capacity to administer block grants. Rather, a difficult task has been rendered even more difficult as a result of the nature of the federal approach, particularly the short planning period involved and the likelihood of future effective funding reductions. 86 PAGENO="0385" 381 Block Grant Actions In response to FFY 1982 needs the following actions have been taken to implement programs contained within the block grant legislation: SSBG The major source of funds for services to low-income persons under the jurisdiction of the state Department of Social Services (DSS) is Title XX. Accordingly, DSS has been designated block grant administator. Annual social service plans are no longer required by the federal government. Title XX funding under the block grant will follow previous patterns and will be allocated and distributed to the Local Social Service Districts (LSSDs) through the department's Consolidated Services Planning Process. In part, this process requires LSSDs to prepare three-year needs assessments, plans to address identified needs, and measures to evaluate service impact. DSS reviews local plans for conformity with state policy and social services goals. The plans then form the base for fund allocation decision and program reviews. Title XX funds are used to provide services (such as child foster and protective care, day care, adult protection, adoption) to low-income persons to enhance their quality of life and their opportunity to participate in the community. DSS will encourage maintenance of current local staff levels and priority funding of essential services. Under the Omnibus Reconciliation Act and related regulations, the state is required to submit an annual program report and a biennial financial audit to the Department of Health and Human Services. The requirements will be accommodated as part of routine DSS review and evaluation activities that include regular on-site monitoring of local districts by DSS field staff. Additionally, local districts are required to provide measures of program impact when,requesting Title XX funds. Home Energy Assistance Block Grant The Omnibus Reconciliation Act consolidates past energy assistance and home weatherization programs into the Home Energy Assistance Block Grant to be administered by the states. Program benefits will be distributed through LSSDs under DSS supervision for AFDC home relief recipients and will be distributed directly for most SSI recipients. Outreach activities, particularly for eligible elderly and low-income households, will be assisted through the State Office for Aging (SOFA) network, community action agencies, and the Department of Labor (DOL). Weatherization activities will be conducted by the Department of State through community action agencies. Energy emergency funds will be administered by counties for regional emergencies, and by DSS for mass emergenô ies. 87 99-965 0 - 82 - 25 PAGENO="0386" 382 The proposed distribution of New York's share (12.7 percent) of the $1.4 billion proposed federal appropriation for home energy assistance will be based upon previous years' funding data and needs assessment. Allocations to local districts for non-public assistance recipients will be based on their proportionate share of 1980-81 home energy assistance applications. Allocation methods for AFDC and home relief clients currently are under development. Program evaluations will be conducted annually by DSS, SOFA, and the Department of State. The Omnibus Reconciliation Act also requires filing of annual program reports and financial audits. Alcohol and Drug Abuse and Mental Health (ADANHA) Block Grant The Omnibus Reconciliation Act requires the state to maintain funding in proportion to FFY 1980 funding for drug abuse and alcohol programs and 1981 funding for mental health services levels. At the same time, however, the state's drug abuse and alcohol programs must each receive 35 percent of the ADANHA funding. The Governor has assigned administrative responsibility for the ADANHA grant to the Department of Mental Hygiene's Inter-Office Coordinating Council (10CC). Program responsiblity will be shared by the Division of Substance Abuse Services (DSAS), the Division of Alcoholism and Alcohol Abuse (DAAA), and the Office of Mental Health (OMH), while the 10CC will assure compliance with federal regulations relating to block grant application, reporting, audit and program evaluation requirements. Based on federal mandates requiring states to allocate ADANHA funds in proportion to previous spending, New York will use 19.2 percent of its 1982 ADAMHA block grant for mental health services and 80.7 percent for alcohol and substance abuse programs. The state also will fund ten community mental health cetners that meet federal requirements for continued funding. The amount of ADANHA funding available for distribution to the states under the continuing resolution is $428.1 million. New York's share is $36.4 million, and in accordance with the Omnibus Reconciliation Act, the following minimum program allocations must be maintained: mental health services, 19.2 percent; alcohol programs, 35 percent; drug~ abuse, 35 percent. The remaining percentage will be allocated to the Division of Substance Abuse Services. DAAA, DSAS, and OMH will contract or award grant funds to various local governments and direct services providers, the method for grant distribution varies as follows: 88 PAGENO="0387" 383 * DSAS will distribute ADANHA funds primarily to existing school and community-based treatment and rehabilitation programs, upstate through county-level Locally Designated Agencies, and in New York City, directly. Funding decisions are based on DSAS planning, needs assessment, and grant applications processes. * DAAA will distribute ADAMHA funds primarily to existing alcoholism services including treatment, rehabilitation, occupational, prevention, and education. Funding decisions are based on local government plans and applications processes. * OMH will fund the ten OHMCs that meet federal eligiblity requirements according to the Omnibus Reconciliation Act. Among the performance measures that DSAS and DAA will use in conjunction with needs assessments to evaluate the use of funds by the various components of these service networks are: * compliance with state and federal rules and regulations; * maintenance of acceptable capacity utilization rates; * client retention rates and outcome measures; and * ability to raise third-party revenues. The Omnibus Reconciliation Act requires OMHto develop review and evaluative criteria to determine the management and program capacity of OMHCs to achieve self-sufficiency as a basis for further funding. DSAS, DAA, and OMH will review local and provider applications and prepare annual program reports and financial audits. For further information contact: Jeff Apfel * Assistant Director Office of Development Planning State Capitol Albany, New York 12224 518/474-5112 NORTH CAROLINA PUBLICATIONS FOR BLOCK GRANT AND CATEGORICAL PROGRAM ADMINISTRATION In October 1981, Governor James 13. Hunt, Jr. requested that the Secretary of Administration and the Deputy Director of the Office of State Budget and Management be responsible for statewide coordination and consistency in the administration of block grants. Such administratic~i includes procedures for planning, accounting, budgeting, reporting, civil rights compliance, affirmative action, equal employment opportunity, and drafting of state administrative regulations. 89 PAGENO="0388" 384 As a response to this request, the Secretary of Administration established an Interagency Block Grant Task Force composed of representatives from the Offices of State Budget and Management, Policy and Planning, the State Treasurer and the State Auditor, the Departments of Administration, Human Resources, Public Instruction, and Natural Resources and Community Development. The North Carolina Interagency Task Force, similar to those formed by other states, has addressed immediate concerns in the transition from categorical grants to block grants in state fiscal year 1981-1982. However, recognizing that states will assume a much greater responsibility in the future for the administration of grant programs, the task force decided to develop a state procedures manual for the administration of federal block and categorical grants. Uniform State Administrative Procedures Manual The first phase of this effort will focus on the development of uniform state administrative procedures for all the block grants. The second phase will involve expanding the manual to cover the administration of categorical federal programs as well. When complete, state and local officials in North Carolina will have a single reference guide for state administation of federal programs. A major component of the initiative is the development of uniform state assurances in areas such as civil rights, affirmative action, equal employment opportunity, and others. The Interagency Task Force has been collecting information from state departments concerning the federal laws, regulations, guidelines, and other procedures they now are expected to follow in the administration of federal grants programs. The purpose of this study has been to ascertain the legal basis of federal requirements and determine where federal guidelines and procedures are overly prescriptive. This information will be important for the state as it establishes its own procedures. The manual will attempt to correct the problem of multiple planning, reporting, budgeting, and assurance requirements, i.e., procedures required by one program, grant, or level of government but which seldom if ever are used to satisfy the requirements of other programs, grants, or levels of government. Some remaining federal categorical programs undoubtedly will continue to have some highly detailed and burdensome administrative requirements that cannot be incorporated into the procedures manual; nevertheless, the identification of these will assist in ongoing efforts by the state to simplify and streamline federal administrative requirements. Recipient's Guide Book for Subgrantees In addition to the procedures manual, the Interagency Task Force will attempt to publish a recipient's guide book for subgrantees. In the past, many requirements have been imposed on subgrantees by state agencies and these requirements have been inconsistent with the requirements of other state agencies. The Task Force is working to minimize this problem as well as to reduce the number of add-on requirements by the state. 90 PAGENO="0389" 385 State Register The Department of Administration has prepared a feasibility study and management plan and is seeking funding for the establishment of a State Register, a periodic single source of information about state regulations. Result: Simplified Administration of Programs The development of the above referenced publications will serve not only to assist local governments and subgrantees, but also to provide state government with a more simplified and efficient method of administering federal and state programs. The task force believes that the increased administrative flexibility afforded by the block grants should be followed by the development of single and uniform state procedures for grants administration. The current initiatives in North Carolina are expected to contribute greatly toward this goal. For further information contact: Ted Parrish Policy Advisor to the Governor 116 West Jones Street Raleigh, North Carolina 27611 919/733-4131 NORTH DAKOTA BLOCK GRANT IMPLEMENTATION PROGRESS North Dakota views block grants as an opportunity to benefit state and local governments and citizens. To this end, the state has elected to administer the eight FFY 1982 block grants and to date is realizing success in its efforts toward greater efficiency and effectiveness, increased coordination with local governments, fewer administrative burdens, and better targeting of resources to locally-determined needs. The state agencies which are assigned to administer the block grants are reporting that the transference ~f skills acquired through those programs to block grants is occurring without difficulty. With most of the block grants, the state has gone beyond the requirements in the Act for obtaining citizen input and a productive working relationship has been established with the legislature. In consideration of budget cuts that are accompanying the block grants, the state's main concern is the critical need for the various responsibilities of the federal, state, and local governments for public programs to be sorted out and articulated clearly; turnback of revenue sources is crucial for block grant and program viability. For further information contact: Ronald J. Bostick Director, State Planning Division State Capitol Building, 17th Floor Bismarck, North Dakota 58505 701/224-2095 91 PAGENO="0390" 386 OHIO COMMUNITY DEVELOPMENT PROGRAM * Governor Rhodes has designated the Department of Economic and Community Development to administer the Community Development Block Grant Program for small cities. Some program details have to be worked out, but the basic approach has been decided which is substantially different from the way the U. S. Department of Housing and Urban Development (HUD) administered the program. Ohio's approach seeks to accomplish four objectives: * to meet the development needs of a large number of communities and provide predictable annual funding; * to ensure that communities with greater needs receive a larger share of the funds; * to increase local government control over decisionmaking and program management; and * to create a sustained, coordinated development system that will stimulate public and private investment in Ohio's cities. Based on these objectives, CDBG funds will be distributed to all eligible cities and counties in Ohio according to a per capita formula that incorporates indicators of distress. Distressed cities and counties will receive twice the per capita allocation of those that are not. Distress will be measured by a combination of five factors: unemployment, growth of employment, population growth, change in per capita income, and change in assessed valuation of real and personal property. Cities and counties may work together and pool their funds. A single unit of govern- ment or a regional organization may administer cooperative efforts. The state will train grantees in program management and design, leveraging, commercial rehabilitation, downtown development, and innova- tive financing. Workshops will be held on real property acquisition, public improvements construction, housing rehabilitation, and relocation. This approach to the CDBG program is a better solution to Ohio's needs and it can be integrated more easily with other state economic and community development programs. For further information contact: David Gehr Management Analyst Office of Budget and Management 30 East Broad Street Columbus, Ohio 43215 92 PAGENO="0391" 387 OREGON POLICY ANALYSIS TO DEVELOP DISTRIBUTION FORMULA FOR EDUCATION BLOCK GRANT FUNDS TO LOCAL DISTRICTS One of the most urgent items in need of resolution in the Oregon educational community is the formula to be used in computing allocations of Education Block Grant funds to local school districts. To assist the State Advisory Committee (appointed by the Governor to consider the funding formula and other issues and to make recommendations to the State Board of Education), the Oregon Department of Education has developed a set of policy analysis worksheets which help to sharpen the focus of allocation and related recommendations by the committee within the context of pressing policy questions. Worksheet Designed to Aid Policy Analysis A policy analysis worksheet is being used for each of many policy questions. These are being raised around several sets of major issues: authorized expenditure functions within the block grant legislation, legal issues which may require state board of education rulemaking, and operational issues. Each of the worksheets provides background information on the policy question under consideration, lists preliminary alternatives and requires development of written recommendations based upon use of the worksheet data in committee discussion. The primary policy question under consideration by the committee is identification of factors that should be included in the funding formula for distribution of funds to local districts and the weighting to be given to these factors. The policy analysis worksheet for this important set of recommendations has been used by the committee to conduct microcomputer analyses of funding distribution factors and weightings. For this analysis, the committee also has provided a worksheet illustrating a sample computer printout that lists twelve Oregon districts of varying size, geographical area, and economic circumstance. Three sample factors on this second worksheet are identical to those named in block grant legislation. While not mandated by law, they are a point of departure for discussion on how an allocation formula works. Committee recommendations are as follows: * Of the total amount of Education Block Grant funds passed through to local districts, a minimum of $100.00 per district will be assured. * 70 percent of the funds will be distributed to districts on the basis of resident average daily membership (student average daily membership). . 30 percent of available funds will be distributed to districts on the basis of six factors equalized by students per capita. Three of the factors are those for which the state has hard statistical student count data: 93 PAGENO="0392" 388 low-income (ESEA Title I census count), geographic isolation of schools (qualifications established by Oregon), and handicapped students (handicapped child census). The other three factors are to be considered only if the district has a program in place and currently is serving through those programs students who: have racial, ethnic, and cultural differences; have limited English speaking abilities; and are talented/gifted. Although it has been recommended that these funds be distributed to districts as reimbursement for higher than average costs related to the factors identified, the districts are authorized under the Education Block Grant to spend their allocations according to priorities set locally. Other Policy Questions Under Analysis Legal issues: * What is the definition of a "Local Educational Agency" for purposes of the Act? * Can the state allow block grant funds to be used for a district program that in the past was supported by local funds and now would have to be discontinued due to the lack of an external source of funding? * Should the state assume a monitoring role to protect against the potential "misuse" of funds by local districts? * How would a state agency discharge its obligation to serve private school students within its boundaries if the local educational agency would choose not to accept block grant funds? * What, for the purposes of this legislation, is the state's definition of a "private school"? * What should be the primary uses of state-level funds? * What relationship should exist between state and local uses within the three subchapters of the Act? * How comprehensive should the state plan for evaluation be at each level? Operational issues: * Is there an advantage to be gained by distributing block grant funds through the ESDs and county units? * How extensively and for what purpose should applications be reviewed by the state? * What types of data should districts be required to keep for program evaluation and fiscal accounting purposes? 94 PAGENO="0393" 389 * Should the department encourage districts to pool block grant funds to increase their impact? If so, how? Incentives? Through guidelines and training sessions? Recommendations Subject to Comprehensive Planning and Review Process Once the committee has completed the decisionmaking process, the recommended policies are incorporated into the state plan for the block grant. A comprehensive process for review and appro~ral of the state plan has been developed by the Department of Education with roles, responsibilities and target dates specified for task completion by the agencies and parties involved. Local Involvement in Community Development Block Grant (CDBG) Planning Local governments have extensive involvement in CDBG planning, opportunities which have resulted due to the following components in the planning process: * local officials are given the opportunity by the CDBG Policy Advisory Committee to assist in developing recommendations for the Governor, as well as to review draft program design; * the state is given permission by the Technical Advisory Committee to tap local expertise; * city/county officials are given a voice via written surveys; and * public hearings are held, as required. Liability is an issue that merits closer attention. Since CDBG program requirements are likely to change, successful competitors for grants also will change. The loser may well be the state. In anticipation, Oregon is more likely to write complex regulations to protect itself from expensive lawsuits. For further information contact: Marshal Herron Director Office of Policy and Program Development Department of Education 700 Pringle Parkway Southeast Salem, Oregon 97310 903/378-8378 95 PAGENO="0394" 390 PENNSYLVANIA HUMAN RESOURCES POLICY INNOVATIC)I!~ Governor Thornburgh has established a set of basic objectives for Pennsylvania's response to the block grants: o to carefully plan for the assumption of block grants and for absorption of the federal budget cuts, with the advice and involvement of citizens, state and local officials; * to adjust as rapidly as possible to changes in federal eligibility standards, regulations, etc., with as little disruption to programs and services as possible; o to reduce administrative costs and unnecessary requirements wherever possible to minimize the impact of funding reductions; and o to insure that state priorities and needs continue to receive primary emphasis and attention. On October 1, 1981, the Governor notified the appropriate federal agencies that Pennsylvania would assume responsibility for all those federal block grants in which the state was eligible to participate in FT 1982. Human Resources Committee of the Cabinet Because of the importance and complexity of the task, the Governor established a Human Resources Committee of the Cabinet to coordinate the state's response to these new opportunities. This year's efforts represent only the beginning of a multi-year process of refocusing programs included in the blocks on the most pressing needs of the state's communities and citizens. The Human Resources Committee of the Cabinet held six information forums throughout Pennsylvania in September 1981 to inform the citizenry of these changes and state activities underway. Since then, the Committee has continued an outreach effort that has covered 51 of the state's 67 counties and involved over 200 sessions throughout the Commonwealth. The Committee is continuing to formulate additional plans this year, including the development of appropriate mini-block grants to localities as a component of several of the block grants-in the spirit of the national government's New Federalism initiatives-and is working with various Cabinet members to reduce administrative costs and regulations in light of the replacement of categorical grants by block grants. "Mini-Block" Grants to Counties In the coming year, Pennsylvania will examine the feasibility of providing "mini-block" grants in several program areas to counties, permitting local governments the flexibility to set priorities on services and to design individual delivery mechanisms reflecting the needs of their areas. In addition, with the advent of the block grants, 96 PAGENO="0395" 391 Pennsylvania's Department of Aging is developing plans to consolidate all federal funds provided to area agenc~ies on aging (including part of the Social Services Block Grant along with other federal categorical grants) into a single Aging Services Block Grant with a single set of state regulations and reporting requirements designed to maximize local flexibility and minimize administrative costs. Simplified and standardized eligibility requirements and local flexibility in the determination of service and client priorities will maximize the capacity to target services to the greatest needs as determined by each area agency on aging. Choices for Pennsylvanians: An Intensive Public Participation and Planning Process Unlike many of the block grants the state will be receiving that have consolidated existing categorical grants, Pennsylvania (and other states) will be receiving directly from the federal government two block grant funding streams-Community Services and Small Cities CDBG-that formerly were received at local levels. Fortunately, an extensive public participation and planning effort-"Choices for Pennsylvanians"- had been initiated in April 1979 by the Pennsylvania State Planning Board. "Choices" was designed to examine the state's past and future problems and opportunities in two important areas: community conservation and economic development. The program included distribution of a Citizen's Edition (a postage-paid return citizen survey), a 60-minute documentary, and thirty public meetings to be conducted throughout the state. Through presentation of the documentary on statewide public television, public meetings, and presentations to many groups, over 185,000 Pennsylvanians participated in this effort in the Spring of 1981. The results were used in preparation of the State Planning Board's Final and Summary reports on "Choices" in October 1981. The State Planning Board, which is advisory to both the Governor and General Assembly, provided a number of suggested policies and actions for improving the state's communities and economy. Members of the Governor's Cabinet benefitted from the work of the Board as it was of considerable value in laying out the objectives of the Commuity Services and Small Cities Community Development Block Grants. The Pennsylvania Department of Community Affairs, while providing 90 percent of the CSA Block Grant to previous community action recipients, was able to focus new priorities on use of these funds for employment and training, emergency assistance, and other job development effo~ts. Community action agencies were encouraged to design programs that focused on these objectives, using maximum local discretion in making the programs locally-responsive. In the case of the Small Cities Community Development Block Grant, plans are being developed through a statewide task force that is representative of local officials for the purpose of creating local private-public partnerships, economic development, and community conservation efforts that are locally-designed but reflective of state objectives. 97 PAGENO="0396" 392 During a time of limited resources, the 2½-year effort of the State Planning Board combined with extensive public input has made it possible for the objectives of the new block grants to be realized sooner and more effectively. The state's past experience has been one of extreme frustration in trying to obtain recognition of Pennsylvania's needs and priorities by federal agencies administering former federal categorical programs. In the months ahead, the Commonwealth will be developing new linkages between these block grants and other programs dealing with community conservation and economic development, in order to make maximum use of scarce resources and to better accomplish national as well as state and local objectives. Conclusion A watershed year in federalism has been initiated to build interagency consensus, foster public participation, incorporate state developed processes and plans, and plan for future utilization of new types of state-local roles and relationships. For further information contact: Charles Lieberth Executive Director Human Resources Committee of the Cabinet Harristown II, Ninth Floor Harrisburg, Pennsylvania 17120 717/787-6835 RHODE ISLAND A-95 PROCESS While the A-95 process in Rhode Island has had difficulty as have other A-95 programs in focusing the attention of federal authorities to their decisioninaking, the state always has regarded the A-95 process as a means for review and problem solving within the context of categorical grants. The A-95 process has been implemented by a state committee, as well as by a particular committee dedicated to reviewing human service programs. Rhode Island views this process as an ongoing activity, particularly in light of the fact that the broad-based membership of the A-95 committee always draws a variety of interested citizens from all walks of civic life. This year, the human services subcommittee was asked by Governor Garrahy to disseminate block grant information throughout the state and this may prove to be a vehicle for further block grant deliberation. The first phase of block grant planning in Rhode Island was to acconinodate large federal reductions in spending. That phase has not been completed. The Governor has pledged to name an advisory cemmittee to make reconinendations for a second year of operation. However, there is a need to institutionalize a professional planning process that will involve the citizenry and the difficult choices brought by the block grant process. 98 PAGENO="0397" 393 The Governor's Policy Office is currently reviewing modification of the A-95 process to accomplish this goal. A-95 review can be refocused upon its original intent and therefore will have a much greater likelihood of success in impacting state decisions. For further information contact: Alvin N. Johnson Federal Coordinator Governor's Policy Office State House Providence, Rhode Island 02903 401/277-2214 SOUTH CAROLINA COUNCIL OF GOVERNMENTS MODEL FOR CDBG IMPLEMENTATION A Council of Governments model is being developed in South Carolina for the purpose of implementing the Small Cities Community Development Block Grant program. The process of program development will be accomplished with maximum input and advice from local officials. Within the framework and set of tasks established for full-scale implementation, the roles and responsibilities of the Governor's Office, localities, and the Council of Governments (COG) have been established. Sequential implementation tasks have been planned as follows: * Design and establish criteria for grant application-The Governor's Office will develop the application package, including the types of information necessary to evaluate an application for funding. In addition, criteria will be established concerning categories of activities such as economic development, community facilities, housing rehabilitation, etc., with the corresponding assignment of points for activities within each category, e.g., newly created jobs, grant fund leveraging by applicant, or number of low- and moderate-income persons served. * Develop regional benchmark figures-Tentative benchmark figures will be developed once the regional COG Executive Board has determined a ranking order for applications generated within regions. The Governor's Office will use the benchmarks as a guide in ranking all projects submitted by the COGs. (It should be understood that the assigning of benchmark figures to each COG does not obligate the state to award grants in the amount of the established benchmarks.) * Establish a set-aside for the Governor's Discretionary Fund-Ten percent of the total CDBG funds coming to the Governor's Office will be set aside for special issues and imminent threat situations. 99 PAGENO="0398" 394 * Conduct regional workshops-Workshops will be held for eligible applicants in each of the ten planning councils and will deal with an explanation of the procedure for applying for CDBG funds and a discussion of criteria developed for reviewing grant applications. * Complete applications-All applications will be required to be completed within a specified time frame (tentatively, two months). The applicant may complete the application themselves, request assistance from their respective COG, or hire a consultant. * Transmit completed application to COG-All completed applications will be submitted by locals to their respective planning councils. * Receive applications-The deadline for completed applications is set tentatively for April 1, 1982. * Review applications for completeness-Once applications have been received, they will be reviewed and, if additional information is needed, applicants will be requested to supply the information within a specified time. * Assign points to all applications based on state- established criteria-Each set of criteria established by the state will be assigned a certain number of points, e.g., one criteria for an economic development project application might be the number of newly-created permanent jobs, with additional points given for each new job. Another example might be a community facility project: if an applicant were applying for funds to install a water line, the criteria could be the number of low- and moderate-income families to benefit from installation of the line; again, additional points would be given for each benefiting family. The actual assignment of points will be the responsibility of the staff of the COG within whose geographic boundary each application originates. * Review and prioritize applicatons-Each COG Board will be responsible for reviewing the points assigned by COG staff for each application and for prioritizing those applications for transmittal to the Governor's Office. A COG Board does not have to assign top priority to the application receiving the most points if it believes an application receiving fewer points will be of more benefit to its respective region (a COG does not obligate the state to fund that application). e Provide technical assistance to planning councils-A staff person from the Governor's Office will be assigned to each planning council to provide technical assistance and ensure that grant applications are reviewed in a uniform manner throughout the state. 100 PAGENO="0399" 395 * Receive applications from COGs-All applications will be transmitted to the Governor's Office by planning councils within a specified time. * Review applications and establish threshold figure-The Governor's Office will review and evaluate all applications submitted and establish a threshold figure for applications that will be considered for funding. If the maximum number of points that an application can receive were 300, the state may assign a threshold figure of 150. This, would mean that only those applications receiving 150 points or more would be considered for funding. This threshold figure cannot be established until all applications are received by the state, in order to fairly evaluate the points assigned to all applications. This figure will vary from year to year depending on the quality of the applications. * Conduct, as appropriate, on-site visits to applicants meeting the threshold figure-The Governor's office will conduct an on-site visit with applicants meeting the threshold figure, to discuss and review information on the application. * Forward approved application to Governor for his approval/disapproval-The Governor's Office will prioritize the application, taking into account the priorities set by the COG Boards and benchmark figures for each region. The prioritized applications will be sent to the Governor for his approval/disapproval. * Enter into contractual agreement with each approved applicant-a model contract will be developed for use of CDBG funds and will include items such as local match, and state and federal requirements. * Make grant awards to approved applications-Once applicants have signed the contracts, the state will issue grant awards to applicants so they may incur costs against the grant. For further information contact: Bill Prince Special Assistant to the Governor for Policy Development State House Columbia, South Carolina 29211 803/ 758-3208 101 PAGENO="0400" 396 SOUTH DAKOTA EVALUATION OF BLOCK GRANT EXPERIENCES South Dakota proposes to develop an innovative demonstration project to "overhaul" the 1982 block grants. The project will involve three major activities for FY 1983 block grants that may be of interest to other states, as follows: * Conduct an evaluation of this year's block grant proposals to determine if funding levels and priorities should change and ensure that needed changes are reflected in the upcoming block grant report (e.g., that the shortcomings of FY 1982 block grants are not repeated in FY 1983). * Develop for the numerous block grant reports a single innovative format designed to encourage effective information dissemination, thereby facilitating a process by which resource allocation decisions are made by the state. * Formulate an efficient public hearing process that will reduce hearing costs yet allow available information to be presented to as large an audience as possible, thereby giving the state information sufficient for evaluating programs and making resource allocation decisions. An evaluation of South Dakota's response to block grants in FY 1982 is relevant to other states in that they can capitalize on information gained from reviewing: * the adjustments made by South Dakota after one year's experience with the blocks; * the utility of developing block grant proposals with a firm idea of future funding (this was not possible in FY 1982 due to uncertainty of the budget); and * the advantage of a single innovative format that clearly presents all information necessary to develop and manage block grants. * the process of an efficient public hearing to use as a prototype. For further information contact: Ben Orsbon Chief Planner Intergovernmental Relations State Capitol Pierre, South Dakota 57501 605/773-3661 102 PAGENO="0401" 397 TENNESSEE HUMAN RESOURCE PLANNING TASK FORCE PROCRAN The citizen-taxpayer is looking to government to do a better job of providing basic services. A decade of experience with governmental human resource programs has led to the general view that better programs can be. developed through creative federalism at the state and local government levels. Consequently, more program responsibilty is being given to state and local governments through such programs as federal revenue sharing, block grants, and a general decentralization of the federal bureaucracy. It is to aid in this transition period and to help in the coordination and consolidation of human service delivery programs, that the Tennessee Human Resource Planning Task Force project is being proposed. The task force will: * develop a one-year comprehensive plan for human resource service delivery, based on information and substantial input from all public and private service delivery programs; the plan will allow the task force to estimate during `transitional phases" the impact of new programs as to funding requirements and impact on the service delivery system; and * seek out all funding sources for programs and aid program areas and agencies in the development of coordinated block grants; it is hoped that the flow of dollars back to service delivery areas will be increased substantially without increasing local spending or reducing services to children and their families. The information gathered by the task force will be made available to legislative and executive branches, agency administrators, and other decisionmakers in order to: plan and deliver needed services at the local level of government; build effective service delivery and get the most for the "dollar"; avoid program confusion among service recipients; make the best use of all human service programs in Tennessee for the betterment of its children. Task Force Membership and Staffing The working task force of deputy commissioners and special assistants to the Governor will be continued throughout the first and subsequent years of human services block grant implementation. Although final plans have not been made, initially the task force has been designed to consist of assistant commissioners and directors of independent commissions who have daily programmatic and administrative responsibility for~the delivery of human service programs. 103 99-965 0 - 82 - 26 PAGENO="0402" 398 The task force will meet weekly, then monthly, to discuss human service delivery problems and new programs and their effects on the system. The Tennessee State Planning Office will act not only as staff for the task force but also serve as its focal point. The structure should increase state flexibility in handling new approaches to human service delivery that are being brought about by block grants, as well as increase the state's ability to deliver a slate of services in a more efficient and systematized way to children and their families. Executive Briefing The Governor's cooperation is imperative before any level of authority can be expected to be responsive in the operation of Tennessee government. Therefore, periodic briefings are planned and will be structured to advise the Governor, his immediate staff, and major officials of responsibility centers in and out of state government, to assure complete coordination and implementation of human service delivery within the state. The briefings reduce the time Governor Alexander and his immediate staff will need in solving daily problems. Task Force Target Dates In order to achieve the primary goal of establishing a well- balanced, cost-effective delivery system for children and their families, the following timetable has been developed: October 1, 1981 Establish Human Resource Task Force December 1, 1982 Initiate Regional Delivery System January 1, 1983 Re-evaluate Proposed System After Public Review April 1, 1983 Regional Delivery System Put Into Operational Mode July 1, 1983 Reassess Child Welfare Programming/Establish Fiscal Year 1983 Goals and Objectives For further information contact: Steve Norris Director State Planning Office 660 Capitol Hill Building Nashville, Tennessee 37219 615/741-1676 TEXAS HEADSTART ON MAN&GING FEDERAL GRANTS-IN-AID Shortly after his inauguration in 1979, Governor Clements created a program called the Texas State Government Program. The results of this seven-point program over the last 2½ years have been: improved management, more effective service delivery, and, at the same time, reduced number of state employees. The improvement of efficiency and effectiveness of state government has prepared Texas for assuming a stronger state role in block grant management ~ncf -"New Federalism" proposals. 104 PAGENO="0403" 399 Well in advance of enactment of the Omnibus Reconciliation Act of 1981, the Governor directed the state agencies and universities to begin developing operating plans that would anticipate overall reductions in federal funding and to begin contingency plans by identifying appropriate reductions in staffing and expenditures. Most state agencies found that this headstart made it much easier to handle the federal funding reductions and to comply with new features of the block grants. During 1981, the state legislature passed a bill requiring all state agencies to administer federal and state grant funds in accordance with standards. established by the Governor's Office. In response to this directive, the Governor asked his Planning and Budget Office to prepare a procedures manual that would be used in administering block grants and other federal grants-in-aid. These procedures were to assist in assuring that the state would efficiently administer the block grants and effectively account for use of the funds. State agencies, local governments, and private organizations have been assisting the Governor's Office in preparing this grant management manual which is scheduled to be published and implemented in September 1982. In April 1981, the Governor created a task force on block grants which tracked the development of the block grant programs, analyzed the final block grant legislation, and submitted recournendations to the Governor for implementing block grants for FY 1982. The task force has been assisting the Governor's Office in developing procedures that will assure local governments and citizens the opportunity to provide input in developing intended user reports for FY 1983 block grants. The task force also has assisted in preparing final reports for legislative and agency hearings scheduled for the Summer of 1982. For further information contact: Paul Wrotenbery Director Governor's Budget and Planning Office Sam Houston Building, 7th Floor Austin, Texas 78701 512/475-8491 UTAH GOVERNOR'S ACTION PLAN FOR QUALITY ELEMENTARY AND SECONDARY EDUCATION Utah Governor Scott Matheson soon will be publishing the state's first gubernatorial public education policy. Historically, the state has been proud of its strong commitment to education, but whether that commitment will continue is one of the most presing policy questions facing the citizens of the state. Because of a birth rate that is double the national average, school enrollments are exploding. Simultaneously, the state budget is constrained, urbanization has created new requirements for public resources, the federal government's role in education is in transition, and the taxpayer is demanding relief. 105 PAGENO="0404" 400 Recognizing the need for swift action to address these critical issues, Governor Matheson directed his staff to develop an action- oriented education policy. The result was "Solving the School Crisis: Governor's Action Plan for Quality Elementary and Secondary Education", the purpose of which would be to: * assist the State Board of Education and local boards to bring pressing educational issues to the forefront; * establish a solid decisionmaking framework designed to strengthen educational leadership at the local level; and * synthesize the recommendations from three statewide studies of educational needs and priorities completed since 1979. The policy addresses Utah's three priority issues in public education: establishing basic purposes of public education; financing public education, and providing facilities for public schools. Given the state's spartan fiscal environment, quality must be equated with effective use of resources and doing fewer things, but doing them well. Promoting the identification of "fewer things", for basic education purposes, is a major objective the action plan. The process for targeting resources toward the basic purposes identified in the plan is community-based educational planning. By locating and integrating the whole range of a community's assets into the education effort, an indispensable step can be taken toward achieving quality education. Local educational planning is also the mechanism for implementing viable alternatives which will ease the facilities and financial pressures currently being experienced. To give local aistricts the flexibility to pursue innovative solutions to these problems, the policy promotes the idea of a state block grant for education. Inspired by the "New Federalism" philosophy, this method for allocating school funds to local districts groups similar categories in Utah's existing Minimum School Program. This year the Governor recommended to the Utah Legislature that twenty-nine subcategories be consolidated into eight block grants. The 1982 Public Education Appropriations Subcommittee of the Legislature adopted part of the recommendation and agreed to study the remainder during the interim. The key to the success of Governor Matheson's action plan lies in the actions ultimately taken. It is anticipated that the plan will be received and acted upon swiftly in a spirit of cooperation and shared responsibility for Utah's most precious resource-young people. For further information contact: Anna-Marie Dunlap Office of the State Planning Coordinator 124 State Capitol Salt Lake City, Utah 84114 801/553-6084 106 PAGENO="0405" 401 UTAH FRAMEWORK FOR POLICY-BUDGET DEVELOPMENT Governor Matheson, through his planning/budgeting offices, has created a framework within which the impacts of President Reagan's federalism-budget cuts recommendations can be analyzed. In preparing for the FY 1983 state budget, the process began with a current conditions analysis, developed policy themes and agency plans, and tracked those plans through the budget process. The focus of the current conditions analysis to be presented in March 1982 will be the position of Utah in the national environment, with major emphasis on the President's proposals. The state recognizes that it is coping with unknowns and will have to plan for a range of outcomes. The kick-off for this year's planning/budget cycle will be a two-day seminar in March for budget and planning staffs and department heads. The agenda will include topics such as demographic and economic trends, federal budget and federalism prospects, and key issues facing the state. For further information contact: Emily Charles Office of the Governor State Capitol Salt Lake City, Utah 84114 801/533-5231 VERMONT APPROPRIATIONS ACT In April 1981, the Vermont Legislature included as a section of the Annual Appropriations Act a provision for executive-legislative interaction concerning potential federal block grants. The Governor was given the prerogative to accept a block grant if, in his judgement, it was in the best interest of the state. The approval of the Joint Fiscal Committee, as agent for the Legislature, was required for allocation of the funds for purposes consistent with the basic appropriations in the Act. The provision maintains legislative oversight while giving the Governor power to determine its value to the State and to accept it unilaterally. A similar expanded provision is being drafted for inclusion in this year's Appropriations Act. For further information contact: John Simson Director, State Planning Office Pavilion Office Building Montpelier, Vermont 05602 802/828-3326 107 PAGENO="0406" 402 VERMONT CONSOLIDATED PLAN FOR HUMAN SERVICES In June 1979, the State Planning Office (located in the Governor's Office) and the Agency of Human Services contracted with the Department of Health and Human Services (DHHS) to begin the Planning Requirements Reform Project. One of the purposes of the project was to link federally- mandated plans to the state's existing planning and budgeting processes. Six DHHS-funded programs were selected for this linkage and three DHHS- funded programs were added the second year. The resulting consolidated plan document successfully met federal plan requirements for all these programs, while providing a base and process for planning and managing human services on the state's own terms. The plan also provided an explicit, holistic view of the state's human services programs that linked program and fiscal planning processes. The plan was used by the legislature, the Governor's Office, and the Agency of Human Services in their efforts to foster true coordination of program management and service delivery. The Agency of Human Services has developed an effective management approach by standardizing and consolidating the state's planning and budgeting cycles. This approach has weathered two budget cycles, several crisis budget reduction exercises, and initial responses to the Omnibus Reconciliation Act of 1981. The flexibility of this approach has: * enabled the agency to respond to shifting conditions without developing a new budget each time circumstances change; * helped synchronize executive and legislative planning cycles, thus increasing the coordination of top-level management in the state; and * had areachdown effect, enabling management and technical staff in the departments to influence the shape and substance of consolidated planning, a process supported by the development of close working relationships between central planning staff and managers and planners in the departments and offices. *The consolidated plan resulting from the Planning Requirements Reform Project was used by Vermont as the application for the Social Services Block Grant. The Agency of Human Services will review the requirements and regulations that pertain to all six block grants and the state will submit the consolidated plan to the appropriate DHHS agencies. Vermont expects the review will result in further streamlining of the plan and a clearer relationship between funding and services. For further information contact: George Coppenrath Agency of Human Services 103 South Main Street Waterbury, Vermont 05676 802/241-2227 108 PAGENO="0407" 403 VIRGINIA STATEWIDE TELECONFERENCE In November and December 1981, the Office of the Secretary of Human Resources sponsored two statewide teleconferences to engage the general public and human resource service providers in the decisionmaking process associated with block grants. The basic idea behind the teleconferences was to bring top government officials into a "face-to-face" meeting with interested individuals through the use of telephone and television facilities. During the first half of the programs, the Governor, the Secretary, and six human resource agency heads presented the concept of block grants and related their impact. In the second half of the programs, viewers were encouraged to call in questions via a toll-free number. Questions were relayed to appropriate officials for a live response. Questions not answered on the air received a written response. The first teleconference-Directions `82: A Teleconference for Human Resource Providers-aired on November 25, 1981 and was targeted for social service professionals. The second teleconference-Money and Human Services: Virgi~nia's Plan-aired on December 10, 1981, focused on the impact of recent federal actions, and was directed to the general public. Both programs were produced by state public information personnel with the help of the Virginia Department of Telecommunications. Utilizing the facilities of WCVE-TV in Richmond, the programs were transmitted via satellite to each of Virginia's five public televisions stations. An interpreter for~the hearing disabled was provided on-air. It is estimated that approximately 40,000 viewers (including human service providers, local government officials, and advocacy groups) participated in the program. VIRGINIA ASSESSMENT OF BLOCK GRANT FUNDING WITHIN THE CONTEXT OF TOTAL FEDERAL FUNDING Federal Budget Impact (FBI) reports are developed by the Virginia Department of Planning and Budget at key points in the federal budget process to assess the likely impact on state programs of projected and actual changes in federal funding, including block grants. The data is obtained by a series of survey instruments sent to state agencies that receive federal funds. Believed to be a significant policy and management innovation, the objective of these reports is to provide the Governor, cabinet secretaries, state legislators, and administrators with the best information available for effective planning and policy resource allocation decisions used in the development of the state biennial budget and amendments to the budget. The reports contain: * detailed financial data; * summaries of significant impacts on policies, levels of program activity, and public programs; and * state agency recommendations for alternatives dealing with - revenue change. 109 PAGENO="0408" 404 Methodology The current FBI report is the fifth in a series examining the impact of "New Federalism". It represents an estimation of likely federal revenue changes as of the Third Continuing Appropriations Resolution signed by the President on December 15, 1981. Where final congressional appropriations bills were passed by that date, estimates are based on those funding levels. Key information, generated partially by a survey of state agencies, is contained in tables measuring anticipated revenues as compared with continuing the programs at "present level" (federal revenues received by the program in FY 1980-81). The report is organized in two parts: (1) figures summarized as statewide totals and (2) figures broken out by federal program and individual reporting agency. The FBI reports are part of an extensive effort by the Commonwealth of Virginia to monitor and evaluate changes in federal funding levels and their, impact. Additional information, copies of the reports, and sample copies of survey forms are available upon request. For further information contact: Ray Sorrell Deputy Director for Operations Department of Planning and Budget 9th Street Office Building Richmond, Virginia 23219 804/786-8755 WASHINGTON STATE COMMUNITY SERVICES BLOCK GRANT FUNDING REDISTRIBUTION Inherent Equity and Statewide Coverage Issues A major issue confronting the State Planning and Community Affairs Agency, when it began planning for implementation of the Community Services Block Grant (CSBG), was the distribution of diminished resources to all areas of the state. The agency decided that distribution should be based upon these principles: equity and statewide coverage. At the time of CSBG enactment, eleven of the state's thirty-nine counties (35.02 percent of the population) were served neither by a Community Action Agency, nor by a Limited Purpose Agency serving as a Community Action Agency. It was decided that the new program would evolve into one serving all counties, with the first year to serve as a transi- tion year and used by the most appropriate neighboring grantees to develop relationships and acceptance in those unserved areas. These agencies were allotted funds designated for the unserved counties. 110 PAGENO="0409" 405 The resulting and potentially much more difficult problem was allocation of funds among the grantees. The agency found that the Community Services Administration had demonstrated a strong urban bias in its distribution of* funds (e.g., a county had two community action agencies_-one serving a large central city and the other serving the largely rural remainder of the county; while the difference in the poverty population was only 124 persons, the urban agency received $640,000 and the rural agency received only $220,000). Conversely, many counties of the state were quite rural, with small populations but high incidences of poverty. If funds were distributed solely on the basis of poverty popula- tion, many of the rural agencies (which often are the primary service deliverer) would not receive sufficient funds to maintain administrative integrity, let alone provide services to poor people. Working Group Established Faced with a difficult decision and wishing to tap the experience and ideas of those who ultimately would be impacted by that decision, the agency assembled a special group to work with staff on the development of the community services plan and allocation formula. The working group consisted of agency directors representing rural/urban, large/small, and minority service-oriented agencies. Recognizing that equitable redistri- bution of funds would result in major funding losses for most urban programs, and that each agency, large or small, had similar operating costs (salaries, space rental, goods and services), the working group decided that each agency should receive the same base amount to cover common costs. Remaining funds would be distributed according to each service areas share of the state's poverty population, thereby, address- ing both rural and urban needs. Full-scale implementation in one step would have resulted in devastating, unanticipated funding reductions to some large agencies. The group decided that the agency should phase in full redistribution. Hence, it was decided that in 1982 no agency would suffer any funding reduction in excess of 30 percent of its 1982 basic funding level. This would provide agencies with one year to plan for the further reductions. Because of the thought given to these issues and because representatives of the affected agencies participated in the planning process, the decisions achieved a remarkable consensus among the local agencies. The decisions, while hurting some and helping others, generally were recognized as fair. For further information contact: Art Cantrall Planning and Community Affairs Agency 9th and Columbia Building Olympia, Washington 98504 206/753-4979 111 PAGENO="0410" 406 WASHINGTON STATE DEPARTMENT OF SOCIAL AND HEALTH SERVICES STRATEGIC PLAN TO REDUCE EXPENDITURES The Washington State Department of Social and Health Services (DSHS) made several decisions when it undertook the task of developing a strategic plan to reduce expenditures in order to offset the anticipated loss of federal funds: * the process would be an open one with considerable opportunity for public involvement; * service reductions would be made where they would have the least adverse impact upon clients; and * no program would be exempted from the review, and funds perhaps would be shifted from a totally state-funded program to one that lost federal funds, depending upon priorities. In other words, the department's plan for absorbing federal budget cuts would not simply mirror federal actions, but would be developed in accordance with state-established priorities. Steps in the Open Review Process The department could have chosen the relatively easy approach of simply applying the federal cuts to the affected programs. Another approach would have been to apply a percentage reduction to all departmental program budgets. Instead, the department chose to adopt a process that allowed for a critical analysis of existing programs, public input on the relative importance of DSHS services, and the formulation of an expenditure reduction plan reflecting the basic mission and service priorities of the department. Program Perspectives Each program director developed a program perspective (describing clients, services, and priorities) that was reviewed by agency groups related to those programs and by DSHS management. These perspectives provided the basis for identifying issues related to funding requirements for each program. Department Perspective The department then synthesized program perspectives into a document-"Department of Social and Health Services Perspective on Implementation of Federal Budget Reductions and Block Grants"-that contained a mission statement and categories of service priorities plus a list of specific program issues. Comment was invited on the draft before it was given general distribution. 112 PAGENO="0411" 407 Public Review and Comment Meetings were held in each DSHS region (attendance totaling approximately 1500) for the purpose of allowing the pubic to comment on the departmental perspective. In addition, nearly 1,000 individuals and organizations submitted written comments on the perspective. Staff also met with service providers and client advocacy groups to explain the budget problem, examine options, and solicit constructive suggestions. Involvement of Other Federal, State, and Local Officials Early in the process, the DSFIS Secretary established an Interagency Task Force to ensure that the department's planning for anticipated federal budget reductions was coordinated with federal, state, and local agencies. DSHS representatives also met with legislators to explain the process and to respond to their questions. Decision Packages The DSHS programs developed decision packages on the issues listed in the departmental perspective. Each of these identified options for change, impacts on clients, potential cost savings, projected implementation dates, and any required changes in federal or state laws or regulations. The six DSHS regions reviewed and commented on more than 200 decision packages. Priorit ization Drawing upon a wealth of public comment and reaction and program director recommendations, department managers conducted a detailed review of all decision packages and ranked them in priority order. These priorities provided the basis for the expenditure reduction plan. Prioritization of Services Within the general framework of the DSHS mission, major service types wre grouped into three priority categories: * Basic Life Support Services-those services designed to ensure provision of essential food, shelter, clothing, medical care, and physical safety for persons unable to do so for themselves (such as protective services, financial assistance, food stamps, residential 24-hour care, acute medical care, and infectious disease control); * Services to Avoid/Reduce the Need for Basic Life Support Services-such as employment counseling and training, independent living for the disabled, crisis intervention, community outpatient care for the mentally ill and substance abusers, preventive and restorative medical care, and family planning; and * Services Designed to Improve Access to the Service Delivery System-such as information and referral, advocacy for the elderly and disabled, volunteer programs for the institutionalized, demonstration projects, and outreach. 113 PAGENO="0412" 408 Application of Priorities to Decision Packages In all of the deliberations, an effort was made to minimize the adverse impact of possible budget reductions on clients. Some federal cuts would occur in programs considered high-priority by the department. To avoid major service reductions in these programs and offset at least partially the loss of funds, the department chose to generate funds from less critical programs. Among these high-priority programs are Maternal and Child Health, Vocational Rehabilitation, Family Planning, Refugee Assistance, and AFDC administative staff training. Certain Title XX programs were maintained at current levels or reduced less than the full percentage amount: chore services, child protective services, and foster care staff services. In addition, the department proposed to transfer funds to cover potential deficits in the state's mental hospitals. This approach is reflected in the following list of changes: * a technical adjustment reflecting lower than expected caseloads in income and medical assistance programs; * elimination of some regulatory activities and reduction of administrative and support costs; and * collection of fees for a variety of services and client/parent participation in the cost of services. Legislature's Role in Carrying Out DSHS Expenditure Reduction Plan It is only after considering all of the aforementioned savings plans, that the Department of Social and Health Services will have to consider further reducing client services. The department could implement some of the planned expenditure reductions with the authority it currently possesses, however, many require changes in the Washington Administrative Code. Implementation of other options depends upon the department's obtaining waivers from federal regulatons. A number of the most important changes depend upon action by the Legislature. Legislative support for specific proposals in the expenditure reduction plan is essential if the department is to achieve expected savings. If necessary legislation is not passed to increase fees, facilitate additional collections, or transfer funds, the department will be forced to cut back further on direct services to clients. For further information contact: Judy Merchant Special Assistant Office of the Secretary Department of Social and Health Services Olympia, Washington 98504 206/754-1138 114 PAGENO="0413" 409 WEST VIRGINIA PRIMARY CARE BLOCK GRANT PLANNING First State Planning to Sign Primary Care Block Grant Cooperative Agreement West Virginia is planning to assume the Primary Care Block Grant (PCBG) when it is available in October 1982, in spite of the stringent federal requirements associated with this block. In October 1981, West Virginia became the first state to sign a cooperative agreement with the Bureau of Community Health Services (BCHS), Department of Health and Human Services to work together during this, the transition year, to provide a smooth transition to state control. Under this agreement, BCHS will continue its statutory responsibility to administer the Community Health Center (CHC) program throughout FY 1982, but decisions concerning the operation of the CHC program in West Virginia will be made with the "active advice, consultation and understanding" of the West Virginia Department of Health. The state will participate in resource allocation, grant reviews, monitoring and technical assistance. Under that agreement, two federal regional office assignees currently are working with the health department and they will act as project officers for the state's twenty-nine community health center grantees. The state recently has completed the first round of joint federal/state reviews of community health center applications held at the state capitol. This activity will enhance greatly the state's ability to administer programs under this block grant in the coming year. Staffing the Planning Process West Virginia has assigned one full-time person, Director of Primary Care, to work on the transition to the state's assumption of the PCBG. The project also requires 1.5 FTE secretaries and portions of the time of the Director and Assistant Director of the Office of Community Health Services. These resources, in addition to the federal assignees mentioned above, provide adequate staffing to shepherd the development of policies and programs associated with this block. Planning Partnership with State Health Department Another important aspect of this activity has been the establishment of a formal State Health Department/Primary Care Liaison Committee under a Memorandum of Understanding with the West Virginia Primary Care Study Group (the interest group representing the interests of non-profit primary care providers in the state). To the maximum extent possible, the liaison committee is to be involved in the health department's development of policy as it relates to primary care. By working openly in this planning and policy development process, the state hopes to relieve some of the anxiety brought about by~ the rapid changes in health care funding, and to ensure the valuable input from those actually working in the field into the development of plans and policies. 115 PAGENO="0414" 410 Benefits of Accepting the Primary Care Block Grant Perhaps the most important question to be addressed by West Virginia has been "Why accept the Primary Care Block Grant at all?" In spite of the many disincentives in this block, including matching funds requirement, the continuation of federal regulations, and the requirement to continue to fund existing centers at current levels, the state believes that the citizens of West Virginia will be better served by a community health center program administered out of the state capitol rather than from a distant federal regional office. The state will be better able to effect integration with categorical programs which it now controls and, if the experience of community mental health centers is any indication, funding by the state legislature for primary care should be a stabilizing factor for programs around the state. Community health centers are an important state resource and if federal stewardship of these programs is on the decline, it becomes the state's responsibility_-a responsibility West Virginia readily accepts. For further information contact: L. Clark Hansbarger, M. D. Director of Health 1800 Washington Street East Charleston, West Virginia 25305 304/348-0025 WISCONSIN COMMUNITY DEVELOPMENT BLOCK GRANT SMALL CITIES PROGRAM Goals As a part of a demonstration project sponsored by the U. S. Department of Housing and Urban Development (HUD), Wisconsin was selected last year to administer the Small Cities preapplication process. In its proposal to HUD, the state established the following program goals: * to encourage communities to participate in the entire array of eligible CDBG activities, particularly economic development; * to develop a comprehensive set of need indicators based on both federal and state data; * to assess the capacity of the applicant to undertake CDBG activities prior to award of the grant; * to promote coordination of CDBG with other federal and state housing and community development programs; and * to encourage use of CDBG money as timely execution of CDBG programs through better technical assistance and administration. These goals were embodied in a rating and ranking system designed to match federal resources with state objectives and local needs. 116 PAGENO="0415" 411 How Needed Changes Were Accomplished When notified of Wisconsin's selection, the Governor designated the State Department of Development (DOD) as the responsible agency. An advisory committee was assigned to work with the DOD and included representatives from the HUD area office, the League of Municipalities, the Wisconsin County Boards Association, the Wisconsin Towns Association, and the Wisconsin Council of Regional Planning Organizations. DOD sent copies of the proposed program to over one hundred local governments for review and comment. These suggestions were considered and, when appropriate, were incorporated in the final drafts of Guidelines and Instructions. To acquaint local officials and staff with the program, training sessions were held in four geographic areas of the state. Revised Indicators of Community Need Prior to its 1980 revision of the Small Cities selection criteria, HUD relied solely upon substandard housing and poverty persons as indicators of community need. Wisconsin replaced this system with six indicators designed to give a more comprehensive picture of distress: two fiscal-full value per capita (1979) and net mill rate (1979); three economic-per capita income (1977), percentage of persons in poverty (1979), and average unemployment rate (1978-1980); one housing-percentage of households in need of housing assistance (1979). The Department of Development, in cooperation with the Department of Revenue, compiled the data for each unit of government. An applicant's score on each indicator depended upon its "need" in relation to all other potential applicants. Each community was assigned a value for each of the six indicators. The communities then were ranked in order of need and assigned a score. Each community's total score was a result of the scoring procedure being applied to each indicator. No calculations were required by the applicant. The score for a given community was available upon request. Applicants also were scored on the impact of the proposed program. Proposals were submitted in the areas of economic conditions, housing and related conditions, and serious deficiencies in public facilities. On comprehensive applications, the points for each area were added and divided by the number of problem areas. Within each program area, there were several components, and within each component, several point scores available. For example, a community received maximum points for its economic development strategy if it documented significant needs and the proposed activities directly addressed those needs. If needs and activities were not strongly linked, the application received fewer points. Although certain components were peculiar to individual program areas, common components of all program areas were: strategy (the extent to which proposed program met the need); cost as compared with other applications; benefits to low- and moderate-income persons (LMI); and concentrated effort (extent to which proposed program combined with other activities to meet community needs). 117 PAGENO="0416" 412 It was the state's belief that communities should receive some credit for their capacity to plan and implement programs. For this reason, points were awarded to applicants who demonstrated successful community development activities. Procedures for Processing Preapplications In 1981, the procedures for processing preapplications were established with the assistance of the HUD area office. Once preapplications were ranked, DOD made recommendations to the area office on funding and submission of full applications. For FY l982,~ the point amounts for various criteria have been changed somewhat, based upon a review of last year's program and upon further consultation with local officials. Because the state will administer other aspects of the program, statewide administrative rules have been formulated and are being published. One goal of the program remains the same, however, to provide the optimal blend of state development objectives and local discretion. For further information contact: Paul J. Swain Legal Counsel and Assistant to the Governor for Policy State Capitol, 115-East Madison, Wisconsin 53702 608/266-1212 WYOMING BROKERING OF PEER ASSISTANCE AMONG LOCAL EDUCATIONAL AGENCIES Since 1980, the Wyoming Department of Education examined its service delivery system seeking more comprehensive use of department resources and better ways to provide systematic contact with school districts. It was determined that all department activities should focus on services that strengthened instruction and that these services should reflect department priorities, statutory program and fiscal responsibilities, and the districts' needs. Federal funding cutbacks affecting eighteen state educational agency positions provided the final impetus to adopt a new concept in 1981. Although agency staff continued to offer "expertise" and consultation in the curricular areas, they were reassigned a primary role as brokers to the districts. They visited designated districts regularly and offered assistance in identifying needs, arranging workshops, and evaluating programs. They asked district staff to assist the department in designing regulations and assessing department effectiveness. 118 PAGENO="0417" 413 District superintendents were appointed to work with the brokers and were given the opportunity to periodically evaluate services and resources available to local districts. The first two primary tasks for brokers were: to assist districts in determining and fulfilling recertification needs and to request local agency assistance in formulating state-level Title I regulations. Other tasks and priorities have been determined as brokers and district staff have worked together in the newly structured system. For further information contact: Audrey Cotherman Deputy State Superintendent Wyoming Department of Education Hathaway Building Cheyenne, Wyoming 82002 307/777-7673 99-965 0 - 82 - 27 PAGENO="0418" 414 APPENDIX A BLOCK GRANT CONTACTS DESIGNATED BY GOVERNORS Bob A. Davis State Administrations Officer State Capitol Montgomery, Alabama 36130 205/834-3572 Carol Burger Special Assistant to the Governor Pouch A Juneau, Alaska 99811 907/465-3500 Andrew D. Hurwitz Chief of Staff Office of the Governor 1700 West Washington, 9th Floor Phoenix, Arizona 85007 602/255-4331 Linda Garner Legislative Aide Office of the Governor State Capitol, Room 250 Little Rock, Arkansas 72201 501/371-2345 or 370-5712 Roger Carrick Deputy Progra~ns and Policy Assistant Office of the Governor State Capitol Sacraisento, California 95814 916/445-2841 Lee White Executive Director Office of State Planning and Budgeting State Capitol, Room 102 Denver, Colorado 80203 303/~866-3317 Stephen B. Heintz Under Secretary Comprehensive Planning Division Office of Policy and Management 80 Washington Street Hartford, Connecticut 06115 203/566-4298 Jorene Jameson Executive Assistant for Operations Office of the Governor 820 North French Street Wilmington, Delaware 19801 302/57 1-32 10 John T. Herndon Director Office of Planning and Budgeting Office of the Governor State Capitol Tallahassee, Florida 32301 904/488-7810 Jack Burns Director, Office of Intergovernmental Relations State Capitol, Room 106 Atlanta, Georgia 30334 404/656-3804 Carl Takamura Special Assistant to the Governor State Capitol Honolulu, Hawaii 96813 808/548-2335 Lawrence C. Seale Administrator Division of Financial Management Office of the Governor State Capitol, Room 122 Boise, Idaho 83720 208/334-3900 123 PAGENO="0419" Tom Berkshire Assistant to the Governor for Policy Analysis State Capitol Springfield, Illinois 62706 217/782-8639 John Hammond * Executive Assistant Office of the Governor State Capitol Indianapolis, Indiana 46204 317/232-4583 Doug Gross * Administrative Assistant to the Governor State Capitol Des Moines, Iowa 50310 * 515/281-5211 Harley Duncan Chief Policy Analyst Division of the Budget Department of Administration State Capitol, Room 152-E Topeka, Kansas 66612 913/296-2436 Rush Dozier Assistant to the Governor State Capitol Frankfort, Kentucky 40601 502/564-2611 Dennis Daugherty Director, Federal Relations Office of the Governor State Capitol Baton Rouge, Louisiana 70804 504/342-2791 Kirk Studstrup Administrative Assistant Office of the Governor State House - Augusta, Maine 04330 207/289-3531 415 Ejner Johnson Staff Director Office of the Governor State House Annapolis, Maryland 21404 301/269-3004 Lucy Flynn Director, Office of Federal-State Relations Commonwealth of Massachusetts 444 North Capitol Street, Suite 307 Washington, D. C. 20001 202/638-1065 Jan Bocskay Special Assistant to the Governor Program Unit, Room 1 State Capitol Lansing, Michigan 48909 517/373-3427 Vic Vikmanis Director of Policy Research Office of the Governor State Capitol, Room 130 St. Paul, Minnesota 55155 612/296-3838 Dick Molpus Coordinator, Office of Federal-State Programs 2000 Walter Sillers Building Jackson, Mississippi 39202 601/354-7575 Janice Gentile Deputy Executive Assistant Office of the Governor State Capitol Jefferson City, Missouri 65101 314/ 751-3222 David M. Lewis Director, Office of Budget and Program Planning State Capitol Helena, Montana 59601 406/449-5616 124 PAGENO="0420" 416 Ed Schulenberg Administrator of Block Planning and Human Services Coordinator Office of the Governor State Capitol, Room 1326 Lincoln, Nebraska 68509 402/471-2091 Howard E. Barrett Director Department of Administration 209 East Musser, Room 205 Carson City, Nevada 89710 702/885-4065 Tama Hamilton Director, Citizens Services Office of the Governor State House Concord, New Hampshire 03301 603/271-2121 Steven A. Clark Policy and Planning Specialist Governor's Office of Policy and Planning State House Trenton, New Jersey 08625 609/984-6877 Bill Giron Administrative Aide Office of the Governor State Capitol Santa Fe, New Mexico 87503 505/827-2221 Roger Vaughn Deputy Director Governor's Office of Development and Planning A. E. Smith Building, 17th Floor Albany, New York 12225 518/474-3152 Paul Essex Special Assistant to the Governor for Intergovernmental Relations 116 West Jones Street Raleigh, North Carolina 27611 919/733-4131 Ted Parrish Policy Advisor to the Governor 116 West Jones Street Raleigh, North Carolina 27611 919/733-4131 Ronald J. Bostick Assistant Federal Aid Coordinator Office of the Governor State Capitol, 17th Floor Bismarck, North Dakota 58505 701/224-2095 Edward J. Thomas Deputy Assistant to the Governor State House Columbus, Ohio 43215 614/466-8706 Cindy Rambo Director Department of Economic and Community Affairs 4545 North Lincoln, Suite 285 Oklahoma City, Oklahoma 73105 405/528-8200 Bob Montgomery Administrator, Intergovernmental Relations Division Office of the Governor 155 Cottage Northeast Salem, Oregon 97310 503/378-3732 Charles J. Lieberth Executive Director Governor's Human Resources Committee of the Cabinet Harristown II, 9th Floor 333 Market Street Harrisburg, Pennsylvania 17120 717/787-6835 Alvin N. Johnson Federal Coordinator Office of the Governor State House Providence, Rhode Island 02903 401/277-2214 125 PAGENO="0421" 417 William A. Prince Special Assistant to the Governor for Policy Development State House Columbia, South Carolina 29211 803/758-3208 Ben Orsbon Deputy Commissioner State Planning Bureau State Capitol Pierre, South Dakota 57501 605/ 773-3661 Stephen H. Norris Director State Planning Office 1800 James K. Polk Building 505 Deaderick Street Nashville, Tennessee 37219 615/ 741-1676 Paul Wrotenbery Director Office of Budget and Planning P. 0. Box 13561, Capitol Station Austin, Texas 78753 512/475-6156 Emily Charles Administrative Assistant for Constituent Affairs State Capitol, Room 210 Salt Lake City, Utah 84114 801/533-5231 John Sinison Director State Planning Office Pavilion Office Building 109 State Street Montpelier, Vermont 05602 802/828-3326 Timothy J. Sullivan Executive Assistant for Policy and Planning Office of the Governor State Capitol Richmond, Virginia 23219 804/786-2211 Fred Helberg Assistant Director Program Development Division Office of Financial Management House Office Building, Room 109 Olympia, Washington 98504 206/753-5297 Larry Beckett Assistant Commissioner for Planning and Special Projects Governor's Planning Reform Project State Capitol, Room W-14O Charleston, West Virginia 25305 304/348-2400 Paul J. Swain Legal Counsel and Assistant to the Governor for Policy State Capitol, 115-East Madison, Wisconsin 53702 608/266-1212 W. Don Nelson Administrative Assistant Office of the Governor State Capitol Cheyenne, Wyoming 82002 307/777-7930 126 PAGENO="0422" 418 APPENDIX B ORGANIZATIONS CONDUCTING BLOCK GRANT SURVEYS OR STUDIES ADVISORY COMMISSSION ON INTERGOVERNMENTAL RELATIONS (AcIR) Contact: Jean Lawson 1111 20th Street N.W. Washington, D. C. 20575 202/653-5536 AMERICAN ASSOCIATION OF SCHOOL ADMINISTRATORS (AASA) Contact: Joseph Scherer 1801 North Moore Street Arlington, Virginia 22009 703/528-0700 AMERICAN PUBLIC WELFARE ASSOCIATION (APwA) Contact: Dr. Toshio Tatara 1125 Fifteenth Street N.W. Washington, D. C. 20005 202/293-7550 FLORIDA ADVISORY COUNCIL ON INTERGOVERNMENTAL RElATIONS (FLORIDA ACIR) Contact: Robert Bradley Suite 400 Lewis State Bank Building Tallahassee, Florida 32304 904/488-9627~ As part of an existing monitoring process, a survey of four "study" states was conducted and the results were published in an ACIR Information Bulletin on block grants in September 1981. ACIR plans to re-examine these four states, as well as conduct a similar survey on the local level in April or May 1982. A telephone survey focusing on education block grants was conducted of each state to obtain the following information: date of implementation; schedule of public meetings; applica- tion forms for local districts; status of Governor's Advisory Council; and whether any transfers were made to ESEA from other blocks. Implementation issues related to the Social Services Block Grant (SSBG) were examined in a mail survey of states and included the following: planning, MIS, auditing, purchase of services, public participation, staff training, service delivery methods, outcome evaluations, and state legislation. A mail survey on block grants (except ESEA) was sent to local elected officials; the survey centered on local input to block grants, impact on local budgets and questions specific to each block grant. A more detailed survey on the sane subject was conducted of local administrators. 129 PAGENO="0423" 419 FORD FOUNDATION Contact: Frank Logue 173 Livingston Street New Haven, Connecticut 06511 203/776-2282 INTERGOVERNMENTAL HEALTH POLICY PROJECT (IHPP) Contact: Peggy O'Kane Suite 505 1919 Pennsylvania Avenue N.W. Washington, D. C. 20006 202/872-1445 NATIONAL ASSOCIATION OF STATE BUDGET OFFICERS (NASB0) Contact: Jim Mallory Suite 328 400 North Capitol Street Washington, D. C. 20001 202/624-5322 NATIONAL ASSOCIATION OF STATE LEGISLATURES (NcSL) Contact: Karen Benker Suite 1500 1.125 17th Street Denver, Colorado 80202 303/623-6600 OFFICE OF MANAGEMENT AND BUDGET COMB) Contact: Frank Lewis New Executive Office Building, Room 5236 Washington, D. C. 20503 A survey of nine states was conducted to assess the capacity of states to carry out block grant implementation. It addressed such issues as govern- mental structure, state revenue capa- cities, planning, and accomplishments to date. A telephone survey of all but two states was conducted to examine health block grants. The predominant focus was on state executive/legislative relationships, lost federal funds, method for state-level cuts, and implementation plans. A mail survey of states was conducted to determine the impact of federal funding and to what extent federal funds would be supplemented with state funds, whether state funding reduc- tions would parallel federal. reduc- tions, and what changes in programs have taken place as a result of block grants in seven major categories. A mail survey and telephone follow-up was conducted of all state legislative fiscal staff to examine how many legis- latures were appropriating federal funds under the nine block grants, and if there was an emerging pattern of more legislative appropriations than in the past. The 0MB Task Force on Regulatory Reform continues to examine policy and policy coordination for opportunities to fur- ther reduce unnecessary regulations. Field work on block grant implementa- tion activities is being considered. 130 PAGENO="0424" 420 U * S. GOVERNMENT ACCOIJNTING OFFICE Contact: Gener Dodaro GAO Building, Room 3350 441 `G' Street N.W. Washington, D. C. 20548 202/275-6169 UNITED WAY OF AMERICA Contact: Pat Barrett 801 North Fairfax Street Alexandria, Virginia 22314 703/836-7100 URBAN INSTITUTE Contact: Gene Durman 2100 `N' Street N.W. Washington, D. C. 20037 202/223-1950 1~)ODROW WILSON SCHOOL OF PUBLIC AND INTERNATIONAL AFFAIRS, Princeton University Contact: Richard Nathan Princeton University Princeton, New Jersey 08450 609/452-4866 A field study of thirteen states to examine transition to the nine block grants was conducted and focused on federal management of the transition, state legislative involvement, role of the Governor's Office, and changes in mode of operation. The purpose of the studywas to assist Congress in deter- mining what modifications to existing blocks are needed and in considering future blocks. A telephone survey of individuals and organizations representing the United Way was conducted to gather data on advisory councils, the role of state legislatures in block grant implemen- tation, targeting of cuts, and changes in eligibility, and to stimulate ideas on block grants in general. A site-visit study was done in eleven states to examine block grants as part of a larger study of federal grants-in- aid programs. The study focused on state! local governmental relation- ships, changes in levels of expendi- ture, and programmatic adjustments. A field research study will be conducted in selected geographic areas of the United States to examine the impact of block grants and changes in federal domestic programs. 131 PAGENO="0425" `~421 STATE CDBG PROGRAM BRIEFS A Series of Summaries on the Individual State Community Development Block Grant Programs Council of S tate C omm tan ty A ff airs A genci n Hall of the States 444 North C apitol S treet, Suite 251 W~lñngton, D.C. 20001 May 1982 Volume I PAGENO="0426" 422 ACKNOWLEDGEMENTS CCSCAA acknowledges and thanks the 15 state community development coorthnators who provided information to this first volume in a series of iixlividual state CDBG program summaries. In most cases, they were asked to organize and forward massive amounts of information in a short period of time. They also had the monumental patience to answer numerous inquiries and review the drafts to ensure their accuracy. The Council of State Community Affairs A gencies (COSCAA) is the national organization representing state executive level agencies responsible for a variety of local assistance functions in financial management, community devel opm ant, economic development, housing, hum an resources, planning, training, and management capacity building. Additional copies of Volume I of this series is available from COSC4A at a cost of $25.00. PAGENO="0427" 423 STATE CDBGPROGRAM 3R~FS Preface In August of 1981, Congress enacted major revisions in the Housing and Community Development Act of 1974 which provided states with the option of administering the HTJD Small Cities Community Development Block Grant Program. Since last August, a number of states have been debating whether to take the program in FY 82 or in later years. This decision-making process has included numerous meetings between state and local officials, the establishment of state-local technical and policy advisory committees, and the development of many different program designs and selection procedures. During the past few months, COS CAA has been closely monitoring the State Community Development Block Grant Program and providing technical assistance and information to states preparing to implement the program in FY 82. As of March 8, 1981, the effective date of the State CDBG Program regulations, approximately 32-35 states have decided to administer the program in F Y 82, with the balance of the states coming into the program in FY 83. Of the 32-3 5 states entering the program this fiscal year, approximately 20 states have designed their programs and are prepared to accept applications for the program. In an effort to evaluate and understand the thrust of the new program, COSCAA has prepared a series of brief program summaries of the new individual state CDBG programs. These summaries will be used to assist other states as they prepare to gear up for the program and provide CC~ CAA with an opportunity to examine the State CDBG Program from the national perspective. The data for the sum m arias came from the pro gram design documents which states have prepared in conjunction with their local officials. Each state program summary, is divided into four~ areas: (1) Program Preparation, (2) Program Design, (3) Selection Criteria aixl (4) Other Provisions. COSCAA has included the following fifteen states in this first volume: Alabama, Arizona, Georgia, Idaho, Illinois, Kentucky, Maine, Massachusetts, Nebraska, North Daketa, Ohio, South Carolina, West Virginia, and Wyoming. Additional state briefs will be available as states com~iete their program designs and can be subsequently added to this volume. PAGENO="0428" 424 ALABAMA ADMINISTERiNG AC~NCY: Office ofState Planning and Federal Programs STATE CDBG ALLOCATION: $31,727,000 PREVIOt5 MULTI-YEAR COMMITMENTS: $12,757,000 Program Prepsxatiaz The State of Alabama established a Technical Advisory Committee and a Policy Committee composed of local CD practitioners and representatives local interest groups. The state also sponsored a series of regional workshops to familiarize elected and other local officials with the design of the new program. Approximately 550 local officials attended these four regional meetin~. Program Desigi The Alabama Community Development BlockGrantProgram diff era significantly from the HUD-administered program. The state will administer a competitive program with six separate funding categories and will have overall goals which are similar to the HUD administered program. The three primary goals of the program are listed below: o Provide essential community facilities such as water aisi sewer through correction of deficiencies which affect health and safety. o Promote economic development to create new johe, retain existing emil oyment and expand local tax baa e o Provide decent housing, especially to families of low aixi moderate incomes, by improving the condition of the existing housing stock. In accordance with these goals, Alabama designed its pro gram with a ntnn her of obj ectives in mind. First, funds will In awarded on a competitive basis to a larger number of applicants by lowering the grant ceiling and eliminating multi-year commitments. Second, the seection of more economic development proj ects should be facilitated by setting aside a certain portion of CDBG funds and distributing them on a quarterly basis. Finally, the new system should allow for a more equitable competition byletting small cities, large cities, and counties compete in their respective groups. Alabama will distrib.ite its CD funds through six separate funding categories: Except for the Economic Development Fund, the Planning Fund, and the Discretionary Fund, which may be applied for by all ron-entitlement governments, funds will he divided into three allotments - one for counties, one for large cities, and one for small cities. Any community competing for the E conomic D evelopn ant and/or the Planning Fund will not be exduded from competing for applicable Counties, Large Cities, or Small Cities fund. Listed below is a brief summary of each fund: State D iscretionaryFuni. Approximately 10 percent of the state funds will be available to address dismters, imminent threats, and urgent needs to areas in the State with identifiable needs which have not received an equitable share of funds, and to react quickly to opportunities where an exceptional economic development project may be lost if money is not PAGENO="0429" 425 available to provide necessary public facilities. Economic Development Fund. The state will set-aside approximately $2, 500, 000 million to fund activities necessary for economic develo pinent proj ects. Eligible j urisdi ctions are invited to submit applications continually. Awards will be made on a cparterly basis. To enswe maximum flexibility, applications may be submitted at any time up to three weeks prior to the date of the award. The maximum g?ant amount will be $150,000; however, the state may waive the limit if the applicant has exhausted all other resoi.n~ces. In order to q~a1ify fcr such funds, the applicant mtet meet the following threshold re quirem ents o The proposal mtat be associated with an economic development proj act creating and/or retaining permanent jots. o The state CD dollars mtst leverage private investment. o The project must not involve intrastate relocation of an industry. o Applicants mtEt have a firm private commitment and funds m~t be used fcr capital investment. Selaction Criteria fc~ the Economic Development Fund. The following criteria will be used to competitively rate the proj ects o CDB G Dollars per permanent job 12.5% o Leveraging ratio (CDBG dollars vs all other 12.5% dollars) o Proj acted increase in local revenues 12.5% o Number of permanent jots created/retained 12.5% o Distress factors 33% a. unem~ioyment (annual average for the past two years) b. % of low-moderate income persons (based on 80%of State median income) o Other factors 17% a. Timetable b. Potentialforspin-off c. ~IzxIirect benefits d. Job diversification e. Urgency Planning Fund. Approximately $150,000 will be available to assist communities having a need fcr community planning. The maximum grant has been set at $7,500 with the applicant matching the grant on a dollar for dollar basis through non-CDBG funds or in-kiixl contributions. The following considerations will be taken into account in the rating process: size of the community, amount of fund re qiested, type and ur gency of planning activity proposed, applicant~s previous planning efforts and their adherence to previous plans, and qualifications of personnel preparing the proposed activity. PAGENO="0430" 426 County Fund. A set aside of $2,158,031 will be available on a competitive basis for non- entitlement counties in the state. Large Cities Fund. A reservation of approximately $5,268,134 will be allocated to cities of 5,000 or more population. These funds will be awarded on a competitive basis. Small Cities Fund. Approximately $5,268,134 will be reserved for cities under 5,000 in popilation. Eligible applicants under 5,000 will compete for CD dollars in this fund. Types of Grants. Two types of wants are available under the County, Large Cities, and Small Cities Funde (1) Singie Ptrpose Grants and (2) Comprehensive Grants. In both categories, localities are eligible to apply for funds in the areas of housing and community facilities. Single Purpose Grants. Designed for communities to address to specific community development needs (e.g., housing, deficiencies in public facilities). The grant ceilings for single purpose grants are listed below: Counties LargeCities Small Cities $350,000 $350,000 $300,000 Comprehensive Grants. Designed for recipients to address a substantial portion of the identified community development needs of an area. A comprehensive grant should involve two or more activites related to each other that will be carried out in a coordinated manner. The grant ceilings or comprehensive grants are listed below. Counties Large Cities Small Cities $500,000 $750,000 $500,000 Selecticri Citeria All applicants will compete for funds in their respective categories. Under each of these categories, single purpose applications proposing a housing activity will be rated against other single purpose housing applications, single purpose applications proposing a public facility will be rated against other single purpose public facility applications, and comprehensive pro gram applications will be rated against other comprehensive pro gram applications. Those applicants with relatively high scores will c~ialify for a site visit which will be made to verify information provided in the applications. PAGENO="0431" 427 Listed below is an overview of the selection a-i ten a. Singe Comprehensive Pu pose o NEED FACTORS SOpts.(27%) Sopts.(17%) - Absolute #of low- and moderate-income persons 40 25 - Percent of low- and moderate-income persons 40 25 o PROGRAM VALUE FACTORS 170 pts.(57%) 200 pts.(67%) - ratio of dollars to beneficiaries 50 60 - nature of benefits 100 120 - edditional efforts necessary to complete proposed activity 10 10 - prior commitments or efforts taken by applicants to address same activity 10 10 o OTHER PROGRAM FACTORS 50 pts.(l7%) 50 pts.(17%) - leveraging 20 20 - localmatch 20 20 - equal opportunityin local government employment 10 10 TOTAL POINTS 300 300 Other Provisic~is Preapplications. The state program eliminates preapplication requirements. Instead, the state will ask for a letter of intent from communitias desiring to compete for the state CDBG funds. Housing Assistance Plans. Housing assistance plans will not be required under the states CDBG pro gram. Only those applicants who propose housing activities will provide verifi abi e housing data on a standard housing form. Citizen Participation Plans. Citizen participation jians will not be required. Instead, the state program will require a certification that the applicant recognizes the responsibility for dealing with local public opinion concerning the merits of the proposed proj ect, and that if public input is not solicited in proj ect sal ecti on and design, local officials should answer all citizen questions arising concerning the project salection and design. Use of Substate Districts. During the design process, representatives of substate districts were inciuded on the Technical Committee. The substate districts will also play a m~or role in the proyision of technical assistance to localities applying for the funds in the State CD Program. The state will be sub-contracting with the substate districts to provide technical assistance under the 107 program. PAGENO="0432" 428 Estimate of A dministrative Costs and S taffing N eeds. The state intends to appro~ ate $450,000 to cover the administrative cost of the program. The state ~1ans to use a staff of between 10 and lZto run the program. STATE PROGRAM CONTACT: Bill Matthews Office of State Planning and Federal Programs 3734 Atlanta Highway Montgomery, AL 36130 205 /832 -6400 PAGENO="0433" 429 ARIZONA ADMINISTERING AGENCY: Office of Economic Planning and Development STATE CDBGALLOCATION: $5,998,000 PREVIOUS MUIJfl-YEAR COMMIT MENTS: $2,400, 000 Pro~am Pze~rafian Under the Arizona plan, regional councils will play a m~or ne in the selection and distrilxition of community development funds in the state. The Office of E cnnomic Planning and Development will be responsihie for preparing the grant selection process, implementing and ensthng grantee compliance with all applicable federal program requirements, and monitoring grantee pro gram and financial performance. Program Desi~i A m~or objective of the Arizona CDBG Program is to promote a strong local government role in the grant selection process through the representation of its elected officials on the statds regional councils. In an effort to attain this goal, the regional councils will play an integral role in the selection of the state's CD proj ects. Under the Arizona system, CD funds will be distributed using two methods (1) Regional Funding Allocation and (2) the S tate Special Proj ects Account. Regional Funding Allocation Under Arizona!s Regional Funding Approach, approximately 90 percent of the state community development funds will be allocated by region on a formula basis. Each regional council will review applications and recommend new grant reciplents and their corresponding funding levels to the state for review and approval. Under this system, each of the five non-entitlement regional councils will in provided an account of CDBG funds, from which both multi-year and new grants will be drawn. This allotment is based on a formula which includes both population and poverty indicators. Regional council recommendations mtst be based on a state-approved regional funding strategy. State approval of regional funding strategies will be based on the fullowing guidelines: (1) The regional strategy includes a provision that preferential treatment is provided eligible applicants submitting'leveraged' grant~ and (2) That the regional strategy includes a provision that preferential treatment be provided "leveraged' grants in a manner commensurate with the degree of `leveraging' incorporated within the grant application. A leveraged grant is any grant application which contains a firm public and/or private commitment. Each regional council will determine any and all eligible costs and activities which com prise from public and/or private commitm ents. 99-965 0 - 82 - 28 PAGENO="0434" 430 Under the Regional Funding Approach, the following categories are eligible fcr funding o Acc~iisition or D~pDsition of Real Property o Public Facilities andlmprovements o Rehabilitation and Preservation o EconomicDevelopment Regional Planning C ests. Each regional council can sprnd up to ~30, 000 from their regional account to fund eligible CDBG comprehensive planning activities to be undertakan by the COG. Note that these funds oust be drawn from each region~s set- aside and inserted in grantees funded with the consent of the Regional Council and grant reciplent (locality). Grant Amounts. Under the Arizona plan, the state will not acce~ any multi-year funding commitments in FY 82. For FY 82, the state encoorages a maximum grant level of $400,000 and a minimum grant level of $100,000. State Special Projects Account The state will set-aside approximately 10% of its- funds to a Special Projects Account in which eligible applicants can compete for funding directly from the state. The Executive Director of OEPAD will make all want selection decisions based on recommendations from the State Economic Planning andDevelopment Board. The Board will make recommendations baa ed on a set of selection cri ten a which emphasizes "leveragecf' economic development grant activities. The state will not fund more than one CD grant per eligible applicant in one year, therefore, a locality receiving a grant from the Regional Funding Approach is not eligible to receive a grant under the state Special Projects Account. Under the Arizona plan, the state has established certaln threshold criteria or minim urn levels which each grant reciplent from the State or Regional Account must meet bef ore they are funded. These thres hold re qiirements are crucial to the An anna program since they establish minimum levels associated with all grants. The minim urn threshold criteria fall into the following categori es, with the state staff determining compliance: Grant Administration and Financial Reqtirements. To ensore compliance all want activities, projects, and costs must be eligible given federal and state guidelines. All g~ant costs should be realistic given the natire and type of grant activity. The state will not fund grants with inherent cost overrun problems. Finally, all applicants oust have the capacity to complete their programs. Communities are assumed to have such a capacity until evidence to the contrary becomes apparent via monitoring visits. Federal Compliance R eqiirement. All applicants mist comply with the applicable federal rules and regulations at the time of application. Congressional Intent Recpirements. Each activity in every grant mist meet at least one of the three congressional ol~ectives. PAGENO="0435" 431 Sdecticzi Cstteria The State Economic Planning and Development Board will examine each application on a case-by-case basis and utilize the following selection cri ten a: o Employment Impact. This variable will be measured by the net increase in employment opportunities generated by the grant for residents within the target areas. o Physical Impact. This factor will be measured by such factors as the improvement in the applican~s housing stock, public facilities, or commercial and industrial facilities, and the extent to which other public or private facilities and services exist or will be provided to support the prqject. o Degree of Grant L everaging. This factor will be measured based on the degree to which the applicant has incorporated firm public and/or private commitments within the grant application. The OEPAD Executive Director will make the selection of applicants to be funded from the Special Projects A ccount prior to the transmittal of formal Regional Council recommendations to the state concerning applicants to be funded from regional accounts. Other Provisicns Definition of Low-Moderate Income Citizens. Eighty percent of median family income (concurrent with the HTJD Section 8 guidelines). C iti ann Parti cipati on R eqiirements. The state encourages the applicant to hold a publi c meeting on the proposal. They also recommend that the applicant publicize the meeting of its geverning body when it approves a resolution to apply for CDB G funds. Housing Assistance Plans. HAPs are not requirel, but detailed documentation of compliance with the state's low and moderate income re qzirement is mandated. Estimate of Administrative Cost and Staffing Needs. Arizona expects to use the maximum amount of funds available to administer the program. The state will staff the program with one coordinator, three professional monitors, and one accountant clerk. Indirect activities will be undertaken by the existing administrative division. Ii~Behalf-of Applications. Such applications are not allowed in the Aii anna program given the simplification of the grant application process, the regional funding approach, and the ability of localities to subcontract grant administration out. STATE CONTA cr PEPSON: Rich Crystal Governor'sOffice of Economic Planning andDevelopment 1700 W.Washingtcxi, #505 Phoenix, AZ 85007 602/255-4920 PAGENO="0436" 432 C~ ORGIA ADMINISTERING AGENCY: Department of Community Affairs STATE CDBG ALLOCATION: $36,376,000 PREVIOUS MULTI-YEAR COMMITMENTS: $15,886,348 Pro~am Preparatias Since the legislation was passed last summer, the Department of Community Affairs has teen preparing for the imilementation of the block grant. In order to solicit local input, the Governor established two committees to examine the program: the Community Development Block Grant Policy Advisory Committee and the Community Development Block Grant Planning Committee. The state has also sponsored a series of regional meetin~ to explain the new system. Pro~am D~i~i Program Focus. The G eor gi a CD Pro gram will address four major areas of concertu (1) Housing, (2~ flsblic Facilities, (3) Economic Development, and (~ Community! Neighborhood Revitalization. All four areas are considered of equal weight. Localities applying for the grants will have the option of establishing their own priorities. The program competition will be divided into two separate components: (1) Single-Activity and (2) Multi-Activity. (1) Single-Activity Grants are designed to allow communities to address a specific comm unity development problem within one of the following three areas: housing, economic development, or psblic facilities. (2) Multi-Activity Grants are designed to address two or more needs. This also includes activities in the `Comm unit y/N eighborhood Revitalization" category. Grant Amounts. Georgia has established the following manimum grant amounts: Single Activity Multi-Activity Multi-Activity Program Program (lyr.) Program (Zyrs.) (minimum of 20% (minimum of 20% $1,400,000 will be reserved) will be reserved) (up to 50% can be used) $400,000 $700,000 $1,400,000 Please note that no new two year grants will be made inFY 82. Selecticzi Cñteria Georgia's selection system is based upon two overriding directives: (1) the promotion of broader participation, and (2~ the distribition of funds to applicants with the greatest need, greatest benefit to low- and moderate-income persons, and greatest project PAGENO="0437" 433 impact. Applicants will have the choice of submitting either a single or multi-activity project for consideration. The two categories will be judged separately, but based upon the same hasic rating system. The criteria and their relative impDrtance are: PovertyConditions 20% Benefit to Low- and M oderate-Iixome Persons 25% Projectlmpact 55% Single A ctivi ty Program Appli ca on Rating System a. PovertyConditions Oto 120 Pcints (1) TotalNumber ofPoverty Persons Oto 40 (2~ Percent of Popilation inPoverty 0 to 40 (3) Per Capitalncome 0 to 40 b. Benefit to L ow- and M oderate-Income Persons 0 to 150 Points (1) Housing Applications Oto 150 51 Percent Minimum Benefit Reqtired 75 Percent Benefit Receives Ma ,dm um P oints (2) PiiblicFacilities Applications 0 to 150 51 Percent Minimum Benefit Required 100 Percent Benefit Receives Maximum P cints (3) Economi cDevelopment Applications 0 to 150 25 Percent Minimum Benefit Reqsired 51 Percent Benefit Receives Maximum P aints c. Project Impact 0 to 330 Points (1) ProjectFeasibility Oto 110 (2) Impact onNeed Oto 110 (3) ProjectStrategy Oto 110 TOTAL PC~S1BLE POINTS 600 Points Multi-Activity Program Application Rating System a. PovertyConditions 0 to 120 Points (1) Total Number of Poverty Persons 0 to 40 (2) Percent of Population in Poverty 0 to 40 (3) PerCapitaincome Oto4O b. Benefit toLow- and Moderate-Income Persons 0 to 150 Points -60 percent Minimum Benefit Reqiired -90 Percent Benefit Receives Maximum Paints c. Program Impact 0 to 330 Points (1) Program Feasibility 0 to 110 (2~ ProgramStrategy Oto 110 ** (3) Relationship toObjectives Oto 110 TOTAL PCSS~LE POINTS 600 Points PAGENO="0438" 434 ** Each applicant must address three (3) of the following six (6) State Obj ectives: Supports comprehensive comm unit y/neighborhood conservation, sta bib zation, and/or revitalizetion. Removes or Irevents slums or blighted conditions. Addresses a deficiency in a community~s public facilities. Expands or retaira porm anent jots. Resolves a serious threat to health or welfare. Supports new or imFoved housing opportuni ti ~ for low- and moderate-income families. Other Provisiciis Housing Assistance Plans. The state will not require local recijients to submit a housing assistance plan. Citizen Participation Plan. The state will not reglire a written citizen participation plan, however, they will require that the local government hold two public hearing on the proposed proj ect to inform the public. The first piblic hearing is to be held prior to the submission of the application and the second is required when the grant award is announced. Use of Substates. While the substate districts will not have a direct role in the selection of projects, locaijurisdictions will not be preduded from using them. Estimate of Administrative Cost and Staffing N reds. The state will use approximately $400,000 to administer the program in FY 82. This is well below the two percent maximum. A staff of twelve full time employees will run the Fo~am. STATE CONTA CT PERSON: David Plaisted, Chief CDB GA dministraticn Department of Community Affairs 40 Marietta Street, NW 8th Floor Atlanta,GA 30303 404/656-3872 PAGENO="0439" 435 IDAHO ADMINISTERIN GA GENCY: Division of Economic and Community Affairs STATE CDBGALLOCATION: $6,280,000 P REVIO tS MULTI-YEAR COMM]T MENTS: 2,48 5,000 PamPieinrati~ In preparation for the State CDBG Program, the Division of Economic and Community Affairs established the P dicy A dvisory C ommittee. The P dicy Advisory Committee, which consists of state and local officials, decided early to keep Idahds method of distrihittion similar to HUD's to eliminate confinion. U pen the com~1 etion of the draft selection system, the state held a series of six regional meetings to discuss the competitive program. Program Desi~i The ol~ectives of the Idaho CD Block Grant Program are quite similar to the objectives of the HUD-admiristered program. The state program encourages projects in three areas economic development, housing and public facilities. Also, the program is intended to provide greater opportuniti re principelly fcr low- and moderate-income citizens. Eligible Activities. Eligible activities incline clearance; acqtisition of property~ demolitior relocation payment~ acquisitior constructior~ or rehabilitation of public facilities; historic preservation activities; economic development; removal of architectural bariier~ and jianning, design and administration. Types of Grants. Idaho will have three types of grants available under its system: (1) Single Purpose Grants which address one or more eligible activities in one of the three catego ri es - economic developei ent, public facilities, or housing. (2) Multi- Ptr pose Grants address more than one problem area. In communities of 2,500 or more, and (3) an Imminent Threat Grant set-reide will in available fcr emergency situations. Both types, single-purpose and multi-purpose applications, may request single-year or multi-year funding up to three years. Funding Allocation. In the allocation of state CD funds, Idaho will reserve two percent for administrative costs, ten percent for the imminent threat set-aside, and an even s1iit fcr the remaining portion between multi-year grants and single year grants. Grant Amounts. Single-purpose grants will be funded to a maximum of $350,000 per year while multi-pirpose grants will in funded to a maximum of $500,000 per year. For e,mm~ie: Single- (1 yr) ~350, 000 Multi - (1 yr) $500,000 Single- (2 yr) $700,000 Multi- (2 yr) $1,000,000 Single- (3yr) $1,050,000 Multi- (3yr) $1,500,000 PAGENO="0440" 436 Sd~tias Cnteria The Division of Economic and Community Affairs (DECA) will accept the applications and begin assigning preliminary points to each application. These preliminary point assignments will be totaled and forwarded to the Division Advisory Council (DAC) which is the local advisory body for the DECD. The members are appointed by the Governor. The A dvisory C ~uncil will review the applications, assign final points, and rank the applications. The top ranked applications will be recommended for funding based upon the funds available. The DAC will forward its recommendations to the Governor for final approval. Proj act Selection C uteri a The following van abl as are considered for both single or multi-year funding. These factors are assigned points. The maxim urn number of points is 575. oProgram Impact (35% or 200 pts.) - Previous A ctions. Examines the previous efforts made by the applicant to increase the effectiveness of the project.(50 pts) - Additional Actions. Describes the additional resources and activities needed to complete the project.(30 pta) - Environmental Considerations. Looks at the impact of the project on the environment.(20 pta) - D~placement of Irdivithals or Busiassses. Actions taken to minimize displacement.(20 pta) - Results from Funds Req.iested. Examines the cost effectiveness of the project.(50 pts) - Number of People to Benefit. The ratio of the people benefitted.(30 pts) o Economic Development (17% or 100 pta.) - Total of Jots Created or Retained.(25 pts) - Percentage ofPrivateFundslnvestei.(Zopts.) - Commitment of New Busizess to Locate in Proj act Area.(20 pts) - ReasonableTimeFrameforthelmpact ofthePrograrn.(Zopts) - UseofaLoanProgram.(lopts) o Public Facilities (9% or 50 pts.) Examines how the project will correct a deficiency in or lack of a communit ~ public facility. o Improve Housing Stock (9% or 50 pta.) Analyzes how the project will improve the existing housing stock of the community. 0 Benefit to Low- and Mcrlerate-Income Persons (9% or 50 pts.) Looks at the total number of low and moderate income people that will benefit from the project. o Prevention of Slum and Blight (9% or 50 pts.) Examines how the project will reduce existing areas of durn and blight in a specific area. o High Growth Communities (6% or 35 pta.) An applicant, to receive these points must be experiencing or expect to experience rapld growth within the grant year. PAGENO="0441" 437 o Funding From Other Sources (4% or 25 pts.) All applicants will ha ranlssd by the percentage cI community development funds requested by divided by total project costs. o D~tressed Communities (3% or 15 pts.) Pcints in this category will ha given to comm unifies experiencing high unem ~o yment, loss of m ~ businesWem jioyers or declared an economic disester area. Other Provisic~is Citizen Participation Requirement. The state does not require a written citizen participation plan but it does require that one public hearing be held to discuss the pro posed project. Housing Assistance Plan. The state will not require a housing assistance plss~ under the pro gram. Use of Substates. The state will not presc~he a fcrmal role fc~ substate districts bit communities will be free to request their assistance. Estimate of Administrative Crets and Staffing Needs. The state will i~e the two percent maximum plus match to administer the program. Idaho expects to staff the program with three full-time professionals and four part-time em~ioyees. STATE PROGRAM CONTACr: KariTuefler Division of Economic and CommunityAffairs State House Boise,ID 83720 208/334-3416 PAGENO="0442" 438 ILLINOIS ADMIN]STERIN G AGENCY: Department of Commerce and Community Affairs STATE CDBG ALLOCATION: $33,713,000 PREVIOUS MULTI-YEAR COMMITMENTS: $18,005,000 Program Preparatiosi The State of Illinois will administer the State CD Block Grant Program in FY 82. During the last few months, the Depertment of Commerce and Community Affairs (DCCA), the administering agency, has been engaged in a dialogue with local officials regarding the design of the program. The DCCA has workad closely with the Governor~s Local Government Block Grant Advisory Committee and has established its own CDBG Technical Advisory C ommittee to review the ranking system. The S tate has also scheduled a series of regional meetings to exFiain the system to local officials. Program D~i~i The state will retain the competitive nature of the program, although the criteria and areas of emphasis will be changed to a significant degree. Proj ects will be ran1~sd in one of the following areas of neecli economic development, housing and public facilities. Each area will have specific criteriafor ranking purposes. Infundingprojects the state cites the limited amount of dollars and emphasizes the need to leverage the state CD dollars with other sources of funding. The Illinois State CD Program will emphasize three major areas of concerm (1) economic devel opa ent, with an emphasis on commercial and iixlustri al retentio~expansion and job creation; (2) deficiencies in housing; and (3) inadequate public facilities or services. Local governments are free to apply for projects under more than one pro blem area within the same application. Eligible Activities. Listed below are some typical e~m pies of eligible activities in each area: (1) Economic Development. Land acquisition; public facilities and improvement~ acquisition, construction, rehabilitation, or installation of commercial and industrial facilities. DCCA will encourage the use of loans by localities to businesses to allow for recapture of grant funds for use in other community devel opn ant activities. (2) Deficiencies in Housing. Real property acquisition; rehabilitation, clearance, demolition, and/or removal of buildings and improvements; rehabilitation of publicly-owned or acquired properties for use of resale in the provision of assisted housing; provision of public facilities to increase housing opportunitie~ financing the rehabilitation of privately-owned residential or mixed-use properties through either loan or grant programs; and provision of housing for the physically and/or mentally disabled. PAGENO="0443" 439 (3) Inadegiate Public Facilities or Services. Water and sewer facilities, including storm sewers, but excluding sewage treatment works and interceptor sewers; solid waste disposal facilities; flood and drainage facilitie~ non-residential senior centers non-residential centers for the handicapped, such as a sheltered worksho~ neighborhood facilities designed to provide health, social, recreational or similar community services for residents of a particular target area or neighborhood; street improvements, and ramping for the handicapped; public facilities other than water and sewer that meet certaln recpirements; and accpisition of real property necessary to install or improve public facilities. Sdecticxi Criteria Applicants will compete for a total of 1,000 possible points in the ranking system. The ranking system will be divided into two parts: (1) Community N eeds and (2) Project Evaluation. CommunityNeeds. (325 points) This area will soamine the characteristica of the community itself to help assume that needy localities are funded. Applicants whose figures are the highest for six of the seven need iixlicators will receive the maximum number of points. Scores for other applicants will be determined by calculating what percentage their statistirs are of those of the applicant with the highest amount, and then multiplying this percentage by the maximum score. Community N eed Factors: - Fiscal Distress Indicator (per capita tams 75 pta. per capita income) - County Unemployment Rate 50 pta. - Num her of Poverty Persons 50 pta. - Percent of Poverty Persons 50 pta. - Number of SubstandardHousinguthts 25pts. - Percent of Substandard Housing Units 25 pta. - Number of Houses Built Pre-1940 25 pta. - Percent of Housing Built Pre-1940 25 pta. Project Evaluation. (675 points) The factors are intended to ensure that the best designed and most effective proj acts will be funded. Specific proj ect evaluation criteria will be used in the areas of economic development, public facilities, and housing. Applicants may propose multiple activities which will be ranked separately in each of the problem areas. Points in each of the problem areas will be awarded on the following basis: Maximumlmpact 350 Points Moderatelmpact 200 Points Minimallmpact 100 Points Insignificant Im pact 0 Points Project Evaluation Factors: - Impact on CommunityNeeds. (350 points) * o economic development o publiefacilities/services o housing PAGENO="0444" 440 - Benefit to Low and Moderate-Irxome People (200 points) - Reso~xc e Leveraging (100 points) - Energy Conservation (25 points) Grant A mounts. Illineis has propesed different grant maximums based on population ranges. The state notes that the ceiling amount for a local project is not always appropriate. In determining appropriate iixlivithal grant amounts, the Slate will consider population factors, needs, type of activities, applicant~s ability to carry out the proposed program, and previous fundinglevels. Listed below are the grant maximums. Population Grant Maxim um 2,500 $400,000 2,501- 10,000 $600,000 10,000 - 50,000 $750,000 EconomicDeveloixnent/Nattral Disaster Set-Aside. The state will reserve five percent of its block grant funds in order to respond to `severe economic pro hems, unique job creation opportunities for low and moderate income people, and natural disasters." A grant ceiling of $250,000 has been placed on awards from the ~Economic Development/Natural Disaster Set-Aside.' Illinois has established a detailed procedure for applying fcr the set-aside funds. While certain thresholds must be met in order to apply for the funds, the state will use similar competitive program procedures for distri biting the set-aside funds. Other Pxovisims Definition ofLow-Moderatelncome Citizens. Eighty percent of median familyincome. Grants Management Plan. Illineis has instituted a new and comprehensive "grants management plan which seeks basic information on the project. The plan seeks data on the staff, the fiscal contact person, the name of the engineer running the proj ect if one is available, a list of consultants whose services will be used on the project, and the identification of any citizen advisory committees. Citizen Participation. The citizen parlicipation plan will be part of the grants management plan plus the state will also recpire that one public hearing be held on the proposed project. Housing Assistance Plan. Illianis has formally replaced the HAP with a one page "Housing Needs Form", which is an overview of a comm unit~s housing stock. This will izElurie data on the housing needs of the community, the condition of the existing housing stock, an overview of special population grou~a, a brief analysis of the commurdtP public housing, and plans for addressing the localit~s housing problem. The "Housing Needs Form" will only be required for housing applications. Role of Substates. The six state regional planning commissions will provide technical assistance and training to localities applying for state CDBG funds. The state will contribite a portion of their 107 funds to the technical assistance effort. Estimate of Administrative Costs and Staffing. The state expects to use the full two PAGENO="0445" 441 percent to administer the program in FY 82. The state will staff the program with approximately 12 full time professionals. It is im portent to note that the Department of Commerce and Community Affairs has sub-contracted with the Illinois Environmental Protection Agency to perform the local environmental reviews and engineering approvals. Environmental Review P rocedures. In an eff cst to save time and m anpewer the state has implemented an environmental review pre-certification. The pre-certification was developed by the D epariment and consists of a checklist which easily determines whether the locality needs to perform an environmental review. STATE CONTACT PEPS ON: Bill Pluta Department of Commerce and Community Affairs 222 S. College Street Springfield, IL 62706 217 /785 -4336 PAGENO="0446" 442 XENTUCKY ADMINISTEPJN GA GENCY: Office of Comm unity Development Department of E conomic D evel opm ent STAYE CDB G ALLO CATION: $30,639,000 PREVIOUS MULTI-YEAR COMMITMENT: $l4~594,023 Program Preparatiai The Commonwealth of Kentucky was one of two states selected in HUIYs Small Cities Demonstration Proj ect in F Y 81. Therefore, the state had an excellent opportunity to gain some experience and prepare for the actual administration of the State CD Block Grant Program in FY 82. Kentucky retained their Policy Advisory Committee and Techrñcal Advisory Committee to help them design the State CD Program for FY 82. The Department also sponsored a series of worI~ho~, throughout the state for local government officials to explain the new program. Program Desigi The 1982 Kentucky Sm all Cities C DB G Pro gram has ado pted the following goals and objectives to promote community and economic developnent. 1) To improve local economies and the economic well being. The state will encourage private investment, discourage the outmigration of business and help maintain and improve existing or growing economic centers. 2) To improve the condition of beusing and expand fair housing opportunities especi ally for persona of low and moderate income. The state will encourage the rehabilitation of existing housing units, the creation of new housing units including adaptive reuse of suitable structures, and the and purchase and preparation of sites for construction of new housing units for low and moderate income persons. Another objective of the program will be to eliminate blighting conditions in residential areas through demolition, code enforcement, and related activities. 3) To provide public facilities to eliminate conditions which are ha zardous to public health and safety and whicth detract from further community develo~rnent. Kentucky will seek to improve existing public facilities and provide new facilities when warranted by recent population growth, or when essential needs exist. Under the Kentucky State CD Program, communities will be allowed to submit applications in three categories 1) EconomicDevelopnent 2) Housing 3) PublicFacilities A Special Projects Fund will be availatie for innovative or emergency activities. Funding Allocation. While Kentucky will not fund any new multi-year grants in PAGENO="0447" 443 FY 82 or FY 83, they do intend to honor HUD's previo~is multi-year commitments. This reduction for multi-year commitments leaves approximately $15,432,197 available for distrilrntion among the three program categories. The funding allocation is listed below: %ofTotal TotalDollars Program Category Allocation Available Housing and P.iblicFacilities 55% $8,487,708 EconomicDevelopment 35% 5,401,269 Special Projects 10% 1,543,220 Note that the dollar split between Public Facilities and Housing Projects will be determined by the proportionate volume of CDBG dollars requested by applicants scoring at least 700 in those pro gram categories. Grant Amounts. Keetucky has established seporate grant amounts of different program categories. For instance, Housing ant Public Facilities projects will have a grant ceiling of $500,000 while E conomi c Development proj ects will be limited to $750,000. There will be no limits in the SpecialProjects category. Finally, applicants are free to apply for several Housing or Public Fnilities projects as long as the total amount requested does not exceed $500,000. In turn, applicants may apply for a number of E conomi c Development proj ects, but the total amount of dollars cannot exceed $750,000. Seiectiai Criteria The selection process will be competitive within the three program areas with different rating criterion. For iratance, only Public Facilities applications will compote with other Public Facilities applications. Listed below are the separate selection criteria Selection Process for H ousing and Ribli c F aciliti es P roj ects. In the case of H ousing and Public Facilities Projects, applicants are free to choose the program area(s) in which they wish to compete. Applicants are free to apply for these funds at one time during the year. The point system is briefly described below: C atego~~ Maximum Points o Comm unity Need (To be determined 150 points by the State. Includes data on the percentage of poverty and the number of poverty persona.) o Project Need 300 points o Project Effectiveness 200 points o Reasonable C osts 150 points o Financing 200 points Total 1000 points In each category, qualifying words are used for comparison of each application, (e.g., substantial, moderate, minimal, insignificant). Selection Process for Economic Development Projects. Communities can apply for Economic Development grants during an right month period between March 15, 1982 and November 1, 1982. This lssigthly application period is intended to give communities time PAGENO="0448" 444 to fully develop economic development opportunities and resolve any difficulties. However, as opposed to the Housing aixi Public Facilities grants, where applicants will be allowed to have several ~.ant applications in the review process simultaneously, applicants will not be allowed to have more than one economic development application in the review process at any one time. All Economic Development proposals mist include the fc&lowing principles: G ) the retention or creation of permanent employment, (2 ) the use of private investment and (3) the maximum utilization of funds through recaptire when appropri ate. The more detailed components of the selection criteria are listed below: 1) Permanent jots created or retained: o the number of types of jots o the certainty of jobs as supported by letters of commitment from the prospective employer o ~~eratjoofCDBGdollarSperjob. 2) The stimulation of private capital investment: o a letter from the involved private parties which provides an assurance of commitment to invest if CDBG dollars are available o an iixli cation of the amount and certainty of the private investment o the ratio of committed private dollars to CDBG funds 3) The maximization of the CDBG funds: o evidence that the CDBG funds will In recaptired through loans, revcIving acco~ts,lease back arrangements, or sale, o the CDB G funds are leveraged in conjunction with other local, state, or federal funds. Approximately two weelis after the application is received, the state will set up a meeting to discuss the project with the applicant. Staff review will be continuous. Meetings with applicants and requests for additional data may occur several limes during review. The staff will see kinformation on the nature of the publi c/private commitment, the ratio of leveraging, the success of the project, and the need for CDBG ~sistance. After the procedure hss been completed, the staff will submit the proposal to the Project Selection Committee which is made up of experts in the fields of ithustrial and economic development. The panel will meet on a monthly basis to review Economic Development proposals. State staff will In available to answer spocific questions alnut iixlivithal projects. The Committee will compare projects based on the selection criteria and make recommendations to the Commissioner of the Department of EconomicDevelOPmeflt. In some instances a project will be eligible for partial funding. In those instances, the Committee will negotiate with the applicant to ascertain whether the project can be reduced in size. Economic Development funds will be distrilasted during three allocation periods. If funds remain after the third period, they will be pooled for stand-by applications in housing and public failities. Selection Process for Special Projects. The Commonwealth of Kentucky has set aside PAGENO="0449" 445 approrimately ten percent of its state CD allocation or $1,543,000 for Special Projects. This category indudes two types of projects: 1) Emergency Projects which pose an immediate threat to the health and safety of its citizens, or 2) Innovative Proj ects, which were unanticipated at the regular deadline date, depend upon immediate funding, and includes unique financing m echanism~. To apply for such funds, the community miet submit a letter to the Department with their request. The state will review the request and meet with the applicant to discuss the project. The community will learn of the state's decision no more than two weeks after the meeting. These funds can be applied for at any time. Othar Provisiaas Citizen Participation. One public hearing must be held by the community before the application is submitted to the state, and another public hearing m~et be held prior to the execution of the agreement with the state. A-9 5 Review. The S tate Cl earl nghouse will conduct the A -95 review of applicaons. Re~onal Clearinghouses will review the CDBG applications in their areas, but this review is for comment only, not approval. No funding decisions will be made until all Clearinghouse comments are considered or 45 days have elapsed. Role of Substate Districts. The Area Developnent Districts in Kentucky played a m~or role in the design of the State CDBG Program. The state h~ provided $300,000 to the substate districts from their administrative fund to assist local jixisdictmons with the State CDB G Program. The Department of Economi cDevelopment will contract with the ADDs to (1) provide technical essistance and training, (2) assist in the monitoring of CDBG reduients, and (3) act as a broker for the state in solving local pmUems in the administration of the prog~am. Estimate of A dministrative Cost and S taffing N eeds. The state will ~ee approsimately 2% or $300,000 to administer the program. As mentioned previously, the state plans to appropriate another $300,000 to the ADDs to help administer the pro~am. Appro dmately, nine to eleven full time employees will be assigned to administer the pro~am. STATE CONTAC]~ PEl~ON: SallyHamilton, ExecutiveDirector Department of Economic Develo~anent Office of CommunityDevelopnent Capitol Pla za Tower Frankfort,KY 40601 502 /564-2382 99-965 0 - 82 - 29 PAGENO="0450" 446 MAINE ADMINlSTER]NGAC~NCY: State PlanningOffice STATE CDBG ALLOCA~flON: $10,090,000 PREVIOtE MULTI-YEAR COMMiTMENTS: $4,298,000 Program Prejaraticxi With the assistance and guidance of an ad hoc Community Development Advisory C ommittee, the M sine S tate P lanning 0 ffice has developed a program which is somewhat similar to the HUD administered pro gram. Program Dasigs The State of Maine will try to meet the following three objectives in administering the S tate C ommunity D evelopment Block Grant Program: (1) the provision of decent, affordable, energy efficient housing for low and moderate income residents; (V the creation of gislityjobi and opportunitias for low and moderate income residents; and (3) the revitalization of deteriorated residential and commercial areas. In meeting these objectives, the state set up broad guideliass to administer the program. Fir~, the state will distribute the funds competitively and structure the program so that no intivithal area of activity - housing, economic developnent, public facilities - is favored over another. The state will set up an extensive technical assistance fund to encourage sm aller, rural communities to participate in the program and finally, the granteas will be encouraged to leverage community development grants with other public and private resources. The M sine State CD Pro gram will be divided into three categories: Raserved Grants. Approximately $l~2 million will be set fund communitias with previous multi-year commitments. General Competition Grants. Nearly $5.69 million will be used to fund projects which are similar to projects funded under the HUD administered pro gram. Technical Assistance Grants. Approximately $150,000 will be available for CDBG technical assistance grants. The General Competition Grants and the Technical Assistance Grants are described in detail below: General Competition Grants. Most of the state CD funds will be allocated to the General Competition Account for projects in housing, public facilities and economic development. Although the grant program may be structured similarly to HUD's program, the scoring system has been significantly revised to eliminate the previous bias against economic development and public worl~a grants. The paperwork reqiirements for the grant have been considerably reduced. In PAGENO="0451" 447 order to apply fcr the grants, communities are aslwd to submit the following data: (a) A statement of overall community developmentobjectives which includes a description of the housing, economic development and capital improvement needs of the community. (b) A description of the proposed pro~am and its projected impact. This would indude a budget, a description of other resources and a management jian. (c) A statement on how the project will benefit low and moderate income residents or the degree to which the project will prevent or eliminate blight. (d) A certification that the views of the communitias' citi ssns have been solicited and reviewed in making the proposal. This indudes evidence that the application has been approved by the commutht~s gverning board. Grant Amounts. Projects can be singe activity or multi-activity, based upon the proUem to be addressed. Multi-activity proj ects should involve activities whi cli are mutually related, either by function or by geographic area. The maximum grant amount will be $~00,000 with no minimum grant size. Project length cannot soc eed 18 montla, however a limited number of two-year grants will be availahie. M ul ti-year grants are availableupto $1.6millicnfcx l8montle. Sdectirn Criteria The selection criteria for the General Competition Grants will be judged and scored by the State PlanningOffice staff with the assistance of Maira Housing Authority staff and State Development Office staff. Also, a team of local officials, selected by the Maine Municipal Association will be invited to review the process and to submit their comments to the administering agency. The scoring system fcr the General Competition Grants inclixles certain threshold determinations and e~mines the following three factors (1) Community Need, (2) Project Impact and (3) Benefit to Low/Moderate Iisome People or the Prevention or Elimination of Substandard Conditions. (1) CommunityNeed (20 points). - Number of people under poverty level 10 - State's community distress rating io (2) ~p~pact (60 pcints). Applications will be scored within functional areas in order to rate their impact housing, economic development, public facilities. - Severityof problem 20 - Project effectiveness 20 - Leveraging 10 - Management iian 10 (3) Benefit to Low/Moderate Ircome People Prevention or Elimination of Substandard Conditions 20 PAGENO="0452" 448 Tahnical Assistance Grants. Maine will allocate $150,000 inTechnical Assistance Grants to regional ron-profit organi zations, such as regional planning commissions, for the pix pose of assisting communities unfamiliar with the State CD Program. Of the $150,000 available in the fund, $50,000 will come from the CD program and the state will contribute $100,000 to the program. Grants will be awarded competitively on an annual tasis. Grant amounts will be set by region through a predetermined formula invulving population and number of communities. In order fcr the or gani ration to apply, it mtat des cr1 be the strategy to be used and provide evidence of support from local offidais. Technical assistance activities should intiude: holding regional workihope on the program for local officials, making a preliminary inventory of all potential CD projects, assisting interested communities in surveying needs, identifying CD strategies, coordinating area resources in advance of CD application, reviewing community applications for adequacy and completeness, and assisting successful new applicants in starting up their programs. Applications will be reviewed and assessed by the State Planning Office staff. Other Provisiccis Citizen Participation Requirements. The State of Maine will require that each community applying for state CD funds, hold one public hearing on the proposed project. The certification must indude verification that the views of low and moderate iocome citizens are solicited during the citizen participation process. Hortaing Assistance Plans. The state will not require that a HAP be submitted under the pro gram. Rde of Substates. The state has appropriated $150, 000 over a two year period to fund the substate districts within the state to provide technical assistance to local jurisdictions. Dialer the program, the state will contract out with the regional planning organizations, to provide technical assistance and training. This could indude the provision of tasic information on the CD program, application assistance, and an assessment of the ~ommunity~s needs. Estimate of Administrative C oat and S taffing N eeds. Maine plans to allocate the full two percent for the administration of the pro gram. The state also plans to run the program with a staff of five full-time professionals. STATEPROGRAM CONTAC7: JaniceHird State Planning 0 ffice 184 State Street Augusta,Maine 04333 207/289-3261 PAGENO="0453" 449 MASSACHUSEI'TS ADMINISTERIN GA GENCY: Executive Office of Communities andDevelopment STATE CDBGALLOCATIQN: $26,542,000 / P REVIO t~ M ULTt- YEAR COM Mfl~ MENT: $11,542,000 Program Pre~iratiasi In preparation for the implementation of the State CDBGPro gram, the Executive Office of Communitias and Development, the administering agency, established a Small Cities Advisory Task Force which induded representatives from local gsvernments as well as from community development and planning interests. Alan, members of the State Legidature were invited to attend the meetings of theTaskForce. As the pro~am is finalized, the state has planned a sen as of six technical assistance training sessions throughout the state to explain the new program in detail. Appronimately, 300 local officials attended the one day sessions. Pro~am Deaigi Massachusetts will run a competitive State CD Program which is significantly different from the HUD administered program. While the program reqlires that the activities by communities must meet at least one of the three national objectives the state has established the following five preliminary obj ectives for the pro~am: o Support projects which will have a substantial and identifiable impact and which will respond to the perceived needs of residents and/cr b.isirassas in a defined area. o Support communitias which have developed comprehensive solutions to their CD problems, and which have the capacity to implement those solutions. o Encourage reinvestment in distressed neighborhoods in order to stabilize the neighborhoods and avcid displacement. o Stimulate economic development which will assist in the creation or retention of permanent job opportunities and expansion of the community's tax base. o Encourage communitias to maintain open policias towards both subsidized and private market housing to ease restrictions on the development of affordali e housing in general. Using the national and state objectives as a guide, applicants can submit proposals under one or both of the following two major headings, as long as only one complete application is submitted by the community. (1) Neighborhood Preservation. The stabilization of declining neighborhoods by addressing the problems which influence neighborhood vitality. economic growth and development which creates or retains jots in the community and strengthens the local economy (2)Economic Development/Commercial Revitalization. The stimulation of economic growth and development which creates or retains jobs in the PAGENO="0454" 450 community and strengthens the local economy. Eli~ble activities in both categories indud~ property acquisition, improvements, and dispesition; private housing rehabilitation loans, grants, or interest write downs, housing counseling, and historic preservation; rehabilitation of existing public housing or acc!sired property to provide permanent public housing units or residential facilities; public infrastructure improvements to leverage private investment; acquisition, construction, or rehabilitation of commercial cr industrial facilities, and appropriate real property improvement~ business development assistance and loans and activities in stqDport of the development of low or moderate income housing including ci earance, site assemblage, provision of site and public im provements and certain housing preconstructi on costs. Selection Criteria Massachusetts will retain the two-step application process used under the HIJD administered program, but it will be considerably shorter and simpler. Diring the pre- application phase, communities will be asked to briefly (seven typewritten pages) provide information covering the five following areas: justification of need, project description, project impact, management capacity, and a housing policy statement. Communities will compete in the pre-appli cation phase based on the iixlivithal merit of their proposals, as well as on how they compare with applicants proposing similar projects. For ezamiie, Neighborhood Revitalization proposals will compete against other Neighborhood Revitalization proposals and Economic/Community Development proposals againat other Economic/Community Development proposals. Only those cities and towns which have successfully completed the pro-application phase will be allowed to submit final applications The final application will reqlire the same type of information but in greater detail. The format for final applications consists of seven categories justification of need, proj ect des cri pti on, local commitments, proj act impact, m anagement capacity, housing policy statement and certifications to meet federal and state requirements. Dthng the final application phase, proposals will receive a numerical score that will be used in determining the eventual grant recipients. The numerical score will mess ~re: Overall CommunityNeed 150 points Projectlmpact (induding the Community~s ability to implement the project and housing policy practices) 300 points Amount of Local Commitment 50 points 500 points Grant Amounts. Grants will range from a minim urn of $10 0,000 to a ma aim um of $700,000. Communities may apply for funding for one or two years, making the highest total grant award possible $1,400,000, over a two year period. Considering previous multi-year commitments, the Commonwealth expects to award 20 to 25 new grants. PAGENO="0455" 451 Other Provisiczis Housing Policy Statement. Applicants are required to prepare a Housing Policy Statement which inc1~xles the community's subsic~zed housing polides and plans for increasing the availability of affordable private market housing. The statement will be recpired fcr all fimding recpests regard1~s of whether the community is applying for economic development or housing related activities. Citizen Partidpation Plans. While the citizen participation reqlirements have been reduced from the requirements under the HUD administered program, the state will reqiire applicants to hold a "community meeting" before a pre-application is submitted and a public hearing batore a final application is submittel. Definition of Low-Majerate Income. Families whose incomes do not e~eed 80% of median familyincome. Financial and A dministrative R eqli rements. EOCD will be adopting the regulations and guidelines promulgated by the federal government in 0MB circularsA-87 and A-102. Use of Consultants. The state has established a comprehensive set of guidelizes on the use of consultants in the State CD Program. Of noteworthy interest is the limit placed on the amount of state CD money whi di can be used for consultants. A maxi m~.rn of $2,000 is allowed for this ptrpose. Any cost over $2,000 will have to be paid by the community from sources other than Small Citi~ funds. Joint Applications. Joint applications from two or more communities will be encouraged by the state's administering agency. However, the applicants must desigiate a "lead" community. The grant maximum for the joint aplication will lxi $700,000 per year. Loans to "F or Profit" Entities. Due to modifications in the federal statute, the State is allowing program funds to be used to benefit profit making enterprises provided that such loans are clearly in support of the public policy objectives of the Small Cities Program. These loans will only be allowed in relation to Economic Development/Commercial Revitalizaticxi projects. In order for private for-profit entities to receive loans, they must meet the following criteria: o There exists a proportionately larger private financial commitment to the project than the public financial commitment requested. o Reuse of proceeds derived from the repayment of the loan are clearly defined. o Documentation exists that conventional or other financing is not available and/or that prevailing interest rates would render the proposed project fioanciallyunfeasible. o The project benefits must directly assist low and moderate income people. Role of Substates. The regional planning agencies in Massachusetts played a m~or role in the desigi oU~he State CDBG Pro~am, however the issus over their involvement in the actual program will be determined by the individual localities. PAGENO="0456" 452 Estimate of State Admithstrative Cost and Staffing Needs. The state will ~obahly use the full two percent in administering the program. Also, twelve full-time professionals will be assigned to administer the program. STATE PROGRAM CONTA Cr: Byron Matthews, Secretary Executive Office of Communities and Development 100 Cambridge Street Bosta~, M assacht~etts 02202 617f727-7765 PAGENO="0457" 453 NEBRASKA ADMINISTEpj~G AGENCY: Department of Economic Development/ljjvision of Community Affairs STATE CDBG ALLOCATION: $12,101,000 PREVIOUS MULTI-YEAR COMM]TMENTh: $3,343,000 Prog~amPre~auan In preparation for the State Community Development Block Grant Program, the Department of Economic Development has worked closely with the Governor's Block Grant Task Force and the locally oriented Small Cities CDBG Committee to establish a fair and equitable distribution system. The Department has also sponsored a series of regional meetings to seek comments on the proposal. Pn~am Design Nebraska~s proposal consists of six competitive development finance programs for eligible local applicants: Community/Neighborhood Revitalization, Water and Wastewater Systems, Industrial Development, Special Projects, Community Development Planning and Programming, and CommtmityDevelopment Capacity Building. The State!s broad program goals reflect the diversity of community development needs: to encourage the most of limited funding; to target areas of greatest need; to minimize competitive grantsmanship; and to award moos, and therefore am aMer grants. The six development finance programs are listed below: Community/N eighborhood Revitalization. This program will provide grants to eligible communities for revitalization activities and assist them in developing and implementing a wide range of neighborhood revitalization activities. Eligible activities include rehabilitation of private property (residential and commercial), code enforcement, historic preservation, property acquisition and disposition, relocation, clearance activities, water system improvements, wastewater collection facilities, street improvements, solid waste disposal facilities, planning activities and economic development activities. Applicants will be competitively ranked and may receive a maximum of 200 points 100 points for Community Need Factors and 100 points for Target Area Need Factors. Community Need Factors include the following; population change, per capita income, absolute number of poverty persons, percent of poverty persons, absolute number of substandard housing units, percent of substandard housing units, absolute number of housing units hailt befor.e 1940, and percent of bousing units built before 1940. Target Area Need Factors include concentration of low-income families, the extent of blighting conditions, and urgent needs. Approximately $7,502,620 or 62 percent of the funds will be available for these grants. Of that amount, approximately $3,343,000 is reserved for existing multi-year PAGENO="0458" 454 commitments. The maximum grant amount will be $350,000 for one year. The State of Nebraska will not fund any multi-year projects. Water and Wretewater Systems. This program is intended to supplement community financial resources in meeting water and wastewater system needs. Non-entitlement cities and counties which receive a priority rating from the N elraska Department of Health or Department of Environmental Control are eligible to apply for the grants. Eligible activities include water wells, water storage, water distrib.ition system improvements or new construction, and wastewater collection system improvements or new construction. The application procedure is six-f oldi (1) the Department of Health develops a priority for water systems; (2) the Department of Environmental Control develops a priority list of wastewater systems; (3) communities are given one year to apply, (4) the community is required to charge reasonable user rates; (5) water meters are required; and (6) consolidation of systems, where appropriate, receive a priority rating. Applicants will be competitively ranked and may receive a maximum of 300 points: CommunityNeeds Factors 100 points PiiorityRatingFactors 150 points Proj ect Impact F actors 50 points Comm unities applying for the funds must spend at least one percent of median family income for debt service on improvement of system for which funds are being re quested. Approximately $2,178,180 or 18 percent of the funds will be allocated to this function. There will be a maximum grant limit of $350,000. Industrial Developnent. In an effort to create jots and diversify the economic base of Nebraska, the state has established the Industrial Development Program. It is intended to promote local economic development through development and promotion of isxlustrial sites and buildings. The program provides deferred loans to assist in the financing of iwiustrial site development and industrial buildings which can be expected to result in creation of new jots in distressed communiti~. Eligible activities include the payment of interest coats (for up to three years) on money borrowed to develop an industrial site or to construct an industrial building on land owned by a municipality, county, or local development corporation. Eligible applicants are communities under 50,000 population that are eligible for the Urban Development Action Grant (UDAG) program. Applicants will be compotitively ranked and may receive a maximum of 250 points - 100 paints for Community Needs Factors and 150 points for Proj eat Impact F actors. A match requirement states that local development corporations would be responsible for payment of the loan principle, t a~s, and m arts ting costs. By providing deferred loans, it is believed that new jots in distressei (UDAG) areas will result. To PAGENO="0459" 455 apply, local governments submit on behalf of local development corjxrations. Merits to be considered are the potential of the community to carry out a successful industrial development program, site suitability, and the impact funding will have in allevi sting economic distress. Approximately $726,060 or six percent of the funds will be available for the projects. No maximum or minimum funding level has been established. Funds would be provided for a maximum period of three years. Upon sale or lease of the infustrial site or building, the full amount of funds provided through the program would be returned to be made available to other communities. SpecialProjects Fund. In the N eli~asl~ program approximately $847,070 or seven percent of the funds will be set aside for special projects to confront special needs of health and safety affecting low- and moderate-income people. Eligible applicants are non-entitlement municipalities and counties. Funds will also be available for special developmental opportunities. A maximum grant amount of $300,000 is available for applicants Applicants will be rated and scored on the following six Project Impact Factors: (1) Benefit to low- and moderate income families, (2) Aid in the prevention of slums or blight, (3) Meeting an urgent need, (4) Cost benefit to the community in terms of impact on the local financial base, (5) Innovative solution to a CD need or a unicpe opportunity for CD, especially in relation to housing and economic development, (6) Leverages private sector investment or generates other financi al resources. Community Development Planning and Programming. Appxo ximately 2.5 percent of the funds or $302,525 have been set aside to assist communities in the preparation and! or implementation of specific plans and programs. Eligible applicants are non-entitlement municipalities and counties, which may in turn subcontract with general purpose governments (e.g., development districts and councils of government), and non-governmental organizations (e.g., development corporations, chambers of commerce, housing authorities and community action agencies). All subcontractors are subj ect to approval. Eligible activities are plans and programs that identify needs/solutions and are im plem ented in the areas of dev elo pm ent plans/studies, such as com prehensive plans and special plans (e.g., land use, housing, community facilities, transportation, business district development and/or improvement, population, economic base, and eflvironmental) implementation plans! programs (a .g., capital improvements, zoning regulations, subdivision regulations, economic action plans, housing/building codes); and community development capacity building, e.g., implementation and/or administration of plans/programs - start-up funds for one year of staffing, but not to supplant existing staff, and development of administrative procedures and/or training. Applicants will be competitively ranked and may receive a maximum of 225 pcAnts -100 points for Community Needs Factors and 125 points for Proj act Impact Factors. Comm unityDevelopment Capacity BuildingFuixl. Approximately 2.5 percent of the funds or $302,525 has been reserved to enhance the capability of communities to determine and meet their CD needs through technical assistance provided by the regional councils. The match requirement is 25 percent of the PAGENO="0460" 456 local share. In order to participate in the program, a local g3vernment mtat submit an application on behalf of a regional council in their district. Only one regional council in each of Netrasl~'s nine districts will receive funds under this element of the program. Each district in Nebraska will receive funds on a form ula basis totaling (a) base amount per district - $11,111, (b) amount per region served - $4,000, and () amount per local government served - $164.04. Eli glue activities include: (1) continuation of the substate activities of the Nebraska Rural Development Program, analysis of development needs in the ares of community facilities, housing and economic development and encouragement of coordination among agencies in meeting those neecis, arxl (2) provision of technical assistance to communities to analyze and imj~ement programs meeting identified needs inducing, but not limited to, preparation of applications for development finance programs and technical ~sistance in administering such programs. Other Provisicms Citizen Participation, Housing Assistance Plans, A-95 Requirement. The State of Nebraska will not require A-9 5, housing assistance hans, or a citizen participation ~ Estimate of Administrative C oats and S taffing N eeds. The state intends to appro~iate the maximum two percent to administer the program, but is uncertain whether they will use the full amount. The Division will ~ae six full time em~ioyees to administer the pro gram. STATE PROGRAM CONTAC7: Sheppard Perkins Department of Economic Development POBox 94666 301 Centennial MallSouth Lincoln, NE 68509 402/47 1-3111 PAGENO="0461" 457 NORTH DAKOTA AD MINISTERIN GA GENC Y: Federal Aid Coordinator 0 ffice~S tate Planning Division STATE CDBG ALLOCATION: $5,704,000 PREVIOUS MULTI-YEAR COMMITMENTS: $988,000 Program Preparation While the State Planning Division will directly administer the State CDBG Program, two locally oriented committees will play a m~or role in the selection of the potential block grant recipients. When the state announced that they were going to administer the S tate CDB G Program, the governor established a Policy Advisory Committee to assist the state in preparing for the program. The committee assisted the Division in developing the applications, establishing the procedures for the program, and formulating the policies of the program. The state also intends to involve the two local government committees in the selection of the grant recipients. Finally, the state sponsored two public hearings with local officials to solicit comments on the new program. Program Dei~i Goals and Objectives for the Program. In the formulation of the North Dakota State CD Program, the State PlanningDivision established the following objectives: o To encourage local governments to use the entire array of community development activites funded through the CDBG program. o To promote the coordination of CDB G with other state and federal programs. oTo encourage the use of CD dollars as a lever for private sector involvement. o To target resources to those applicants with the greatest amount of need and benefit to low and moderate income persons. oTosimplifythe CDBG goals,objectives,and procedures for local governments. o To contribute to the timely execution of CDBG programs through better technical essistance and administration. Areas of Need. Under the North Dakota State CDBG Program, applicants can apply for funds to address a community developnent need in one of the fcLlowing three areas: (1) Housing. (2) Local economic conditions which principally effect persons of low and moderate income. (3) Deficiencies in local infrastructures which effect the health and safety of the public or some other essential need. There will be no formal percentage of funds allocated to the three m~or categories. In deciding which program area to apply for, an applicant should address its needs through its proposed activities and those activities which represent at least a majority of the funds reqiested. While the project may consist of one or several activifi~, those other activities must he incidental to and in support of the principal activity. In applications proposing more than one activity, the entire program will he rated as a whole and not separately. Funds allocated to the recipients must he sufficient to PAGENO="0462" 458 complete the program within twelve to eighteen monthi. In an effort to fund a larger number of small communities, the state will establish three separate funds for communities based on their pa pal aft on size. The three "pots' of money will be set up according to the following population ranges 1980 Popilation Rangos Total # of Eligilie Applicants 0-500 257 501-5000 118 5001 and over 41 The state allocation between the three ranges will be based on the percentage of poverty persons statewide in each population range and with the previous multi-year commitments subtracted from the communities of `5001 and over" allocation. The resources will be distributed in the following manner~ Popilation % of Persons in Total Dollar Poverty Statewide Allocation 0-500 23 $1,285,682 501-5000 40 $2,235,968 5000 and over 37 $1,080,270 Grant Amounts. The state will establish a different grant ceiling for each population range. Popal ati on R ang~ Grant C ellj~g 0-500 $250,000 501-5000 $375,000 5001 and over $500,000 Application Procedure. In an effort to shorten the previous HUD application process, the State Planning Division has shortened the procedure to one submission. In order to apply, the locality m~t submit a community needs assessment, a strategy to address the identified needs, a cost analysis of the CD strategy, a determination of benefit to low and moderate income persons, an analysis of the communit3~s housing stock in terms of condition and quantity, relevant mapa of the target area, and a certification of compliance signed by members of the governing hoard. S~ecticzi Cñteria Under the North Dakota rating and ranking procedure, localities are raked to submit their applications to the State Planning Division for an initial review and ranking of the project. The Division will screen the applications for completeness and check to make sure that certain standards are maintained. For ixstance, the Division will ezemi ne the communit~9s CD strategy, perform a threshold check for environmental factors on the proj ect, and e~amine the completeness of the applicant's previous funding commitments. The recommendations of the State Planning Division will then go to the Policy Advisory C ommi ttee for final review. The applications will ha sorted according to population size group and m~or activity~ (1) Housing and Related Conditions (2) Local Economic D evel opment, and (3) Public Infrastructure I mprovement. The applications will then be rated under the selection criteria established by the state and will be re- ezemined by the Policy Advisory Committee for its final review. These recommendations will then be submitted to the Governor for approval. PAGENO="0463" 459 After the minimum reqlirements are met, the state will look at the "Program Impact Factors" of the proposed program. The evaluation of program impact will be based upon how well proposed activities address the documented needs. The relationship between the needs and the proposed activities must be described in specific, measuratie terms. In evaluating program impact, consideration will be given to the amount of funds requested, the results to be achieved, previous actions taken to address the identified needs and the relationship of the program to the eli~ble activities selected. The variables for the `~Program Impact Factor" differs with each program area. The total amount of points in each area will total 250 points. All points addressing the same m~or area will be evaluated in terms of impact on the identified major subject area, as follows: (1) The project will have substantial impact; (2) The project will have moderate impact; (3) The proj ect will have minimal impact; (4) The application does not meet the minimal impact standards and will receive points in this category. A listing of the `?rogram Impact Factors" in each area is listed below: Housing and Related Proj ects o Housing Strategy- (S0points). The housing needs of the community have been identified and documented and the proposed activities address, to some extent, the identified needs. o Costs- (25 points). This variable examines how reasonable the cost of rehabilitating a unit as compared to other projects. o Concentrated E ffcrt - (20 points). This factor analyzes how other activiti~ integrate with and support other activities to alleviate the housing problem. o Targeting- (15 points). Lool~s at how the proj ect is directed toward a distressed area or low to moderate income persons. o Expanded Opportunity- (15 points). Assesses how the proposed activity expands housing opportunity far low and moderate income families. o Low and M aderate Income Benefit - (125 points). Examines how the project will benefit low and moderate income families. Local H conomi c D evel opm eat C onditi aria. o L ocal E conomic D evel opa eat Strategy - (50 points). - The applicant has documented economic development needs and has prepared a strategy to address the needs. o Costs- (Z5pnints). Examines the cost of the proj ect and compares them with the costs of similar PAGENO="0464" 460 pro ~ams. o RedevelopmentArea- (Z5points). In N orth D abeta, a redevel opn ent area is defired as an area in whi di buildin~, by reason of age, obsolescence, or physicaL deterioration, have become economic or social liabilities; in which such conditions impair the economic value of the area; in which it is diffictit and uneconomic for individual property owners independently to undertal~ to remedy such conditions; and in which it is necessary to create, with proper safeguards, inducements and opportunities for the employment of private investment and ecpity capital in the rehabilitation of such buildingo. This variable examines how the proposed activities will improve economic conditions in the designated redevelopnent area. o ConcentratedEffort - (25 pants). Assesses how the application integrates with and supports other activiti~. o Low and Moderate Income Benefit- (125 points). Examines how the proj ect will be directed toward low and moderate income persons. Communitylnfrastructtre Improvement Conditions. o Communitylnfrastructixe Strategy - (50 points). The community infrastru~ure needs have been identified and a strategy h~ been designed to try to meet those needs. o ConcentratedEffort- (25 points). The actvities integrate with other efforts to alleviate the problem. o OtherEfforts- (25 points). Examines the eatent to which the community has investigated other sources of funding and documented previous efforts in resolving the problem. o Costs - (25 points). Loola at the reasonableness of the cost of the project as compared to similar projects. o Low and M oderate Ixxome Benefit - (125 points). Assesses how the project will assist low and moderate income citizens. OtI~rPzovisicms. Citizen Participation Requirement. There are no specific C' requirements in the State CDB G Pro~am hit N crth D ale.ta state law authori nsa the mayor or governing heard of a community to approve any local project and to publish any plans for a project beforehand. Role of Substates. The state has not formally established any role for substate distrids in the pro gram but it does not preclude a locality from wor Icing with substate districts in the provision of technical essistance or the administration of the grant. Site Visits. Site visits will be made at the discretion of the state. The visits will be made to verify data and to acqiaint the state staff with the community. PAGENO="0465" 461 Housing Situation Analysis. The housing analysis will be required when the community proposes a housing proj ect. The applicant will be required to analyze the communit y~s housing stock in terms of condition and quantity. Definition of Low and Moderate Income Families. Incomes do not exceed 80 percent of the median income of the families resi ding in non-metropolitan areas. Estimate of Administrative Costs and S taffing N eeds. The state will use the two percent maximum to administer the program. The state also expects to staff the program with the ecpival ant of four full time professionals. STATE PROGRAM CONTACr: Allen Merta Federal AidCoordinator 0 ffice State Planning Division 17th Floor -State Capitol Bismarck, NorthDakota 58505 701/224-2818 99-965 0 - 82 - 30 PAGENO="0466" 462 OHIO ADMINISTERING A GEN C Y: Department of Economic and Corn unity Development, Office of Local G overnment S ervi ces STATE CDBG ALLOCATION: $44~040,000 PREVIOUS MULTI-YEAR COMMITMENTS: $24, 174,000 Program Drii~i The State of Ohio has elected to administer the State Community Development Block Grant program for FY 1982 utilizing a per capita formula with distress aiteria included. Considerin gO bids situation of high unem plo ym ent, economic development will be the m~or o1~ective of the state program. The Ohio program calls for an eg.iitable distribution of available funds to each of the statds 213 eligible non-entitlement communities. In essence each eligible city will be guaranteed an allocation of the state's funds. To insure that communities with greater economic needs receive a greater allocation of funds, the DE CD will utilize a distress factor in determining community allocation' figures. Selectia~ Criteria Ohio will use a formula to distribute the funds in order to maximize the number of communiti~ which can benefit from the program. Those cities and counties which are highly distressed will receive appro ximately twice the per capita allocation as l~s-distressed cities and counties of like population. The population for eligible counties is the total county population minus the population for citira, and prior multi-year HUD commitment citi ~. The CDBG allocation is determined for each eligible city or county in the following manner: 1. A per capita all ocati on is computed by adjusting the state average per capita allocation according to the average of the area's standardized scores on income and unemployment rate. The state average is found by dividing the total amount available for disbursement by the total eligible population. 2. The total allocation for an area is determined by multiplying its per capita allocation by the eligible population. C iti ~ and counties will red eve funds directly from the state. However, they must hdd a public hearing on the proposed use of funds prior to submitting an application to the state. Counties are allowed to make subgrants to villages and townshipe or may administer the program at the countylevel. Imminent Threat S st-A ride. The state will reserve 5 percent of its funds to alleviate imminent threats and emergencies. The emergency funds will be approved by the legislattre'sState Controlling Board upon the recommendation of the Depurtment of Economic and Comm unity Devdopment. PAGENO="0467" 463 Other Provisicxis Citizen Participation Requirements. Each participating locality is required to hold one public meeting on the proposed community development prc~ect. Housing Assistance Plan. Local jwisdictions are not required to prepare housing assistance plans in order to receive funding. Estimate of Administrative Costs and StalfingNeeds. The state will appro~riate the two percent ma ~dm urn for administrative expens~ but will pro be bly use a lesser amount. Because of the large number of participating communitios, the state plans to utilize a staff of approximately 28-32 full time employess. STATE PROGRAM CONTACr: Jane Schoedinger Department ofEconomic and Community Development 30 East BroadStreet, Z5thFloor Cthnnb~,OH 43215 614/466-7610 PAGENO="0468" 464 SOUTH CAROLINA ADM]NISTER]N G A C~NCY: Division of Comm unity and Intergovernmental Aff airs STATE CDBG ALLOCATION: $26,938,000 PREVIOUS MULTI-YEAR COMMiTMENTS: $10,927,000 PamPzeparati~i The State of South Carolina will administer a competitive program inFY 82. The state established the Policy Advisory Committee and the Technical AdvisoryCommittee in helping to design the program. The state also sponsored a series of wcrkihops to seek comments on the program. Pro~ramD~igo In the design of the South Carolina CD Program, the ten Councils of Government (COG's) play a substantial role in the selection of local community development projects. According to the South Carolina plan, local applications are filed with both the COG serving the applicant's region and the Division of Community and Intergovernmental Affairs. Program Focus. The program has been divided into two categories: (1) Economic Development aixl (2) Comm unity Revitalization. Eligible activities in the economic development category include: assistance to new or existing businesses through loans, interest supplements, or other forms of financial assistance; acciiisition, construction, reconstruction, rehabilitation, or installation of commercial or industrial buildingo and structures; capitalization of local development corporations and small busizess investment corporations to initiate a specified project; acquisition of real property for economic development pirposes and construction or extension of public worki. Eligible activities in the area of community revitalization include: rehabilitation of public or private housing units; acquisition, construction, or rehabilitation of certain publidy-owned facilities such as senior centers, neigiiborhood facilities and parki; street improvements; dearance activities; replacement of housing subsidies for d~placed persons; construction or extension of jxibli c wor ki such as water and sewer; and preservation or restoration proj ects. Selection Process. Once the applications have been received at the COG level, the COGs will begin the rating and ranking process besed on the selection criteria desigoed by the state-local committee. State officials will monitor each rating session at the COG level to ensure uniformity. The COGs will then rank their applications and forward them to the state. At the state level, CD staff will utilize the same criteria used by the COGs to rate and rank all applications. The state agency will rate all of the number one ranked applications from each COG to determine the application having the maxi mum impact. That application shall become the statds number one ranked application. PAGENO="0469" 465 The ne~ round in the competition will be between the remaining nine number one ranked applications and the second ranked application from the region previou~y f~nded. The application e~thibiting the maximum impact shall be deemed the state's number two ranked application. This process will continue until the ava,ilaUe funds are e~thausted. Selecticzi Calteria In their effort to rate and rank the applications, the COGs and the state will utilize a uniform selection system. Under the system, each applicant is recpired to address four of the seven selection criteria outlined in the program. Questions are listed under each criteria to facilitate the evaluation of the projects. 1. Benefit to low- and moderate-income persons ~n absolute numbers and percent of total popilation) 2. Supports conservation or expanshtiofi.esidential properties. 3. Permanent job creation or retention which will occur. 4. Supports creation or retention of industry, business or services. 5. The leveraging of public and private commitments. 6. Elimination or prevention of thims or blight. 7. Resolves a serious defidency in public facilities affecting the health, safety, or local economy. Points will be assigned to each of the four selection criteria chosen by an applicant. A maximum of 50 points is availalAe for any one criteria for an overall total of 200 points. Points will be assigned in the foilowing manner: Level ofPrqjectlmpact Pta. No significant impact on the identified proli em 0 Minimal impact on the identified pro 1~em 15 Substantial impact on the identified proliem 30 Maximum impact ontheidentifiedpzouem 50 All applicants will be separated into their respective categories and ranked. Grant Amounts and Match Requirement. The maximum grant amount availahie for all projects is $500,000. There is no minimum grant amount. The applicant is also req.iired to provide a 10 percent program match (5% in kind, 5% cash). Otl~r Provisiczis Definition of Low-Moderate Income Citizens. The low-moderate income index is defined as 80 percent, of median family income. Site Visits. On-site visits are made by state officials to e~mine projects which are ran ked high during the COG review Citizen Participation Plans. Each applicant is reqiired to hold one public hearing before their application is submitted to the state. Such information must be clearly documented. Housing Assistance Plan. The state will ant recpire that the applicant submit a housing assistance nan. PAGENO="0470" 466 Estimate of Administrative Cost and S taffi Nee4~ The S tate of South Carolina has allocated $350,000 for running the program. This amount will be split evenly between the state and HUD under the two percent administrative match rule. The state has hired four full time em plo yees and one part- time em ployee to administer the pro gram. STATE PROGRAM CONTACr: HaroldHenn Division of Community and Intergvernmental Relations 1205 Pendleton Street - Suite 308 Cnlumtia,SC 29201 803/758-3306 PAGENO="0471" 467 WEST VIRGINIA ADMINISTERING AGENCY: Office of Economic and Community Development STATE CDB G ALLOCATION: $1 8,714, 000 PREVIOUS MULTI-YEAR COMMITMENT: $4,482,750 - Program Preparaticzi In West Virginia, the Community Development Division of the Governoz's Office of Economic and Community Development has elected to administer the State CD Block Grant Program in FY 82. The State will also sponsor a series of worl~hope to explain the application procedure to local officials. Program Desigr The West Virginia State CD Program will continue to meet the three national o1~ ectives and have divided their program into two m~or areas with fror funtional categories. A. Development Program 1) Housing 2) CommunityFacilities 3) Economic Development B. Comprehensive Planning Additional details on the two programs are listed below Development Program. Approximately $13,669,000 or 87 percent of the available funds will be set aside for community development grants to eligible units of local government. Under the Development Program, applicants can submit proposals to the state at anytime during the year in three m~or functional categories - housing, community facilities, and economic development. Proposals determined to be complete shall be reviewed on a quarterly basis. In designing a local development program, local applicants are reqiired to assess their comm unity and economic development needs and design a pro gram to overcome the identified problems. Funds requested for the project mt~t be spent within a 24-month period. Development programs may be funded up to $500,000 without a commitment of local funds. Requests in excess of $500,000 up to $750,000 will require a local commitment of funds on a 50/50 basis for funds requested in e~ess of $500,000. In no case shall more than $750,000 of state CD func~ be committed to a singie project. The guide for determining eligibility is found in Section 105 of the Housing and CommunityDevelopment Act. Comprehensive Planning Program. Approximately $1 87,140 or one percent of the State CD funds will be available on a quarterly basis for comprehensive planning grants. Grants will be made available for purposes of preparing or updating long-range comprehnsive plans and capital PAGENO="0472" 468 improvement programs, and land use regulations. Comprehensive planning programs will be limited to a maximum of $40,000 of state funds, and will require a local cash match of 10 percent. Local officials can use the planning grant to prepare documents, which provide them with a well-defined statement of policies and objectives for guiding the physical developnent of their communities. Specific activities which may be funded include the preparation or revision of com prehensive plans, the preparation or updating of local zoning and subdivision regulations or the preparation or updating of long-term capital improvement program and budgets. Local recipients are specifically prohibited from using planning funds to prepare or administer the State CD Program or any other local planning and code enforcement program. Ot1~r Provisictis Citizen Participation Plans. Applicants must publish a notice providing citizens the with infcrmation concerning the amount of funds hung repeated and the proposed activities to be undertaker hold at least one public meeting and give citizens the opportunity to ezamine the proposal and submit comments which the applicant must take into consideration. Housing Assistance Plans. HAPs are not reqiired under the state plan. However, an applicant must complete needs assessment, which includes a survey of housing conditions and the identification of housing assistance needs of low and moderate income households. Administrative Costs. Local administrative costs are limited to 10%. Role of Substat e D istii cts. Under the West Vir gi ala pro gram, the Regional Planning and Develolxnent Councils will have two madatory and two optional roles. First, West Virginia officials have opted to have the regional councils perform the A-95 clearinghouse function to ensure that the proposed CDBG proj ects are consistent with existing regional and local development plans. As part of the state selection process, each suhstate district will be asked to establish regional priorities for the applications submitted from their member agencies. The two optional functions relate to the ability and capacity of eligible communities to apply for and and implement CDBG programs. The substatds can provide technical assistance and assist in the actual administration of the program upon the consent of the local jurisdiction. Estimate of Administrative Cost and Staffing Needs. The state will run the program with one coordinator, four representatives, and one program support person. The staff will also reci eve some assistance from the Community D evel oiin ant Division' a p1 zoning staff. STATE PROGRAM CONTAC1~: Fred Cutup, Director Community Develojxnent Di vision GovernorsOffice of Economic and Community Development State Capitol Complex, ~silding 6, Room B-553 Charleston, WV 25305 304/348-4010 PAGENO="0473" 469 WYOMING ADMINISTERING AGENCY: Department of Economic Planning and Development STATE CDBG ALLOCATION: $2,921,000 PREVIOUS MULTI-YEAR COMM]TMENTh: $1,155,000 Program Preparation The Department of Economic Planning and Development designed their program with input from local officials and in discussions with the Local Government Coordinating Committee. The state has also sponsored a series of public meetings to obtain additional comments on the program from local officials. Program D~igi The basic design of the Wyoming State CD Program is quite similar to the HUD administered CDBG program. The state will continue to stress HUD's three national objectives and will retain all of the activities which were eligible under the HUD program. Despite these similarities, the state has made a num ber of maj or modifications in the application process, the selection criteria, and the type and size of grants. Application Process. The Wyoming submission requirements will be quite simple, and brief. The state will ask for basic information on the community and a narrative describing the problem to be solved, a description of the proposed proj ect designed to solve the problem, the extent to which the proposal constitutes a completed project, a map of the project location, an expected time frame, a detailed budget, and a resolution from the communitls governing board approving the plan. Type and Size of Grants. Wyoming will only award single year grants for a maximum grant size of $400,000. The state has also placed a match requirement on those applicants proposing revenue-~i.oducing projects other than in the area of housing. Communities are required to provide funds for the project in the ratio of one dollar from the applicant to every ten dollars of HUD funds. The match cannot be from state or federal grants. Sdection Criteria The Planning Division of DEPAD will assume the responsibility for rating and ranking applicants and forwarding their recommendations to the Governor. The final review and announcement of grant recipients will be made by the Governor. The selection criteria will be made up of four program variables. The maximum total will be 315 points. 1) Program Assessment 200 points 2) Integrated Effort 50 points 3) Fiscal Analysis 40 points 4) Costs 25 points 315 points PAGENO="0474" 470 Additional details on the selection criteria are discussed below. Program Assessment - 200 points. Applicants will be asked to document their needs and to describe how well proposed activities address those needs. This may include the amount of funds req~iested in relation to the benefits of the expenditures, and previous actions taken to address the identified needs. Integrated E ffort - 50 points. Applicants will be asked to describe how well their projects are combined with other programs to solve a specific problem area. Emphasis will be ~iaced on utilization of funds from other sources to combine with State CD funds. All paints addressing the first two variables will be assessed in terms of impact on the identified m~or project area as follows: 1) The project will have subetantial impact 2) The proj ect will have moderate impact 3) The project will have minimal impact 4) The proj ect will have an insignificant impact Fiscal Analysis -40 points. Applicants must be able to demonstrate a sound fiscal management system. The state will examine: o The ratio of total bond ixxlebtedness to total bonding capacity (20 points) o Whether the applicant is levying the optional 1% sales tax or can indicate the issus passed in the applicant's jurisdiction, but not in the county as a whole (10 points). o Whether the applicant is levying no less than one mill under the maximum mill levy (10 points). Costs- 25 paints. Administrative costs incurred in carrying out the program must not exceed 15% of the total project cost. However, the state will accept an administrative cost of up to 20% far housing rehabilitation projects. The state will closely ezamine the applicants ability to keep administrative costs at an appropriate level. Other Pzovisicz~s Housing Assistance Plan (HAP). A HAP, as defined under the HUD administered program is not recpired during the application process. However, applicants who include housing in their proposals must submit a brief narrative describing how they arrived at the number and type of housing units involved, and why the type of program was selected. Citizen Participation. Applicants are required to solicit citizen input through a properly publicized public hearing befcre submission of an application. The hearing must inform citizens of the dollars available and the range of allowed activities. Financial Recpirements. The State recommends that grantees follow 0MB Circulars A- PAGENO="0475" 471 102 and A-82 procedures or eq~.iivalent procedures. The state notes that the State Examiner will be used for all audit procedures. Rde of Substates. There are no plans in the FY 82 program to include substate districts in the selection procedure. Locaijurisdictions are free to request their assistance. Estimate of Administrative Cost and S taffing N eeds. Wyoming will utilize the entire two percent administrative money to implement the program($58,420). Three panple will be working directly with the program. I~riphersi support will be supplied by the other mem bers of the Planning Division staff. STATE CONTACT PERS ON: Dan Perdue Department of Economic Planning and Development Barrett Building Cheyenne, WY 82002 307/777-7284 PAGENO="0476" 472 * * Briefing Book on Block Grants and * the New Federalism. Coalition on Block Grants and Human Needs April, 1982 PAGENO="0477" 473 ~BLE a? i. n~ri~ix~ria~ For~ord Letter vi Block Grants and the "New Federalism': A Strate3y of Abardonirent 1 Past Experience Overview 3 BY 1982 Block Grant Sursary 5 II. NFW BLOCK (~WP AND BUD(ET P1~)K)SAlB BY 1983 Block Grant Proposals 9 Child Nutrition 10 Maternal and Child Health/NIC 14 Primary Care 17 Child Welfare 20 Low Incai~e Energy and flnergency Assistance 21 Education 25 Education for the Handicapped 28 Rehabilitation Services 32 Enployment and Training 34 Rental Housing Rehabilitation 37 Proposed Changes in BY 1982 Block Grants 38 Cctrniunity Develop-rent/Urban Develop-rent Action Grants 38 Catuiuinity Services 40 Social Services 41 BY 1983 Budget Proposals 42 Aid to Families With Dependent Children 42 Food Stamps 48 Medicaid 55 BY 1984 "Swap/Repeal Proposal 57 BY 1984 "Turnback' Proposal 63 III. IPN~'r (P ThE BLOCK G~AN1'S 67 Irrpact on States 68 Impact on Cities 72 Impact on Rural Areas 74 Impact on Other Vulnerable Constituencies 77 IV. ~Y ISSt~ 81 Neglecting the Truly Need 82 Accountability 84 The Fiscal Situation of States 87 PAGENO="0478" 474 -2- V. F~ 1982 BLOC~ (~N~ SPECIFICS * 91 Ccixrnunity Developxent Block Grant ~ 92 Health Prevention and Services Block Grant 93 Alcohol Abuse, Drug Abuse and Hental Health Block Grant 94 Primary Care Block Grant 95 Maternal and Child Health Block Grant 95 Education Consolidation Program 96 Social Services Block Grant 97 Lot, Incare Energy Assistance Block Grant 97 Catimunity Services Block Grant 98 Title xvii Requiret~nts 100 Block Grant Regulations--HHS BLOCK GRANTS 102 Block Grant Regulations--CDBG Soall Cities 107 vi ~ crir.PE 110 A~er~iix A - l~ Federali~n: Every State a h)ser 130 Ajçen5ix B - PAST EXPERIE1~E 134 Overview 135 LEAA 136 Camtunity Developtent 139 CxvA 142 General Revenue Shariog 145 Partnership for Health 148 Title XX 150 PAGENO="0479" 475 INI~Ux~rI~ This Briefing Book on Block Grants and ~New Federalism' was prepared by the Coalition on Block Grants and Htnnan Needs, an alliance of national organizations sthich are deeply concerned about the devasting implications of the Administration's "New Federalism" proposals for the truly needy in America. Our menber groups include many of the national church ~denaminations, civil rights organizations and groups representing poor and ~orkirng people, disabled Americans, the elderly, children and other vulnerable groups. The Coalition was formed early in 1981 sthen it became clear that the Reagan Administration' s block grant proposals ware designed to reduce and finally eliminate federal support for dozens of programs that are crucial to the well-being of millions of Americans. Since that time, we have focused on the new block grant proposals, the basic entitleient programs and the cost recent "New Federalism" proposals. The ramnbers of the Coalition are united by carson carsiitrnent to five central' principleè in relation to the Administration's initiatives in these areas - - the need for edequate federal funding for hunan needs and incane maintainence programs; -- the need for federal standards to ensure that such funds are targeted to those people wl-o have the greatest needs; - the need to ensure that there is federal enforcanent of civil rights laws and other crucial protections ~ich have resulted fran decedes of struggle to improve the lives of Americans with special needs; - the need for federal standards to ensure that local, state and federal agencies follcw open, detocratic decision-making processes and are bald to basic standards of public accountability, includimj requirenents that there be edequate records, auditing and oversight; and - the need for a careful, deliberative process, with case-by-case consideration of each program sthich is proposed for decentralization, ~thether it should be operated by the federal, state or local goverrinent, or the voluntary sector, and ~hether continuing federal resources, standards and oversight are useful. Much of the debate about "New Federalism" has missed the central point. The "New Federalism" proposals are not simply a trove tcwards "sorting out" of federal and state roles and a decentralization of those federal programs r~thich the states can administer better. If the issue for the Administration really were such a rational "sorting out," the Administration would cot propose turning over virtually all darestic programs to the states witbout federal standards and, in time, withDut federal resources. It ssould insteed: PAGENO="0480" 476 o seriously examine ~that programs must continue to .be administered nationally because they relate to national needs; o continue federal support, standards and oversight for those prograna which require such involvet~nt; o set forth a role for local goverrinents in operating those prograiTe which they can administer better than states or the federal governoent; and o set forth substantial guarantees that private citizens, civic organizations and others will have an opportunity to be inforrerl about aad involved in the process of assessing needs and priorities for the use of funds, as well as the performance of the agencies responsible for administering the programs. The Administration proposals are curiously silent on these issues, focusing exclusively on a wholesale shift of responsibility and temporary resources fran one level of government to another -- fran the federal goverrirent to the states. The `New Federalien" proposals are, clearly, as the President has stated, interim steps tosaird the withorawal of all federal support for over 100 programs. The issue is not block grants at all - it is instead terminal grants. As the Administration keeps changing its proposals, constantly proposing new canbinations of prograrm and features, it is essential that the public and the Congress not lose sight of the fact that the Administration's constant, overriding goal is to find a way out -- to find a way to gain congressional acquiescence in the abandonment of much of the national goverrirents responsibility for dealing with the the national problems of unemployment, poverty, inadequate education ar-ri inadequate services. If the Administration ware to achieve this goal, the consequences would be devasting for the ?merican people and for the state governtents which would assume new responsibilities. The original edition of this Briefing Bcok was developed in the Spring of 1981 in response to the Reagan Ad~iiastrations proposals for block grants in the areas of health, education, social services, cannunity development and emergency assistance. At that time, the Coalition saw the need to fill an information gap about the implications of the Administration's block grant proposals, and rrore than 100 national organizations joined together to raise basic questions about then. Coring the 1981 debate on block grants, the Coalition unfortunately failed to achieve one of its primary goals: to separate the block grant proposals fran the 1981 Qimnibus Budget Reconciliation Act -- a rrmove which would have permitted full and open debate on the merits of the proposed block grants. Along with other 1]~ PAGENO="0481" 477 advocates, however, the Coalition did persuade Congress to ex~pt many key, targeted programs fran the block grants and to add minimal protections and federal requirsa~nts to the new block grant programs. These achievenents are now newly threatened by the Reagan Administration' s proposals for seven new block grants for the upcanimg fiscal year, FY 1983. Even core fundamentaliy, they are threatened by the Administration's proposal to transfer another 43 federal programs to the states beginning in FY 1984, and to allow states to drop those programs at-ri instead receive "super revenue sharing funds" ~hich could be reallocated for any legal purpose. Furthermore, the proposal for state takeover of AFDC and Food Stanps in return for federalization of Medicaid -- the so-called "Swap" -- threatens the continuation of the cost basic survival programs for poor people. This edition of the Briefing Book contains descriptions of the Reagan Mmir~istration' s cost recent block grant proposals and its "New Federaliam" proposals, as s~ll as descriptions of the block grants passed by Congress in 1981 and their regulations, and descriptions of pest block grant programs. This Briefing Book also contains analyses of key issues associated with "no strings" block grants and their likely consequences for a number of constituencies. We lope these materials will continue to provide needed information and stimulate discussion of current and future block grant and "New Federalisn" programs. Among the many individuals and organizations that contributed to the production of the two editions of the Briefing Book are the following: Arclxliocese of Washington, D. C. John Carr Center on Budget and Folicy Priorities Bob Greenstein Center for Ccmrnunity Chaoge Paul Bloyd Rosa Colbert Woody Ginsburg Yolanda Green Sandi Greene Ronnie Kweller Andy t'btt Children's tefense Fund Mary Lee Allen Nancy 82Db Carol Golubuck Sara Rosenbaum Judy Weitz Human Services Information Center Jule Sugarman Gary Bass :iii 99-965 0 - 82 -~ 31. PAGENO="0482" 478 League of Wxnen Voters Kathryn Lavriha National Association of Social Wz)rkers Sudan Bees National Center for Policy Review Bill Taylor National Consumer Law Center Carol Werner National Council of La Raze Bamiro Calvo Lizanne Flaming Bud Kanitz Litia Cna Tanas Saucedo Janet Schroyer-Fortillo National Education Association Debbie S1mn National Health Law Program Judy Waxman National Lc~i IncaTe Bousing Coalition Kate Crawford National Boral Center Alice Hersh Public Strategies Decker Anstran Rural America Shannon Ferguson U.S. Catholic Conference Melanne Verveer u.s. Conference of Mayors Joan Bannon Laura Waxoan Consultants Cindy BrcMn Fran Eizenstat Harlcy Frankel Abigail Ravens Bonnie Kweller of the Center for Cairnunity (I~ange wes largely resjx)nslble for updating the new edition of the ~f Book, as well as for coordinating production of and editing both v~Tons. iv PAGENO="0483" 479 The Coalition expresses its gratitnde to the fr)1lc~4ng organizations, wlxse nonetary contributions helped make pssible publication of this revised Briefing Book on Block Grants and `~New Federalism' American Federation of State, County and Municipal flnployees American Friends Service Camnittee Budget Coalition, AFL-CIO Center for Camnunity than~e Children' s Defense Fond Displaced Haoenakers Net~ork Fair Budget Action Center League of WaTen Voters of the United States National Association of O:mnunity Health Centers National Association of Social Wcrkers National Black Child Develc~ent Institute National Center for Social Welfare FkDlicy and Law National Council of La Baza National Council of Senior Citizens National Education Association National flr~loyn~nt Law Project National Health Law Program National Puerto Rican Forum National Urban Coalition National Urban League Rural America U. S. Catholic Conference -v- PAGENO="0484" 480 COALITION ON BLOCK GRANTS AND HIJMeN NEEDS 1000 Wisconsin Avenue, NW. Washington, D.C. 20007 (Same letter sent to President Reagan) February 25, 1982 Dear Member of Congress: We the undersigned 77 organizations are deeply concerned about the devastat- ing consequences of the Administration's new dmrestic proposals. it is absolutely clear that the combination of block grants, "new Federalism" initiatives and proposed deep cuts in vital income assistance programs will have one over-riding effect: abandonment by the Federal goverrxrE.nt of responsibility for helping to proonte the general welfare of our people. We strongly believe that the Federal goverrsrent has an affirmative duty to carry out this task. The proposals to drastically cut food starrps, Aid to Families with Dependent Children, and Medicaid will deepen further the gap between rich and poor families in America. The sorry fact is that these programs have not kept pace with in- flation during the past decade. These proposed cuts, on top of the ones enacted last year, will not reduce waste -- but they will deny food to hungry children, nedical care for sick old people, and other critical services no decent society should deny the poor, low income workers and the unaigloyed. The proposals to "swap" Medicaid for food stanps and AFDC and to "tumback" 40 programs to the states will have equally serious consequences for those in need. The "swap" plan would shift to the states the cost of financing the Food Stamp program and the Aid to Families with Dependent Children program. But, it does not mandate continuation of these programs. States would have the option of maintaining then, but they may also cut benefits or even transfer these funds to finance highways or other services, or to reduce their deficits. Swapping Medicaid for food stamps and AFDC would also be a huge financial drain on the states. It will cost states $1 billion in 1984 alone. The "turnback" proposal, which is really a repeal of 40 federal programs, would also be costly, about $5 to $16 billion the first year. To help states meet the cost of these programs, the Administration proposes to return excise taxes and a portion of the windfall profits tax beck to then. But, the windfall tax expires in 1990, and few states have oil they could tax on their own. Moreover, excise taxes are not only regressive, but also inelastic and do not grow with the economy. The conclusion seems inescapable that millions of low income Americans would eventually have their already low standards of living reduced if the transfer proposal becomes a reality. In some places, the reductions could be dramatic and the types of hunger and malnutrition problems found in this country only 15 years ago could return. In addition to the draconian budget cuts, we continue to oppose the Adminis- tration's block grant proposals. Turning money over without clear priorities, direction or strategy to the states will undermine national goals in housing, employment and training, education, rehabilitation, social services, health and nutrition. These proposals will mean twa things: less assistance to those in genuine need and a brutal political struggle at the state level where the oust vulx~erable and those without clout are alirost certain losers. -vi- PAGENO="0485" 481 February 25, 1982 Page two It should also be clear by na~ that these block grants are, in the President s own wards, an "interim step" toward total abolition of Federal support for vital domestic needs. ~bt surprisingly, last year's block grants have already been subject to deeper cuts and are prominent candidates for termination and "turnback" to the states. While sane state officials any think they gain flexibility with these block grants, they will find that the funds for then will be eliminacsd and they will be faced with raising their own onney to keep programs operating. We reject the idea that the Federal goverrmeslt has no role or responsibility for helping meet domestic needs. Indeed, many problens such as unemployment, poverty and discrimination are the direct result of inadequate national policies. We don' t believe that the Federal government should abandon the poor or place the full burden on states and carrnwnities for investing in the future with programs for job training, education, housing, decent health care and other needs. But that is the program that has been advanced. If it passes, it will mark a retreat from the nation's caimituent to justice, decency and opportunity. It will also shift enorrnsus new tax burdens to states and carn]unities. And it will spark a "new Feudalism," in which every state will have to fend for itself, not a new Federalism. For these reasons, the undersigned organizations believe this radical program trust be defeated. American Association of University Women American Baptist Churches, USA, Office of Governmental Relations American Council of the Blind American Federation for the Blind American Federation of Teachers American Friends Service Commnittee American Health Planning Association American Public Health Association Americans for Deancratic Action Association of Ccsmniunity Organizations for Reform Now (ACORN) Association for Retarded Citizens Center for Conirunity Change Child Welfare League of America Sincerely, Children's Defense Fund Children's Foundation Coalition for Legal Services Coalition of American Public Employees Camunity Nutrition Institute Congressional Black Caucus Consumer Coalition for Health Consumer Energy Council of America D. C. Conmnission for Women Deafpride, Inc. Disability Rights and Education Defense Fund, Inc. Episcopal Urban Caucus Federal Education Proj ect of the Lawyers' Corrmnittee for Civil Rights Under Law -vii- PAGENO="0486" February 25, 1982 Page three 482 Food Research and Action Center (FRAC) Friends of VISTA Gray Panthers of Metropolitan Washington Housing Assistance Council Information Center for Handicapped Individuals, Inc Jobs Roundtable League of WcxrEn Voters of the United States ü.itheran Council USA, Office for Governrrsmtal Affairs National Anti-Hunger Coalition National Association of Social Workers National Black Child Developmant Institute National Center for Urban Ethuic Affairs National Congress for Carm~inity Economic Deve1o~nt ~National Congress of American Indians National Congress of Neighborhood Women National Cons~zner Law Center National Council of Churches National Council of Cormrunity Mental Health Centers National Council of Jawish War~n National Council of La Raza National Council of Senior Citizens National Low Incai~ Housing Coalition National Network of Runaway Youth and Youth Services, Inc. National Office of Jesuit Social Ministries National Rural Housing Coalition National Society for Children and Adults with Autism National ~Urban Coalition National Urban League National Woman' a Conference Corrmittee National Wonan a Health Network National Women's Law Center National Women's Political Caucus Neighborhood Coalition Older Woman's League Proj ect on Equal Education Rights, NG~1 Legal ~fense and Education Fund Rural America Rural Arrerican Women Rural Coalition SANE Service flriployees International Union Southeast Women' s Employment Coalition United Auto Workers United Cerebral Palsy Association, Inc. United Church of Christ, Office of Church and Society -viii- PAGENO="0487" February 25, 1982 Page four 483 United Food and Cam~rcia1 Workers, Intl. Union, AFL-CIO United Methdist Church, Depar~nent of Human Welfare, Board of Church and Society United Presbyterian Church, Washington Office Wider Opportunities for Waran Waren' s Equity Action League Working Group cn Camunity Developrrent Reform Young Woman's Christian Association of the USA, National Board -ia- PAGENO="0488" 484 ~OQ( ~M1~S ~ i~ "N~ F~AIJ~: A ~RA~FEGY ~ "I have a dream of my own. I think block grants are only the intermediate steps. I dream of the day when the federal govern- ment can substitute for base the turning back to local and state goverrrnents of the tax sources ws ourselves have preampted here at the federal level so that ycxi wnuld have those tax sources." President R~mald Reagan March 1981 During 1981, while much of the nation's attention wss focused on the debate in Congress and around the country over the Reagan budget, an equally significant battle wss shaping up over the Administration's plan to kill dozens of federal programs and replace tham with a series of "block grants" to be administered by the states with virtually no national priorities, standards or oversight. Duder the guise of "increased flexi- bility" and "econanic restraint," the Administration wss advocating a redical program designed to reduce and finally eliminate federal involve- max-it in health, education, social services and other major areas of national need. Ironically, the Reagan Administration, which wss making rhetorical carinitmants to "the truly needy' and `the social safety net," wsnted to replace targeted programs with unfocused block grants that set no priorities. The Administration wsnted to consolidate dozens of federal programs, reduce their funding by 25% and establish a series of state-administered block grants. In the process, a nuither of key targeted programs wnuld have been repealed, including the Child Welfare Act, the Child Abuse and Neglect Act, the Education for All Handicapped Children Act, the Rehabili- tation Act, the Waxen' s Educational Equity Act and laws establishing federally funded carrnunity and migrant health centers, arrong others. The Administration justified the proposed 25% funding cuts for the block grants by claiming that substantial administrative savings s~ould re- sult frcm program consolidation. Available data, however, suggested that the estimated savings ware greatly exaggerated. Many of the programs that the Administration wanted to eliminate or consolidate ware established by Congress after documented neglect and abuse at the state level. In many cases, states had a history of being unwilling or unable to meet the needs of hczneless children, black lung victims, migrant farmwnrkers or the econanically disadvantaged, to name just a few. It seamed unlikely that the continuing needs of these and PAGENO="0489" 485 -2- other vulnerable groups would be met by turning over less ironey to states, with no requiraments for accountability and no federal direction or over- sight. The Administration' s block grant proposals contained virtually no requireTents to target assistance on the basis of need, no citizen partici- pation mandates, no civil rights protections, no program quality standards ard no federal oversight or evaluation. There was no prohibition against substituting federal for state or local funds and no requiranent for "main- tenance of effort." The proposals included no role for state legisla- tures, no application or planning process and no basic accountability pro- cedures. Fortunately, Congress was persuaded to retain as distinct, categori- cal programs the key targeted programs mentioned above. Nevertheless, by consolidating many other programs into block grants, and slashing funds by up to 25%, Congress did set the stage for reduced services, diminished accountability ard increased canpetition arrong needy constituencies. With many essential features of federal programs rarovar1 ard avail- able funds drastically reduced, the new block grants mean less assistance to needy individuals, families ard camaunities, as well as a brutal polit- ical struggle at the state level, ~tiere the poor and others witi-out polit- ical clout will often be the losers. Not only is the process for allocat- ing block grant funds at the state level far rare likely to respond to political clout than to human needs, but it alan pits one needy group against another -- older citizens against poor families, children's advo- cates against the handicapped -- in a desperate political battle over re- duced resources. In short, the Reagan block grants ware not a step towards a new federal-state parthership, but a step towards abardoreent of federal responsibility for meeting human needs. The block grants passed by Congress in 1981 have set the stage for even deeper cuts and less accountability in the future, as the Reagan "New Federalien", "Swap", "Turnback" and FY 1983 block grant proposals clearly denonstrate. Again under the guise of giving states nore flexibility in their use of federal funds, these proposals ~ould actually eliminate federal support, over several years, for both the 1982 block grants -- and for other targeted programs that w~uld be put into these or new proposed block grants -- and for vital incane maintainence and nutrition programs that the states cannot possibly maintain at adequate levels without drastically increasing taxes. These proposals demcrnstrate the Reagan Administration's intention to eliminate virtually all federal support for human needs programs. PAGENO="0490" 486 -3-- PAST I~tfl?~CE (WERV1E~ A recurrent public policy debate has concerned the trade-of fs between categorical and block grant assistance programs. Since the l940s, consolidating categorical programs into broad block grants has been suggested as a way to streamline federal assistance programs. In 1949, the first Hoover Ccemission recanmended that "a systes of grants be established based upon broad categories - such as highways, education, public assistance and public health." Through the l950s and early l960s, several block grant programs were proposed. Congress enacted five block grant programs between 1966 and 1974: the Partnership for Health Act of 1966 (314(d)); the Osnibus Cries Control and Safe Streets Act of 1968; the Cciriprehensive E~nployment and Training Act (CETA) of 1973; the Cctrrnunity DevelopTent Block Grant Program (CDB3) in 1974; and, in 1975, the Title XX amendrients to the Social Security Act. These programs were either consolidations of many smaller categorical programs into one large grant, as in the partnership for Health, CDBG and CETA, or an entirely new program, as in the Safe Streets Act of 1968. The arguments in favor of block grants are familiar: * Efficient delivery of services at the state and local level and reduced red tape and service duplication. * Improved accountability and access- ibility. * More responsive and innovative programs that meet the needs of the citizens at the local level. The experience with the five block grant programs, however, does not support these arguments. The Law Enforcement Assistance Administration's block grants were considered ineffective and, as a result, the program was abolished by 1980. The state-administered Title XX Social Services programs has had significant problams, with lack of accountability a major concern. Cover- nors have resisted an evaluation that could have answered the cost basic questions about the programs effectiveness and impact, and advocates have charged that it has not met the needs of poor people. The CalTnunity DevelopTent Block Grant program has also been heavily criticized, with evaluations concluding that local governments have been PAGENO="0491" 487 -4- unable or unwilling to achieve major congressional objectives with their CDBG funds. There is also substantial evidence that program effectiveness and public accountability do not improve with block grants. The Canprehensive flnployment and Training Act provides an example. It is well documented that until eligibility standards were tightened, many local governments passed over minorities and the long-term unamployed and brought less disadvantaged -- and in some cases even ineligible -- people onto CETA payrolls. In fact, previous experience with block grant programs shows that they have achieved only minimal impact on the substance and effectiveness of services and have provided no real impetus for states and localities to develop innovative programs. In short, block grants have not yielded the results vthich their supporters prcmised: increased efficiency, responsive- ness and innovation. Instead, they have illustrated the problws that occur ~then federal funds are transferred to states and localities without direction, accountability or specific objectives. Ironically, a General Accounting Office report called for new and tighter controls on CDBG at the very mar~nt that the Reagan Administration was acting to eliminate the program's safeguards and accountability tools. We must learn the lessons of our past experience, not coupound the errors. PAGENO="0492" 488 -5- F~ 1982 BL(X~ GENif SIIWRY The n~ block grants represent a middle ground between the original no-strings' Reagan propDsals and the meaningful federal oversight and direction sought by advocates. Fewer programs than the Administration wented were consolidated into the nine block grants; and minimal targeting, citizen participation and oversight provisions were included in the block grant legislation. In brief: o The changes in the (kzmiinityDeVelCplEflt Block Grant program rerove the stringent ap~i~ioii and citizen participation features of the original program, but do reguire one public hear- ing on a jurisdiction' a plan. The requireTent that the funds principally benefit lv and rroderate incare areas is stressed less by the new Adminis- tration. States have the option of administering t~ie Small Cities (non-entitlerent jurisdiction) program or allying the federal government to administer it. o There are four block grants in the health area. Excluded froit the blocks, and retained as cate- gorical programs, are immunization, tuberculosis, black lung, venereal ~3isease, developilental dis- abilities (prcpitsed for inclusion in the Social Services block grant), migrant health centers~ and a new adolescent pregnancy program. o The Health Preventia~i arxl Services Block Grant includes hare health services, rodent control, fluoridation, health education/risk reduction, health incentive grants, arergency medical ser- vices grants, rape crisis services and hyperten- sion programs. A public hearing on the state plan is required beginning in FY 1983, and states must establish criteria for evaluating the per- formance of grantees. o The Alcc*x1 AbJse,Dru9Ab1Se!~!~~4 Services Block Grant includes mental health cen- ters and alcohol and drug abuse programs. Pre- viously funded mental health centers are to re- ceive funds in FY 1982, 1983 and 1984. A public hearing and grantee performance evaluation criteria are required. o The Prinary Care Block Grant includes only one program, cainunity health centers, ~~nith are PAGENO="0493" 489 -6- operated on a categorical program basis this year, FY 1982. States may administer the centers beginning in FY 1983, or they may choose to have the federal government continue to do so. The state must set criteria for evaluating the health centers and, beginning in Fl 1983, hold a public hearing on its plan. * The Maternal and thud Health Block Grant in- cludes a number of programu for mothers and children, including services for crippled and disabled children, lead-based paint poisoning prevention, Sudden Inf ant Death Syndrose pro- graam, hemophilia diagnosis and treatment, adolescent pregnancy and genetic diseases. No public hearing is required. * Education Consolidation has two parts: Title I replaces (and largely waters down) the pro- gram for disadvantaged children under Title I of the Elementary and Secondary Education Act. Title II consolidates other ESEA programu, Teacher Corps, teacher training, career educa- tion and alcohol and drug abuse education. State education agencies must pass through 80% of their funds to local education agencies. * The Social Services Block Grant consists of only Title XX of the Social Security Act, thich provides a range of services such as child and adult day care, protective services, employment services, counseling, preparation and delivery of meals and health support services. While Title XX was fon~erly targeted to low income persons, the new block grant does not include inccrne eligibility criteria. It does, however, retain the original program goals ~thich include helping recipients achieve and/or maintain economic self-sufficiency. * The Low Inccix~ Energy Assistance Block Grant provides funds to help low income people pay their fuel bills. ~t includes incczne criteria, requires equitable treatment of renters and prohibits counting energy assistance as income in detenriining other benefits. A public hear- ing on the state plan is required, beginning in Fl 1983. * The Carnunity Services Block Grant continues the local community action program, with con- tinued funding in Fl 1982 for existing CAP PAGENO="0494" 490 -7- agencies. Congress did not go along with the Reagan prop~sa1 to include this pro- gram in the Social Services Block Grant. A public hearing is required beginning in FY 1983. Funded CAPs or other nonprofit organizations nust have boards canprised of at least one third of dexocratically selected representatives of the por in the area. Block Grant Regulaticz~s. Regulations for the seven block grants administered by the Department of Health and Human Services (all except camsunity developnent and education consolidation) are minimal, failing for the cost part to elaborate on or interpret the language of the statute. In every pessible instance, HHS has left maximum discretion to the states in administering the block grants -- fran determining that public hearings are not required this year (despite a general provision, in Title XVII of the act, requiring hearings every year), to allowing states to be the primary auditors of their programs, to stating that the department will ordinarily defer to a state' s interpretation of the law unless it is clearly erroneous, to allowing states to determine the form and, to some extent, the content of their block grant plans. Federal oversight is minimal, with no requireisots for data collection by derographic characteristics. Civil rights requiranents are minimal and achiguous. The "interim final" regulations were published in the October 1, 1981, Federal Resister. A similar situation exists with regard to the propesed regulations for the CDBG Seiall Cities program, ~iich were published in the Federal Register on Novmeber 20. Publication of proposed regulations for CDBG entitlaTent jurisdictions has been delayed until Congress approves the Soall Cities regs. Again, maximum discretion for interpreting the law is left to the states, with no prescribed application, recordkeeping or program evaluation forms or standards. The regulations do not address citizen participation and dcwnplay the prmnecy of the CDBG program' s primary objective -- to principally benefit lv and rroderate incare people. State arx~ Local Strategies Ccrnmunity groups are using a variety of strategies for gettipg involved in block grant palicy caking and implamentation. Hest are ~orking in state-wide coalitions that include labor unions, religious organizations, groups that advocate for minorities, wa-rem, children, and handicapped, etc., service providers, professional associations, neighbortood and grassroots organizations and, in sate cases, individuals. PAGENO="0495" 491 -8- Strategies include building relationships with state officials, bureaucrats and legislators so they are aware that camiunity groups and their allies want to be involved in the block grant process; holding educa- tional fonims on block grants for both constituents and representatives of state governmsnt; pushing for representation on state block grant advisory bodies; holding "people's hearings" in the absence of state-sponsored pub- lic hearings; collecting data (beyond what is required in the law) and documsnting service reductions caused by block grants and federal budget cuts; pranoting news stories about the impact of block grants and budget cuts; and proposing state legislation and regulations that reinstate tar- geting, oversight, public participation, etc., that are now lacking in the federal law. If your group is working on block grant issues, you should contact: The Coalition on Block Grants and Human Needs 1000 Wisconsin Avenue, N.W. Washington, D.C. 20007 202/333-0822 PAGENO="0496" 492 -9- II. New Block Grant and Budget Proposals Following are sunTnaries of the Reagan Administrations new block grant proposals for F? 1983; proposed changes in block grants that were en- acted in F? 1982; proposed budget cuts in safety net entitleosnt pro- grairs for F? 1983; the proposed "Swap" of AFDC and food stamps for Medi- caid in F? 1984; and the proposed "Turnback" of 43 additional federal pro- graos to the states in F? 1984. PAGENO="0497" 493 -10- II. FT 1983 Block Grant Proposals (bud Nutrition Block Grant The Reagan Administration is proposing to cut the school breakfast and child care food prograirs by about one-third and then merge than into a block grant. These cuts would be on top of cuts of 30% last year in the child care food program and nearly 20% in the school breakfast program. Most of those affected would be low inccine children. Backgrc*ind on the School Breakfast Program * The school breakfast program provides a nutritious breakfast each school day to about 3.6 million children in about 33,000 schools; 88% of these children are poor or near-poor (ccming from families below 185% of the poverty line). Many of. these children are from families in which there is only one parent, who leaves home early to work. * Studies have found that the program has an important nutritional impact. A major Con- gressional Budget Office study issued in 1980 found that except for the WIC program, the breakfast program is the roost nutritionally effective of the child nutrition prograrrs. Compared to the school lunch program and the special milk program, the breakfast program was "the roost beneficial" in tenis of nutritional effectiveness, according to CBO, which added that "its cost-effectiveness is high." CBO found that children participating in the break- fast program have improved diets and a higher concentration of hemoglobin (indicating less anemia) due to the program. * Studies have consistently shown that many of the low income children participating in the breakfast program cane to school without eat- ing breakfast and would have no morning meal if the program were not available. A substan- tial body of evidence shows that children who do not eat breakfast not only have poorer nutrition, but also do not learn as well. * Last year the breakfast program was cut nearly $80 million, or nearly 20 percent; over 800 fewer schools offer breakfast compared to last 99-965 0 - 82 - 32 PAGENO="0498" 494 -11- year. The percentage of schools that have left the breakfast program is alrrost as large as the percentage of schools that have dropped out of the lunch program. * As a result of last year' s lopislation, there are also over 400,000 fewer children participatiog in the school breakfast program. This is as large a decline (in percentage te~ins) as has occurred in the school lunch program. About 70% of the decline is in free or reduced-price breakfasts served to poor or near-poor children. Badcgrcund on the thud Care Food Progran * The child care food program helps provide rreals to children of ~orkiog parents (principally children of working rrothers in one-parent families) ~nile they are cared for in day care institutions. It is targeted principally at lcw incane children. About 75% of the children in the program are poor or near-poor, and over 90% of the program's funds support ireals for poor or near-poor children. * The program was cut by nearly $130 million, or 30%, last year. These cuts, ccrrhined with the major reductions in fundiog for social services programs that support day care institutions for lo~ inccrre ~orkiog families, are haviog a major irpact on these institutions. Scxne institutions closed. ~`bst reiiain open, but are beiog forced to raise fees charged to lcw incane parents, reduciog the nunber of children ~tho are cared for and/or reduciog the quality of care. * The principal group adversely affected is the w~rking poor -- the same group that bore the brunt of many of last year's cuts. The N~ Pr~osals * If no cuts had been made last year, these tr~ programs ~ould have cost $950 to $975 million in fiscal 1983. As a result of last year's cuts, the programs are expected to cost about $735 million next year if rx further cuts are made. The new proposal is to cartmine then in a block grant at $488 million, a new cut of 33%, aed an overall reduction of 50%. * The cuts ~odld gro~i in subsequent years, because the Administration is proposiog that the new block grant be permanently funded at the $488 million level, with no ad- justment in future years for risirm~ food prices. By the end of the decede, the programs s%ould have declined by PAGENO="0499" 495 -12- about two-thirds fran ~there they would have been without last year s cuts or the new proposals. Schools and child care centers could not make up for this loss. There will be no way around the fact that food will cost mare than it does today. * A likely result of the new cuts is that a substantial nunber of additional schools will drop the breakfast program, as there would be no way for schools to replace the lost funds. Mast children in the program are poor and cannot pay mare for the breakfasts. Large parts of the breakfast program would simply disappear. Hundreds of thousands (perhaps several million) of poor and near-pxr children would no longer be able to eat breakfast at school, and many would start the school day with no breakfast at all. * The new cuts would work equal if not greater hardships on day care centers. Day care institions are not as wall organized politically as schools, and they will probably fare badly in the ccrnpetition for funds at the state level. * In efdition, in some states the child care food program would probably terminate. In about 12 states, the U.S. Dapartrnent of Agriculture -- rather than the state -- now runs this program. In sare of these states, the state Education Dapartinent is prohibited by law fran disbursing funds to private institutions -- and mast child care institutions are private, non-profit institutions. The new proposed block grant would end US[lk operation of the program in these 12 states, so it is likely that in some of thmn, low incarie day care centers would be cut off entirely. * Probl~ns would also be very severe for family and group day care hares, as scxre states would likely provide funds only to day care centers and terminate family and group day care hares. The haies are mare difficult to handle fran an administrative standpoint, yet it is there that an increasing nurrber of 1cM-incczne children are cared for because they are generally less expensive than centers. Many of the persons providing family hare day care are thsoselves low incarie ~nen. * The biggest losers would be the working poor. The cuts in support for low incane day care institutions would make low cost child care harder to find. These parents would generally have to pay mare for child care at the sane tine that their benefits in other programs (such as PF1X~ and food stamps) are being cut. Increased child care costs reduce the gains fran working at low-wage jobs; and the sharp reductions in the child care food program would be one mare PAGENO="0500" 496 -13- factor contributing to the erosion of work incentives for low incone working mothers. The Concept of the Block Grant * There is no logic in ccxnbining the school breakfast and child care food prograns into a block grant. The program with which the breakfast program is most closely allied is the school lunch program, not the child care program -- but school lunch would not be in the block grant, while the child care program would be. The breakfast program and the child care food program are run by different institutions at the local level, and in some places they are even ad- ministered by different departments at the state level. It is hard to envision how any efficiencies or econanies could result frcm the block grant. * The school breakfast/child care block grant was an `11th hour" proposal, hurriedly thrown together by the Administra- tion in late January as an alternative to further cuts in reimbursements for non-poor students in the school lunch program. After planning for months for further school lunch cuts, the Administration wisely backed off that idea at the last minute -- but then sutwtituted this equally un- wise block grant proposal instead. The Administration nay have concluded that because most families in the breakfast and child care programs are poor, these programs are more vulnerable than school lunch. Prepared by: Bob Greenstein Center on Budget and Policy Priorities 202/544-0591 PAGENO="0501" 497 -14- II. FY 1983 Block Grant Proposals Maternal and Child Health /WIC Block Grant Congress passed the Maternal and Child Health (MCH) Block Grant as part of the Qanibus Budget Reconciliation Act of 1981. It builds on the only federal health program targeted on methers and children, the Title V Maternal and Child Health and Crippled Children's Program, passed by Con- gress 46 years ago, and it replaces this program and six others which provide health services for riothers and children: Lead-Based Paint Poisoning Prevention Program, Sudden Infant Death Syndrome funds, the Supplemental Security Income program of support services for disabled children, adolescent pregnancy services, Genetic Disease Program and a program for the development of hesophilia diagnosis and treatment centers. Under these programs, almest 17 million pregnant women and children receive services ranging from prenatal care, checkups and immunizations to the mest sophisticated types of medical care for crippling childhood diseases and intensive infant care for newborns. These programs also support a network of clinics in most counties across the country to which Medicaid-eligible families and poor families not eligible for Medicaid can go for routine health care for their children. The MCH block is currently federally funded at $348 million, a 30.1% cut, including inflation, from FY 1981 levels. The Special Supplemental Food Program for Women, Inf ants and Children (WIC) was enacted by Congress in 1972. It provides prescription food packages (iron fortified infant formula, milk, eggs, cheese, cereal, juice), nutrition education and access to health care to over 2 million low income pregnant and nursing methers, infants and young children who are medically certified to be at nutritional risk. WIC is entirely federally financed. About $950 million was appropriated for WIC for FY 1982. It is one of the few social progracs that Congress did not cut last year, although the President had proposed a 30% cut. The. Reagan Administration is now proposing to end the WIC program and expand the Maternal and Child Health Block Grant to provide the prescrip- tion food packages and nutrition services now available through WIC. How- ever, the funds added to the MCH Block Grant to compensate for terminating WIC would be 30% below current WIC operating levels. If funding for nutritional services for low-income women and children now provided through WIC is cut by 30%, hundreds of thousands of wxr~n, infants and children will suffer the effects of nutritional deficiencies. Already, WIC is unable to reach all who need it. Tens of thossands of methers and children are on waiting lists or are turned away because there PAGENO="0502" 498 -15-- are insufficient funds to serve them. Not unrelated is the fact that in the U.S. today, one out of every 81 infants and one out of every 47 non-white infants dies each year. To block grant WIC will shortchange nothers and children. Pregnant and nursing wa~n need to eat adequately and receive necessary medical care to have healthy babies. Inf ants and children need to eat adequately and receive necessary medical care to stay well. Less of either will re- duce the chances children have to live and to grow up healthy. Anything short of a full and focused canmitznent to both is detrimental to methers and children. To block grant WIC and the !NiI program will n~an fewer overall federal and state dollars going to affect naternal and child health: * Congress is mere likely to provide ade- quate funds for maternal and child health and nutritional services if WIC and MCH are kept as separate programs. Both MCII and PlC currently have bipartisan support in their respective authorizing and appropriations subcawnittees. If jurisdiction for WIC is shifted to the authorizing and appropriations subccrsnittees which handle the MCH block, the two programs will be forced to ccmpete for the sanm limited funds. * If WIC and MCH are merged, state health de- partments will lose noney. WIC requires no state matching funds, but the MCII block re- quires $3 in state matching funds for every $4 in federal funds. Any WIC matching re- quimsiont which calls for new state expendi- tures will mean financially-strapped states will decline federal dollars and provide less food and health care for nothers and children. If the MCII state match is reduced or eliminated to accamTodate the WIC merger, further cutbacks in an already minimal program will be assured. To block grant WIC n~ans to end one of the nxst effective federal progran~ on the bocks: * A study at the Harvard School of Public Health found that participation in WIC is associated with a marked reduction in the incidence of low birth weight infants. (Low birth weight is one of the leading causes of death in the U.S. and is associated with higher rates of disability and retardation.) WIC PAGENO="0503" 499 -16- infants averaged 128 more grace at birth than infants fran a control group. The study determined, conservatively, that each $1 spent on the prenatal component of WIC averts $3 in hoepitalization ccets after birth. * A study conducted by the Massachusetts Depart- ment of Public Health, in ~thich births to 4,000 WIC mothers were n~tched with 4,000 compar- able non-WIC births, concluded that the neonatal mortality rate for the WIC births was only one- third the rate for the non-WIC births. * t~ta collected by numerous states and by the Center for Disease Control shows that WIC results in n~rked reductions in anemia. Prepared by: Judith Weitz and Sara Rosenbaum Children's Defense Fund 202/483-1470 800/424-9602 PAGENO="0504" 500 -17-- II * FY 1983 Block Grant Proposals Priuaiy Q~re Block Grant Ccmmunity and Migrant Health Centers are private, non-profit programs which provide primary medical care to persons who live in areas with too few or no physicians and high infant rrDrtality rates. In F? 1982, federal funding for Cctnmunity Health Centers was cut by 25% and funding for Migrant Health Centers by 18%. Coniriunity Health Centers were placed in their own Primary Care Block Grant, and states were given the option of taking over the program beginning FY 1983. Congress required states which want to take over the program to provide 20% state matching for FY 1983 and 33% in F? 1984. The Department of Health and Human Services (HHS) has urged states to take over the Primary Care Block Grant. It has told states not to worry about the required state match. HHS has also attacked Ccrnmunity Health Centers in other ways. On Detober 18, 1981, the Department issued a list of 1,500 areas no longer considered medically underserved, an action which threatened the loss of federal funds for 95 to 100 clinics. The "designations" were based on extremely faulty health planning data. For example, parts of Harlem and Watts and East Oakland, California -- impoverished ccmmunities with high infant mertallty rates and few physicians -- were considered by HHS as no longer medically underserved. After a great deal of political pressure directed against HHS and data frcm camnunity health centers, the Depart- ment is reconsidering its action. HHS is also threatening clinics with loss of funding because they have not met "perfoi~nce criteria." Sane clinics have received notices which do not even specify which criteria have not been met. Congress continued Migrant Health Centers as a federal program in F? 1982, fearing that states would be unwilling to provide health care to migratory workers who cross state lines. For F? 1983, President Reagan proposes including Black Lung Clinics, Migrant Health Centers and Family Planning prograirs in an expanded Primary Care Block Grant. F\mding would remain at F? 1982 levels, with no increases to cover inflation. As a direct result of the F? 1982 budget cuts, 40 ccmmunity health centers have closed. By the end of the year, 120 carrnuriity health centers and 14 migrant centers could close, resulting in the loss of medical care to 1.3 million people in medically underserved areas and 50,000 migrant and seasonal farmworkers. The 772 Carimunity and 128 Migrant Health Cen- ters serve 6 million people living in rural and urban medically under- served areas. These health centers provide medical care for the "truly needy": PAGENO="0505" 501 -18- o 80% of all center users have incates below 150% of the pDverty line ($12,675 for a family of four). o Health centers each year provide care for 559,000 migrant and seasonal farm~orkers and their families o 80% of health center users are mLnorities. o Health centers care for 400,000 elderly eadi year. The nunber of elderly receiving care at health enters has doubled in the last three years. Ccrnmunity and Migrant Health Centers have increased access to health care for millions of Americans and have in~o7ed the health status of their carrnunities: o Three-fourths of health cefiter users receIve preventive care. Health centers enphasize preqancy care and care for children. o In one southern canmunity, infant deaths decreased 50% followir~ establislirrent of a health center. OntiTrunity clinics in Baltirrore decreased the incidence of rheumatic fever by 60%. Ccxmnnunity and Migrant Health Centers provide quality care: o In a study of Catinunity H~alth Centers between 1968 and 1976, New York' s Albert Einstein School of Medicine found that these centers provided care "generally equal to and in same instances superior to that of other established providers of health care." Ccxrununity and Migrant Health Centers are (~st-Effective. o They reduce the use of expensive hospital energency roatis and cost 33% to 60% less than hospital outpatient departnents and energency roans. Studies have shown that these centers reduce hospitalization rates by 25% to 66%. The amount of money thus PAGENO="0506" 502 -19-- saved exceeds the cost of the entire $248 million program. A recent independent study showed that last year alone, health centers saved the Medicaid program $580 million. Prepared by: Judy Waxrran National Health Law Program 202/232-7061 PAGENO="0507" 503 -20- II. FY 1983 Block Grant Prcxosals thud Welfare Block Grant Tn its FY 1983 budoet the Administration has ororosed, once aoain, to include the child welfare oroorarns in a block orant that ~ould include the Title IV-B Child Welfare Services and Trainino Procrams and the Titles IV-A and IV-E Foster Care and Adontion Assistance Proorams addressed by P.L. 96-272. Fhndino for the block crrant ~ould be limited to $380 million for F~ 1983 and thereafter -- at least 18 oercent bela~, the current fundino levels for these oroorarns and 46 oercent below the fundina levels orioinallv anticinated in P. L. 96-272 for F'! 1983. Adeouate fundiro of these oroarams is essential to trove toward the family Dermanence homeless children need. Passaae of the block orant ~ould effectively reoeal P. L. 96-272. States ~ould no lot-icier have fiscal incentives to develno orotections for individual children-i in care, such as case olans and ceriodic case reviews. or to ensure that children receive aualitv care and oerrranent families. Incentives for the states to develoo cost-effective oroorams to keeo families tooether and to reunify families that are seoarated ~sould be eliminated, as ~ould incentives for the adootion of soecial needs children. This ororosal ianores findinos that oublic dollars used to keeo families toaether or to trove children into oermanent adootive families are core cost-effective in the loom run than olacino or leaviro children in out-of-ho*rie care. At the same time, other orotosed cuts of at least $2 million in the state orant rxjrtion of the child abuse orooram, $1.2 billion in AFJX~ and over $400 million in the Social Services Block Grant ~ould also undermine basic family suororts, forciro core and core families to turn to the child welfare svstam as a last resort. Wno ~ould oav? The cost vulnerable children in our society and American taxoavers. Preoared by: Mary Lee Allen Children's L~fense Fund 202/483-1470 800/424-9602 PAGENO="0508" 504 -21- II * F! 1983 Block Grant Prcço6als L~ Iso~ie Energy and ~rgency 2~ssistance Block Grant The Reagan Administration's FY 1983 budget proprses numerous, and very substantial, changes in the lc~ incane energy assistance program, one of the 43 programs the Administration wants to turn over to the states as part of its `New Federalism" venture. The changes presented in the F~ 1983 budget include: * Consolidating the energy assistance program with the arergency assistance program. * Cutting the funding level by one-third fran FY 1982 levels (fran $l.875 billion in FY 1982 to $1.3 billion in FY 1983). This is even lover than ~that the Administration sought last year. * Counting energy assistance benefits as incane in determining eligibility and benefit levels for both AFIX and food stan~s. * Providing states "added flexibility in deter- mining incare eligibility requirarents and payment levels." * Changing the state allocation formula "to target funds to states nost in need" by focusing on heating costs in the winter (rather than annual lmcne energy costs). * Eliminating "unnecessary restrictions... ~shich currently prevent states fran de- livery of effective energy and energency assistance to tbose ~-io need it the nost." The lv inccme energy assistance program was established to help lv incare housebolds offset the huge increases in hare energy costs resulting fran actions taken by OPEC and by the federal goverroent to decontrol the price of oil and to ~ase in deregulation of natural gas prices. Since 1973, fuel oil prices have increased over six-fold; natural gas prices have nore than quadrupled; and the cost of electricity has nearly tripled. These costs are expected to clirrib even higher -- with the encouraganent and suppcrt of the Administration. t'bre and core lv incare households PAGENO="0509" 505 -22-- simply cannot afford to pay their utility bills, and many literally face the day-to-day choice of "heat or eat." Last year the Administration proposed essentially the same kind of program consolidation, but at a proposed budget level of $1.4 billion rather than the $1.3 billion being proposed for F? `83. Congress rebuffed that effort and instead passed a three-year authorization for the Low In- cm's Energy Assistance Program, authorizing funding of $l.875 billion per year. The mrsrgency assistance program was maintained as before. About half the states participate in the emergency assistance program, a 50-50 federal-state match program, for which the federal share was $61 million last year. The program assists families with children facing a wide range of emergency situations, of which energy is one. The energy assistance legislation enacted last year was made "looser" in its requirements than the expiring statute, but it contained 16 assur- ances that states Sust meet in their program designs, and it contained definitions, provisions for ensuring canpliance and so forth. The Adminis- tration `s proposal would gut these requirements. In fact, the Department of Health and Huiran Services virtually abdicated its responsibility for the program at the outset and gave the states tremendous discretion. For example, the law requires program outreach, public participation in the development of the state plan, equitable treatment of renters and targeting of benefits to those most in need, among other requirements. But HHS made no attempt to define what was meant by adequate outreach, for example, or what factors should be considered in targeting of benefit levels. Instead, whatever a state did -- as lon~ as it said it would do scsiething -- was deemed acceptable. The result is that 11115 has very little knowledge of how the program is running, how well the intent of the law is being met and how adequately energy assistance needs are being met. The existing situation -- with specific assurances in the statute -- suggests that the sweeping changes proposed by the Administration would wipe mit any means of holding either IIFIS or the states accountable to any kind of standard, no matter how minimal. Although the Administration has not yet submitted the specifics of its proposal, it appears that the following will be included as part of the effort to remove any "burden" fran HHS and to provide the utmost dis- cretion to the states: * deletion of mandatory outreach; * elimination of targeting of highest benefits to those with lowest inca's in proportion to energy costs; * changes in eligibility language; * deletion of the "income disregard" pro- vision (which has prevented energy PAGENO="0510" 506 -23- assistance fran being counted as incctne for other programs); * elimination of HHS s respansibility for data collection; * elimination of the energy crisis assistance reserve requiranent; * elimination of lIFTS's respDnsibility to investigate ccrnpliance with the Act; * elimination of the state independent audit requirenent; * deletion of the fair hearing require- ment; * deletion of the definition of median inccme (which required HHS to provide certain data to the states); * deletion of the 15% limit on use of funds for ~eatherization activities. These changes s~ould be accanpanied by a change in the formula to target funds to states with the highest winter heating costs, along with a one-third bidget reduction (the rationale is that the budget request is adequate if "targeted' appropriately) and consolidation with the energency assistance program. Inpact of Proposed thanges Consolidation ~ould result in diffusing suppnrt for energy assistance, as the block grant ~ould suddenly be available for a broad range of energency situations, not just energy. Nearly half the states had not even participated in the small energency assistance program (which required a 50% match) before; and energy assistance was started specifically because of huge increases in energy costs. The changes listed above wnuld tear the essence out of existing legis- lation: they eliminate standards and measures that have been found essential in the past; they eliminate protections for the intended "safety net" beneficiaries; and they eliminate any method of bolding HHS and the states accountable for ensuring wall-run programs, equitable distribution of assistance and knovledge of whn is served and hov adequate the help is in relation to the need. Ebr an Administration that talks about "waste, fraud, and abuse," it is a real contradiction to reiove investigation, audit and repnfting requirenents. PAGENO="0511" 507 -24-. The energy assistance legislation was simplified greatly last year; left in were minimal requirements necessary to ensure that the funds were used to meet congressional intent. By stripping out such standards, the funds almost become "general revenue sharing" funds, and there is no way to insist that low-income households are treated fairly and that their needs are recognized. Without national standards, the variance among states would become much greater, even though the program originated because of the severe national energy problem. Under the new proposal, one greatly diminished "pot" would be expected to do everything. For example, the Administration has justified its request to eliminate the Energy Department's weatherization program by deleting the existing 15% limit on the use of energy assistance funds for weatherization. In fact, Administration-led opposition to supplemental appropriations for the energy assistance block grant argued that no additional funds were needed, since some states had exercised their op- tion to transfer 10% of their funds to certain other block grants. (The Administration had argued hard for the adoption of the 10% transfer option last year.) The Administration's proposal to count energy assistance as income in deteimining eligibility and benefit levels for AFDC and food stamps would be devastating. Qirrently, participants in those programs are categori- cally eligible for energy assistance. The proposed change would be a "dollar-for-dollar" trade-off for AFDC recipients, effectively cutting of f energy assistance for those families. Those receiving food stamps would have their benefits cut $3.50 to $5.25 for every $10 of energy assistance. This change would hit the elderly especially hard, as they comprise 35% to 40% of current energy assistance recipients. The Administration's proposed one-third budget cut for this block grant would mean a drastic cut in benefits and/or the number of households served. This, too, would be at state discretion. Less than 8 million of the 20 million eligible households were served in FY 1981, with an average benefit level of $225, at a funding level of $1.85 billion. At $1.3 billion, if half the eligible households were served and a state exercised the existing transfer options (15% for weatherization, 10% for other block grants), the average benefit would be $85. Over the past year, gas prices rose 20% and oil prices increased over 11%; oil prices increased 30% during the last 15 months. What will happen to people who cannot pay their energy bills if funds are cut back and then diffused further through the changes proposed by the Administration? Prepared by: Carol Werner National Consumer Law Center 202/543-6060 PAGENO="0512" 508 -25- II. FY 1983 Block Grant Prcçosals B~ucatiai Block Grants Title I of the El~iEntary ani Secmlary Education Act Five million children who live in poor neighborhoods and who are behind in school will becane victims of the budget ax as a result of reduced funding for Title I of the Ele~entary and Secondary Education Act. Title I is the largest federal education aid program and last year was rraintained as a separate program, entitled Chapter I of the Education Con- solidation and Improvaiient Act, and kept out of the block grant, Chapter II. The cuts are estimated at $1.9 billion for FY `82 and $1.5 billion for FY 83, as ccmpared to the current funding level of $3.1 billion. In many instances, current Title I funding is not adequate to help as many children as it did last year. At present, estimates shcei that only 45% of the 11 million eligible Title I children are being served. Under the Title I program, coney is used to provide extra help in reading and math for elanentary school children who are not performing at the level of other children their age. Teachers and classrocm aides who ~enrk with small groups of educationally disadvantaged children also rely on Title I funds for their salaries. Special programs to help children of migrant werkers and suamer school programs for high school students depend on Title I funds as well. Recent studies shcw that students who partici- pate in various Title I programs do better in school than catiparable students not in Title I programs. Cne study conducted by the Stanford Research Institute found that Title I children make core than a conth' s gain in reading for every conth they spend in the program. Even though Title I was kept out of the block grant and maintained as a separate program last year, it was severely weakened. Title I conies will still be distributed to local education agencies (LEA~s) using a formula based on poverty, but the funds no longer will be targeted to those children cost in need. Other restrictions on education conies were also weakened. L&A.s are only required to continue funding programs at 90%, not 100%, of the level that they did in previous years. And even though LE1~s are not permitted to use federal coney to replace or "supplant" state and local coney, the bill includes no enforcament for these provisions. Parental consultation and involvement in the design and implementation of education programs is nci~i optional. State Education Block Grants The education block grant, Chapter II of the Education Consolidation and Improvement Act, consolidates all other programs contained in the Elementary and Secondary Education Act, including: Grants for the Disad- PAGENO="0513" 509 -26-- vantaged; Career Education Incentives; Consumer Education; Teacher Corps; and the Alcchol and Drug Abuse Act. For FY 1983, $433 million is authorized for the block grant. Under the block grant, states are raguired to share 80% of the funding with the tEAs. To assist in parcelling out the funds, a state, in conjunction with the state education agency, must consult with an advisory canmittee. The casnittee, appointed by the governor, rrust offer broad representation of the educational interests and the general public in the state. States xm.ist also provide t~inely public notice and public dissenina- tion of information. It is left to the discretion of state and local education agencies to determine which of these educational activities to fund. Vocatiaial aud Adult Educaticxi These programs are proposed for consolidation into a state block grant of vocational and adult education. Inçiact Aid This program canpensates local school districts whose revenues are reduced because the parents of school-aged children live or wDrk on tax-exanpt federal property. Payments are made directly to the local school districts, and funds may be used for operating expenses and sate- tines for construction. In FY 1983, assistance will be made only to districts on behalf of children whose parents both live and ~ork on federal property. Pefl Grants This program provides financial aid directly to undergraduate stu- dents, and the grants are the baseline for other financial assistance. Giaranteed Student Loans In addition to funding cuts, eligibility requirenents for guaranteed student loans will be stricter and the arount of loans to each applicant will be limited. Prepared by: Kathryn Lavriha League of Wzxnen Voters of the United States 202/296-1770 99-965 0 - 82 - 33 PAGENO="0514" SELECTED EDUCATION BUDGET CUTS [All levels are expressed in millions] FY 1982 level *will be incorporated into a block grant TOTAL FY 1983 BUDGET AUTHORITY FOR ALL EDUCATION PROGRAMS: $10,266 ($2,800 M less than proposed for FY 1982.) Pro gram Proposed FY 1983 level Proposed FY 1984 level CHAPTER I, EDUCATION AND CONSOLIDATION IMPROVEMENT ACT Title I, Aid to the Disadvantaged $2,978 $1,942 $1,500 CHAPTER 2, EDUCATION AND CONSOLIDATION IMPROVEMENT ACT State Education Block Grant 471 433 305 Vocational & Adult Education 634 500 500 Impact Aid 453 289 289 Pell Grants 2,188 1,400 1,000 Guaranteed Student Loans 3,061 2,485 2,515 -27- PAGENO="0515" 511 -28- II * F~ 1983 Block Grant Prcçosals Educzticn for the Haix3ica~ed Block Grant President's Reagan' s proposed FY 1983 budget w~u1d cut spending for the education of handicapped students by nearly 30 percent and change existing law to create tw education of the handicapped block grants which ~uld amend P.L. 94-142, the Education for All Handica~ed Children Act, to "reduce federal restrictions and regulations." Fran all indications, the proposed changes in the law ~xuId be tantarrount to repeal of the sub- stantive protections and quality assurances contained in P.L. 94-142. The tv~ block grants wDuld be: * State Block Grant -- Would ccmbine P .L. 94-142, P.L. 89-313 (state-operated programs currently under Chapter I of the Education Consolidation and Irnplarentation Act of 1981 -- formerly Title I of the Elenentary and Secondary Education Act) and Preschool Incentive Grants (currently under P.L. 94-142). The arrount of noney for the block represents a 30 percent cut in current funding. Significant changes to P. L. 94-142 are to be proposed. * ~ Pu~poseB1odc Grant -- All of the Education of the Handicapped Act (EllA) dis- cretionary programs (everything but P.L. 94-142) s~uld be repealed and merged into one fund to be kept at the federal level and re- duced by 15 percent. There is ro indication of how this xnnney is to be spent. Rssibly all applicants for federal grants for re- search, deronstratiori, and dissenination in special education ~xuld be canpeting rather than having discreet categories of funding, i.e., severely handicapped, regional resource centers, parent information centers, etc. The current discretionary programs are "ear- marked" in the budget for funding of projects in the following areas: * an early childhood irodel and daronstra- tion program; * a program of research in education of the handicapped; PAGENO="0516" 512 -29- * a program of regional resource centers; * severely handicapped projects; * a deaf-blind program; * regional education programs -- a pro- gram of vocational, adult and post- secondary education for handicapped youth; and * a program of instructional media ser- vices and captioned films. With the Administration calling for severe budget cuts, substantive amendments to P.L. 94-142 and repeal of P.L. 89-313 and the EHA discretion- ary programs in favor of block grants, it is inportant to recall s~kiy this legislation came into being. Fran at least the late l950s, the federal goverrinent assuned an increasing seed and catalytic' role in the educa- tion of handicapped children; thus the EllA discretionary programs vere inaugurated over time. These programs must continue their vital "seed and catalytic role," along with the additional role of support for the larger mission of P.L. 94-142. P.L. 94-142 itself ~s by no means enacted in haste -- it ss~s the result of at least four years of intensive deliberation by the Congress. In the end, Congress decided that tw~ objectives rrnst be achieved: a lar- ger federal fiscal partnership in the education of handicapped children, and the establishment of a `mininun floor" of educational rights guaran- tees for handicapped children and their parents. Surveys of Special Education administrators nationwide conducted by the National Association of State Directors of Special Education (F~St~E) and the Council of Administrators of Special Education (CASE) (a division of The Council for Exceptional thildren) have docunented the following devastating results that vould likely occur if the Reagan Administration' s proposals are adopted by the Congress: * Severe budget cuts and substantive changes in the law ~uld drastically affect services to handicapped children. Local and state efforts will not be able to cczrpansate for the lack of federal funds. A result ~ould be decreases in services to preschool-aged and 18-21-year-old students. * Sate districts reported that 20 to 50 percent of exceptional students wDuld lose services. * Evidenced by state legislative activity last year under sinilar threat, states ~sould con- PAGENO="0517" 513 -30-. sider weakening their own special education mandates. * Personnel would be reduced. * Teacher/pupil ratios would worsen as class size increased. * While the nation is in need of at least 64,000 new special education teachers, the budget proposals cosld effectively bring teacher training to a standstill. * Reductions in special education opportunities will eventually n~an greater social and tax- payer costs. In sum, the Administration is proposing to discard some 15 years of negotiation and agre~nt respecting the federal role in special education and respecting the relative size of the federal fiscal ccriinitment in meet- ing specific education needs of handicapped children. Prepared by: Barbara &i~ith The Council for Exceptional (lildren' 703/620-3660 PAGENO="0518" 514 -31- Fl 1982 and FT 1983 Budz~t Request' 1982 Third Coot. AdministratiOn'8 Administration's P 1981 Appropriation Resolution (FL. 97-92; Empires March 31, 1982) 1982 Revised Rescission Request 1983 Budget Request Education of the Handicapped Act (ERA) * State Grants (P.L. 94-142) $ 874.5 $ 931.008 9672.436 s Preschool Incentive Grants 25.0 24.0 24.0 * Deaf-Blind Centers 16.0 15.36 15.36 * Severely Handicapped Projects 4.375 2.88 2.88 * Early Childhood Education 17.5 9.6 9.6 * Regional, Vocational, Adult 2.95 2.832 2.832 and Postsecoodary Programs * Innovation and Development 15.0 7.2 7.2 * Media Services and Captioned Films 17.0 11.52 11.52 * Regional Resource Centers 7.656 2.88 2.88 * Recruitment and Information .75 .72 .72 * Personnel Development 43.5 33.6 33.6 * Special Studies 1.0 .48 ~ EHA Total 81,025.231 $1,042.08 8783.508 - * State Special Education Block - - - $771685 Grant (Includes P.1. 94-142, Preschool Incentive Grants and Pt. 89-313) * Special Purpose Block Grant - - - (Includes all ERA Discretionary Programs) Olock Grant Total - - $845.668 Education Consolidation and Improvement Act (ECIA) * Handicapped State Operated Programs $ 152.625 $ 146.52 $ 116.16 - (P.L. 89-313) * Education for the Disadvantaged 3,104.317 2,885.969 2,474.4 1,942.0 (Chapter 1, ECIA) * Dchool Improvement Block Grant 537.485 483.84 470.4 432.0 (Chapter 2, ECIA) Rehabilitation Services * State Grants $ 854.259 $ 863.04 $ 771.869 $ 579.536 Vocational and Adult Education * Vocational Education (Includes $ 681.639 $ 653.266 $ 549.445 - State Grantsand Other Services) * Adult Education State Grants 100.0 86.4 84.48 - Total $ 781.639 $ 739.666 $ 633.925 * Vocational and Adult Education - - - $500.0 Block Grant In millions of dollars. Prepared By THE COUNCIL FOR EXCEPTIONAL CHILDREN - DEPARTHENT OF GOVERNMENTAL RELATIONS -. February 8, 1982 PAGENO="0519" 515 -32-- II. F! 1983 Block Grant Proposals Rthabili~ticm Servi~ R~ABILITATI(~ S.~VIC~ AI1[NI~~K1~IQI (~A) (in millictis) F! 1983 P.L. g7_35 Pr~id~it's ~nthoriza- Proposed F! 1981 F! 1982 tiori PT 1983 Basic State Grant $854 $863 $943.9 block grant Service Projects 29.860 23.9 30.11 block grant Training 21.7 19.2 25.5 block grant Independent Living 18 17.28 19.4 block grant Total of Rehab. Services Block Grant - - $637 For 1983, the President is proposing that Rehabilitation Services pro- grans be transferred fran the Department of Education to the Depar1n~nt of Health and Huxran Services. Moreover, these categorical prograns would be consolidated and funded at a total level of $637 million for FY 1983. (Jan- bined, these prograns are presently being funded at $923.6 million. This is a $286.6 million reduction. In addition, the Administration proposes a recission of $91.1 million for the vocational rehabilitation stats grant program in PY 1982. These prograzan ~uld be terminated as part of the "turnback" initiative in F? 1984. PAGENO="0520" 516 -33- ~OCATICNAL RE2IABILITATICII SERVICES FW~ ThE SOCIAL SECXJHflY ThL~r FIN)S Pr~1dent's Proposed FT 1981 F! 19821 F! 1983 Fran the Old-Age Survivors $11.5 million $264,000 $924,000 Insurance Trust Fund Fran the Social Security 75.6 million 1.7 million 6.1 million Disability Insurance Trust Fund 1Effective October 1, 1981, by P.L. 97-35, the vocational rehabilitation services mechanim~i under the OASI and DI trust funds was changed. The present law provides reimburs~nent to states for rehabilitation services !~X after they have shown disabled beneficiaries to be successfully engaging in "subetantial gainful activity" (SGA) for nine continuous months, and that the vocational rehabilitation services contributed to the successful return to SGA. Determinations will be handled on a case by case basis. This reimbursesent after SQA has already drastically reduced expenditures and will continue to do so. Prepared by: Kathy Roy United Cerebral Palsy Association, Inc. 202/842-1266 PAGENO="0521" 517 -34- II. F~ 1983 Block Grant Proposals &ployn~nt and Training Block Grant In the face of the highest unenployment levels in the country since before World War II -- over 10 million individuals out of work -- the Reagan Administration wants to shirk federal responsibility in this area and turn the problam over to the states. It is preparing to capitalize on the Septamber 30, 1982, expiration date of the Canprehensive Buployment and Training Act (CETA), which has provided federally directed amployment and training services for the disadvantaged since 1973. The CE'r~3fprogram is no stranger to the block grant issue: It is one of the niajor prograsm enacted under former President Nixon's "New Federalism." Fraud and program abuse during CETA's early experience, before new federal regula- tions tightened the program in the late l970s, undermined public and political support. But the CETA experience shows hc~v quickly we forget - we now otserve the Reagan Administration asking for a return to the no-strings approach that hurt CETA in its early years. The first step in the Administration's strategy is to eliminate CETA's effectiveness through severe funding slashes. Specifically, in FT 1982, the Reagan Administration and Congress: * Eliminated 80% of the funding for prograsm under the Youth E~ployment and Desonstra- tion Projects Act (YEDPA), eliminated Title VIII of CETA (the Young Adult Conservation Corps) and cut 20% fran the Title IV Suniier Youth Buployment Program. * Ccmpletely eliminated the Public Service Ebiployment (PSE) prograzrs, which in 1981 funded approxisr~tely 310,000 jots for over 500,000 people during the year. In addi- tion to providing job experience and skill training to long-term unamployed adults, the PSE progress financed much-needed ccsmunity services that facilitated a variety of prograns for nrniy constituencies, in- cluding the elderly, the handicapped and local schools. * Reduced by 64% the funding for CETA Title III national prograns which provided special services for specific groups of disadvantaged jots seekers, such as displaced hanemakers, the elderly, migrants and welfare recipients. PAGENO="0522" 518 -35- These funding reductions may contini.~ through the re~ainder of FY 1982, under the Continuing Resolution sthich expires on Harch 31. Congress rruist pass legislation to provide funds for the rarainder of this year, and the Administration is likely to propose further cuts and perhaps even rescissions. The Administration and several mambers of Congress have offered proposals to replace CETA with a rrore nodest program. Three bills, in addition to the Administration proposals, are important: S. 2036, intro- duced by Sens. t~n Quayle (R-Ind.) and Edward M. Kennedy (D-Hass.); H. R. 5320, introduced b~' Rep. liugustus Hawkins (D-Calif.); and H. R. 5461, intro- duced by Rep. James Jef fords (R-Vt.). Each of the four proposals ~~ould shift responsibility for coordination and oversight of targeted training prograira to states, localities and the private sector. All contain fewar federal protections for equitable service to minorities, opportunities for citizen participation and input, non-discrimination and grievance processes. Smite of the critical federal responsibilities and protections that the bills ~uld waaken are: Fundiz~ Level. Proposals range fran a high of $5 billion (Hawkins) to a lv of $2.4 billion (The Administration). Plannir~ Process. CETA requires local plans outlining the services that will meet local enployrrent and training needs, review and caurrent by interested citizens and casrainity based organizations and several advisory councils with broad representation. Each of the four proposals structures planning input through only one advisory body, a Private Industry Council (Plc), which ~uld have a majority of business representatives, though representation of other local interests -- labor, camnunity based organizations, the eligible population, etc. -- is also mandated. The Administration and Jeffords proposals do not require public review and camnent on proposed plans. hInthistraticn of ILx~l Services. CETA was administered by local "prime sponsors,~~ usually local goverrrrent officials, wbo ware presunably sanewhat accountable to the pdblic. All of the new proposals except Hawkins' ally the governor to designate the Private Industry Council as the administrator of enployment and training services for the disadvan- taged; and they do not require citizen input, except minimal representa- tion of consuners and local citizens on the council. Grievance aM Qixplaint Procedures. Program reguiraments and procedural protections are only e~fecUve if there is a means of enforcenent other than self-enforcenent by the egency administering the program. CETA mandated an administrative grievance procedure available to all program participants and other interested individuals. Of the new bills, only the Hawkins proposal continuss the CETA grievance procedure. The Administration' s proposal lets the governor set canplaint policy, and the others rely solely on continued self-policing through the Ccnptroller General or Inspector General. PAGENO="0523" 519 -36- W~e aed A1lc~rice Payn~nts. The Administration proposal and the Quayl~7R~nnedy bill prohibit the payment of training allowances or wages to individuals in subsidized jobs. It is ironic that the twn proposals ~thidi seek the least federal role and the nost flexible design propose a strict federal regulation s~kiich nay have a significant adverse affect on the ability of the rrost disadvantaged individuals to participate in employment and training services. Both the Senate Labor and Human Resources Camdttee and the House Education and Labor Carunittee expect to report bills in early May to meet the May 15 deadline for FY 83 appropriations. The fact that the Adminis- tration is suboitting its own bill, rather than ~orking through Senator Quayle, the Republican chair of the Senate Ebployment Subcatunittee, indicates that it will push strongly for block granting of employment and training responsibilities to the governors and to private industry. The Reagan Administration's CETA proposals wnuld do away with important safeguards, obliterate the benefit of the several years' exper- ience with CETA block grant operations and return the anployeent and training system to its situation prior to the 1976 and 1978 CFTA amendments. Vital national policy objectives once again will be endan- gered, with the same state officials responsible for operating programs also in charge of nonitoring perforurance and securing caupliance. Abdication of federal responsibility to assist the jobless, by inade- quately funding enployment programs and sharply reducing federal standards and oversight, is incanpatible with current crisis levels of joblessness and is a shDrtsighted approach to cost cutting. Our society gains a great deal nore by helping the jobless obtain a means to a livelilood than by paying the extremely high social costs of keeping them on welfare or dealing with the law enforcement, health and bousing problems caused by leaving them destitute. Prepared by: Larry Glantz. National flnployment Law Project 202/544-2185 PAGENO="0524" 520 -37- II. FY 1963 Block Grant Propoeals ~ztal Bc*ising R~iabi1itatiCn Block Grant As part of its plan to eliminate virtually all federal housing subsidies for lv and rroderate incane people, the Administration proposes to replace the Section 8 rroderate rehabilitation program and the Section 312 rehab loan program with a Rental Rehabilitation Block Grant. These grants se~uld go to state and local governzrents to cover up to 50% of the cost of rehabilitating multi-family rental properties. Local goverr~nts or building ~ners ~uld be required to natch the block grant contribution dollar for dollar. The rehabbed units ~.ould be available to lv incave families with housing certificates, a second form of subsidy. This proposal further cuts federal support for housing rehabilita- tion. It substitutes grants averaging $5, 000 for the Section 8 program ~fnich provided an average subsidy twice that high, and it ties those units to people who will receive an inadequately subsidized housing certificate. Unlike current housing vouchers, these n~t certificates would no longer limit the percentage of incczTe which poor people ~uld devote to rent. Many certificate holders ~ould wind up spending 30, 40, even 50% of their incares on shelter. ~t the sana time, the Section 8 substantial rehabilitation program -- ~iich is especially useful for lv incare housing suffering frco very serious deterioration -- and all new construction subsidies wyild be halted. Rents on existing public housing and subsidized housing ~ould also be raised drastically. Prepared by: Andy ~.btt Center for Careunity Change 202/338-3134 PAGENO="0525" 521 -38- II. Prcçosed tharwjes in FY 1962 Block Grants O3imlnity I~velcpIEnt Block Grant/Urban DevelcpvEnt Action Grants The Administration' s F? 1983 proposals for Catrrtunity Developrent Block Grants ((leG) and Urban Develcpnent Action Grants (ULWtG) are basically unchanged, in b~get and prograintatic tenns, fran the legisla-. tion and appropriations in effect for F? 1982. Budget authority for both years is $3.456 billion for CE~G and $440 million for Ut7~G. But (leG and UflkG are inclnded among the 40 programs which the Administration ~ould turn back to the states beginning in F? 1984. Such a transfer ~ould certainly be the final blov against any efforts to ensure that these funds are targeted to needy people. Interposing the states between the federal and local governments is likely to lead to several deleterious results: * a further weakening of federal standards on crucial targeting, citizen participa- tion, civil rights, displacement and basic performance issues, similar to the weakening which is already occurring for the `&nall Cities" CC8G program which wes turned over to the states in 1981; * eventual elimination of all federal funds for these activities; and * the building of 50 new state bureaucracies to administer these programs, with which most states have had no experience at all. HUD' s proposed regulations governing the state-operated "&nall Cities" program are not yet final, and they may face* a congressional reso- lution of disapproval which could further delay their implementation until as late as mid-June. Nevertheless these regulations are important, because they reflect what FlU]) ~ould likely propose for an urban (lEG program as well. The deficiencies in the proposed regulations are: * they fail to define lv and moderate incane; * they dilute the emphasis on the law' s require- ment that the program principally benefit lv and moderate incane persons, and they do not provide a means for monitoring campliance with this requirement; PAGENO="0526" 522 -39- * the proposed performance reporting require- rrents provide no uniformity of reporting and no correlation with stated activities or na- tional priorities/objectives as spelled ait in the law; * they make no provision for citizen canplaints, such as to whan such carplaints should be addressed or tin~etables for response. The Administration's Ct~G proposals have another major drawhack. They drop separate funding for several other programs, saying that CI]3G will substitute for all of then, while adding other pressures as veil. Arrorq these pressures are the folloving: * the proposed FY `83 phase-out of veatheriza- tion funds fran the Department of Energy; since this activity is also eligible for CDBG funding, it is likely to place an additional denand on CD funds, hot without aLditional rroney to support it; * Enterprise Zone legislation which gives priority to applicants that s1x~i a high level of infra- structure and public service (police, fire, sani- tation) camnitments to their proposed zones; these denands, again, are likely to lead zone applicants to CDBG as a resource for providing these services at the expense of other CD canmitnents, especially to existing lov/nrxlerate carunumity needs; * proposals fran the President's Housing Carrnission that housing construction be made an eligible activity under CDBG; given the proposed drastic curbs in other federally subsidized housing con- struction, this proposal alone could quickly and totally drain any local CDBG entitlenent and still not make a dent in the urutet need resulting fran the loss of the other housing programs. Prepared by: Paul Bloyd Center for Carrrtunity Change 202/338-6382 PAGENO="0527" 523 -40- II. Prop~sèd tharxjes in FY 1982 Block Grants O:minity Services Block Grant Funded at $336.5 million in BY 1982, the Carinunity Services Block Grant wnuld be reduced by nearly 70%, to $112.5 million, in BY 1983. While official budget documents project that between 295 and 520 Cainiunity Action Agencies and Limited PurpDse Agencies ~ould close down during FL 1982, unreleased documents reveal that closer to tsso-thirds of the existing 900 CMs ssould close. The $112.5 million ~ould be used as follows: * $100 million to be made in nrrithly payoents to the states -- a 67% reduction fran funds available this year. * $12.5 million for administration, including $6.2 million for close-out activities of grantees. The Cepartment of Health and Human Services is considering three alternatives on the funding of carniunity econanic developent, carrnunity credit unions, rural loans and rural buusing, migrant detonstrations and youth spDrts programs provided for in the Secretary' s Discretionary Fund of the Cairunity Services Block Grant: take no action assuming Congress will provide specific direction to HHS in the next Continuing Resolution for FY `82; offer $20 million for the programs in FY `82; or fund discre- tionary programs at the full level of $32 million in BY `82. With alloca- tions already made to states under the Caiimunity Services Block Grant, any increase in the discretionary fund ~ould reduce state allocations. HHS has decided that in the 11 states ~iich do not yet use the block grant, the eligible BY `82 grantees will include CM and limited purpose agencies that received Sec. 221 funds under program accounts 01 and 05; or under rural housing and rehabilitation (Sec. 222); and conduit or dele~te agency organizations for migrant and seasonal farim~ork programs. J~b~ver, HHS rerorts that no Sec. 222 grants were made in BY `81, and, therefore, that rural ~using and rehabilitation agencies are not eligible. Prepared by: Jule Sugarman Human Services Information Center 703/527-1634 PAGENO="0528" 524 -41- II. Prcçosed thar~es in FY 1982 Block Grants Social Services Block Grant The Social Services Block Grant is currently funded at $2.4 billion. For FY 1983, the Mministration is proposing to decrease funding to $1.97 billion and include services nn~i provided under the ~`brk Incentive Pro- gram, currently funded separately at $245.7 million. PAGENO="0529" 525 -42- II * FY 1983 Budget Prcçosals Aid to Families With Dependent Children The President' s bu:Iget for BY 1983 proposes drastic changes in the program of Aid to Families With Dependent Children which ~uld directly cit AFDC benefit pants to needy children by alnnst $2 billion. There WDuld also be other reductions in federal funding for A~)C which would stimulate states to reduce benefit levels or rrnke other cuts to adjust for such losses. The AFEC Work Incentive Program ~uld also be eliminated. The AFEC cuts will irr~x)se severe hardships on the poorest ~xren and children in the country, who at best receive only enough for a bare subsistence budget under the program. O~rer seven and a half million children in 3.8 million families currenti~receive AFDC, and, f~U~e majority, it is used as a targrrary stopap d~ing pthEiods when there are no other means available to then. !~breover, these benefit cuts cane on top of last year * s cuts which eliminated the supposed "high-incane" families fran the rolls. Benefits to those AFEC families who manage to obtain jobs were drastically reduced by those cuts, so that a ~orking family that is still eligible has no itore net incane beyond the AFIX~ bene- fit after four rronths of arployment, and has very little "extra" inccrne fran ~rking during the first four rronths. It is thus even clearer this year than last that the proposed reduc- tions ~ould cit into the basic food, shelter and clothing needs of desperately poor children. In a8dition, for many families, the loss of AFIJC also means loss of Hedicaid. Moreover, these sane families would be the victims of proposed cuts in other programs such as food stamps and housing assistance, so that their overall loss would be even rrore than the arrount of lost AFEC benefits. The President has also proposed repeal of A~)C as part of "Nw Federa liam.N. He has proposed that in BY 1984, the federal government establiih a wholly federally funded medical assistance plan to replace the current federal/state Hedicaid program, and repeal the current AFDC and food stamp programs, leaving it to the states to determine what, if any, replacenent programs they wish to establish. This proposal also includes the "turn- back" of 43 other programs to state governments. It is certainly much too soon to know whether the swap of food stamps and AFDC for Medica~ will receive serious legislative consideration. Lbwever, the mere fact that the proposal has been made means that those concerned about the AFDC prbgram rrnist both deal with the proposals for immediate bodget cuts and keep a watchful eye on the further develcpnent of the "swap" and "turnback" proposals. The Administration' s AFIX2 budget proposals for BY 1983 include the following cuts in direct benefits: 99-966 0 - 82 - 3L~ PAGENO="0530" 526 -43- 0 States ~x~ld be req~4red to pay less than fuil benefits ~&ienever an AFOC recipient lived in a ~s~ld with others. For example, benefits s.xuld be reduced or "pro-rated" when tw A~1X families live together, or when the children's grandirother or older sister lives with then and their rrother, whether or not those relatives had any incane, were rraking any contributions to the IWEC recipients, or were thanselves receiving assistance. It appears that at least 800,000 families ~uld be affected by this proposal (families living with "others" other than stepparents). Also, 389,000 of the "other" individuals living with ~FDC recipients receive sane form of cash public assistance. The Administration claims that there are econatiies frcm shared living expenses in shared households and that they are often not taken into account in AFDC. Hovever states are already permitted to "pro-rate" the shelter portion of the grant when non-recipients in the household have incare above their needs. Furthernore, 14 states, including California, Michigan, New York, Oregon and Verrront, already take account of any reduced shelter costs attributable to sharing, by determining aid on the basis of the family's actual shelter payments. ~twenty-three of the retaining 36 states pay benefits belcw full needs, so that a family receives less than what the state believes it reguires to rreet its shelter needs. Of course, states raist also count all incare that is actually contributed to the family, and, since last year, must count all inccnie of a stepparent, whether or not any is contributed. (-$174 million)* * States ~x~ld a1sobel~!~i.l~eI t cx ut the i1XXI~E of a~y wire lat~ ~i1t liv zig in the 1x~ldas ir~m to the AFDC - thildren. This proposal, like the one discussed above, ~uld cut benefits regardless of the arrount of incate that wes actually available to the children, and regardless of any evidence of reduced costs as a result of the presence of the unrelated adult. It seams to be aimed simply at a return to the era of "nan-in-the-house" rules, when states denied benefits by assuniing that visitors were living in the house and contributing their incane to the family, and then made midnight raids to find such visitors. (-$69 million) * AFDC benefits ~i1d be redtx~ed if AFDC recipients received ~rgy Assista~e. ~The figures in parentheses after each item are the CMB projections of the federal "savings" fran the change. In the case of the direct benefit cuts, the amount of lost benefits as a result of the change ~uld be significantly higher and could be twice as much as this figure. PAGENO="0531" 527 -44- Energy assistance is provided as a supplenent to AFLX~ and other inccne in recognition of a poor family's inability to meet soaring energy costs out of its incane. States consider incane, inclixling AF]X~ payments, in determining a family's eligibility for energy assistance. Counting energy assistance back against AETX simply deprives families receiving AFDC of energy aid, while it goes to other families with the same anx)unt of incane fran a different source. (-$175 million) o Family benefits axild be reduced ~i~t the ~~xingest dnild readies ~j~r resoving the nother's needs fran the grant; e.g., a nother ar~1 t~ diildren ~ild receive a grant for t~. The Administration says this is because the parent is no longer needed to care for the children and therefore should be seeking work. However, the incate loss to the family cannot be net by the rrother' s simply seeking work -- she mast be able to find a job. If she does find a job, there is no reason to treat her children any less favorably than the needy children of other working parents i.e., to do other than continue to provide for her needs and count her inccxre in determining the anount of aid payable. (-$47 million) o ~1icents for AFOC ~ild be required to jc* seard~ for a fixed period before they aed their diildren ccxild receive AFDC, uc nmtter 1~ pressing their need ~s at the tinie they a~li~ Recipients ~to are deaned to be ettployable are required to job search under current law. Under this proposal, applicants would be required to job search before their applications could be acted on. It is inhuman to impose a veiting period on children who are in dire need, especially when states already take nore than 30 days to make decisions on over 25% of the applications received. F\irtheriaore, the Administration' s savings figures suggest that the fact of obtaining a job during job search would be a disqualification for aid -- that the $30 and 1/3 earnings disregard might not be applied to earnings received fran any such job. If the mother doesn't find a job, her family suffers fran the prolonged delay in getting assistance; if she does find a job, her family suffers during the period in which they are witbout incane and also loses the suppleiiental AFDC and attached Medicaid coverage to which they would otherwise be entitled. (-$145 million) o States ~ild be r~ired to establish ~k relief pxogr~ ar*1 to limit a~vernge ueder their AFDC-U pr~ra~~ to families of u~iplc~ed parenth ~ ~re wozting in a ~rk relief assigrmie~t. All states would have to have sai~ work relief programs. States that wish to aid needy unenployed workers would have to establish large- scale statewide programs, since inability to provide a work relief slot for the unanployed parent would necessitate denial of aid to the family. Individuals assigned to work relief would not receive salaries, but would simply labor for a public or private non-profit eiiployer in a second class or ssorse status, without any eiployee rights - Social Security coverage, collective bargaining, advancenent to other jobs -- or PAGENO="0532" 528 -45- fringe benefits - sick leave, vacation, health insurance, pensions. Since they wnuld not receive a salary, they ~ould not benefit from the earnings disregard, and thus could not be better off by ~orking; but they would be ~orse of f unless all their expenses were paid for. It is not even fruitful to debate whether or not these projects could be turned into useful training programs, since there is no funding provided for such a purpose. The projected savings are puzzling, since families ~sould con- tinue to receive their AFDC benefits while in wrk relief, and there are increased administrative costs. Wnere then does the Administration find savings? Is it assuming that erecting new hurdles to the receipt of aid will insure that there will be some otherwise eligible families who wan' t clear the hurdles? (mandate ~,ork relief: -$49 million; limit AFDC-U: -$86 million) * Mirxr diildren, other than SSI recipients, ~X) have ii~e of r ~n, seth as Social Seoiri~b~fits bes~I on the ____ ~sed ~rent, ~i1dbe frrced to ccntril~ite ix~neto neet the needs of their siblir~s. This proposal s~ould deprive children living with half, full or step sisters and brothers of sane of their personal income, even if it is no nore than they personally need. Fbr exan~le, a child receiving Social Security benefits se~uld not have an opportunity to try to save sane of that rroney for ed~ational needs, even though she can no longer receive either Social Security benefits or AFIX for that purpose. Similarly, where the child's incate cares from a personal injury award designed to make up for sane damage caused by a tragic accident, she nay well need the full arrount to rreet her increased needs as a result of the accident. (-$63 million) * thildrenofabeent servicanei ~xild be denied b~fits,desp~~ the fact poverty. The current Administraticn first tried to cut off benefits to children of servicenen during its California tenure but was blocked by a United States Suprarre Court ruling that a parent whD was absent from the home because of military service was as absent as any other, and therefore that his children could not be denied aid if they were otherwise needy. The Administration n~i argues that denying aid to such children wnuld stop "military personnel" from shifting their support responsibility to the publid. F~ver, denying aid to the children will not insure that the absent parent will, or can, provide then with adequate support. Indeed, the California children in the aforenentioned case ~re receiving allotxrents from their absent parents, but these arrounts were far bela.'i their needs because of their parents' l~ pay. (-$16 million) PAGENO="0533" 529 -46- * The program of E~g~cy Assistance for Families ~i1dbe e]~. Supposedly the energy assistance program vould be broadened to allow aid for the types of anergencies that are now met under EAF. I~wever, there ~.ould clearly be no reguiranent that the energy assistance program pay any specific anount of aid for these iteis to poor families with children under 21, the current sccpe of E1\F. Even if there were such a requirsnent, there s~ould nonetheless be a diminution of the aid available to such families, since the Administration is proposing that funds for the energy assistance program be cut over $500 million below 1982 outlays. (-$60 million) * States ~xild be required to round benefits to the next lc~st cbllar aM ~Id be barred fran payiz~j benefits for an~eriod prior to the date of a~licaticn. Currently, states are permitted to pay benefits back to the first day of the nDnth of application, and a few states do so. Families do not show up at the welfare center the day after they becare poor, and paying back to the first day takes this into account: The family gets at least a full xronth' s grant to help deal with the bills they accumulated in that first rronth. (round benefits -$10 million; date of application -$14 million) The Administration is also proposing the following reductions in federal funding: * Federal natdiing ~uld be reduced if state error rates exceed 3%, aM this tolerance level ~xild decline 1% a year to 0 in F~ 1986. This is simply a straightforwerd reduction in federal matching. There is no wey in which errors can ever be totally eliminated, and there is a point at which the noney spent to further reduce errors is rrore than the cost of such errors. ~t~ying a reduction in federal matching to error rates is particularly pernicious, since it encourages states to take any action necessary to avoid overpayments and payments to ineligibles, including risking erronsous denials and terminations, and underpaynents. (-$234 million) * Federal natdiirxg for the Wrk Incentive Program ~*ild be eli~ated. Despite the Administration' s repeated eo~iasis on w~rk require- ments for AFtC recipients, it is proposing to eliminate the only federally funded auployment and training program specifically earmarked for AFtC recipients. Admittedly, the program has had only limited success in pro- PAGENO="0534" 530 -47- viding oppDrtunity for training and in finding jobs for recipients, but that seams the inevitable result of the fact that it has never been funded above $365 million. Simply eliminating the program without providing any federally funded replacaneñt obviously is not going to provide any irore training or find any rrore jobs. (-$245 million) Prepared by: ~ele Blong Center on Social Welfare Tholicy arid Law 202/347-5615 PAGENO="0535" 531 -48- II. FY 1983 &idget Proposals Fbod Staips The Administration is proposing $2.8 billion in new food stamp cuts in fiscal l983.* These cuts ~sould be in addition to nore than $2 billion a year in food stamp reductions enacted last year. The canbined total of nearly $5 billion in reductions fran last year's cuts and fran the new pro- posals approximately equals the dimensions of the cuts proposed last year by Senator Jesse Helms (R-N. C.). The new proposals would hit particularly hard at the elderly and disabled, the working poor and state and local governrrents. The Cbngres- sional budget Office (CBO) estimates that 92% of all elderly and disabled food stamp households (or nearly 2 million households) would have benefits reduced or terminated; 26% of the elderly and disabled households -- or 560,000 households -- would either be terminated or would have benefits cut to such lcw levels ($l-$5 a month) that CR0 expects then to drop out of the program. An additional 66% - or over 1.4 million eldeily and dis- abled households -- would still receive sane food stamps but would have the amount of stamps cut back. Overall, CBO estimates that 25% of all food stamp benefits nc~ provided to elderly and disabled households would be wiped out. According to CR0, 95% of the working poor would be terminated or reduced, and 23% of working households would either be terminated or would drop out because their benefits would be reduced so much. An additional 71% would renain in the program but have their benefits reduced. Working families would lose an average of $684 a year in food stamps. Overall, 41% of all food stamp benefits provided to working households would be eliminated. CR0 estimates show that 85% of the entire food stamp caseload -- or 6.35 million households with about 17 million persons -- would be terminated or have their benefits reduced. *The Administration budget shcMs a net reduction in food stamp costs of $2.3 billion, rather than $2.8 billion. This is because benefit cuts the Administration is proposing in other programs -- such as the Aid to Families with t~pendent Children program (AFtC) -- would reduce families' inccrres and thereby make then eligible for sais additional food stamps. The Administration estimates that the cuts it is proposing in programs such as AFD2 and SSI would result in $500 million nore in fond stamp bene- fits for affected families. As a result, the net change in the. food stamp budget is $2.3 billion. PAGENO="0536" 532 -49- ~`bst of the families and elderly individuals ~fro ~e~uld be affected have very lcw inccmes. The rrost recent USIY~ survey data shows that about 90% of food stamp households have gross incctres below the poverty line during the period they receive food stamps. The average tousebold has a gross incane of $325 a nonth and average cash assets of $66 while it re- ceives stamps. The average food stamp benefit is now 43 cents per person per neal. The new proposals also have severe impacts on state and local govern- rrents. Proposals to bill states for all errors over 3%, to reduce the federal share of state costs in administering the program and to end federal funding for state costs in administering food stamp ~ork require- merits ~ould shift about $700 million in food stamp costs fran the federal goverrnient to state and local governments in FY 1983, and ~uld shift larger arrounts in succeeding years. The Administration s specific proposals for achieving budget cuts in the Food Stamp program are as follows: * olishir~ the earned inc~x~ deducticzi. This ~ould cut benefits schstantially for the ~orking poor. Cur- rently, 18% of gross earnings are deducted in figuring food stamp benefits in order to carpensate for taxes and ~ork-related expenses. The Adminis- tration is now proposing to abolish this deduction altogether and use gross earnings in figuring food stamp benefits. This arrounts to assuming that funds withheld for taxes are actually available to buy food. As a result, ~orking families will get fewer food stamps than fami- lies who have the same level of disposable inccine but do rot w~rk. At pre- sent, if tao families live next to each other and one gets $5,000 a year fran welfare or unemployment canpensation, while the other family s~orks and receives $5, 000 in talce-hczme pay, both families get about the sane anount of food stamps. Under the new Administration proposal, however, the family that works will get $300 to $400 a year less in stamps than the family on welfare or unemployment insurance, because the ~orking family' s benefits will be tied to its gross wages, with no consideration given to the fact that a portion of its wages are withheld as taxes or consumed by wjrk-relat&1 costs This proposal will result in a $606 million-a-year benefit reduction -- with the entire reduction concentrated in that 17% of all food stamp families who york. * Pals t~E "benefit reducticn rate" fran 30% This ~ould cut benefits by $978 million a year. !kst families wDuld lose same portion of their benefits. Currently, a tousetold is expected to use 30% of its disposable in- came for food. The difference between the cost of the Thrifty Food Plan PAGENO="0537" 533 -50- (the USflk' s minisnum diet plan) and 30% of the household S s incare after deductions is provided in food stamps. Under this proposal, a household ~uld be expected to spend 35% of its disposal incane on food. Food stamps wDuld r~i equal the difference between the cost of the Thrifty Food Plan and 35% (rather than 30%) of the household' s incane after deductions. In other ~sords, hc*ise1~1ds s~xild have their food stanp benefits cut by an anix~nt equal to 5% of their dis posable incxines. This ssould result in a major across-the board benefit cut. !~tst families s~ould have their benefits reduced, and in sate cases the propor- tion of benefits lost ~ould be extranely large. This r~ould be especially true where elderly persons are involved. For example, an elderly couple on Social Security or SSI with a total incane of $5, 000 a year r~ould lose 57% of its food stamp benefits -- its benefits would fall fran $336 to $144 a year. In addition, this proposal ~ou1d further reduce benefits for the wrk- ing poor. The carbined impact of this proposal and the proposal to eliminate the 18% earned incane deduction ~ould be massive. A three per- son family whose breadwinner earns the minimum wage (which is less than $7, 000 a year, and is belov the poverty line) ~ould lose nearly $700 a year in food stamps, as its benefits were cut fran $66 to $9 each nonth. The proposals to raise the benefit reduction rate and eliminate the earned incctre deduction ~xuld also increase "marginal tax rates" on the working poor. For each additional dollar earned by a working irother on AFIJC and food stamps during her first four nonths on a job, between 85 cents and one dollar would be taken away (through reductions in AFEC and food stamp benefits, arxl throu~i increases in Social Security taxes and incane taxes). After her fourth rronth on the job, she would actually lose nore than $1 throu~h benefit reductions and tax increases for each addi- tional dollar she earned -- and would be worse off if she worked harder and increased her earnings. Her marginal tax rate would exceed 100%. (The distinction in the marginal tax rates between nothers in their first four nonths on the job and nothers who have worked sore than four nonths is due to an AF1X~ provision enacted last year that treats these two cate- gories of working rrothers differently.) By contrast, wealthy individuals in The highest incane brackets lose no sore than 50 cents of each additional dollar in incatie -- a feature of the tax code designed to main- tain incentives. There. can be little question that these new food stamp proposals will exacerbate disincentives to work for lc*-incare families. * Eliminating the $10 inininun benefit for one aod t~ persm ~sd~1ds. Currently, one and two person households who ireet the food stamp eligibility tests receive at least $10 a rronth in food stamps. This provision primarily benefits elderly and disabled persons and was designed PAGENO="0538" 534 -51- (the USI)\' s minimum diet plan) and 30% of the housebold' s incai~ after deductions is provided in food stamps. Under this proposal, a housebold would be expected to spend 35% of its disposable incane on food. Food stamps would rx~~i equal the difference between the cost of the Thrifty Food Plan and 35% (rather than 30%) of the housebold' s inccxne after deductions. In other words, hous~ldS ~ild have ________ cut ~ an au~mt equal to 5% of their s~ This would result in a major across-the board benefit cut. Mast families would have their benefits reduced, and in sai~ cases the proportion of benefits lost would be extrenely large. This would be especially true where elderly persons are involved. For example, an elderly couple on Social Security or SSI with a total inccrne of $5, 000 a year would lose 57% of its food stamp benefits -- its benefits would fall fran $336 to $144 a year. In addition, this prcçosal would further reduce benefits for the working poor. The carbined inpact of this proposal and the proposal to eliminate the 18% earned incane deduction would be massive. A three person family whose breadwinner earns the minimum wage (which is less than $7, 000 a year, and is belc~ the poverty line) would lose nearly $700 a year in food stamps, as its benefits were cut fran $66 to $9 each itonth. The proposals to raise the benefit reduction rate and eliminate the earned incaTe deduction would also increase "marginal tax rates' on the working poor. For each additional dollar earned by a working rrother on M'EC and ,food stamps during her first four nonths on a job, between 85 cents and one dollar would be taken away (through reductions in AFDC and food stamp benefits, and through increases in Social Security taxes and incare taxes). After her fourth rronth on the job, she would actually lose rrore than $1 through benefit reductions and tax increases for each additional dollar she earned -- and would~ be worse off if she worked harder and increased her earnings. I~r marginal tax rate would exceed 100%. (The distinction in the marginal tax rates between nothers in their first four rronths on the job and nothers who have worked nore than four nonths is due to an AFtC provision enacted last year that treats these two cate3ories of working rrothers differently.) By contrast, wealthy individuals in the highest incane brackets lose no nore than 50 cents of each additional dollar in incane -- a feature of the tax code designed to maintain incentives. There can be little question that these ne~ food stamp proposals will exacerbate disincentives to work for lov-incare families. * ~ $ ~mthinuu benefit for cne _~~m) person 1~us~iolds. Currently, one and two person households who rreet the food stamp eligibility tests receive at least $10 a nonth in food stamps. This provision primarily benefits elderly and disabled persons and was designed PAGENO="0539" 535 -52- to assure that elderly and disabled households who are poor enough to qualify for stamps receive at least a $10 rronthly benefit. The ?~3ministration is now proposing to repeal this provision and thereby to reduce benefits an edditional $138 million a year. Under its n~i proposal, virtually all households who now receive the minimun benefit ~uld lose all their stamps and be terminated fran the program. t~bst of those wtio would be drcpped would be elderly or disabled households. Sane of those dropped ~sOuld be elderly persons living alone on a Social Security or SSI check of as little as $285 a rronth, or less than 80% of the poverty line. Overall, the majority of those terminated by this proposal appear to be elderly wanen living alone. Several hundred thousand additional households would have their benefits reduced to less than $10 a nonth by the carbined impact of the increase in the benefit reduction rate and the repeal of the miniinun benefit provision. ~`bst of these households, too, are elderly or disabled. * Reducing fcxd staip b~fits if a fanily receives ~rgy assistance pa~nts. The ~dniinistration is proposing to count low incare energy assistance payments as though they vere regular incane. The result is that food stamp benefits ~#xuld be cut up to $5.25 for every $10 a family receives in low incane energy assistance payments, and food stamp families would lose $231 million a year in stamps. This would work particular hardship on households in the northern part of the country. The 2\dministration contends that energy assistance payments are dis- cretionary payeents that are available for food, and therefore food stamp benefits should be cut if a family gets energy payments. This contention is rot correct. The energy assistance program ~s initiated in 1978 to help low incane families offset the steep increases in energy bills resulting fran the deregulation of oil prices and fran OPEC price hikes. Ebergy Department data show that fran 1977 to 1980 alone, energy costs incurred by low incane households increased by $6 billion a year. The energy assistance program, funded at about $1.75 billion a year, offsets less than a third of the price increases. It doss rot provide additional rroney to buy nore food. ~breover, in a large number of states, the energy payments are sent directly to utility car~,anies to apply against a family's bills, and the family never so much as handles the rroney. Under this proposal, all families receiving energy payments will lose saie food stamp benefits. Sate families will even be made ineligible for food stamp benefits in the winter rronths `~then the energy payments are pro- vided -- because ~then the energy payeents are added to their regular incane (as the .ndministration prc~osal reguires), they would be lifted over the food stamp incane limits. This proposal will have a particularly sharp impact on elderly and disabled persons, since about 40% of the recipients of low inccne eneroy PAGENO="0540" 536 -53- assistance are elderly or disabled. Sate of these persons se~uld be rei~ved fran the food stamp program in winter rronths. This proposal will -- in a very real sense -- place sate poor families in the dilamna of having to choose between adequately feeding thettselves or adequately heating their apartments. * (gi.ng fxd st~ip inding rules. The Administration is proposing to save $117 million a year fran changes in rounding rules used in canputing food stamp benefits. The current rounding rules are based on the standard rounding rules used by the Internal Revenue Service and rtost other institutions. Qmttputations yielding a result of 1-49 cents are rounded down to the next lc~st dollar ~Atile results fran 50-99 cents are rounded up. The Administration is preparing to change the rounding rules so that recipients always lose. In canputing the basic food stamp allotment (~thich is based on the Thrifty Food Plan), as wall as the food stamp standard and shelter deductions, all cents would be dropped. For example, if the cost of the Thrifty Food Plan was $249.90, the food stamp allotment would be $249 rather than $250. In addition, w~-ien each individual household * s benefits are canputed, the cents would again be dropped. A household qualifying for $50.95 would receive $50 rather than $51. However, an exception would be made in canputations involving household incane -- because in this case dropping all cents would benefit recipients. The general rule in the new proposal is to select for each stage of the canputation `~thatever rounding rule produces the lowest benefits. The end result is that this prcçosal anounts to a loss in benefits of $1 to $2 a nonth for nest households. This proposal essentially is an across-the-board cut on a small scale. * ~ over 3%. In 1980, Congress enactei a provision under which states with high error rates must steadily reduce their error rates or be subject to fiscal sanctions. States are required to reduce their error rates by roughly one-tenth each year. Recently, T~SUk issued $16.5 million in sanctions against 14 states for failing to achieve sufficient error rate reductions. The Administration is proposing to replace the provision enacted in 1980 with a new provision that would result in virtually every state in the country being sanctioned. The Administration is proposing that states reimburse the federal goverrutent for all errors over 3% in FY 1983. States would be fined an estimated $600 million next year. In FY 1984, states would be sanctioned for all errors over 2%. In F~ 1985, states would pay for all errors over 1%, and in subsequent years for all errors over zero. The Administration is suthtitting similar proposals in the AFIX~ and Medicaid programs. PAGENO="0541" 537 -54- tiallv i~ore difficult for states to achieve the extr~sielv lr~, error retee needed to avoid sanctions. In addition. states exoeriencino caselo~1 increases due torisina un~nmlovment ~ould also face serious oroblei~s, Administrative costs ~ruld rise in these states as their marticination climbed due to the rise in the number of jobless mersons, but the states ~ould receive no additional federal funds to helm defray any Dart of these increased costs. o E]iminatirba funds for a&d.njstratjon of ~rk ~[stratjc,n and i~ saarcth reau rE~tts 1w state snr)1ovn~t servjc~ a~icjes. The Administration is mromsirri to end the allocation of funds to state enolovment aaencies for the administration of food sterno ~s~rk recis- tratiori and lob search reouirsoents, In F? 1982. $65 million `~as orovided for this ourcose. It is unclear s~hether state velfare soencies ~ould take over this function or ~iether state snolovsent service offices ~ould con- tinue to carry it out. This decision ~ould evidently be left uo to the individual states -- but in either event, the states ~uld have to assume 100% of the costs of administerino these reauirenents, o Job searob at a~x,ljcatjci~. The Administration is orocosino to reQuire enolovable food sterno amolicants to search for jobs durino the oeriod their food sterno aoolica-. tioris are beino orocesse(j, rather than (as at oresent) after they are certified as elicible for food stanos, The current recuiraiients are desianed so that administrative costs do not have to be exoended in administerina job search reauireoents for aoolicants ~io are found to be ineliaible for other reasons, and wh never receive stamos. The n~ oro- nasal -- by reaujrjna states to administer job search recuirenents for such mersons -- could increase administrative costs and oaoer~ork, The n~i recuirsoents ~ould be added at the same time that fundina for state enolovment service aaencies 1~uld be terminated, and that federal oarticioation in any n~i administrative costs borne by state ~lfare aaencies ~uld be ended throuah innasition of a "caomed" block arant for state administrative costs. All administrative costs of irnoleoentina this ~ reaujr~~t ~x,uld thus have to be borne by the states. The oror,osal is exoected to have a very minor fiscal imoact, The Administration budaet assun~s a savinczs of $15 million for the federal aoverrnent, but it does not indicate bow much additional administrative cost ~ould be incurred by sthtes~ Preoared by: Bob Greenstein Center on Budaet & Policy Priorities 202/544-0591- PAGENO="0542" 538 -55- II. F~ 1983 Bañget Prop~eals Medicaid The Reagan Administration is proposing to reduce the federal spending for Medicaid another $2.2 billion in FY 1983. Including the states * share of reductions, this v~uld mean a 10% overall cut. The proposed cut is on top of a 4% cut in federal dollars for Fl 1982. Specific proposals: 1. Pbniatory co-payme~ts for all r~ipients - o $1.00 payment for office visits or in- patient care day for the poorest recipients. o $2.00 per in-patient day and $1.50 per out- patient visit for people with incanes slightly above cash assistance levels. Studies have shown co-payments discourage people fran seeking needed care. People will postpone less expensive preventive care and be forced to consune nore extensive and itore expensive care. For example, an expectant nother may not have the cash to obtain nine nonths of prenatal outpatient care, wbich is less expensive for the ~dicaid program than the intensive hospital care that a newborn baby who received no prenatal care could need. Th exceptions are proposed for essential services or for energency services. The sickest families ~ould pay the nost because of proposed ceilings. For families with low inccrnes, however, the burden of. co-payments can be devastating. In Texas, for example, a nother with tao children receives a rrnxinurn AFtC payment of $116 per nonth. If one child is hospitalized for a week, co-payments for each physician visit, for each in-patient day, and for each out-of-hospital prescription drug could easily consune 50% of the family s meager income. 2. A 3% c~it in federal uatdiing f~u1s for all services to the medically needy aed for optional services This proposal merely shifts the burden of funding to the state. It says "do the sane job and we will pay you less." As a result, states ~ould reduce or eliitinate their medically needy programs for the working poor. Without ~dicaid, these people may be forced back on cash assistance programs. PAGENO="0543" 539 -56- States also are likely to eliminate the so-called "optional services" which are not "optional" to persons who need then. These services include such basic care as prescription drugs, eyeglasses, dental services, out-of- hospital clinic visits and institutional care for the mentally retarded. 3. 1~lative res!x~nsibiity for nursing Irne residents This provision ~ould allci~r the states to require adult children to pay part of the nursing hoiie costs of their parents. Medicaid patients already often have difficulty in being admitted to nursing homes. Discrimination against Medicaid recipients ~ould be exacerbated by creating a category of recipients who have children who can pay, and a category of recipients who do not have children. Individuals may have to beccine dependent on their adult children and have their eligibility for nursing hrne care jeopardized if their relatives do not pay. Children of nursing hctte residents are theiiselves often elderly, often on fixed income and unable to contribute. Prepared by: Judy Waxman National Health Law Program 202/232-7061 PAGENO="0544" 540 -57- FY 1984 ~SwapN/Repea1 PropoBal The Peagan Administration has proposed a "transfer" of food stanps and ABTC to the states, with the federal govermnent picking up the states share of Medicaid costs in return. Unfortunately, this proposal -- upon close examination -- poses serious problans. o The prcpDsal does r~yt continue food stanps and AFIX~ and simply shift the cost of financing these programs to the states. It terminates food stamps and AFJX as we know then today. 1*iile final details of the plan have not been ~orked cot, and it is possible that scoe tenporary "maintenance of effort" pro- vision could be included, it seams clear that states s~ould not have any obligation (at least not after the first several years), to fully utilize the state funds foxTrerly spent on Medicaid for the subsistence needs of low inccire families. States ~ould even- tually be able to shift scoe of these funds to highways, to re&x~ing the state's deficit or to any other purpose. o It is extranely likely that many states (prob- ably cost states) ~ould shift ~ne of these funds away fran low incare families. The states face major budgetary pressures and canpeting de- mands fran many other, core powerful constituencies. The experience of the past 15 years illustrates that AFDC and food stamp recipients do not fare well under state funding decisions, and that they ~ould be in particular jeopardy under the new Administration prqposal. o In a nunter of states -- especially in the South -- AF~ benefits ranain extrarrely low today. In Mississippi, a rrother and t~o children with no other incane receive a maximun AFEC grant of $96 a nonth ($1,150 a year), or 16% of the poverty line. In Texas, a cother and tw~ children re- ceive $116 a nonth. In all but tao southern states, the ireximun payment to a three-person family with no other incare falls below $200 a rronth, and in half the southern states it is less than $150 a nonth. o low benefit levels are not limited to the southern states; 22 states provide maximrxn pay- ments of less than $285 a rronth (or less than 50% of the poverty line) to a rather and t~ PAGENO="0545" 541 -58-- children with no other incate. Ten of these 22 states are outside the South. o t~spite the widely heralded gains fran the Voting Rights Act and the reported evolution in attitudes at the state level, AF1X~ grants are actually lc~r today (when inflation is taken into account) than they wsre 10 years ago. A study conducted at the Department of Health and Human Services found that when inflation is taken into account, AFDC benefits nationwide declined 24% between 1969 and 1980. Since 1970, only tvo states have increased AFDC benefits as much as the inflation rate, while over half the states failed to increase benefits to reflect even half of the increase in the cost of living. o The situation is nov ~orsening as state budgets tighten. A Congressional Research Service analysis shows that fran 1980 to 1981, over 40 states failed to increase benefits enough to reflect even half of the rise in the cost of living, over 30 states failed to provide for any increase at all, and six states actually reduced benefits despite double-digit inflation. o The AFEC experience is of great concern, because numerous states have kept AFDC benefits extramely lv, despite the fact that over half of these benefits are federally funded, and that each dollar in state noney brings in at least one dollar in federal noney. If AFIX~ and food stamps are 100% state funded (as the new proposal. envisions), and each state dollar spent brings in no additional federal dollars, then the pressure to shift substantial sure to other state functions with core poserful constituencies will be overwhelming. o The history of the food stamp program in the l960s is also instructive. At that time, states set their ovn incane limits for food stamps, even though food stamp benefits vere entirely federally funded. Many states -- especially those in the South -- set very lv inccrre limits. South Carolina * s incane limit, for example, ses not much above 50% of the poverty line. o Even ssorse, in the late l960s, several hundred counties did not operate a food stamp program. Sate of the px)rest counties in the country declined to run the program, even though the federal goverruent paid the full costs of food stamp benefits. o Dee in significant part to this state and local reluctance to count adequate food assistance efforts, major problene of hunger and malnutrition existed anong the poor. They came to public attention in the late 1960s and shocked the 99-965 0 - 82 - 35 PAGENO="0546" 542 -59- natiOn at that tine. In sara parts of the South, doctors ~rking with HEW' s "Ten State Nutrition Survey" found that 1CM incane children were suffering fran nutritional deficiency diseases at rates canparable to the rates in underdeveloped countries. ~en doctors returned to the same areas 10 years later, they found poverty-related malnutri- tion to have been dramatically reduced. The doctors credited the food stamp program as the major reason for this progress, and they called the food programs the sost successful of all anti-poverty programs of recent years. o The rrost imjx)rtant steps in alleviating the alarming degree of hunger and malnutrition found in the 1960s were taken by a Republican President, Richard Nixon. It wes President Nixon ~tho ended state incane limits and benefit levels in the food stamp program and instituted national standards. President Nixon took these steps because state and local goverrirants were failing to meet the need. If states failed to meet the need then -- s~nen the federal goverrinent paid the bill -- sst~at reason is there to believe they will meet the need in the future, ~then they ~uld have to use state dollars to fund these efforts, and s~en they are facing severe budget crunches? o This problen is made even sore serious by the fact that vir- tually no state ~ould nount a food stamp program of its own, due to the administrative problens of trying to run a food stamp program at the state level. Fbr a state to set up its own food stamp program, the state s~uld have to print its own stamps, autlorize and police its food stores, safeguard the stamps fran counterfeiting, arrange for their destruction after use, etc. All of these tasks are now performed by USIIk on a national scale, and. the * administrative costs and ~irdens for an individual state to take then on are prohibitive. As a result, rather than run their own food stamp programs, states w~u1d be likely in- stead to increase welfare checks enough to partially offset the loss of food stamps. HDwever, less food ssould probably be consuned. o This problen w,uld be exacerbated over time as food prices rose. Unlike AFIJC benefits s,A~iith are set at the state level, food stamp benefits have been regularly adjusted by the federal goverrinent to keep pace with the cost of food. This has been done to assure that food stamps continue to provide the same level of food purchasing power. Fev if any states wDuld be likely to retain this feature if the food stamp program were ended. The consolidated cash benefits that w~uld replace AFDC and food stamps ~vould likely fall far behind inflation, just as AFUC grants have in the past decade. This means, quite simply, that as the PAGENO="0547" 543 -60- years go by, lo~ incate families will have less and less to eat. * The end of food stamps as a separate program -- and its likely incorporation into states cash welfare systens -- raises a number of additional concerns. Can states be ex- pected to provide benefits to persons with incares above their current limits for welfare (which in a number of states are at or belcw 50% of the poverty line)? If not, millions of persons -- especially the s~orking poor -- will lose their food stamps and receive nothing in return. * Can states be expected to provide benefits to those types of families and individuals whan they have up until now refused to include in their welfare programs? In about half of the states, twn parent families with children iray not receive welfare, no matter how poor they are. Can we be sure these states will now change course and provide benefits to those families? If not, these families, too, will lose food stamps and receive nothing in return. * Shat about childless couples and non-elderly individuals who live alone? In many states they receive no welfare and can now get only food stamps. ~hat will happen to then? Will 55-year-old widows be able to receive any support? * Behind all the questions lies a simple fact -- the food stamp program is the only program in America that is available to all who are poor -- regardless of age, sex or family capnsition. The food stamp program is the rrost basic safety net now provided by any level of government. It assures that all who have low enough incaras may at least be able to secure a minimum diet and avoid hunger and malnutrition. The food stamp program has been described by sane (including former Nixon Administration welfare expert Richard Nathan and Republican Senator Robert Dnle of Kansas) as the nost important social program since Social Security. If the program is ended, this safety met will be taken- away -- and it is virtually inevitable that any state- funded replacerent programs will contain gaps throu~ which many poor families and individuals will fall. * The problan is likely to be especially severe in the South. Southern states now provide the lc~st AFEC benefits and the imnst restrictive AFDC coverage. They also had the lc~st food stamp incane limits in the l960s and the highest degrees of hunger and malnutrition at that time. Yet southern states are also the poorest states in the na- tion in per capita incare and the least able to finance adequate subsistence programs for their low incarre popula- tions. This is of particular concern in a state like Mississi~i -- which has the snallest revenue base and the PAGENO="0548" 544 -61- lowest per capita incae in the nation, and in ~shich one in five residents now receives food stamps. * If southern states significantly reduce benefits and cover- age, ha~Qever, this will have extremely undesirable effects on all states. Currently, one of the ntst important func- tions played t~ the food stamp program is to help "fill the gap" between states with low AFJX~ payrrerits and states with higher payments. Since food stamp benefits are tied to in- care, recipients in states with low AFDC benefit levels re- ceive rrore food stamps than do recipients in higher payment states. As a result, the disparity in total benefits between recipients in different states is lessened. If, however, the food stamp and AF]JC programs as they now exist are ended, and southern states sharply reduce benefits, then the disparity anomg states will grow significantly. This, in turn, is likely to spur renewed migration of low incczre, unskilled persons fran the South to northern urban areas. At a time ~hen many northern cities and a nurrber of northern industrial states are in econanic decline, they ~ould receive an influx of nec~r recipients dependent on state support. This could pose severe probiets for these cities and states, especially since they seuld r~ have to support these n~ arrivals entirely with state dollars. * The problems wDuld be exacerbated during periods of high unet~ployment. Currently, s~en uneirployrrent rises in a city or a state, nore persons in that area enroll in the food stamp program. This serves t~ purposes: it allows un- employed families to obtain adequate food witbout further draining state or local tax revenues, already depressed because of the ecoixinic downturn; and it also brings rrore federal noney into the depressed local econany. However, under the n~i Administration proposal, there ~ould be no federal response to rising unemployment, because the federal* gcrverrinent ~ould no longer be financing a food stamp program. This means that ~then unemployment rises, state and local goverrinents ~uld have to cut bad~ on assistance rather than expand it -- because the state revenue base to finance these programs s~ould be contract- ing. This ~ould not only adversely affect low incane recip- ients of the programs, but could also result in sane fur- ther depression of already weak state and local econanies. * Finally, the Administration' s proposal to federalize Medi- caid could, in sate states, further intensify the problems created bj the turnback of AF1X~ and food stamps. In Medi- caid, there is great variation anong states in the incane limits used, in the medical services provided, and in thether various categories of persons (t~x>-parent families, persons living alone, childless couples, families just above the AFDC incare limits) receive Medicaid coverage. PAGENO="0549" 545 -62- It will not be feasible (either politically or legally) for the Medicaid program to be financed entirely by the federal government and to maintain the vast disparities in cover- age and benefits nov provided. It is virtually inevitable that in states nov providing a rrore extensive Medicaid program, significant aspects of the current program will not be supported when the federal goverri~nt takes over. If these states choose to maintain existing Medi- caid standards, they will have to use state dollars to bridge the gap between their current Medicaid program and a amaller scale federal program. This would reduce (in same cases by a very substantial anount) the funds available to the state to replace AFDC and food starp benefits -- and would thereby lead to further reduction in ti-ose benefits. Of course these states could decide not to maintain current Medicaid standards -- but then, many lv incaile families and individuals (especially the work- ing poor) would lose some or all of their Medi- caid benefits. Either way, lv incaie persons end up the losers. Oxxlusion The conclusion seams inescapable that millions of lv income Ameri- cans would eventually have their already lv standards of living reduced if the "transfer' proposal becanes a reality. In same places, the reduc- tions could be dramatic, and the types of hunger and malnutrition problams found in this country only 15 years ago could return to some extent. The gap between poor Americans and those in higher incate brackets -- already increased by last year's bndget and tax bills -- would be expected to widen further. Prepared by: Bob Greenstein Center on Budget and Policy Priorities 202/544-0591 PAGENO="0550" 546 -63- II. F! 1984 ~TUrnback" Prc~xsal The Reagan Administration' s "New Federalism" proposal to shift 43 federal programs to the states beginning in Fl 1984 drastically accelerates the trend -- begun with the Fl 1982 and 1983 block grants -- to elininate federal responsibility for human and caanunity needs. The list of programs to be "turned back' to the states inclndes those in exist- ing and proposed block grants, as well as a number of key, targeted pro- grams that advocates were able to save fran block grants last year. Clearly, the block grants proposed for FY 1983, in ccmbination with the proposed deep cuts in funding for social programs, wDuld set the stage for this radical withlrawal of federal responsibility for human needs. The Administration' s plan wDuld first hold constant, then decrease and eventually elininate federal funding for the 43 programs between Fl 1984 and Fl 1991. While the Administration' s Fl 1984 `New Federalism' initiative should not be all~ed to divert attention fran the inrnediate threat of proposed bndget cuts and block grants for the caning fiscal year, it is ~orthy of attention and concern. In reality, the tao issues are interdependent: if further bndget cuts go through -- even if ODngress does not go along with all of thsm, as early bipartisan reaction indicates nay be the case -- the states' financial liability for the 43 programs ~sould be reduced correspondingly, making the proposal rrore attractive. Cbnversely, if the proposed cuts do not pass, the entire `turnback" program could be in jeopardy. Another concern is that this radical proposal could make last year' s block grants look rrcderate and acceptable by cat~arison, setting thsm up as rrodels for a "canpranise" this year, despite criticisms that they lack sufficient funding, targeting and civil rights and accountability protections. The program shift ~ould begin in Fl 1984, `~then federal funding for the 43 separate programs s~ould be replaced by a "trust fund" of $28 billion. The trust fund ~uld be canprised of revenues fran excise taxes on gasoline, alcohol, telephone service and tobacco, plus part of the wind- fall profits tax on oil. Apparently last year' s block grant debate influenced the design of the new proposal: The Administration announced it mcre than a year prior to its proposed implsmentation, thereby avoiding criticism that states wuld not be prepared for their new responsibilities; and the trust fund clearly is an attonpt to reassure states that they will get the funds to pay for their new responsibilities. A close look at the trust fund proposal, however, reveals its deficiencies. The $28 billion is 15% belcM current funding levels for the 43 programs, and well belc~i their 1980 funding levels. In addition, the PAGENO="0551" 547 -64- trust fund wauld reosin at $28 billion per year for four years, with no increases for inflation or need. ~ch state could draw on the fund to suppart as many of the 43 programs as it chose, with on requirmient that funding for various programs reflect previous patterns. A %hite House release explains the program this way: "Ebring a transition period of four years, FY 84-87, the states can use their trust fund noney in either of twa ways. If they want to continue receiving amse or all federal grants that are designated for turnback, they can use their trust fund noney to reiichurse the federal agencies that make these grants and .abide by federal corniltions and rules. Or, to the ex- tent they choose to forego the federal grant programs, they can receive their trust fund noney directly as super revenue sharing, to be used for these or other purpases. There will be a nandatory pase-throi4~ of part of the ~.çer revunue sharing funds to louni goverrzi~sta. (B2nphasis added.) "Beginning in Ff `88, the core than 40 federal turnback programs. . .will cease to exist, and the states will be in canplete control of their osn priorities." At that paint, too, both the trust fund and the federal excise taxes supparting it will phase out at the rate of 25% per year, until they disappear in FY 1991. As federal support declines, states could choose anorng several options -- ingxsing their owa excise taxes, using other state revenues or cutting programs. The programs to be transferred to the states beginning in Fl 1984 inclode (lxam.nity Developsent Block Grants, ~thich have not only channeled funds to lo,, inccxre neighborhoods, but s~tiith have also provided excellent rallying paints around chich cassunity groups have coalesced. Thus, the repeal of this program, anong others, wauld be a dramatic sethack for the neighborhood rrovesent. The programs to be eliminated are the follcs~ing: Blod~ Grants/Rev&iue Sharing Prograi~ General Revenue Sharing Ccmmnity tavelqxsent Block Grants PAGENO="0552" 548 -65- trust fund ~uld retain at $28 billion per year for four years, with no increases for inflation or need. Each state could draw on the fund to support as many of the 43 programs as it chose, with no requir~Tent that funding for various programs reflect previous patterns. A %`~ite Fbuse release explains the program this way: `During a transition period of four years, F? 84-87, the states can use their trust fund rioney in either of twD ways. If they want to continue receiving soue or all federal grants that are designated for turnback, they can use their trust fund itoney to reinburse the federal agencies that make those grants and abide by federal conditions and rules. Or, to the ex- tent they choose to foreo the federal grant programs, they can receive their trust fund noney directly as super revenue sharing, to be used for these or other purpDses. There will be a mandatory pass-through of part of the super revenue sharing funds to local goverrs~nts. TMBeginning in FY `88, the sore then 40 turth~ prcgra~...~fl c~se to exist, az~ the states will be in cxuplete c~ztxc~ of their c~i iiiorities. (E~r~asis added.) At that Foint, too, both the trust fund and the federal excise taxes suççx)rting it will phase out at the rate of 25% per year, until they disappear in F? 1991. ~s federal support declines, states could choose anong several cptions -- impsing their ~n excise taxes, using other state revenues or cutting programs. The programs to be transferred to the states beginning in FY 1984 include Ccmnunity Developnent Block Grants, ~ith have not only channeled funds to lcw incane neighborhoods, but `~thich have also provided excellent rallying pints around ~thich ccmnunity groups have coalesced. Thus, the repeal of this program, anong others, ~uld be a dramatic sethack for the neighborhood novanent. The programs to be elininated are the follc~.iing: B~ Gra~s/Rev~ ~ri~ General Revenue Sharing Caiun~nity Duvelc.pnent Block Grants PAGENO="0553" 549 -66- Ccmprehensive flsployxrent ar~ Training Act Social Services Block Grant Ccsrrnunity Services Block Grant Los Incane Ruergy Assistance Prinary Care Block Grant Maternal ars~ Child Health Block Grant Alcobul, Mental Health and Drug Abuse Block Grant Crime Prevention Block Grant State Fdocation Block Grants Preventive Health and Health Services Block Grant O~r Pro~ Legal Services Child nutrition Cnild walfare Adq~tion assistance Foster care. Runaway youth Primary care R&D Black lung clinics Migrant health clinics Family planning WIC Vocational rehabilitation Vocational and adult edocation WIN Urban sass transit construction Urban sass transit operating expenses 9 other transpmrtation programs 4 water, sewar, waste treatment arel camiunity facilities programs Occupational safety ars~ health state grants Urban Develoçsnent Action Grants. (See Appendix A, page 131, for a chart s}xs~ing individual states' losses that would result fran the "Swap" and "Turnback" proposals.) Prepared bj: Runnie Kweller Center for Camunity Change 202/33B-64B4 PAGENO="0554" 550 -67- III. IMEw~'r (P `flIE BLOCK G~AN1'S The test of block grants is not b~i they look on paper or hov they sound in principle, but hw they affect real people and real catraunities. The ne~~i block grants are likely to have a ntuther of devastating consequences for individuals and canmunities in need. The following pages describe sate of these likely consequences for states an5 their governors, cities and local officials, rural areas arKi vulnerable constituencies, inclnding local carinunity organizations. PAGENO="0555" 551 -68- III. J14~r ~ ~fl1E EW~ c~P~VrS ]1~r (11 6~FA~ The new block arants have confronted states and their oovernors with the followina problenm: 1. O~sist~eitlv declinirri levels of federal su~art About one-third of the $35 billion cut in federal soendirm to date, or $13 billion, has case fran programs run by states, accelerating a reduction in the federal government's supnx)rt of state and local govern- ments. In 1978, nearly tso-thirds of federal aid sos directed to state and local governments, a percentage that will decrease to around 50 percent in 1984. This pattern, chich is likely to continue, reflects the impact of the "New Federalien" on states. t'breaver, it is clear that the Reaqan Administration's plans for FY 1983, 1984 and 1985 will significantly reduce, and rassibly eliminate, funding for block grants. President Reagan told the National Association of County Officials on March 9, 1981, that his real agenda sos to eliminate the federal tax base for danestic expenditures, i.e., eliminate financial suppart for thase prograsm propased for inclusion in the block grants. The President's determination to control federal spending, main- tain the large 1981 personal and corperate tax cuts, rapidly accelerate de- ferise spending and not cut Social Security have forced him to focus sore cuts on the remaining entitlement and discretionary programs. This means that fran 1983 through 1985, block grants will be subjected to cuts below their already reduced 1982 levels, and that the Administration mic~ht even seek to canpletely terminate block grants due to the pressure of canpetimsg fiscal objectives. As a result, it is no surprise that Governor Richard A. Snellinq (R-Vt.), chair of the National Governors' Association, has described the Reagan program as an "econmmiic Bay of Pigs." 2. Elimineticxi of natimal ~stitu~x!ies for federal. ~ The elimination of catsoorical pronrarm has also eliminated na- tional constituencies for federal financial supcort. Interest groups now turn their attention to near-tens allocation decisions at the state and local levels, and to remaining categorical programs. Conseguently, gover- nors have became the sole constituency supcortirxn block grants with the Congress and Executive Branch, making it easier to continue reducing federal funding for major damestic programs. This ithenamenon has already been observed with the new education block grant, ~ich has been cut sub- stantially since it sos enacted just a few rmnnths ang. PAGENO="0556" 552 -69- 3. Int~ise political ~ressure abc*xt allocation dxxices The block grants decentralize not only program authDritv, but also political catpetitiOn for resources. O:xnpetinq qroups that have vied for federal appropriations will na~i devote their attention to allocation decisions by state and local officials. Ocopetition will be especially in- tense, as the block grants include 20 to 25% funding cuts, and many groups will have to fight simply to maintain services they believe are essential. As a consequence, sitting governors are being placed in numerous no-win situations. In being forced to make very unpopular choices they will becate the "bad guys," unable to blans federal bureaucrats for cutting or eliminating local programs. This situation will becane even core difficult and politically dangerous for governors if President Reagan and the Congress keep cutting the block qrants until all federal appropriations are terminated. This will leave states with a Hobson' s cboice bet~en dropping basic services or raising taxes. 4. Severe staffime nrdlen~ Many state goveranent staff rositions have been funded in whole or in large part with federal funds allocated to the states throuc~h categorical programs. As these categorical programs are eliminated, and available resources cut, the support for many staff positions lessens or disappears. At the same time, block grants have made it necessary for state goverriTents to assure many program responsibilities forrrerly performed by federal staff. Fbnctions shifting to the states include program direction, auditing, grants managei~nt, planning, rule-making, evaluations and grants allocation. In order to handle these new responsibilities, governors must establish effective and credible planning, allocation and evaluation systens that will enable then to defend their decisions, especially in the face of the intense canpetition for funds airong local groups. This will require strong, sophisticated and wall-staffed state agencies, precisely when federal support for state staffs is diminishing. 5. State financial limitations Governors will be under treoendous pressure to find additional state resources for both programs and staff. In many instances, qovernors will request core funds fran state legislatures, but it is doubtful that the political climate in cost states will support increasing taxes in order to continue services slated for reduction or elimination. State staffing needs will be especially urgent at the beginning of the block grant programs, when states confront major start-up and in- planentation issues at the same time that f~erally funded staff positions disappear. Unless a governor wants to risk charges of fraud, waste and miamanaganent, he or she will be forced to request larger state appropria- tions to meet staffing requireTents. PAGENO="0557" 553 -70- C~ the program side, federal bndqet cuts associated with the block grants have left large gaps in such vital services as day care, community developsent, community mental health, vocational rehabilitation and amergency energy assistance at the same time that service needs have increased due to growing jx~mulations, inflation and increasing uneeplowient. As a result, many governors will have to request additional supoort fran their state legislatures simply to meet the mast basic needs. Progressive governors, sensitive to the social and economic needs of disadvantaqed con- stituencies, will feel particularly pressed. These state fiscal pressures will cane at an especially difficult time for both governors and state legislatures. State and local revenues will decrease because of: * the federal badget cuts described earlier. * the effect of the new federal tax reductions. (r4nny state personal and corporate taxes are tied to the federal tax structure, so federal re- ductions will lead to state reduc- tions. Sane estimate that the 1981 tax law will result in a net revenue loss to states in excess of $40 billion.) * decreased gasoline tax revenues caused by reduced gas consuiption, which, coupled with increased highway main- tenance costs, is shrinking state highway fends. Ithile state revenues are decreasing, the nation's ~thysical in- frastructure - roads, bridges, water systems -- is rapidly deteriorating. The cost of rehabilitating or replacing these facilities during the next decade will ran into hundreds of billions of dollars and will compound states' fiscal difficulties. ~`breover, despite interest rates double what they were in 1977, the federal government and corporations are croedinq states cut of financial markets, limiting their ability to borrow. Finally, the nation's recession will foster increased unemployment and industry cutbacks, further reducing state revenues and increasing costs like welfare sal unemployment insurance. As a consequence of all these factors, states will be extremely hard pressed to meet earlier responsibilities, let alone asstme new fiscal burdens. PAGENO="0558" 554 -71- 6. Extensive liticzaticn Constituencies frustrated by service cuts, inadequate state staff to manage the new block grant proqrams aid delays or chaos associated with implenentinq the programs may turn to the courts for relief. Wnile it is obviously difficult to forecast accurately whatthe courts niqht do aid in which areas, it is reasonable to predict that advocates will seek court-imposed ranedies in such areas as: * preventing precipitous service cut-of fs (if advocates succeed in their litigation, states will be forced to appropriate the dollars to nake the transition fran federal categorical to block grant programs); * ensuring adequate public participation and administrative due process in the planninq aid allocation processes: if successful, these efforts could establish case law as detailed as federal regulations; aId * prohibiting discrimination against minorities, wanen, the handicapped aid the elderly; these protections, guaranteed under federal law, will also constrain aid possibly lenqthen the allocations process. These suits will also generate process-related administrative costs, in addition to the potential proqranrratic costs already described. Prepared by Decker Anstran Public Strategies 202/828-8493 PAGENO="0559" 555 -72- III. IMPPC~ cP ¶J!IE &ocK ~ANIS iw~r ~ crri~ ~xrorm the early concerns of city officials reaarcljng the Reaoan ~d- ministration's block qrant proposals sos their failure to qjve city officials a role in block grant planning or resource allocation. City officials also feared that they sould not have access to information on block grant programs. More specific worries sore that if the law did not mandate that funds be passed through or allocated directly to cities, their needs would be noglected; and if funds sore not targeted on the basis of need, governors would allocate block grant zanies uniformly throughout the states, a~hout rogard to where they sore cost needed or ~there they would be used zosi effectively. J~ccording to the U.S. Conference of Mayors (USrm), these fears sore realized during the early stages of block grant imnplmrmntation. City officials have, in fact, had difficulty obtaining even the cost basic in- formation on the new block grants, frcm either the state or federal qovern- ment. Only a handful of city officials sore inclmxled in the eight reaional briefings held by the federal departments administering block grants, and there has been little casnunication fran the federal level to local goverranments. At a recent meeting of the U.S. Conference of City Fkmmn Service Officials, only representatives fran Virginia and South Carolina - out of approximately 50 people in attendance -- had been able to obtain fran the state regousted block grant information. Similarly, city officials have had difficulty participating in block qrant decisiormmakinq aix! in registering their concerns about the service needs of their constituents. 2\dding to these problem in F~ 1982 are the uncertainty over funding levels and the fact that cost states -- with the blessing of federal officials -- did not hold poblic hearings on block grant plans. ~ccordirg to USC'l, a few states have made efforts to involve local goverrinents in block grant planning and implementation. Early in FY 1982, Virginia set up a series of task forces to plan block grant programs, and several local officials sore included. Florida surveyed local qoverrinents to obtain their views on issues surrounding block grant planning and imple- mentation. Other states have appointed advisory committees which include local officials. But a recent SOy! survey of 100 cities, conducted in early Bovmther 1981, gives further evidence that the early fears of city officials sore realistic. Of those responding to questions on block grants, 55% said their states had neither consulted then nor offered an opportunity to participate in block grant decisiorrnakinq; 38% said they sore unable to get information fran their states on block grant implementation; and 58% PAGENO="0560" 556 -73-- sain they expected to lose funds as a result of block grants. Only one city expected to receive rrore funds under block grant programs. With regard to the anall Cities Program under the Catsiunity Develomient Block Grant, 42% of the respondents said the state was opting to administer the program; 27% had cannlaints about the process ~herebv the state was assuting control or tiought the state. was doina a naor lob. Fifty-three percent were not informed as to hov the state was carryina out the transition. Many cities, in states as diverse as California, Tennessee, Nebraska and Maine, reported that they were consulted only after decisions had been made and the Bnall Cities program was already designed. In many cases, ccmnunication was initiated by the city, not the state; in others, states did not respond `~then city officials souqht information. PesporKients attributed these difficulties to confusion at the state level over block grant programs and state responsibilities; historic bad vx&dbllqoclps between the state and the city; and the strona pro-rural/ dgbl3erban bias of many state legislatures. Many cities surveyed strongly doubted that states ~e~uld qive the same attention to their needs that %~~shington had. This dcobt was based largely on the belief that states will attanpt to provide services in every part of the state in order to please a range of constituencies, particularly the strong rural/suburban contingents ~Mch daninate many state legislatures. This will inevitably mean drastic reductions in the share of funds going to urban areas, especially in light of the deep funding cuts that accanpanied the block grants. Prepared by: Laura ~xman U.S. Conference of Mayors 202/293-7330 PAGENO="0561" 557 -74-. III. 1M~f ~ THE BTJX~ G~AN1'S 11~N7P CW R1RAL A~S Before discussina the imoact of block qrarits on rural cazeunities, it is important to clarify what is meant by `rural." Rural refers here to ccmaunities of up to 50,000 residents, or all non-metropolitan areas. "Rural" and "non-metropolitan" will be used interchangeably. It is also important to stress that within this browS definition, there is great diversity. Son-metropolitan areas differ by qeoorathy, size, population, density, ethnic sake-up, ecorrinic base, level of development and dagree of poverty. Sbr example, rural areas inclrxle a ski resort in Vernont, a coal town in Fantocky, a community of large farms in Fansas, a black sharecropping community in Alabama, a boar town in Wyoming and an unincorporated community of Hisoanics in Texas. Rural areas abound with contradictions. While agriculture is a major econanic factor in rural America, less than 10% of the jobs in rural areas are in faxmnincr. The nutber of private sector lobs is orowiro at a faster rate in rural than in non-rural areas. While there has been a turnaround in migration back to non-metropolitan areas, the rural "renaissance" is extrenely uneven. Base areas are qrcs~in~ very rapidly, while mare than 400 counties -- for the mast part predanintely minority and/or agricultural - continue to decline. The mast vulnerable rural Americans are the puor and minority popula- tions. The problan of rural poverty is little understood and too often ignored. The rural population is disproportionately poor, inclndinq 40 percent of the nation's poor, but only 32 percent of the ca'ulation. The average annual income for a rural poor family in 1978 was $3, 394, incltniinq earnings and public assistance payments. While the majority of the nation's rural poor are white (7 out of 9 million), rural black families are three times as likely to be poor as rural white families. The rural poor are less educated than their urban counterparts. And finally, the majority of the rural poor live in the South, where public assistance programs are particularly insiequate. What will block grants mean for rural residents, and particularly the rural poor? Severe problems. There are several reasons why. First, faced with the budqet cuts which accammany block grants as well as with their own boSqet crises -- and lacking the luxury to deficit spend -- mast states will have no choice but to pass on thase cuts in the form of decreased services. Unfortunately, the rural poor will have little chance to fare well in the resulting battles between legitimate but ccmipetinq interests which will be waged at the state level for a piece, of the decreasing pie. 99-965 0 - 82 - 36 PAGENO="0562" 558 -75- The nDst organized, sophisticated and visible groups and programs with the stropoest political power bases are the must likely to ~et the lion's share of the dollars. The rural poor, however, are not generally well orqanized, visible to the general public (and the nedia) or politically sophisticated and powerful. The rural poor are usually anall in absolute numbers and qeoqraphically dispersed, and thus easily ignored. In short, the rural poor have little or no political clout. The second reason why the rural poor are likely to lose out under block grants is that they are not well represented in state and local qovernnents, particularly in state legislatures where many of the allocation decisions will be made. While many legislatures may be dczninated by manbers fran rural ccrmuinities, few state legislatures adequately represent the rural poor or i~orkipo person. The rural banker may not share the sane interests as the rural tenant farmer. Similarly, the coal operator and coal miner probably do not share the sane views. Rural state leqislators are, in fact, traditionally very conservative and often opposed to public programs which provide services to the poor. Furtherriore, state legislators are often extraniely vulnerable to the kinds of political pressure that the rural poor are unable to muster. A third problan facing rural minorities, in particular, under block grants is that racial discrimination and insensitivity to minority orouns continues to be a significant problant in many states, especially in the South where must of the rural poor live. Under the block grants, which give total discretion to the states to decide which services will be provided to whoa, minorities are likely to have a difficult - if not impossible -- task in canpetipo for the limited dollars. l'aad, witlKut federal targeting, they lack an~ recourse. Fourth, rrost poor rural camnunities lack the human and financial re- sources needed to canpete in the fundraisiro and qrantmakiro orocess -- to ioentifv a problea, develop a solution, write a proposal and imolenent a program. With decreasiro funds and increasiro canpetition for those limited dollars, the ability to raise money fran both the public and private sectors will bec~e more and more crucial. The problen for the rural moor will be exacerbated by the dwindling support for the kinds of programs which have been able to provide such assistance in the past, such as cams~uiity based organizations, legal services attorneYs and human service agencies. Finally, rural people will be at a disadvantage in fighting for limited funds because of the econaaics of providiro services in non-netrooolitan areas. Given the decreased dollars, state officials will be increasinaly conderned with spending their money "efficiently." ~rbo often that translates to: provide the most services to the greatest number of oeoole at the lowest cost, regardless of need. Programs serving ron-metropolitan residents must be flexible and designed to meet unique rural conditions, rot scaled-do~mn urban conditions. t~velgeing appropriate and creative solutions may require a disproportionately large investment of staff time and effort. Furthermore, because of population sparcity, ecormanies of scale do not exist in rural carrnunities as they do in urban areas. For both of these reasons, PAGENO="0563" 559 -76- services in rural areas amy cost sore per capita. In other words, there will be less bang for the political beck. Clearly, it is too soon to bios for sure how each state will administer block qrants. Flistorv can orovide amne clues, however. First, cost of the cateporical programs slated for extinction were develcged because the states would not -- or could not -- fund or directly provide the services. There is no reason to believe that in hard econanic tines ars3 with federal resources declining, states will choose to devote sore resources to programs they did not suocort in the oast. Second, the record of public assistance orograms, sthich give states considerable flexibility to establish eligibility and benefit levels, is enlightening about how the rural poor nay fare under block grants. The southern states s~ere cost of the rural poor live have the cost limited welfare benefits of any re~ion of the country. Stir example, in 1980, the national average payment per AF1X~ (Md to Families with Deoendent Children) recipient was $93.39 per month. In the South, payments ranged fran a high of $64.25 in ibrth Carolina to a low of $29.34 in Mississiooi. For all of these reasons, block grants are likely to spell disaster for cony of the nation's 69 million rural residents, and particularly for the nine million poor oeoole livino in non-nmtrcsx,litan ccmtnunities. Preoared by: Alice Hersh National Rural Center 202/331-0258 PAGENO="0564" 560 -77- III. IMP~~ ~ `fliE BLO~ ~ARI'S I~ O~fl~D~ The Reagan Administration' s bloclc grant program will have serious consequences for many segments of 1~merican society. 1. Fbr thildren, poor people, the baz~1icapped, t~ elderly aixi other gr~çs that need tha services x~ pixwided t1ux*4~ ~t~ric~l ~zograse, block grants will have tha frllowing edverse cos~es: o The deep cuthacks in federal support associated with the block grants will deny many needy people essential services. Of the sore than $35 billion total cut, nearly $10 billion fell on families with incones bel~i $10, 000 a year. o Groups will be forced to fight one another for the linited retaining resources at the state level. This conflict will be bitter, will result in extraordinary political tensions within the ccmnunity and will foster fragmented, rather than coordinated, hun~n service approaches. o They will face administrative chaos. The Reagan Administration' s determination to imple~tent the block grants as soon as possible guaranteed that states and caamunities ~e~uld be unable to plan for an orderly transition to the ne~ programs. Confusion and tunioil resulted, and in many ccs~nunities service programs have nearly ground to a halt. o Citizens nc~, guranteed protection against discriminination will be unprotected. The block grant legislation severely ~akened federal prohibitions on dis- crimination and federal requiranents to target funds to econcinically depressed areas and disadvantaged people. People in central cities and r~rote rural areas can be expected to suffer at the expense of sore politically potent state-level constituencies in suburbs and mediun-sized cities and tcMns. PAGENO="0565" 561 -78- 2. kbr n~*,~s of O:zxWeas and taxpsyers, tiw block grants will: * Reduce accountability for federal funds. States will be free to spend funds with- out prior federal oversight or citizen participation in determinirs~ priorities and needs. They will not be subject to throuqh, reqular federal audits, site visits and evaluations. Experience with earlier block grants srxqests that it will be difficult to determine after the fact hew the rroney ~ms spent. * Minimize their ability to eddress truly national needs. Inherent in the block grant leqislation is the assr.srrption that there are no national needs in the areas of health, education, social services, cczrirrunity devel~znent, asergency assistance, etc. Nhile states and localities will have increased program flexibility, they will also have the flexibility to decide not to fund services that (Inperess has deter- mined darand nationwide attention. These services include child day care, health services for crippled children, carmrrziity mental health services and respiratory treatment for coal miners. National needs such as these will be eddressed only if states and localities decide to &Idress their and have sufficient resources to do so. * Substitute federal funds for state and local rroney. Since states will no longer be required to provide ratchipe funds in order to receive federal block grant ironies, they may not continue providing their own funds for the programs being consolidated. Rather, they might use their funds for other purpses and substitute the federal block qrant ironey for their past expenditures. * ~ke it difficult to target federal funds efficiently. States will be able to set irtiatever eligibility requirarrents they wish for services provided by block grant funds. States nay cheose to serve middle class individuals whe do not really need services or itho could pay for than, rather than truly needy families and individuals. States nrust also decide to allocate funds PAGENO="0566" 562 -79- to prosperous carinunities rather than to econanically depressed central cities or remnte rural areas. If these sorts of allocation choices are made, federal funds will be wasted on unnecessary services and activities. * Lead to increased administrative costs in many areas. The Reagan Administration says block grants will cut waste and duplication and eliminate unnecessary federal staff. Yet the General Accounting Office, Congress * official watchdoq, claims administrative costs could actually in- crease, as 50 state bureaucracies are established to administer each block grant and to assune the functions nc~i carried out by only one federal aqency. 3. Ebr private, r~n-izofit local service delivery aa&~cies, block ararits will tose several n~jor issm~s: * Funding, already strained by infla- tion, will becarme tighter, as federal cuts associated with block grants are replicated at the local level. r4anv private agencies that are heavily de- pendent on federal funds -- caminunity action aqencies, canmunity health centers, day care proqrams, rehabilita- tion facilities, etc. -- may be forced to close, as private non-profit aqencies lose $27 billion fran 1981-84 due to federal budget cuts. In addition, per- sonal incare tax cuts are expected to shrink personal charitable contribu- tions by over $18 billion durian this period. In all, the recent budget and tax cuts will cost private non-profit agencies nearly $46 billion fran 1981 to 1984. * Pressure will develpe about who should be served. As resources vanish and federal eliqibility requirenents are abolished, local service delivery agencies will be forced to make rrore decisions, based on their own criteria, about who gets served. Within the tight budqet environment that will exist, these de- PAGENO="0567" 563 -80- cisions will be subject to intense scrutiny and criticism. * States may shift funding to public agencies, and state agencies may create or strengthen regional or district service offices. In the face of raducaf resources, such shifts will allow states to increase their control over service providers and their staffs and to de- fine nore specifically ~k~at services should be providef. For the same reasons, states might also nove towards using private, for-profit vendors. As a result, many private non- profit agencies will be forcef to close or to change their traditional focus dramatically. * Furxlraising activities will assuma greater prceinence. Private agencies will have to increase their efforts to obtain private sec- tor contributions -- efforts that have already been expandef to address inflationary derands. Those activities will reduce both the re- sources and staff tirre available for agencies service duties. Prepared by: Decker Anstran Public Strategies 202/828-8493 PAGENO="0568" 564 -81- Iv. ~y ISsLFS Aside fran specific issues pertainir~ to individual prograrra proposed for block grants, the Reagan AdministrationS s block qrant proposals raise a number of carrron concerns. These include the lack of tarqetiog aixi accountability rrechanisms, as ~ll as the fiscal difficulties that states will experience in tryirx~ to administer block grants without sufficient resources. The follcwinq pages discuss these issues. PAGENO="0569" 565 -82-- IV. KEY ISSL~ F~rI~ ~ ~LY NE~JY One of the ironies of the debate surrounding the original Reagan block grant proposals was the contradiction between the budget discussion, with its talk of the "social safety net" and helping the "truly needy," and the ram~val of all targeting and need-related requirsoents in human service programs proposed for block grants. The Administration wanted to replace a variety of programs focused on disadvantaged or needy constituencies with general grants of coney that included no requiranents that services be provided on the basis of econcznic need, handicap, etc. For example, the proposed social services block grant co~letely raroved the incaTe eligibility criteria associated with the original Title XX program (the Title XX block grant passed by Congress also eliminates these criteria). The Administration wanted to recove targeting requiretents fran the proposed energy/energency assistance block grant, but Congress reinstated targeting in the final 1CM incane energy assistance program. The Administration' s proposed education and health block grants -- which included programs specifically enacted to assist disadvantaged and handicapped children -- had no targeting requirenents, no eligibility cri- teria based on need and no priorities for whan ~uld be served. While Con- gress refused to abolish many of the cost crucial targeted categorical pro- grams that the Administration wanted to consolidate into block grants, the block grants that did energe substantially weaken targeting requirenents. One does not need to be c~ical to predict that the process by which states allocate block grant funds will respond to the priorities of con- stituencies that are predaninantly middle class or affluent, organized and vocal -- and whose rrentbers vote. The less powerful and less numerous indi- viduals wl-o have pressing but not politically popular needs are likely to lose out in statewide catpetition for reduced resources. Thus, the block grants -- particularly in their original form, which the Administration has threatened to revive, but also in the codified versions enacted by Congress -- have turned the allocation of federal tax dollars into a brutal political struggle at the state level, where the cost vulnerable and least powerful are alrrost certain to be the losers. Besides pitting the poor against middle class and affluent con- stituencies, the block grants also set one disadvantaged group against another in canpetition over a small pie. Rural areas will fight inner cities, elderly will fight cothers and children and energency medical ser- vices will canpete with preventive health services. In this way, the block grants have greatly increased the politicization and brutalization of the allocation of scarce dollars. Recent accanplishnents in preventing discrimination, and the resulting gains in securing equal opportunity, were also seriously imperiled by the Reagan block grants. The proposals were dangerous because they can- PAGENO="0570" 566 -83- mitted to the ultimate discretion of states and localities the provision of progrens and services that Congress had devised to meet specific needs of victims of discrimination, deprivation or neglect. Much of the rhetoric about safeguards and accountability offered by the Administration during the block grant debate was an ecbo of statenents made by a previous administration when the State and Local Fiscal Assistance Act of 1972, which established General Revenue Sharing, was first proposed. The Reagan Administration seened to have forgotten -- or boped others had forgotten -- that actual experience with revenue sharing and block grants discredited many of the original assertions. Even when civil rights issues are viewed in the narrower context of a need to prevent discrimination in the use of funds, however they are allocated, both the Administration's proposals and the final block grants are woefully deficient. They simply apply boilerplate civil rights lan- guage, without any consideration of the ~Erticular enforcetent mechani~ii5 needed when funds are distributed through block grants. PAGENO="0571" 567 -84- IV. KE~ ISSt~ ~ "Any block crant trooosal is inevitably cauaht in a dilemta: the goal of providing maxiznun flexibility and minimal restrictions to the recipient (state or locality) in the uses of the federal funds conflicts with the goal of ensuring that federal funds are effectively used for the attainnent of national ob- jectives and for the provision of additional.. . ser- vices to federally-defined populations. "The question, then, is ~that to recuire of the (state or local agencies) that receive these block grants. Tb specify the precise purposes and activ- ities for ~?nich they will use the funds? Tb ~rooose criteria by ~hich to measure progress? To evaluate thenselves or sulniit to external evaluation of their performance? To subject their plans and performance to scrutiny by a higher level of qovernrnent (or by sane kind of carrnunity review group)? To ally aggrieved persons who feel that the federal our- ngses are not being fulfilled, or that their needs are not being net, to a~~eal to Washington? Ul- timately, to be denied future block orant funds (or to have the arrounts reduced) because of un- willingness or inability to use the funds in vevs envisioned in the federal authorizing statute?" -- The Stockman "Black Book" At a t~n~ ~hen the American people are darnandinq nore accountable, nore effective qoverrinent, the Reagan Administration' s "no strings' aooroach to block grants greatly reduces the accountability and effective- ness of many qoverrinent programs. Daspite the clear, balanced presentation of account- ability issues in Office of Manaaenent and Budget Director David Stockman's "Black Book," the Administration's proposals ianored accountability issues and ~ould have qiven virtually unfettered discretion to state aovernments. The Reagan Administration' s aooroach to block orants provides no assurance that states will administer the programs in an open, accountable manner. The CC~G and social services block orants, for example, simply re- auire that states suhoit brief reports stating ~enerallv hov they intend to spend their funds. Citizens have a chance to review and canment on these rerrorts and the state rrnist hold a public hearing on the planned use of block grant funds -- thouch not until fiscal veer 1983, accordina to HHS. The federal qoverrunent receives the reports and is to cattoare then. PAGENO="0572" 568 -85- with subsequent reports describirrt what was done. Each state will also audit its expenditures under the block grants. This approach to block grants raises a nunber of accountability issues: * It does not require the involvement of state legislatures in assessino needs, settino priorities or evaluat- inn performance. * It does not provide assurance that citizens will have access to the in- formation they need to monitor and assess the state * s plans or perfor- mance. * It does not provide for any evalua- tion of performance by local citizens or the federal qoverrinent, or, in sate cases, even the state govern- ment itself. Thjrthernore, because the renorts that states sutrait at the beoirinina and end of each year are brief and nonspecific, it will be virtually inpossible for citizens, local goverrinents or state legislative cantittees to track block grant funds. The nev block grants are sublect to the most serious problems that have plagued past block grant and revenue sharing programs -l the virtual impossibility of tracino how the funds have been spent, whether they have been spent legally and what their impact has been. The importance of reportino as the most fundamental steP towards accountability has been underscored in several recent reports fran the General l½ccounting Office and by the Inspectors General of various federal departments, arromo others. Former HUD Assistant Secretary Robert flnbrv expressed concern about this issue when he stated: "Most mayors dont have the slightest idea how CDBG funds are spent." The "decision mero" on the social services block orant which HHS staff prepared for Secretary Richard Schwaicker also discussed this issue: "One consideration in choosino whether to renuire anythim beyond minimal Federal rost- expenditure oversiqht is that in many states it is impossible to determine fran publicly avail- able docunents which sources of funds are planned for what services, and hence for normal political involvement to influence state priorities. PAGENO="0573" 569 -86- "Furthernnre, without such detail avail- able to HHS, there would be no basis for describ- mm or assessing current and near-tens state Priorities in testifying to the Congress, con- sidering legislative changes and the like. "The specific aroument for reouirinq a state alan that is to be ao~roved by the Secretary of HHS is that it provides a basis for assuring that states plan to achieve key requiraments, and/or to correct previously identified deficiencies, such as failure to prevent waste or to target sufficient funds to preventive services." Despite the clear analysis in this neil), Has -- after extensive cOn- sultation with Ct'IB -- chose not to propose measures which would adeouatelv ensure that state governments would be accountable to their citizens, their lepislatures or the federal goverrsi~nt for their expenditure of block orant funds. Under Ct4B pressure, HUD and the Department of Education made similar decisions. In designing block orant programs, they all failed to orovide Procedures and safeguards which folla~, any of the six routes to accountability suoaested by Mr. Stockiran in the "Black Book": * To specify the precise purposes and activities for block orant funds: * To propose criteria for measuring progress; * To evaluate performance; * To sublect Plans and performance to scrutiny by a higher level of govern- ment or cczripunity review groups, * To a1lc~i aggrieved persons to appeal to Washington, * To deny or reduce funds because of unwillingness or inability to cariolv with the statute. Prepared by: andrew H. Mott Center for Carffnunity Coame 202/338-3134 PAGENO="0574" 570 -87- Iv. KEY ISSUES FIS(W-. Sfl'UATIC~ (F STM!~S The fol1c,~iina analysis, ~thich appearel in the May 10, 1981, Washinoton Ikat. reviews the fiscal nliaht of states and raises n&or guestions about states' ability to cone with the malor loss of f~eral funds that accamDaniel the new block grants. PAGENO="0575" 571 *~Ijc tt~a~ington ~o~t Sauday. May 10. lOS! State Governments Face crunch 4.6 percent, and may be forced to raise taxes to stay even in 1982. Ohio temporarily raised sales and income taxes this year to weather its crisis. Wisconsin has made sizable apend- ing cuts. Missouri cut its budget 10 percent By Dan B8IZ in January, and expects no increase WaahlsetosPosSsSaTfWrs& next year. Michigan is perhaps in worst shape From Oregon to Connecticut and overall. It will spend about 6 percent from Michigan to Alabama, the state less this year than last, and has cut governments are undergoing a fiscal state employment by about 4,300 retreat brought on by the national tax jobs. revolt and the sluggish U.S. economy. Minnesota faces a $500 million rev- State legislatures have been forced enue shortage in the upcoming bien. to slash spending, in some cases acroes nium. the board, and, for the first time since Iowa cut its fiscal 1981 budget by - TTTTITION 1960 1965 7.0 168 10.9 177 Slack Economy, Tax Revolt Cited AS FISCAL 1955 03.2 11.8% 1970 24.0 22.9 1976 :1977 1978 49.8 59.1 65.4, 77.9 82.9 29.1 31.) 31.0 31.7 30.9 35 STATES 22 STATES 9 STATES [18TA'T'~i 1980 ~::1981tST.i 1982 EST 91.5 94.4 86.4 31.7 29.5 24.3 PAGENO="0576" 572 -89- Victor Atiyeh her proposed a package wants to cap further federal ncreeeol~ Proposition 13 fever swept thee cram- of cuts totaling $260 million, along g 5 peromt, and at their winter try three years agn, higher state taxes with new taxes of $240 million. meeting in February, the governors are becoming ccmmonp1ac~ In Mlnneaota~ where Gov. Al Quie protested that they could not take up The headlines have gone in renest came into office with a pledge to cut the elaclL weeks to President Reagan's budget tazea~ voters fam a reduction in see- Many states have cut benefits end cuts at the federal level, but these vices and about $400 million in new tightened eligibility atandar~ Ken- pale by coenpareron with ~ ~ ef. taint Laginlators worked on a solution tucky, for example~ I considering ready going on acrme the country in all l~ seek, and Qule I fighting to changes that would eliminate 57,000 atlis. and localities, prevent erosion of hI tax canterpieoe, people from the program. Benefits in And the federal cuts, whim will hit indexatiolL Wesbingtcsm state will be cut front the states In f~caI 1982, will make IndereetionIana$toime~ $458to$4l6forafamilyofthree. niditers even worse, cateing further taxpayers from the effects of inflation, Mirumesota and Georgis, among oth- spending arts and more tax increases, but a number of states that have tried era, are ceraidering charging Medicaid Any expectation that the states will it now find themselves in financial patients nominal sums to slow the take over responsibilities now being trouble. groweh of the program. Other states jettisoned in Washington I belied by State politicians elsewhere are doing may limit the amount they pay dec. the weak fiscal condition of many all they can to head off even more tore for treating Medicaid patients. stats governmenta The only hope I drastic arts, and are dipping into re- Budgets fir elementary and second- that Reegs&s economic program will serve funds at an unprecedented rata amy schools have been squeezed, a par- produce the kind of results he so con. Stats governments expect to spend tiwlar problem became state govern- fidently predicte. about $6 billion more than they get in meat in now tha primary funding The fiscal wreckage can be found revenues in the current fIscal year, source for the schoo~ all ~ose the country, although many according to a forthcxsning study by Kentucky's reductions have affected midwestern states appear hardest hit the National Governors Aseociation school supplies, new texthooln, teach- because of the depseasion in the au- (NGA). This will cut sharply into the er-pupil ratios in kindergarten clewea tosnobile industry, balances states maintain became of and varioon support servims~ Wash- Connecticut faces a $110 million restrictions on deficits. Only one stats, irrgtcn's legislature put a lid on teach- rewnue shortage in fiscal 198~ Some Vermont, allows deficits er salaries, Iowa teachers face layoffs state agencies in Alabama have been Moat states try to achieve a year- and Mimouri teachers protest thst the t~d1meywillreceivelessmoneythI endbalanoeof5to6percentofex- new budget will force Ibsen to lose year than called for in the Inalget pendituree. For fiscal 1981, the aver- further to inflation. approved by the legislature. age will be well below 4 percent, down To prevent deeper cuts in higher ~(entucky her gone through repeat- from about 9 percent in Becal 1980, education, college tuitions are rIing~ ecl,,rounds of cuta ilhimin Gov. James acoording to NGA eetimatnt Students in Washington stats face R. Thompson recently proposed $220 Those averages also mask a disper- incresees of 70 percent, while a 25 million in cuts from the 1982 budget ity between the few healthy states and percent hikein Nevada I likely he proposed in March. the many that are suffering. Famergy- Other programs, from parka to po- Closer to horns, only Virginia asenee rich states like Alaska, Team, Load- lice, have been slashed by legIslatures healthy, while Maryland and the DI- smana and Montana, whose revenues with their backs to the walL Idaho, trict of Columbia continue to suffer have been swollen by higher oil prices whose budget I slightly larger thin from a shortage of revenue that may and varicese severance tax~ are Bean- year than last, h dosed parks to cause program cuts or layoffs daily healthy. But for most other hold down costa. And in Massachusetts, where voters states, financial conditions have tight- The financial squeeze has made approved a drastic property tax lim- ened since l~ year, and are expected higher taxes a nscaeasty in some itation measure lest November, pol- to become worse in facel 198K statnt `You can cut the budget just so itidans are bracing for a stzu~le over `A good number of states are at far,' said J. William Buns, deputy how to slice ups smaller pie. zero or 1 percent (in their bslancesj' secretary of the Office of Policy Man- The mess there I how much the said Joe McLsoghlin of the NGA. agemant in Connecticut, where a host state should attempt to help out "They're cutting it very thin.' of tax increases I likely. `We're in the towne and cities whose revenues will At least 33 states project year-amid tasiness of delivering semvi~ You be cut drastically by Proposition 2½. balances of below 5 percent, compared can't eliminate anowpiowing. You've Other states which have done that, or with 20 a year ago, according to pre- got to keep the adamol open.' have provided their own property tax liminary findings by the NGA. Pro- The Tax Foundation estimates that relief, now find themselves in financial jections for fiscal 1982 show that legislation proposed thin year by the trouble. year-end balances may fall to the natioefs governors would rains state `It's partly self-inflicted." Robert range of 2 percent taxes by $3 billion, asotinuing a trend StnitI~ Oregon's chief budget officer, Nothing appears sacred when the begun last year, when tax increases said of the problems in his state, statebudgetsxbeginstofalLlnMin- outpeced tax cuts for the frost time where efforts to subsidize property tax neeota, the budget crisis and a deci- since 1978, the year California voters payments have diverted money front siorm not to sell construction bonds approved Proposition 1K other programs until interest rates drop may eliminate Between 1977 and 1980, 18 states Many states might have been able funding for a new building to house enacted tax or spending limits, 36 to get through the tax revolt with only the Hubert IL Humphrey Institute of states cut their income taxes, 22 states a little belt-tightening had it not been Public Affairs slashed sales taxes and 9 states in- for the receeeioet "Die states have In Michigan, Thomas A. Clay, di- dexed their tax systems But those tax been hit by a double whamnmy,' said rector of the state budget office, said, cuts have since come home to roost Jim Mallory, deputy director of the `There hasn't been an important area The National Conference c~ State National Association of State Budget of our budget that hasn't been cut Legislatures, using Census Bureau fig- Officers - -. We're retrenching rather dramat- urea, reports that tax revenues in- In many states, the only choices are icsliy.' creased faster than inflation in nine deep redtsctioes, higher taxes or both. Among the programs hardest hit states in fiscal 1980, all but one in the In Oregon, a state hurt not only by MedicakL State costs have risen 84 West and South. State tax receipts the tax revolt but also by a slump in percent since 1977 to an estimated rose 9.6 percent In Vermont and the timber induetry, Republican Gov, $14.2 billion in fiscal 198K Reagan Michigan, tax revenues declined. PAGENO="0577" -90- 573 THE WASHINGTON POST As a result, state governments have been forced to raise taxes. In 1980, 18 states enacted 29 tax increases, in- cluding seven states that boosted ei- ther sales or income taxes, according to the NGA. Even more states are considering tax increases this year, and the mood of the legislatures is best symbolized by a non-binding straw vote last month in the House of Representa- tives in notoriously anti-tax New Hampshire. By 2 to 1, members of the House there said they would favor enactmg the state's first income tax. Most states are trying to avoid higher sales or income taxes because of the political consequences. "The one that separates the men from the boys is to go after income or sales taxes," said John Shannon of the Ad- visory Commission on h~tergovem. mental Relations. But many states are raising less visible taxes, such as those on ciga- rettes or alcohol, or increasing user profound effect on the role of state fees, to bring in more revenue. And and local governments, whose share of higher gasoline taxes are being con- the gross national product has de. sidered in nearly two dozen states to dined from a peak of 15.1 percent in visors up highway maintenance funds. 1975 to 13.5 percent in 1980. Still, the tax revolt has not com- And when Reagan finishes his work pletely died down. Michigan's Repub- on the federal budget, the effect on lean Gov. William C. Milliken is sup- the states will be nearly as dramatic. porting a ballot proposition to cut In fiscal 1980, federal aid for the taxes on homes by 50 percent, while states accounted for 31.7 percent of raising the sales tax from 4 to 5.5 state-local receipts. By fiscal 1982, percent and cutting state spending an that will decline to 24.3 percent, sc- additional $250 million. He is trying cording to the Advisory Commission to head off a more drastic tax cut on Intergovernmental Relations. plan favored by conservatives. Steven Gold of the National Con. In Nevada, Gov. Robert F. List ferenee of State Legislatures said, signed legislation that cut property "That is the next body blow that's taxes by 50 percent but boosted the going to hit the states." sales tax from 3.5 to 5.75 percent. Staff writers Art Harris, Jay Ma- Public attitudes may change, how- thews ond Loretta Tsfoni, staff re- ever, because those state surpluses are searcher Maralee Schwartz and spe'- disappearing, and local voters will riot correspondents Jim Borrows, have to decide if they are willing to Terry Ganey, Ca,sivn Gotz, Laura live with fewer police, parks and Parker, Carin Proit, Austin Wehr- teachers, or raise local taxes, wein and David Y'pson contributed This tax revolt has already had ~ to this report. 99-965 0 - 82 - 37 PAGENO="0578" 574 -91- V. FT 1982 BLOCK G~N1~ SE~CIFICS Following are descriptions of the nine n~i block grant programs: Can- nunity Develqrnent, Health Prevention and Services, Alcolxl Abuse, Drug Abuse and Mental Health Services, Primary Care, Maternal and Caild Health, Education Consolidation, Social Services, Low Incane Energy Assistance and Ccrrrnunity Services. Also included are a description of the general block grant requiraments found in Title XVII of the 1981 Cenibus Bedget Beconciliation Act; an analysis of the t~partment of Health and Human Services regulations for the health, energy assistance and cairnunity services block grants; and an analysis of the Hepartment of Ibusing and 2Urban Develcpnent regulations for the Soall Cities Program under the Ccmnunity Developnent Block Grant. PAGENO="0579" 575 -92- V. FY 1982 BLOCK (~AN~ SL~CIFICS (X~UUTY ~P?4~7~ The Department of fkusinq and Urban Developaent' s caruTlunity develojrnent program has always been a block grant, but the new legislation n~ves that program in the direction desired by the Administration by rmsoving many protections such as stringent application and citizen participation requiranents. Within the CDBG program, separate funds are nov earmarked for Urban Developnent Action Grants (UIF~G). CDBG funds are split 70%/30% between urban entitlament jurisdictions and small cities, rather than the former 80%/20% split. Under the revised CDBG program, neither entitlament nor nonentitlament (small cities) jurisdictions are required to sutmit applications for approval. They only need to sutxnit a statament of their propDsed canmunity developnent activities and projected use of funds. The statament must be available for public examination and caument and must include information on the anount of honey available for propesed casmunity developrent and housing activities and the range of activities to be undertaken. The grantee must hold at least one public hearing and, in preparing its final sttniission, is to consider public carments received. If appropriate, the grantee is to ruodify its proposed statenent, and the final statmrent must be made available to the public. The grantee's projected use of funds is to be `developed so as to give maximum feasible priority to activities `~thich will benefit lv and rroderate ncare families or aid in the prevention or elimination of slurre or blight," according to the congressional rerort on the legislation. The funds may also be used for activities s~hich meet urgent carmunity developaent needs because "existing conditions pose a serious and irrusediate threat" to the caiTnunity's health or welfare. Entitleiient jurisdictions are still required to submit a housing assistance plan (HAP) to HUD, but small cities need not prepare a HAP. The HAP came under considerable attack during carrnittee hearings on CDBG, and it is likely that the Administration and sate meibers of Congress will try to eliminate it entirely in 1982. HUD will conduct annual reviews and audits of the performance of en- titleiuent jurisdictions and has authority to reduce annual grants if its review suggests that this is appropriate. ~ rrore than 10% of a jurisdiction's CD grant may be used for public services, but there are no restrictions on ~there such services can be pro- vided. Energy conservation measures will not count against the 10% ceiling. For the first time, the legislation permits for-profit econanic developnent as an "eligible activity" under CDBG. PAGENO="0580" 576 -93- The reconciliation act folds into the CDBG program, without providing additional funds, activities previously authorized by the Section 701 cariprehensive planning aid program and the Heighborhood Self-Help Develop- ment program. The Section 312 rehabilitation loan program is authorized, but no na, funds are provided. Future loans will be made with funds avail- able fran repayment of past loans. While the 011kG program is separately authorized, with its own funding for fiscal years 1982 and 1983, it is core limited than before. Econcrnic develqinent activities are strongly enphasized, there is no longer a re- quiren~nt for a balance between neighborhood and other types of projects and citizen participation is reduced. A public hearing and an after-thefact analysis of the programs impact on neighborhoods are required, however. Congress adopted provisions governing the amall cities program largely fran the core advantageous Senate bill. States now have the option of running the amall cities program thenselves but they must pass through all funds, plus 10% additional state conies, to localities. Alternatively they can allow HOD to administer the program. States may use up to 2% of their federal funds to administer the program, provided the acount used is matched with state funds. Where states do not opt to administer the amall cities program, HOD will accept proposals directly fran non-entitlacent jurisdictions. HFAL~ Congress cut funding by 25% for about 20 health programs included in four block grants: health prevention and services, alcohol and drug abuse and mental health services ; primary care (ccrcrnunity health centers); and maternal and child health. Excluded fran the blocks are programs for irmrninization, tuberculosis, black lung, venereal disease, developrental disabilities and family plan- ning, as well as migrant health centers and, for fiscal 1982 only, primary care research and developiient. In addition, Congress established a new adolescent pregnancy program ~thich partially duplicates an existing program that was included in the maternal and child health block grant. In general, thanks to House ccmmittee insistence, the health block grants provide opportunities for public hearings on the state-run programs and require states to establish criteria for evaluating grantees' perform- ance. In sa~ cases, states are required to justify their decisions on use of the block grant funds. Required reports and audits are to be available for public inspection. HFAL~ PREV~IC~1 AND SERVICFS ~ ~AN~ This includes hare health services, rodent control, flunridation, health education/risk reduction, health incentive grants, a continuation PAGENO="0581" 577 -94- of existing anergency medical services grants, rape crisis services (with a $3 million set-aside each year and funds distributed according to a popu- lation-based formula) and hypertension programs (with set-asides of 75% in FY 1982, 70% in FY 1983 and 60% in FY 1984). The state may shift up to 7% of these funds to other health block grants. Administrative costs are limited to 10%. Beginning in F? 1983, the state legislature oust told `public hearings on the proposed use and distribution of funds" for this block grant. The state is also reguired to submit an application ~thich includes certification that the state will cake grants for fiscal 1982 to each entity within the state ~thich received a grant or contract in fiscal 1981. The application also includes the states agreetent `to establish reasonable criteria to evaluate the effective performance of entities ubich receive funds. . .and procedures for.. . independent state review of the failure by the state to provide funds for such entity." Other requiraments include: * identification of those "populations, areas and localities in the state with a need for the services" provided by this block grant; * agreenent that the block grant funds will supplenent, and not supplant, state and local funds for these programs; * making available for public canment a report that describes the intended use of the block grant funds; submission of an annual report on the activities fund- ed by this block grant; and an annual audit of expenditures. AI~(KL A~E, r~ A~EE A~) ~~AL HEALTh SERVICES HtOQ( (~AN~ This block grant includes caraiunity mental health centers and drso and alcd-iol abuse programs. The Secretary has a 1% set-aside for grants to public and non-profit private organizations to provide training and re- training to enployees "adversely affected by changes in the delivery of mental health services and for providing such anployees assistance in securing anployment." Previously funded mental health centers must receive continued support in fiscal years 1982 through 1984, but the Secretary has authority to approve defunding of existing grantees. The legislation earmarks specific percentages of the funds for the three programs included in the block and allovs shifting of up to 7% of the funds to other health blocks. No sore than 10% of the federal funds may be used for administration. PAGENO="0582" 578 -95- The sane requiretents for public hearings and criteria for evaluating grantees performance apply here as in the health services block. In addi- tion, ccirmunity nental health centers are required to provide specific types of services to specified types of people. Federal funds must not supplant state arid local funds for these services. The state must make available for public caanent its description of the intended use of the funds and, annually, sutmit a report arid conduct an audit. ~I~RY (ARE BW~ ~r This "block qrant' actually continues canmunity health centers as a separate program, with separate funding, and gives states the option of whether eventually to administer the centers or ally the federal goverrinent to continue doing so. The centers are operated on a canpletely categorical basis, as in the past, in fiscal 1982, while states use planning grants to prepare for their eventual takeover of the centers. In fiscal 1983 and 1984 states may administer the centers but must fund existing grantees for one year. If a state does not wish to assurre this responsibility, federal administration will continue. Beginning in FY 1983, the state legislature must hold public hearings on the proposed use and distribution of the block grant funds. The state must "establish, after providing reasonable notice and cppDrtunity for the suthiission of casrents, reasonable criteria to evaluate the fiscal, mana- gerial and clinical performance of canmunity health centers." ~E~L AND QUID HFALTh BW~ ~ANF This block grant consolidates Title V of the Social Security Act relating to maternal and child health arid services for crippled children, the Supplerental Security Incane (SSI) program for disabled children, the lead-based paint poisoning prevention program, the Sudden Infant Death Syridrare program, funding for canprehensive herophilia diagnostic and treatment centers, an adolescent pregnancy program and the genetic disease program. ~> funds may be transferred out of this block. The legislation deletes a provision of the House version that required states to pass throuqh one-third of their allotmen~:s to counties arid municipalities. This is "to avoid creating difficulties" in states where local health departments are not active in providing maternal and child health services, according to the House-Senate conference repDrt. Sot, the report adds, "it is the intention of the conferees that states maximize the erount of funding available for the direct delivery of services, and that local health departments (Where they exist) and other local public health entities receive at least the same proportion of funding in future years as they have in the past" for these services. The legislation also states that retoval of the 15% administrative cost ceiling is not intended to encourage states to spend core than that on administration arid other "nonservice expenditures." Rather, states are PAGENO="0583" 579 -96- expected to econanize even beyerñ the current 7.5% administrative cost average. The state must submit an annual repart on the maternal and child health block grant to the Secretary, stating the intended use of the funds, including consideration of the needs of the state for services, a statament of goals and objectives for maetinp those needs and information on the types of services to be provided and the categories of individuals to be served. An audit is required every tao years and a repart on activities undertaken is required each year. ~ U~TIC~ P~X~M The education consolidation program consists of tao parts: one con- tinues Title I of the Elar~ntary and Secondary Education Act (ESEB) which supparts programs for disadvantaged students (but in severely restricted rm; the other consolidates into a block grant 28 small elamentary and secondary education programs. Bilingual education and the Wzxnen s Educational Equity Act are r~t included in the block grant. While the n~'i legislation states that programs are to be operated in school "attendance areas" with "the highest concentrations of lcw incane children," this is a substantial dilution of previous language which pro- vides for very specific targeting of funds within school districts. The n~ block grant also eliminates major provisions that delineate state responsibilities for auditing and enforc~ant; ~akens maintenance of effort, supplament not supplant and canparability requireiients; and eliminates a variety of accountability provisions, such as those requiring public access to information and those establishing canplaint procedures and rionitorimp require~ants. Finally, the ne~, Title I block grant eliminates parent advisory councils and other forms of parental involvai~nt, requiring only that pro- grams be "designed and implamented in consultation with parents and teachers" of children served by Title I programs. The second portion of the education block grant consolidates all other ESRk programs (except bilingual education and the Wanen `5 Educational Equity program), as ~ell as Teacher Corps, teacher centers, precollege science teacher training, the Career Education Incentive Act and the Alcohol and Drug Abuse Education Act. It also phases the Follcw Through program into the block grant over three years. State education agencies are required to pass through 80% of their funds to local education agencies. PAGENO="0584" 580 -97- SOCIAL SERVICES &O~ ~ Wriile the President had proposed consolidation of 11 programs into a massive social services block grant, Congress simply atiended the existing program under Title XX of~ the Social Security Act into a block grant that includes social services and staff training. Anong the crucial programs left out of the block grant are child welfare, adoption assistance and child abuse and foster care. The new legislation no longer targets services on the basis of incane, and it eliminates requiratuents for states to match a portion of the federal funds. However, it does not retain the original goals of the Title XX progran, which include helping recipients achieve or maintain econcrnic self-sufficiency and preventing or ramedying neglect, abuse or exploitation. The legislation permits training of social services staff through con- ferences and ~orkshops and through grants to nonprofit organizations or to individuals with social service expertise. Before spending their social services funds, states must develop and make public a report on hcw the funds will be used, including information on the types of activities to be funded and the characteristics of those to be served. Reports on hov the funds were spent, as well as audits, are required every tse~ years. States nay transfer up to 10% of their social services funds to any of the health block grants or to the lcw incare energy assistance block grant. IA~1 flW ~Y ~SSI~E B1Q(~ ~ANT This program, which wes basically a block qrant to beqin with, cane out of the reconciliation process in extratnely good shape. Congress did not go along with the Administration * s proposal to include artergency assistance in the block grant with energy assistance, nor to eliminate incaire criteria for receiving assistance. of all the new block grants, this one has the must stringent require- cents for outreach and targeting of services to lv inccrre people. It also includes a crucial "incane disregard' provision which prohibits counting this assistance as inccrre in determining other govermrent benefits, and it limits administrative costs to 10%. Funds for lo,.i incane energy assistance are targeted to households with the la~st incares and the highest energy coats in relation to incare, and renters are to receive equitable treatment. While states may set their vn eligibility criteria, federal funds may be used only for households that include a public assistance recipient or a recipient of certain veterans' benefits, or whose incare is belv either 150% of the poverty level or 60% of the median state inccrne. PAGENO="0585" 581 -98- The state s plan must be made available to the public in such manner as to facilitate public ccrnment; and the state may not receive funds after the first year of the program unless it conducts public hearings on the propDsed use and distribution of the energy assistance funds. The legislation states that the governor is expected to fully inform the state legislature about the state plan and assist and encourage the legislature to conduct independent oversight hearings on the operation of the program. There is no provision sthereby the Secretary may disapprove a state's plan, however. States are also required to provide the oppDrtunity for "a fair ad- ministrative hearing to individuals ~those claims for assistance. .are denied or are not acted upnn with reasonable prcpptness." An independent audit of the program is required annually. To the extent that it is necessary to designate local administrative agencies to carry out this program, states must give special consideration to local public or private nonprofit agencies that are currently receiving federal funds for any low incare energy assistance or weatherization pro- gram. States may use up to 15% of their block grant funds for weatheriza- tion or other energy-related hare repair; and they must reserve a reasonable arrount, based on past experience, for crisis intervention. States may transfer up to 10% of their low incare energy assistance funds to any of the other block grants except education or carrmunity develo~xrent, allowing then to partially offset the funding reductions in other program areas. Q~H~fly SERVICE B1O~( ~Nr Corrrress enacted a separate block grant for carwnunity services, thwarting the Administration' s plan to fold this program into the Social Services Block Grant. The legislation repeals authority for the Ccmmunity Services Administration and places the block grant under the jurisdiction of the Department of Health and Husian Services (HHS). In FY 1982, states are to make grants to previously designated canmunity action agencies or to organizations serving seasonal or migrant farrraorkers. Beginning in FY 1983, funds may be administered directly by çolitical subdivisions of states, by private nonprofit carrrnunity organiza- tions or by migrant and seasonal farrms~rker organizations. A carounity action agency or nonprofit organization that receives funds must have a board whose marnbership is constituted as follows: onethird, chosen darocratically, to represent the çoor in the area served; one-third elected public officials; and one-third msebers of business, industry, labor, religious, welfare, education or other major groups and interests in the careunity. The state legislature is to hold a public hearing, beginning in FY 1983, on the propased use and distribution of funds. The state may trans- PAGENO="0586" 582 -99-- far up to 5% of its funds fras this block grant to services under the Older Americans Act, Head Start or energy crisis intervention. State administrative costs are linitef to 5%. As pert of its application, the state must certify that it will use the carmunity services funds "to provide a range of services and activities having a maasurable and potentially major inpact on causes of poverty in the carrnunity or those areas where poverty is a particularly acute problan." Activities are to help 1CM incane persons, including the elderly poor, to secure anployrnent, education and housing and to obtain anergency assistance, among other prposes. The HHS Secretary may use up to 9% of the funds appropriated for this block grant for discretionary projects, carried out directly or through grants to states or public and other organizations and agencies. Eligible projects include assistance to "private, locally initiated ccanunity developeent programs which sponsor enterprises providing eiiployment and business developnent opportunities for 1CM incare residents of the area" Rural Development Loan Fbnd revolving loans and guarantees; ccmnunity developient credit union programs, technical assistance and training pro- grams in rural housing and carinunity facilities develc~xnent; assistance for migrant and seasonal farneR~rkers; and national or regional recreational programs for 1CM incana youth. Prepared by: Ronnie Kwaller Center for Canmunity thange 202/338-6484 PAGENO="0587" 583 -100- BIIXK ~ANP S1~X~IFI~~S TITLE XVII RECXJIRI~1FNTS Sections 1741-1745 of the budget reconciliation legislation include minimum public hearing, targeting and auditing requiregents for several block grants. The EMucation Consolidation Program is specifically exenpted fran Title XVII requiranents, as are the Maternal and thild Health and Primary Care Block Grants. (As noted above, the Primary Care Block Grant includes its own public hearing requir~nt.) The Department of Health and Human Services (HITS) has further deter- mined that both the Social Services and Low Thccine Energy Assistance Block Grants are also exenpt fran Title XVII, because they ware formerly block grant programs in ~nich federal funds flowed to the states. As such, they do not fall under the Title XVII requireilents for nev block grants. Public Hearings Title XVII says: `Th state may receive block grant funds for any fiscal year until the state has conducted a public hearing, after adequate public notice, on the use and distribution of the funds propased by the state." HHS ruled, however, that this requir~nent was not in effect in FY 1982, because several individual block grants require hearings beginning in FY 1983. Transitian Title XVII allc~d states to wait until the third quarter of FY 1 `J2 (July 1, 1981) to certify that they had canplimi with block grant planning requirenents and ware ready to use block grant funds. Until that time, the federal agency with jurisdiction over the block grant wauld distribute the funds on a categorical program basis, with pro-rata reductions to reflect the spending cuts adopted by Congress in the budget reconciliation act. These transition provisions did not apply to the Social Services or Low Inccms Energy Assistance Block Grants. Because they had been block grant programs prior to FY 1982, and the n~ legislation wnuld require few administrative changes on the part of states, all states ware required to implenent then on October 1, 1981. PAGENO="0588" 584 -101- While advocates considered Congress's adoption of these transition provisions as a great victory, it turned out that few states took advantaqe of then. According to data canpiled by the National Governors Association, the over~thelming majority of states chose to implanent sost or all of the block grants on Cotober 1, 1981. New York and California were the notable exceptions to this trend, California having adopted a state law that delayed implenentation of all block grants until July 1, 1982, the latest date permitted by Title XVII. TarqeLi~ Each state must develon a public recort on its proposed use of funds for individual block grants. The report must include: a stateaent of coals and objectives; information on the types of activities to be supported, geographic areas to be served and categories or characteristics of individuals to be served; and the criteria and mettod established for the distribution of the funds, including details on hc~i the distrib.iticzi of fun~1s will be tarceted ~i the basis of need to achieve the nurouses of the block urant. Beqinning in FY 1983, the report must include a description of how the state has out the goals, objectives and needs set in the previous year. The report and any changes to it shall be made public "on a timely basis and in such manner as to facilitate caliounts fran interested local governments and persons." ~its. Title XVII requires states to perform financial and canpliance audits of their block grant funds every tao years. In contrast to its decision on public hearings, HHS ruled that this provision supersedes the reguir~nt in an individual block grant -- in this case the rrore lenient reguiranent for an annual audit of the Caiirnunity Services Block Grant. ~s to Records In order to evaluate and review the use of the block grant funds, the Ccmptroller General is to "have access to any books, accounts, records, correspondence or other documents" relatinq to such funds. Prepared by: Ronnie Kweller Center for Canmunity Change 202/338-6484 PAGENO="0589" 585 -102- ~ ~r ~ia~ In sharp contrast to past federal regulations, those for the new block grants are deliberately minimal, failing to elaborate on or clarify the satetiires vague provisions of the legislation. This is true of the regulations prcmulgated by the Department of Health and Human Services (HHS). and by the Department of Housing and Urban Developi~nt (HUE)). The HHS regulations cover four block grants in the health area as ~ll as block grants for social services, canmunity services and lcw inccrne energy assistance. HHS published these "interim final' regulations in the October 1 Federal Register (pp. 48581-48598), allying a 60-day carment period. De Nowsnber 20, HUE) published interim regulations for the State Program (~nall Cities Program) under the Cannunity Developimnt Block Grant, with casoents permitted until January 19. The propased regulations are on pages 57255-57261 of the Federal Register. ~~Re!~4ccr1~lth, Social Services, Ccimuni Services ar~i Lcw ~ HHS itself has described these regulations as "bare bones minimum" and in every possible instance has given maximum discretion for interpreting the law to the individual states. The regulations clearly indicate that HHS will exercise little if any judgment as to the adequacy of state block grant administration, beyond technical concerns such as ~nether the state has sutmitted a casplete application. Despite statutory language stating that the BBS Secretary will pre- scribe the form of state applications for block grant funds, the regulations do not dO so. They merely state that the application must canply with Title XVII requiranents for a report that includes the goals, activities, geographic areas and types of individuals to be served, and the "criteria and rnetbod" for distributing funds, including bow funds will be targeted on the basis of need. The reports are to be available for public ccnmnnt. The preaichle to the regulations states: "The Department will review the suhnissions to determine that they are canplete and in accordance with the statutory reguiranents. Fbnds will be made available to any state filing a canplete suhnission." This language strongly suggests that HHS will not exercise judgment on the adequacy of the plan. It semus unlikely, for instance, that HHS s~ould reject a plan because it ~ms not going to address a need identified by a ccrnmunity group at a public hearing or in wd,tten carinents. - PAGENO="0590" 586 -103- Because HHS apparently will not exercise such judgosnt, governors are under no pressure frcm the federal level to pay attention to ccirir~nts on their block grant plans, nor does HIIS do anything to make them feel obliged to justify any failure to trodify their plans on the basis of the caTUThE~nts. Record-Keeping; Reports Again, the regulations fail to carry out the statutory provision stating that the Secretary will prescribe the form and content of states' annual administrative and fiscal reports on block grant expenditures. The preamble to the regulations osrely directs states to keep records "suff i- cient to permit the preparation of reports required by statute and to permit the tracing of funds to a level of expenditure adequate to insure that funds have not been spent unlawfully. . . .Except for these provisions, the Secretary is not prescribing any data collection requirements and is not prescribing any format or content of any information that the act re- quires the state to collect." The regulations do not define any of the vague terre in this statement, such as "adequate" or "sufficient." These minimal requirements for record-keeping, plus those for after- the-fact reporting, seriously curtail a state's accountability for its use of the funds. Other than in the preamble, the regulations themselves do not even address reporting requirements, allowing the vague statutory language to stand on its own. The law requires a report, beginning in FY 1983, describing how the state has net the goals, objectives and needs identified in its previous report. There are no requirements for data on who was served by sex, race, age, handicap, incaro, etc., nor on what services they received, nor for any data that would facilitate evaluation of program effectiveness. Past experience with block grant programs, including General Revenue Sharing and Title XX, has shown the difficulty of tracking block grant funds in the atsence of detailed data reporting. The minimal requirements for the new block grants will continue and intensify this unacceptable situation. Federal Oversight and Monitoring; Audits; Ccmplaints The preamble to the HITS regulations leves no doubt as to where the department stands on the issue of federal oversight: "A basic purpose of the block grant legislation is to simplify state grant administration and minimize federal involvement by placing far greater reliance on state government. Accordingly, the block grants will be exempt frcm the usual departzrental grant administration requirements. . . .We are establishing a fiscal and administrative standard providing maximum discretion to the states and placing full reliance on state law and procedures. Under this standard, a state will not lock to Part 74 (of the Code of Federal Regula- PAGENO="0591" 587 -104- tions) for such matters as property procurement standards or what is an allowable or unallowable cost. Rather, the state's laws and procedures governing the expenditure of its own revenues will govern." The regulations theaselves do not even address oversight or auditing, simply leaving it to the preamble to describe how HHS is interpreting the statutory requirements. The law requires annual audits for the Low Income Energy Assistance Block Grant and for three of the health block grants: Preventive Health and Health Services, Alcohol and Drug Abuse and Mental Health Services and Primary Care. Audits are required every two years for the Maternal and Cnild Health, Social Services and Cctnmunity Services Block Grants. In the case of ccninunity services, the regulations state that the Title XVII requirement for an audit every two years supersedes the lan- guage of the block grant itself, which requires an annual audit. Audits are to be conducted by an "entity" that is "independent" of the agency administering the block grant, according to the statute. Here again, however, HHS gives the states maximum discretion for self-regula- tion. The preamble states: "The block grant programs are intended to confer great discretion on the states, which by statute are the primary auditors of their own expenditures. The fundamental check on the state's use of block grant funds is the state's accountability to its citizens, which is implemented by public disclosure within the state of infonriation concern- ing use of the funds. Accordingly, when an issue arises as to whether a state has complied with its assurances and the statutory provisions, the Department will ordinarily defer to the state's interpretation of its assurances and the statutory provisions. Unless the interpretation is clearly erroneous, state action based on that interpretation will not be challenged by the Department." The preamble adds that "the Department will rely on state audits if the audits have been conducted in accordance with the Ccnptroller General's standards. . . .Any additional auditing by the Department would build upon the state's work." Regarding both ccmplaints and audits, the federal role, once again, is minimal. According to the regulations: "In resolving any issue raised by a complaint or federal audit, the Department will defer to a state's interpretation of its assurances and of the provisions of the block grant statutes, unless the interpretation is clearly erroneous." The next sentence, however, mndifies the extent to which the state will judge its awn conduct: "The Department will provide copies of complaints to the independent entity responsible for auditing the state's activities under the block grant program involved. Any detexmination by the Department that a state's interpretation is not clearly erroneous PAGENO="0592" 588 -105- shall not preclude or otherwise prejudice the state auditors considera- tion of the question." Regulations for ccmplaint and hearing procedures are somewhat ambig- uous and may be clarified when the regulations are published in final form, according to an HITS official. %Tnile not explicitly providing for a hearing when a complaint is received, the HITS official said the depart- ment's intent is to allow the agency receiving the complaint to bring the parties together on an informal basis to discuss the complaint, before the agency determines whether funds have been misspent. Complaints may be filed when the state is deemed to have failed to use its block grant funds in accordance with the block grant legislation or the assurances and certifications required by law and included in the state's plan. The regulations identify in brief the contents of the com- plaint and say where they should be addressed for specific block grants. The Department will "promptly" furnish the state with a copy of the complaint and the state will have 60 days (or longer if the Departrrsnt agrees) to cawrsnt on the complaint. "The DepartlTsnt will conduct an in- vestigation of complaints where appropriate" and will provide a written response to the complaint within 180 days of receiving it. Before a state can be ordered to repay funds that the Department has determined were spent improperly, the state is entitled to a hearing. The state may appeal the decision resulting from the hearing to the Depart- ment's Grant Appeals Board (for which regulations were published in the Federal Register on August 31, 1981). The preamble to the regulations states that HHS "has provided for a comparatively informal hearing procedure rather than a formal hearing be- fore an administrative law judge... .The flexible procedure adopted is de- signed to resolve questions in a fair and expeditious manner." Thus, the regulations state that "participation as parties in the hearing by persons other than the state and the Department is not per- mitted" -- though an HITS official said the complaining party could be called as a witness by either side -- and that "the use of interrogator- ies, depositions and other fonrs of discovery shall not be allowed." It remains to be seen whether states comply with the intended informal spirit of the hearings, or whether they use these regulations to thwart a fair airing of the complaint. The regulations further state that the hearing shall .be public, except when the Secretary or the presiding officer decides otherwise. The presiding officer is to be an HITS employee, designated by the Secretary, who is to be "free from bias or prejudice and may not have participated in the investigation or action that is the subject of the hearing or be subordinate to a person, other than the Secretary, who has participated in such investigation or action." All parties to the hearing may be advised and accompanied by counsel. PAGENO="0593" 589 -106- Nondiscrimination The statute prohibits discrimination on the basis of age, handicap, race, color, national origin and sex for the four health block grants and those for cctrrriunity services and energy assistance. While the Social Services Block Grant does not include explicit non- discrimination language, federal laws prohibiting discrimination on the basis of sex, race, age, religion and handicap apply. These prohibitions will be clarified in the final version of the block grant regulations, according to an HITS official. The regulations do not elaborate on these provisions. The preamble states that, with one minor exception, the Secretary will rely on existing nondiscrimination regulations, rather than developing new ones for the block grants. (The exception is that nondiscrimination assurances re- quired by the law are to accanpany states' applications for block grant funds.) It should be noted that up until now, all enforcement against dis- crimination on the basis of race and handicap has occurred at the federal level. Advocates, therefore, are concerned that the block grant regula- tions fail to address meaningful enforcement of basic nondiscrimination protections. Further, the regulations fail to clarify that the ccxiiplaint proce- dures do not apply to investigations of alleged violations of federal civil rights laws. This suggests that the vague and unspecific block grant ccinplaint procedures supersede the mere carefully drawn procedures for investigating violations of basic federal civil rights protections, such as Title VI of the Civil Rights Act and Section 504 of the Rehabilita- tion Act, which pertains to handicapped persons. It is unfortunate and dangerous that the block grant regulations do not specify that they do not supersede the enforcement procedures set forth by federal civil rights laws and their own regulations, especially as it can be argued that the legislation establishing the block grants clearly deionstrates Congress's intent that enforcement and couplaint pro- cedures of the various federal civil rights statutes apply fully to the block grants. Prepared by: Ronnie Kweller Center for Carrnunity thange 202/338-6484 99-965 0 - 82 - 38 PAGENO="0594" 590 -107- &CCK ~AN~ RE~AT~ Ccminity Develcçztent Block Grant - ~ll Cities Program Interim regulations for the Small Cities (non-entitlalent jurisdic- tions) program under the Canraunity Developoent Block Grant are in a hold- ing pattern, pending ccrnpletion of a mandatory 30-day congressional re- view. As the 30 days must occur while Congress is in session, the holiday recess, which lasted until January 25, delayed caripletion of the review. BUD published the Snail Cities regulations in the Hovad~er 20 Federal Register (pp. 57255-57261), but apparently is delaying publica of Ct~G entitlanent jurisdiction regulations until the status of the Small Cities regulations is resolved. In the meantime, there are several issues of concern in the proposed Small Cities regulations: Princi~nl Benefit The primary objective of the CDBG program -- that funded activities principally benefit low and coderate incate persons -- is considerably downplayed in the new regulations. Indeed, the Department of Housing and Urban Developrent' s original draft of the Small Cities regulations did not even mention this objective. Citizen and congressional objections to this anission led to develorxnent of the currently proposed regulations, which state that the primary objective can be achieved through activities that carry out one or core of three national objectives, including aiding in the prevention or elimination of slums or blight and meeting urgent caamunity developoent needs. Besides diluting the enphasis on low and noderate incane benefit, the regulations decline to set a uniform definition for low and rrcderate in- cane, allowing states to use their own definitions, based on either federal standards "or upon state conditions or determinations consistent with the intent and objectives of the act.' The prean~ble to the regulations notes that in administering entitle- ment CL~G programs or non-entitlenent programs that individual states choose not to run, BUD will continue to use the incare eligibility stan- dards of the Section 8 program. "The Department believes, however, that other definitions may be equally consistent with congressional intent." This approach raises serious questions of equity and effectiveness. If states are free to set their own definitions for low and iroderate in- cane, what will ensure that the national goals of the program are achieved? In this time of declining budgets at all levels of governrrent, moreover, it is of maximum importance that funds that are meant to be targeted by incare are, in fact, so targeted. A uniform incare standard wnuld be a significant step toward this goal. PAGENO="0595" 591 -108- Record-Keeping and Grantee Perfoni~ince Evaluation Like the regulations for the HHS-administered block grants, HUT) 5 regulations explicitly state that the Department will give a great deal of discretion to the states for interpreting the law. In the case of the Small Cities program, the proposed regulations state that "In exercising his obligation and responsibility to review a state's perfonnance, the Secretary will give maximum feasible deference to the state's interpreta- tion of the statutory requiresents consistent with the Secretary's obliga- tion to enforce compliance with the manifest intent of Congress as de- clared in the act.' This intention canes through clearly in the regulations pertaining to record-keeping: `Each state shall establish and maintain such record-keep- ing requirements as the state shall deam appropriate in order to facili- tate review and audit by the Secretary of the state's administration of grants. . .and shall establish record-keeping requiraments for units of general local government receiving assistance which shall be suffiáient to facilitate such reviews and audits of such recipients as may be necessary or appropriate to determine whether they have carried ant their activities in accordance with the requirarsnts and the primary objectives of the act and other applicable laws." The regulations do not define the terms "necessary" and "approp- riate," leaving this, too, to the states. Similar language is used with regard to performance reports. This is particularly disturbing, as both Congress and the Administration have placed great eaphasis upon "back-end review" of the CDBG program since the front-end application process has been largely eliminated, according to the preamble to the regulations. Nevertheless, "the Department.. .is not atteapting in these regulations to prescribe in detail the manner in which states are to report their activi- ties to the Secretary." Not only is this troublesome in terms of HIJD's receiving sufficient information on which to base performance review, but it flouts congres- sional intent, as stated in the Senate committee's report on the Ct)BG leg- islation: "The canrnittee `s proposal re-~hasizes the post-grant review and audit process as the proper point in time to determine consistency and appropriateness of local CD programs." It is difficult to imagine any de- gree of consistency within a process that permits 50 different methods of record-keeping and reporting. Civil Rights In this area, too, HUD seena to be downgrading the importance of an important area of federal concern. While prior CDBG regulations spelled out the exact civil rights obligations of grantees, the new proposed regu- lations refer only to conformity with the Civil Rights Acts of 1964 and 1968 and other applicable law. The regulations do not, however, describe gmantees' responsibilities under these laws. PAGENO="0596" 592 -109- Citizen Participation The regulations do not address citizen participation, giving states no guidance as to how citizens can cciament on the state's published state- rnent on its intended use of ~DBG funds, nor do they address public access to program infonTation. Citizen participation and public canrrnnt beccne meaningless tenns when there are no guidelines for making it a reality and when public access to information is not guaranteed. Multi-Year Ccmniti~nts Here, pressure fran city officials caused HOD to revise its original regulations, which did not require honoring of multi-year funding caamit- ments made prior to passage of the new (DBG legislation. The proposed regulations do require that states honor multi-year ccinmitnEnts made in F? 1980 and 1981, providing the funded localities request it and that HUD determines they have performed adequately. HUD is to be responsible for administering funds that it distributed under such ccniTlitrrnnts, while the state will administer funds that it distributed. 1~tching Funds Under the Small Cities legislation, states that choose to administer the program must provide a 10% match fran their own funds for carmunity development activities. Such activities do not have to relate directly to activities undertaken with CDBG funds, nor must they take place in ccarnun- ities receiving nonentitlement funds. The regulations allow activities that improve distressed areas or benefit low and mederate income house- holds, as well as housing and ccninunity development activities that are not eligible under the act, such as construction of new housing and rent subsidies. A~ninistrative Funds States may not use CDBG discretionary grants to cover administrative costs, which mist be paid out of state funds. Prepared by: Paul Bloyd Center for Canriunity Change 202/338-6382 PAGENO="0597" 593 -110- VI. I~tFSS (LIPS The following pages include sane of the news coverage and editorial ccenent during the debate on block grants and the early block grant imple- nentation period. PAGENO="0598" Lost month. President Reagan talker with five reporters about his concept of federal-state relations. Colunnesiat Peirce is a specialist in that field. One has to credit President Reagan for taking a sincere interest in the US. federal system and elivating it to ila most promi- nent position in American debate in over a half century. Heeven tooktheunuaualstep of denignating federal questions as the sole thime for our briefing. Yet as I walked out of the Oval Office, I felt no small measure of despair. Reagan had come close in the interview toconfirna' lag the view of skeptim who say his "new federalism" announts to little more than shipping programs down to the statea as fast as ponuible. I tsked him what should be the federal government's "domestic functions"? His sole snswera "national security" - and then, later in the interview, "interstate commerce" as well, Mr. Reagan had spoken out fur raising and spending taxes at the same level of government, for block grants over smaller categorical granla so often associated with "that entra layer" of bureaucracy. He hod poieted with pride to his edwin- istratioo's removal of hundreds of regula- tions, his personal consultations with hun' deeds of state and local officials during his first 10 months in office, He had discusaed his hope to identify sources of pevenue. that could be turned back to the states Why, then, the dismay? FIRST, because Mr. Reagan seems not to appreciate folly the turmoil into which his ropid budget-cutting has thrown state and local budgets. The,.atote.locol sector absoebesl 113 bil- lion in cats is the fast budget rouiid. In September the president sought to cut another 12 percent Now he would give no guarantee that state-local aid - even general revenue sharing and the new block grants-might not suffer still more cuts in thenect bud' get Mr. Reagan pointedly ignored the alarm voiced by the nation's governors in early November before the Senate Intergosern' mental Relatisns Subcommittee, chaired by Sea, David Durenberger of Mmnews te, The governors had warned of "disarray and chaos" instate capitels because of the federal cuts. Richard Snelling (R-Vt,), Na. tionat Governors Association chairman, had cited one Congressional Budget Office scenario that aid testate and local govern' meets cooldvirtuallydisappearby 1984, so great are the presaures on the budget So the governors had said Washington simply must trim the so-fur sacrosanct "entitlements," ranging from Social Secs' city to veterans-benefits us Medicare, the defense budget, even Reagan tax cots. But Reagan, in the interview, dismissed Snelling's urgent call for a two-year mora' terians an further cots in aid to stotesand localities, so thattheymight institutesome rational budgeting and planning. "It would be great if we could afford it," he said. The president gave no prospect of major budget cuts other than in aid to states and totalities - even though that aid accounts for only 15 percent of the federal budget and isdwarfed byentitlementsand defenses pending. THE PRESIDENT brushed aside one goal of the governors - a sorting out of roles, with welfare and Medicaid becoming federal responsibilities and such fields as ~`: ~E1R~ education and transportation pasnuog to- tally to the states. Ide simply reiterated his long-held epic. ion that wetfacs costa are best cnntrolied locally, He showed no interest in negatiat' `trig such questions The presideat also scorned a resolution, pa.saedbythewrstern guvernorsin Arizona Nov. 7,gppoaing furthercuts in thedomes' tic budget absent "a significant sortlng,out of functions between the federal govern' ment and the slates." Said Reagats "Most of those western governors are Democrats-" to aict, seven are Democrats, six are Republicans. What the president fails to grasp is that the protests by the governors, and the demands to be acknowledged as constitu tionally equal partners, are bipartisan. broad-based and growing - a develop' ment that may mark s historic turn in federal-state relations. FINALLY, the president demonstrated almost no sensitivity te the great new differencesin wealthdeveloping among the states - the gulf between the energy.pour states and those in the South and West with vast reservoirs of oil, gas, and coal which they can tax heavily. Sen. Darenbercer has asked how these differencesjibe with Reagan's plea to puuh vast program areas to the state level. He questions whOther it's "fair to expect the states and localities that suffer from a declining economy to provide the santo level of publicservicesas those states float with elsergy-nelated revenues?" The president was askedDurenbergen's questionduringthe interview. Hisresponse was that an energy-rich state enjoys no greater taxing advantage than, fur exam- ple, California with its multi-billion dollar fruit andvegeteble crops. Guvernmeuts tax everything they can touch, he suggested; energy severance taxes are no different Even if one agrees that some level of state energy severance taxes is justifiable, the sweep of that argument is startling. It ignores the fact thatenergy-rich states are pulling itt billions of dollars, based on the spiraling prices of energy, and can easilyabsorbthe Reagan badgetcula,while the energy~paor states, especially those with declining industrial bases, are pushed to the wall, Any interstate disparities in weatth, said the president are strictly the states' own problem. "The built-in guarantee of free' dam is our federalinm. That makes us unique.Thatis, therightofacitizeutevote with his feet." Any inequalIties should be taken care of by "the marketplace." He apparently feels that the federal gov- ernment has no obligation to people or slatesorplacesdeultcripplingbloss bythe economic vagaries nf the times. Abeent in this, to coy mind, is the maen~ tint sense of nationhood and nationwide interdependence sod mutual responvibilit3 that ought to underpin any federalist phil. osophy. Thus my feelings of despair at the close of the Reagan interview. Peirce wrileu a syndicated column or state and local goiersmesto.. 594 N ~ ~nse oi ~ in Reagan's federalism PAGENO="0599" 595 -112- THE WASHINGTON POST. SUNDAY, NOVEMBER 8, 1981 Vernon E. Jordan Jr. What Are the Poor Supposed to Do? The Reagan auministration Where can the poor turn, then, if tribations to charities, job cam- percent far same time now, and steadfastly persists in its refasal ta not to state and local governments? paigns and greater corporate activ- there is littlereason to assume that answer the basic qarstion its policies Some suggest the basiness cam- ism. the maximum will he reached in the raise: "What are poor people sup- munity kill step in and increaseila But it in not realistic to expect future. posed to do while their survival pro- job creation and social responsibility much relief from the business sector. What about prioate ettuntarism, grams are cut back and before the efforts. Doubtless some companies Corporations have been allowed to then? The president correctly promised prosperity takeseffeco?" will. Enlightened business leader- donate up tob percent of taxable is' stressed the American tradition of Even if the Reagan program ship has come out forthrightly for come, and the new tan law doubles voluntary support for community works-and it shows every sign of jastsuch an activist role. Many have that to 10 percent But corporate needs. Individuals have always been failing-it will take years before it called for increased corporate con- contributions have averaged about 1 generous with their contributions results in sharply increased employ- and their time. ment and a tolerable inflation rate. But there are limits to entuntor- In effect, the federal government - ~._ .._~__.._- mm that the administration refuses is telling poor people to wait until to acknowledge. Recent studies mdi- happy days come back again. And cats that the voluntary sector will until they do, it seems tobe suggest- lose some $27 billion in federal aid ing that other institutions should fill between 1981 and 1984, and it is un the gap between the little that poor likely that private donations can people have and what they need to . plug the gap. Most private giving is survivo. to religious organizations, and the Prime among those institutions social welfare institutions, currently are state and local governments, most dependent on federal monies, The idea behind the misguided . represent a shrinking sector of the block grants is that local officials charitable pie. can choose to support the programs Conceptoally, too, the stress on that benefit theircommunities. votuntarism is muddled. We should A finr idea, but not for the real be well beyond the morally primi- world of limited resources, political live stage of believing that the basies domination of local governments by of human existence-jobe, income, those least interested in the plight of fond, shelter and health care the poor and forced competition should be provided by individual among worthy caases for diminish- charity and not by government act- ing dollars. tag on behalf of a shared community Esperience demonstrates that few sense of human rights. state and local governments will Some state and local govemments continue key programs at adequate will try to fill the gaps as best they levels. Barely a few monks into the can, Some parts of the private sector new fiscal year, we already see day. will step in to create job and train- care centers closed, welfare grants ing opportunities and support reduced, school lunch programs cut worthwhile community projects. back and oihee social services Some individuals and nonprofit trimmed, as local officiats refase to agencies will stretch their efforts to makeup for the lost federal dollars. the limits to try to help those io There is a lot more that is wrong need. with the block grants idea, or to use But taken together, all of those the phrase that more accurately de- worthy efforts wilt be unable to re scribes its thrust, states' rights, place the gnveroment's resources or But the overriding reality of block its fundamental responsibilities. grants is that they are a means of The question: "What are the poor shifting national responsibilities to supposed to do?" remains anon- localities ill-equipped to deal with swered. them. They virtually emure the end The writer in preoident of the 0 ght gt t Iscatco t to 9 PAGENO="0600" 596 -113- "I HEREW( PECLARE `fl'~IS COR1IERSTOH~%~ 4- M)*~.f c'.3T t~4qifr/ PAGENO="0601" 597 -114- The `New Federalism' Looks Good - From Washington IT wasn't so surprising that when the National League of Cities gathered in Detroit last week, President Rea- gan's "new federalism" came in for plenty of flak. What was surprising perhaps was the intensity of the bipartisan attack. New York's Democratic Mayor Koch said the Administration's program to give local govern- meñts responsibility for scores of programs once super- vised and largely underwritten by Washington was a "sham and a shame." But many officials, some once re- garded as influential supporters of the President, also complained bitterly about the financial strains on local governments. The League's departing president, Mayor William H. Hudnut 3d of Indianapolis, regarded as a Rea- gan ally not long ago, said "too much has been asked of cities and otherrecipients of these Federal programs." Gov. Richard A. Snelling of Vermont, a conservative Republican who heads the National Governors Associd- tion, emerged as a leading critic of the "new federalism" as practiced so far. He said it was leading the nation to- ward "an economic Bay of Pigs." (As an example of the effects, Pennsylvania, on Dec. 12, was to begin trimming welfare aid to families with dependent children in accord- ance with new Federal guidelines.) B. DrummondAyres Jr., a Washingtoncorrespondent of The New York Times, conducted separate interviews last week with GovernorSnelling and with theAdministra- tion's chief defender of the program, Richard S. William- son, White House assistant for intergovernmental affairs. He first asked each how the "new federalism" seemed to be working. Richard A. Snelling Answer. I assume that by the `new federalism' you meansomesortingoutoftheseveralresponsibilitiesof the Federal, state and local governments, and some conscien- tiouseffort toaccomplish theconstitutional role-making surethat equal justice and opportunltydid not stopat state borders. One of the ways to do that, certainly, is toprovide equal opportunity and capacity through block grants and the like, forthe simplereason that that's thewaythat the Fed- eral Government could adjust the very distinctly different capacityof different states and local entitles and establish fairly clear goals of national interest in such a program. And then allow the states to allocate those funds and, within broad guidelines, to developprograrns whichwould be specific to the priorities of these states in implements- tlonofthegoals. What we've really had so far is simply budget cutting. There has been avery small, minute movement towards reallocation and redesign of grant programs. There are some 59 programs out of nearly 600 categorical grants -whichhavebeenpackaged into9 so-called blockgrants. However, moat of those have strings attached which, to all intents and purposes, prohibit the states from making real priority decisions. So to me the most important thing to communicate is (that so far there has been) no test of thenew federalism. People Are Talking Shorthand Q. Is there a danger that the Administration has over~ slmpllfiedtheproblems that face thenatlon? A. I don't like to characterize the views of anotheras too simple. Maybe what is happening is that people are talk. log in shorthand and shorthnnd can bea representation of averycomplex subject. I think it's very clear that-the Federal Government has intervened in many areas where theyneed not intervene in order to assure people of their constitutional rights and to promotethegeneralwelfare. Now, on the other hand, it depends a great deal on what the President means and I am eager to have him explain. If he literally means that there is no cause forgovernmen- tal support of programs at the Federal level to assure equality of opportunity and of capacity across the state borders, then I would say simply that I see no Constitu- tional justification forthat. That view was absolutely rejected by the Federalist papers. The lengthy dialogue between Mr. Hamilton and Mr. Jay and Mr. Madison made it quite clear that they were not advocating the Constitution in the sense that everyboat was on itsown bottom and each state had onlya responsibilltyforthecommondefense to others. Q. Have the states, cities and counties been asked to sbouldertoomuchoftheburden? A. Certainly, in my judgment. The total budget which goestonon-Federal agencies is modestly more than lOper- centofthetotalnationalbudget. - tn essence, the game plan has been that there will no changes on the revenue side from the Initial victory in tax cuts, that defense is not to be discussed and that entitle- ments cannot be discussed, but at the same time, there's great concern about a projected 70-, 80-, 90-billion-dollar deficit. And so I think that if the only source for a budget cut is that which Is accessiblebecause it's undercontrol andyou may not bring under control that which is not under con- trol- so-called entitlements - that that requires a much greater burden for state and local governments than is fair, appropriate or for that matter likely to stand the test of time. The Government's Obligations Q. The President, In a recent interview on federalism, indicated that he would not look favorably upon a sorting out that had the Federal Government picking up most of the cost of welfare. Can there be a new federalism if the Government doesn't pick up the cost of such big-dollar items? A. There are really twodifferent ways tosort things out. One would be to say the Federal Government will do all of certain things and state and local governments will each doall ofcertalnotherthings. PAGENO="0602" 598 Andthere's anotherwayentiely,Whhlsthatace~15 ~ degree of Federal interest would be defined In each~of A.Thamarel~t~~n~lfoneIna stateorleea those areas that are descrthed In the Declaration of Inde- ~icial, becausetheyfaceakind ofeconomicuncertainty. pendenceasbeingOfnationalconcorn. Congress still hasn't passed the appropriation bill so they CongresswoUld state a national interest ineachof these don'thavethefundinglevelsforthiscomlngyear. areas and stand willing to augment the capacity of both ~~nmily, the state and local officials face problems be- states and local governments to the ~ent that that ~ cause you're in an era of strained public resources tore- pacity was inadequate, with reasonable effort, to afford shadowed by the adoption of Proposition 13 In California the constitutional level of aid and comfort to those who and P ition 2'/~ in Massachusetts, and in the election wereinseed. last year of Ronald Reagan and many conservative Re- And that, I believe, could be accomplished in a way publicansinthesenate. which would reduce the Federal expenditures; which Thirdly, there aredislocations any time you change the would provide much greater flexibility to states and local way Government does business. And Ronald Reagan Is governments in determining how they would implement leading a quiet revolution. It's not only his economic pro- programs. gram but also the component parts which devolve respon- ~ sibilitieabechtostatoandincalofficials. ignoretheplightofpeOPleonthebmisofthectworstatem All of those things, coupled with the fact that we'rein a which they resided and in many cases were born and are recession now, malte it a tough job to be a state or local reallyunabletoleave. elected official. These are understandable political con- QIn conclusIon, what would be your recommendation cents. ootbe PresldentabOUttheflwfederatwm? Unfortunately, one does not have the luxury of making A.ToproceedalOllga middle ground; to approach fiscal the structural changes, of devolving responsIbilities hack stability by a mederate reduction in taxes, a niederate re- to state and local officials, in a perfect world. You get the duction in entitlements, and to proceed year after year to world as you're given it. Ronald Reagan inherited, as he turnover to the states, alongwiththeir shareof this fiscal mid during the campaign and when he was first elected, restraint, a greater and greater responsibility for design- the worst economic mess the nation has faced since the ing the programs necessary to assure In their states that G~t Depmssion. He told the American people what he ~ pl~ed to do about that during the campaign: he was Toaverygreat extent, theproblems inMiami tedayare going to make significant budget reductions, significant the result of Federal actions, by way of immigration pelt- reductions in the marginal tax rate, regulatory relief and cy. I don't see how we could Ignore the consequences of trytostabilizethemoneta17P0liry. ~ Sol franklybelievethatthe Constitution's call forpower (~)nf'JsI~fl Is Inevitable to Implement the Bill of Rights, with respect to the corn- Q. There were a number of complaints in recent weeks mon welfare, requlres the Federal Government to assist ~ ~ of federalism as it comes from the White the states when the states do not have the capacity to at- House is rather contradictory. Is any thought being given fordthecitizenstheirconstitutiotmi rights. by~ idenjfederaliPeech? A. First, I think there Is some confusion. To paraphrase Richard \~Ii11iarnson sometiting Winston Churchill once said, There are two thingsyoushould neverwatchbeingmade: one is sausage andtheother is legislation. And I thinkthesamethingcan Answer. I think theaccomplishments have been signifi- be said about any substantial effort tochange thewaythe cant.One,thepublicdebateonhowAmericalsgovernedIs Federal Government is doing business. So there are at louder,discussedwith moreenergyand clarity, than inre- timescontradictions, there aresome contusions, thereare centmemory. I thlnkallpartieswill concedethat, because somefailurestohavetheclarityweallwould like. Ronald Reagan has made It clear to the American people Secondly, the President made a majorspeech to theNa- he wants to change bow America Is governed and a large tionalLeagueofCitiesinMarchonthefederallsmissue. In part of that is redistributing responsibilities and authority late July, he addressed the National Conference of State amongtheunitsof government. Legislators onthe federalism issue. Many of his speeches, Second, the budget cuts themselves addressed his view from his remarks in Yorktown celebrating the Bicenten- of what national priorities are, such as the budget shsuld nial to speeches before the National Business Alliasce, deal with national concerns and get out of the business in have had themesin them and paragranhs in them dealing certain other areas. He made [Inc proposals and they wert withfederalismquestions. adopted, in large part, both by the Republican Senateand As to whether or not there should be a speech devoted theDemocratic-controlledHouse. solelyonfederalism in the near future, it's a possibility. I Third, the President proposed dramaticconsolidationof would suggest, however, that what we'll probably see is categorical grants, and while he was not as successful as some of those themes elaborated on t more detail early he would have liked either in number or in providing as nextyear, much flexibllty as he wanted, he din get 57 categorical Q. ~ you tell us what the President meant by his re~ grants combined into block grants. And, as a National cent statement to the effect that those who find theirlife Governors Association publication said, it was the mont m~lnle In one place as a result of the new federalism dramatic shift in the grant process the Federal Govern- alwayshavetheoptlonofvoolngwlththeirfeet? menthashadinthelastli0years. A. I think he endorses what Louis Brandeis once mid, Fourth, in theregulatoryrelief area, the Vice President that the states should be laboratories of experiment, and has made substantial progress in over one-third of the diversity Is good. And too degree, (judging) what is done initiatives he's taken to provide greater relief to stateand ~Consecticutasopposedtowhat'sdoneinNewYork, peo- localgovernments. plc have the opportunity, through the political process, to So all those thlngshavebegun, and the President has en- particlpateinthonedeclslons. lndeed,theycanpartiCipate tablished a vehicle both for a higher participation-the more actively and effectively inmost cases at the local or Advisory Commission on Intergovernmental Regulations statelevelthanattheFederallevel. - greater consultation with state and local officials - Now the question of whether that means that there's no 1,350 in the first 11 monthsinoffice-and the formation of commitment to a bare minimum for the truly needy, no, I a Presidential Advisory Committee on Federalism to ad. don'tthlnkhe'ssayingtbat.Ashe made clearinsettinghis dressthesensatters. . budget priorities early this year for 1982, he was commit- So I think there has heels progress. Clearly not as much tedtowhathecaliedasocialsafetynet. as we'd like, but there has been progress- that seems ir- A mistakein Washingtonls a mistake for alls0states; a refutable. Withrespecttotheimmediategoals,wewant to mistake In Springfield, Ill. or in Salem, Ore., nm state go more aggressively and further on block grants. We capitals_Albany,N.Y._onlyaffectsthatstateandthey want to address, and hopefully comeup with a formula on canlearnfromeachother. the revenue return issue. We want to proceed with oven greater vigor the regulatory relief area. And wehopethat someoftheseotherissues-such as sorting out thesever- ancetaxissues-canbedebated freelyandthere canbea -115- development of consensus and guidance on where we shouldgo. 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But -119- he says he can't predict how many will quit wurking. `This stuff is Incredibly complex. Four years, and I don't know it yet," he says. Mr. Wilson fears the federal cuts will too deep to bear. "We may have to come up with some stale dollars" to fill the gap, he says. The Governor Coy. Richard Snelling, a Republican, says he hasn't any Intention of raising state taxes to make up for lost federal aid. In fact, he intends to allow the state income tax, which is pegged at 23% of the federal income tax, to be pulled down next year by President Reagan's federal tax cut. Tax cuts and budget cuts are necessary to revive the economy, he insists. He pleads that they be put in perspective. Focusing only on the human effect of the cuts Is like asking a heart-surgery patient how he likes being sliced by the surgeon's scalpel, the governor says, ecltninc Mr. Reagan's own arguments. Yet the prospect of carrying out some of Mr. Reagan's cuts clearly doesn't sit welt with Gov. Snelling, for all his eagerness to be among the first to seize the new block grants. The cuts "have gone too far, too fast," he says. He complains that the Presi- dent's men, chiefly Budget Director David Stuckman, have engaged only In "pseudo' consultation" with governors before propos- ing cuts. And he nays the President "gave up" on his demands for broad block grants and allowed Congress to grant very little new flexibility to states, Indeed, before the new block-grant legis- lation, abeut 18% of all formal* grants to state and local governments allowed some degree of flexibility, according to the Na' tional Governors' Association. With the new legislation, the portion Increases only to 20%. Gov. Snetling, the head of the association, says he will keep' pressing Congress for more diocretion. H~ would like to try reining in galloping Medic~eid costs by paying fans!' lies to take care if aged relatives in their own homes, ratha)' than sending them to cx' pensive nursing homes. He would also like more subsidized day care to take place in private homes, where it costs an average of 16 cents per hour per child In Vermont, rather than using day-care centers, which cost an average of $1.14 an hour. Rural mothers frequently find the centers Incas' venlent to reach anyway, he says. U. Gov. Madeleine Kunin is a Democrat who was elected independently of Guy. Snelling and who some think could possibly be governor herself one day. She liken the budget csts even less than Guy. Snelling and fears that other slates (not Vermont) might use their new block-grant authority to short' change their poor. But she doesn't see serious political back' lash from the cuts. "I don't think It will be lack of day care that will topple any admin- lstration... regrettably." PAGENO="0607" CD `1 ;31g) :a' o C, 0 ,z~3 t* Pt) ~fl (bE C CC U') a PAGENO="0608" 604 -121- ~ ~ GOvernors'Will Fight By Bruce~Babbitt. given ws~' to ambivalence and a sorting out of governmental respond. aessse of miorslculation. The im- buttes is a two-way street And they The nation's governors are quietly mediate effect will be more pressure are en record advocating.that Individ- sitting on the sidelines as the presi- on state and local budgets. None- cal income security programs, euch as dent and the Congress repeal the theless, many of cia believe the fed- welfare and Medicaid, eught to be at Greot Society and remake the fed- eral government eaght to withdraw the core of national program reeponsis oral system The reason fur this from some areas of primary state bility. Whether as a nation we spend bench-sitting diffidence is not hard and local responsibility anti have more or less money on welfare is not to diacern~ `the president has simply ósitsvitted tire governors a~ their se- supported tire president even es ha the central issue'iasthis context; the game of block grants reshapes the block grant as a tuol for basic point is that decisions about the The governors have traditionally phasing out federal programs of so- size and scope of tntitlement pm- del services, education, health aeon- grams ought to bemade by national been etrong advocates of block ices and community development, government on an uniform,. nation. grants. They have long dreamed of a wide basis,Wel,fare and Medicaid are block grant program that wosild give _____________________ tue states the best of both worlds, , as much a part of thenational "safety net" as Social Security, a program crestipg an inter-gavemnmentsoi Perspectives that even President Reagan does nat candy store in which the Congress eupplied the goods and allowed the prapooe to turn over to the states. states to hind them out to grateful However, even the `advocates now The president has made known his recipieista. fear that the president is going tao intention to abdicate federal reoponsi. President Reagan has suddenly far, biity and to damp welfare and changed tue game by using block To date, the president has set no Medicaid programs onto the states, grants for a very different purpose: to discernible limits to hig agenda for Perhaps sensing the putential for close up the candy store. lllsck grants clasiog down the federal govern- widespread opposition, he has wisely are nosy a tactical weapon to cut the ment atid handing programs back to delayed welfare and Medicaid block federal bvdgeto while deputizing the ` the states, His strong opinions about grant propesalsuntil next year;'lf and governors to hand eut the bad nesvs. : state responsibility are not balanced ` when such proposals are advanced, The administration candidly ecinsits by any thaughts about federal rq- the governors will not be sitting on thattIsis year's 25 perc~nt block grant sponsibility. We are beginning Cs the bench. They will be on the geld, reductions are merely the entering sense the president has no philoso- ready to fight for a federal system of wedge in a scheme to shrink and then phy about federalism. If he believes logically divided program responsibli- eliminate federal support for.ansny of the federal government has any role' ties. the social service programs included beyond raising armies and minting in the blocks, coinage, we have yet to hear what it Wills this change of direction, the is. `Tue writer,' a Demo&ä't, ia enthusiasm in the state capitols has' Must governors believe that the the governor of Arizona, PAGENO="0609" c,,1 ~°~~ii ~ ;~d: ~ ~ ~ `~11~ ~ ~ili ~ li~ ~ it. ~ ~` 1~8r tI'~~Q t~5~ .tlo~ ~ hj~i2t I ~S/J~ 1b0 Itt C,) PAGENO="0610" 606 -123- " YOUR FEPE~AL PUP BUNNY &OES ~W HAT I ~AY THE MA&IC WORDS- sLash! -- AMP THE ,*?~ t~ BLock GRant S?ELL 5 £ CAST ~ PAGENO="0611" 607 The Food Stamp Dilemma States Are Not Capable Of Handlincr Distribution ~pMti tiy Dr. ean Mayer ru HE REAGAN administration's * proposal to transfer responsi. I bility for food-stamp payments ~. to the states is a serious mis- take. With the cutbacks in other fed- eral feeding programs, it could well lay the groundwork for a return to the disastrous situation of the 1960s, when 20 to 30 million Americans did not have enough money to buy a minimally adequate diet for them- selves and their families. In 1967, a medical team sent by the Field Foundation found areas of hunger and malnutrition in every part of the nation, rural and urban alike, and in every ethnic group. The worst cases were those who are al- ways the moot vulnerable: infants and young children, pregnant and nursing women, the elderly. Follow- ing that and similar findings of a 10-state nutrition survey, the White House Conference on Food, Nutri. Commentary tion and Health in 1969 recommend. ed an expansion of America's large- scale nutrition programs. Over the next three years, these programs raised the number of food- stamp recipients from 500,000 to 12 million and eventually to over 16 million. In 1977, another Field Foun- dation team, which included many of the same physicians who participated in the original study, retraced their steps. While in many areas (such as Appala- chia) the facts of poverty had cot changed, they found no medically de- monstrable cases of malnutrition. In their findings, the doctors escribed this elim- ination of malnutrition to the federal food programs. Food stamps, in particular, have proven to be our prime bulwark against the hunger due to poverty. It is the pro- gram needy people depend on for three meals a day. Now, President Reagan would turn the program over to the states. - Despite all the insults heaped on it in the last few years, the federal govern- ment is much better equipped to deal with such massive, complex programs as s°ood stamps than are most state govern- ments. Very few have the strict financial procodures, the computerized record- keeping and the trained civil service needed to administer the program effec- tivelv. By contrast. there is general agreement that the Department of Agriculture has been doing a very good job of managing the program equitably and efficiently. Although there have been charges ot lax- ity and abuse - and some can he sub- stantiated - the fact is that less than 5 percent of total spending goes to ineligi- ble recipients or is over-issued. The rate of fraud is much lower than with income- tax returns. Incidentally, the major frauds generally have been perpetrated not by poor recipients, but by crooked caseworkers in collusion with disreput- able retailers and hard-core criminals. This record of abuse could be improved, but not by iragmenting the program. Overall, the states are the weakest link in our system of government. There is far more corruption, waste and favoritism at the "grass-roots" level than in the federal establishment. While the fact that some- thing did not work in the past does not necessarily mean that it will not work in the future, we do not want to find our- selves once again in the situation where, as in the 1960s, eligibility for assistance might depend upon whom you know and even, in some cases, whether or not you are willing to wash the sheriff's floor. It is by no means certain that the poor svoutd receive equal protection under the law in every state. In the last 10 years, only two states increased welfare benefits enough to keep up with inflation. The transfer of funding and adminis- tration raises the specter of bewildering, discouraging and expensive labyrinths of federal and local regulations for the dif- ferent programs. It could well lead to a disparity in benefit levels like the ones that spawned the migrations from the South and from Puerto Rico after World War II and created the urban ghettos - and riots - in New York, Washington and Los Angeles in the l960o. The most cogent reason to keep food stamps in the federal government is the nature of the program and the inability of the individual states, no matter how competent or willing, to assume the bur- -124-- den. Food stamps are basically an income supplement - targeted specifically to food - in an effort to ensure every American the ability to purchase an ad- equate diet during periods of economic distress. The program has functioned well. For example, during the recession of 1973-74 the number of people on food stamps rose from 16 to 19 million, then fell back to 17 million with the recovery. As the present recession has deepened, the num- ber has risen once again, this time to over 21 million. Thus, in contrast to the costs of pro- grams like Medicaid, which will rise pre- dictably with escalations in the costs ot health care, the cost of the food stamp program fluctuates with the health of the national economy. Unlike the federal government, the states cannot maintain an operating def- icit. Throwing the food-stamp program and the cost isf its administration back to the states will mean that Michigan, for example, will face the highest cost at the very time when it is least able to pay for it. Unemployment there is running at 14.4 percent, well above the national av- erage; tax revenues have dropped. Be- cause there is relatively little federal spending in the Great Lakes region, Michigan gets back only 76 cents on every dollar sent to Washington. Thou far, the food stamp program has been protected from such disparities. It is a national answer to a national need. It works. The middle of a recession that features high unemployment is not time to "fix" it. Dr. Jean Mayer, ieho organized and chaired the White House Conference on Food, Nutrition and Heatth, is a nation- ally syndicated health columnist, PAGENO="0612" Take away the 55 seats in those nine atatea, and yea find that anly 115 diatrict linea have really been drawn for the 1980s. And almoat one-third of them--those ia Colorado, Illinoio and Missoari-were drawn by federal roorta, after the legislatoreo and goveroors were ooable to agree on any plan. The whole process haa been marked by the naked appliratisa of political muscle: vetoes and threats of vetoes, retribution against mavericks and, of course, some wonderfully creative partisan gerrymandering. The claim that the legislatures are sensi- tive to the interest or needs of the powerless -whether those minorities are political or racial-is hard to prove from the redistrict- ing record. It is lbs courts that have been protective of center-city black representa- tives, particularly in Illinois and Missoori. The Justice Department rejected the fiml North Carolina plan for drawing a fishhook around Durham County, wherw blacks have significant voting strength, in order to ac- commodate a nervous congressional incum- bent. It sent the Texas plan hack because it diluted Hispanic voting strength in the Ris Grands Valley, and it blocked the Georgia plan for diminishing black voting strength. Black organizations have complained that the districting plans passed in Alabama, Louisiana and Mississippi will reduce the chances of electing any black congressmen from those states in the 1980s. The Georgia plan was rejected lust week by the Justice Department fur diminishing black influence, and the other three are still under scrutiny. `she same Arkansas legislature that passed the law mandating the teaching of "creation- ism" (recently overturned in court ass viola- tion of the "establishment" clause of the Constitution( also passed a districting plan that the federal cssrt threw out for failing to meet the 20-year-old population-equality standards. It leads you to suspect that whereas the Arkansas legislature cannot read the Constitution, neither can it count in thousands. Come on, folks. You're making it tough to take federalism seriously. 608 -125- David S. Broder ~ co The States Drop the Ball ; I ri/t~-~ Ever since President Reagan made his fed- eralism initiative the centerpiece of his Slate of lbs Union address, a dew topic has been added to she agenda of the palitical hot-stove league: can you trust the stales to meet their responsibilities if you give them the pro- grams Reagan wants them Is rsin? I like the affirmative in that debate, in part because it is the unfashionable minority view among the Washington-oriented jour- nalists, politicians and bureaucrats with whom I spend my time. They look with win- piciun, if not contempt, on lesser breeds omit- side the Beltway. The other reason for Inking the affirms. tive on state responsibility is less frivolous. Over the years I have traveled the political beat, I think there has been a steady and, at times, dramatic improvement in the compe- tence and character of slate government. But recently, I have gone through a re- porting enperience that has made me wonder about that intpressisn. With Wavhimmglon Post researcher Morales Schwartz, I did detailed rsview of the way the slates have been handling mine of their more serious con- stitutional responsibilities: redrawing the lines for the congressional districts to reflect the population changes in thol980 census. The picture that emerges is not an enno- bling one. It is, instead, a performance that hands ammunition to those who would argue that you better keep a federal hand on the controls of government, because you can't trust the states. It is, perhaps, an unfair example, because nothing else in government is vu crassly political-sn subject ts logrolling, horse-trad- ing and manipulation-as the process of drawisg district lines. Still, it is 20 years since the Supreme Coon, in its first affirmation of the principle of one-person, sos-vote, compollod the Tennessee legislature to redraw its grmooly malapportioned districts. And the "reappor- tionment revolution" is cited by Reagan and lot nf us lessor federalism freaks as one major reason why state government in now ready for new responsibilities. The first thing we found was that the states are being almost casually laggard about their responsibilities. Au of last week- `md, with all of 1981 past and the campaign year of 1982 six weeks old, only 174 of the 435 members of the Hoene of Representa- tives knew what the lines would he for their apring and summer primaries and the gen- eral election in Nsvember. The first two primary states-Illinois and Texas-both had to extend their filing dead- lines, because the districts were not not. Others face the name threat as partisan bick- ering delnys their decisions. The record of the ntate governments is ac- tually worse than the nsked numbers sag- gout. About sne-quarter of the state legisla- tures have not passed a plan. Another cjuar- tsr have their plans under challenge or have had them rejected by their governsrn or the courts. Of the 27 slates whore lines are set for 1982, six have only a single at-large repre- sentative and two-Maine and Montana- have simply postponed the process nntil next year. California's 1982 linen won a temporary okay from the stats Supreme Court, hut may have tabs redrawn for 1984 and later years. PAGENO="0613" 609 States Unable or Unwilling to Shoulder By Jay Mathews ~/t 1' ~ Fl 1 * reaerahsm Burden cuncellos the stocky, mustachioed chairman at the California Assem- dy s Ways and Means Committee, Ronald Reagan's "New Federalism" has come at the worst possible tinie. `I lie state is short $2 tuItion for next year aiid its creative hudgeteers are riiiiiiing 1)01 of tricks, Flue Reagan ptaiu to transfer fed- exit Jurograins to tte states has a "nice appeal to local hi)iue rote and sell determination," said Vascoucel- us, a l)emocrat from Santa Ctara ` (sooty, hut we are in the red, on the verge of bankruptcy, and there s nothing we could pick up. Across the cu)sintry, in nine scat- tered slates with varied eciiniimies surveyed tiy `ike Washington Post, the New Federalism has produced only a few scattered cheers in state legislatures, and a list of moans and sharp words Tii them, New Federalists means - - . 5 us service in os n- geles, an end to federal benefits for 9000 A fu~or i e Wash ngto I th d M' I' St p. t P as - In the must economically crippled states legislators can see only two unhappy outcomes from the presi- de t' I ~- f ` k If d f I ` P g ihe tete eh~O, to e tumps to c~it - . .` ~. - a e services, espite I eir past P sOp pp t t m g governnient closer to the people, statehouse lawmakers heading - into an election year fiiid that a chilling prospect now. - `We don't have enough money to live sip to the state's responsibility, let alone step in where the tederal government has pulled out, said . Harry Stehen, a Democrat and Mm- nesuta's speaker of the , House, "What we're facing is an anti- government movement, not a pick' up, or even a do.as.much-as-you- did.before movement." That is not' a prospect that both- em the Republican majority leader of Colorado's Senate, Fred Ander- son. "A lot of these programs we will have Ihe option of picking up or let- ting go. I think that's a good deal fur us," said Anderson, whose state has low unemployment and relatively few recent deficit problems. "The whole system was overloaded to the tederal side There was so much pe- In New Jersey, state administra- peneork it almost wasn't worth- torn were hit with questions about while." - the new Reagan cuts only days after How much Reagan's scheme will taking iiffice in Kean's new admin- alter the shifting scenery of local pot- stration. The new environmental tics in a key election year seems to commissioner, Robert Hughey, said depend on how shaky the local neon- its just unacceptable to think that y is and how deep the deficits are we would reduce' air and coastal h stat protection programs threatened by In Washington State, svhere on- federal cuts, but he acknowledged employment is now higher thaii it being too new in his job to know just was during the Great Depression, ow much his, programs night lose. Democratic state Sen. James McDer- Democratic Sen. Don Kilpatrick, mutt, the party's unsuccessful can- vice chairman of Oklahoma's Senate didate for governor in 1980, said of Appropriations Committee, said . "we're getting i-ontlictmg stories" th Reagan cots: "Killing the econ from Washiogtoii. And Oklahoma omy is the out difficult cut to oh- state Rep. Clete l)eatherage said sorb. We don't have a tax structure "We have no imisirmation for `83 and Ii' deal with it, We don t have an a shortage at intirmatiun for `82. We economy ieft. - can't appropriate money when we Charies ltoyer, the Democratic don't know how much we're going to mayor of Seattle, oaid he figures ted- tote." Cual programs turnec~ over ta the Several large ripples are washin states will cost $75 billion by 1991, . , - -~V~r t e states rum the budgetary iso I ,on y , ,,1i ion in revenue roks dropped into Congress by the óf~b2 ~ annually for the local z~S~ht~ Thes~ o~nd n ate ~overnmenta to pu e - In New Jersey, facing an esti- legislatures and in news accounts of mated loss of $700 million in federal the process. aid because of the Reagan program, First came a series of cuts in fed- even newly elected Republican Guy, orally funded programs such as job Thomas H, Kean is worrying P - training and welfare for the working licly. about what it will do to his poor which already have forced stktg and party Ph human mp ct states to cut ser ice ev a the of tlys budget is severe and it dis- weakened economy has lowered their turbo me greatly," he said, - - tax revenues and cut their ability to State leg lators a d adm 15 t a e s me p g m w th th w tars say the lack of hard information funds ~tout the Reagan program, which Next come more budget cuts fur the ,ptesident has said must be 1983, forcing states to find their swim worked out over several years, adds funds if they are to keep spending at no their sense of unease. previous levels on programs such as "The whole idea is such a blue'sky Medicare, Medicaid, fond stamps, `pipe dream we haven't really tried to job training, welfare and education, do anything with it yet," said Cal- Finally comes the president's iforrpa's Vasconcellas, "The style "New Federalism" proposal to swap seems to be to do something with so major programs with' the states. little detail that no one can really States would pick up food stamps tell what it means." and Aid ta Families with Dependent Kentucky's Democratic Gsv. John Children, while the federal govern. y, Brown Jr. has born deluged with ment would take over full responsi. suggestions for more revenue, such bility for Medicaid health care. Sev. `ad an increased tax on mined coal or eral other programs-including non- a nenl tax on unmined minerals, but interstate highways, mass transit, he said, "I'm hesitant to push the sewage treatment, day care centers, parSe' button." He told the state community development, downtown ~hamber of commerce he preferred renewal and general education- not to deal with Reagan's proposals would he turned over ta the states, in this legislative session, waiting to to be financed with a federalism - calls special session after the dimen- trust fund from federal excise, taxes aisno of the Reagan cuts, as and part of the oil windfall profits amended by Congress, are known. tax. PAGENO="0614" In the states with the worst eco nomic problems, such as Washing- ton, none of this appears to help much. Last fall Washington was five days from bankruptcy when Repub- lican Gnu. John Spellman borrowed $400 million from a group of New York banks to pay state lulls. The state had lost $382.5 million in fed- eral binds, mostly fur transportation and public employment. In Novem- ber, the state legislature reluctantly raised the sales tax one cent to poy hack the loans. Now Washington lawmakers have discovered the state will have a $220 million deficit by October. Because states, unlike the federal govern- ment, cannot incur permanent debts to pay their deficits, Spellman has proposed filling the gap by raising state college tuition (already in- creased 70 percent last year), ex- tending the sales tax to gasoline, and requiring large industries to turn in sales tax receipts early for a one- time gain of $95 million. In Oklahoma, fat with oil and gas revenues and enjoying the lowest unemployment rate in the country (3.9 percent in December), the sit- uation could not he more ytifferont. Last year the state legislature had a $326 million surplus. During Dem- ocratic Guy. George P. Nigh's three years in office there have keen 16 tax cots. Oklahoma officials estimate they will lose $40 million in federal funds in fiscal 1982, much less than earlier estimated, and perhaps $50 million in fiscal 1983. George Hnmphreys, director of the House fiscal division, said cuts in the state budget lost year "weren't. all that substantial." `Fhe Human Services Department shifted funds from unappropriated accounts, bitt also ordered an in- crease in the price of school lunches to make up for federal cuts. Despite their relative economic strength, the moderate to cisnserva- tive Democrats who control the Oklahisma legislature are nut eager to rush into programs the Reagan administratiisn has abandoned. "We Can afford to pick up all the cuts," Humphreys said, "but I don't think anybody wants to. For exani- pIe, there are programs like CETA public service jotis provideit under the Comprehensive Employment Training Act! that the legislature is not committed t(i." Deatherage, who chairs the House Appropriations Committee, said her legislative colleagues are inclined to think "if the feds aren't going to fund it then we shouldn't fund it either." If one of the nation's wealthiest states takes that attitude, there ap- pears little chance that less-endowed legislatures will pick up federal pro- grams abandoned by Washington. State lawmakers report few irmova- tive propesals to make up for the loss of federal services. Only pets- grams that receive some isf the fed- eralisni trust fund money-which may he less than expected-appear to have a chance of continuing. Neither do large corporations seem very concerned sii far that state legislatures might restore corporate taxes or expensive regulations that has'- been cut by the federal govern- mciii; iii expectsd increase in cisc- porate tiihhying staffs in state cap- itals to burestall such a development has sis tar not occurreit. Many l)emocrats decry the de cline of services, hut Republicans say voters have clearly expressed their desire to make do with fewer ser- vices in exchange tsr paying less taxes. "Shy etectiog Ronald Reagan to the presidency, the voters have already given their mandate-less govern- oient and lower taxes," said Califor- nia state Sen. William Campbell, the Republican miniirity leader. "If the state carries out the voter mandate, the voters will praise the state." To eliminate a projected $2 billion deficit for fiscat 1983, California Guy. Edmund G. Brown Jr. and his advisers have projected cuts of about $1.4 billion and propuised a series of complex revenue gymnastics which would raise more than $600 million. These include accelerated collection st taxes on iiicome, insurance and sales, increased interest on delin- quent taxes and a change in the way taxes on oil companies are com- puted. Some Sacramento veterans said they were reminded of the days when Brown's father was governor; he svas knosvn as a master of accel- erating collections in order ta fore- stall geiseral tax iiucreases. `l'he idea is to avoid voting for a tax rise in a year when most legislators are nm- ning for reetectiumii arid Brown is ron- oiiig for the U.S. Senate. Eveiitsially, Catifisriiia otticiats say, new taxes will be necessary. Also, the iteficit iii Catitoriiia as in niau,y other states wilt he much greater if the oatiimnal economy does not retisaud later this year as Rea- gan has predicted--anit as, ironic- ally, anti-Reagan I)emocrats like Brown have assumed in their own budget projections. In states such as Catifmsrnia, which still have relatively healthy econo- mies, a series of comparatively small budget adjustments are being pro- posed to handle the current deficits, with the threat of much larger rev- comic gaps fruim the New Federalism left for another itay. lii Cuslorado, Democratic Gee. Richard D. Lamm said the Reagan plan to transfer misre thou 40 grant progranys tim the states woatd put Cmilorado $121) million in the hole is 1984. Fisr now, however, the state is grappling svith a mere $12 million deficit for fiscal 1982. Some Cotisradii officials have sug- gested delaying capital expenditures aiid limiting the griiwth if suime pro- grams to avoid that iteficit. The leg- islatiire also is considering raising the state's :1 percent sales tax suit increasing amitii regfstratiiiii and tither lies. Armzimiiaiis. uvhose em'iiiiiiisiu- proh- teiiis are similarly small, greeted the ness Reagan irmspuisal with some en- thusiasm. Bruce Babbitt noted proudly that he was the Democratic governor Reagan quoted as saying "the national government should be worrying about arms control, not potholes," but he added that he would prefer that all entitlement programs and not just Medicaid be- come a federal responsibility. Arizona had a record fiscal year- end surplus of $234 mihliuin in mid- 1980, hut a deficit of $143 million is projected for 1983. Babbitt has pro- posed a procedure similar tis the Cal- ifornia revenue-juggling, in which businesses would remit state income tax withholding payments musnthly instead of quarterly to bring in an additional $47.4 million before the end of this fiscal year. Increases in excise taxes on liquor and tobacco, and an increase in some state fees, also have been discussed. In Missouri, Republican Gov. Christopher S. (Kit) Bond welcomed the chance to administer federal fetal stamp and welfare programs "sus long as we are provided with equi- table funding." The state's budget is in some dis- array, however, hmecause if the tailed economy and federal cots. Itmund's government is $100 milhiisn in ar- rears in aid tim schools, forcing some districts to borrow to pay teachers. A proposal to raise the gasoline tax from seven tq 11 cents a gallon received initial approval in the state's Hoase of Representatives, but only after an amendment was added putting the issue on the ballot for voters to decide. 610 PAGENO="0615" 611 The Democratic House speaker, Bob Griffin, has proposed a complex tax package, including a graduated -128- corporate income tax, new sales taxes on cable television, heauty and barber shops, laundry and shoe re- pair and radio, television and furni- ture repair. He also wants to in- crease taxes on cigarettes and liquor, and raise some state fees, but most legislators consider the package doomed because of the governor's opposition to any tax increase and because most legislators are up for reelection this year. In states with much more severe economic problems, such as Minne- sota, tax increases seem more likely. The Democratic-controlled legisla- tore in Minnesota passed a package of tax increases and spending cuts last month to erase a record $778 million deficit. But before they ini- tiate further cuts or new taxes, they want to see a new revenue forecast from Republican Gov. Al Quie, whose revenue-projection blunders in the past helped lead to his an- nouncement that he will not seek reelection. Minnesota officials, however, in- cluding Senate majority leader Roger Moe, have estimsted that Minnesota would gain under the proposed Rea- gan swap of Medicaid for food stamps and welfare, because it spends more on Medicaid than it does on the two welfare programs. In Oklahoma, that swap looks to Democratic State Sen. Finns Smith like one of the most astute political moves in a long time. "If you are going to cut entitlement programs, why not turn them over to the states and let them cut them? Then they will get the blame," Smith said. But Oklahoma's strong economy and great potential for tax increases should cushion any blows. "We argue here about how we are going to upend the money," said Dian Copelin, assistant press secre- tory to Guy. Nigh, "not about wheth- er we are going to have it to spend." PAGENO="0616" 612 -129- .~ .~5' / `~? 33 "Sony, liii all my pommm'r'm imm'm'n turned back to time ~ PAGENO="0617" 613 -130- A~ç,erx1ix A N~Federa1iffln: Every State a Loser The fol1c~qir~ charts, prepared by The American Federation of State, County and Municipal E~np1oyees, show the net loss for each state that ~u1d result fran the President * s "Turnback" and "Swap" proposals. PAGENO="0618" 614 -131- PRESIDENT REAGAN'S NEW FEDERALISM: EVERY STATE A LOSER (Figures in Millions of Dollars in FY 1984) - TURNBACK PROGRAM - - SWAP PROGRAM - Total Public Cost to Trust fund Turnback Net Medicaid assistance Net States allocation 1 programs2 difference3 savings4 cost5 difference5 in FY `84~ Ala. $ 713 $ 725 $ -12 $ 140 $ 431 $ -291 $ -303 Alaska 188 239 -51 32 65 -33 -84 Ariz. 463 441 22 0 194 -194 -172 Ark. 345 441 -96 137 215 -78 -174 Calif. 2,144 3,804 -1,660 2.524 2,503 21 -1,639 Cob. 331 516 -185 161 165 -4 -189 Conn. 283 562 -279 277 208 69 -210 Del. 107 152 -45 38 49 -ii -56 D.C. 333 562 -229 141 104 37 -192 Fla. 1,433 1,661 -228 348 774 -426 ...654 Ga. 819 972 -153 285 531 -246 -399 Hawaii 145 192 -47 94 130 -36 -83 Idaho 151 189 -38 31 63 -32 -70 iii. 1,547 2,257 -710 857 1,033 -176 -886 ltd. 552 882 -330 336 339 -3 -333 Iowa 330 513 -183 166 173 -7 -190 Kan. 225 392 -167 141 116 -27 -140 Ky. 690 734 -44 186 453 -281 -325 La. 634 813 -179 309 467 -158 -337 Ma. 240 316 -76 81 126 -45 -121 Md. 507 816 -309 342 349 -7 -316 Mass. 732 1.417 -685 669 515 154 -531 Mich. 1,147 1,710 -563 914 1,078 -164 -727 Mint. 236 771 -535 501 249 252 -283 Miss. 563 546 1-7 109 361 -252 -235 Mo. 700 1,940 -240 247 365 -118 -358 Mont. 128 190 -62 43 48 -5 -67 Neb. 185 291 -106 77 74 3 -103 Nev. 58 140 -82 70 37 33 -49 N.H. 110 182 -72 57 49 8 -64 NJ. 907 1,497 -590 557 525 32 -558 N.M. 251 271 -20 57 148 -91 -111 N.Y. 789 4.496 -3,707 4,002 2,063 1,939 -1,768 N.C. 820 1,041 -221 277 462 -185 -406 N.D. 83 154 -71 45 25 20 -51 Ohio 1,406 1,925 -519 744 1,005 -261 -780 OkIa. 249 479 -230 228 180 48 -182 Ore. 393 513 -120 128 203 ~75 -195 Pa. 1,658 2,523 -865 967 1,079 -112 -977 RI. 124 203 -79 95 96 -1 -80 S.C. 553 575 -22 128 348 -220 -242 S.D. 124 177 -53 32 41 -9 -62 Tent. 702 818 -116 267 494 -227 343 Tex. 1.352 2,102 -750 833 895 -62 -812 Utah 182 264 -82 61 74 -13 -95 Vt. 118 140 -22 32 65 -33 -55 Va. 617 835 -218 250 355 -105 -323 Wash. 493 724 -232 248 296 -48 -280 W,Va. 429 487 -58 65 192 -127 -185 Wis. - 235 825 -590 633 365 268 -322 W,yo. 75 iii -36 17 17 0 -36 TOTAL $27,600 $43,538 5-15,938 $18,976 $20,200 5-1,225 $-17,151 PAGENO="0619" 615 -132- NOTES ON THE AFSCME "NEW FEDERALISM" TABLE This table shows that President Reagan's New Federalism would cost states over $17 billion in FY84. It corrects inconsistencies and mistaken assumptions made in a similar table published by the White House which purports to show that the Reagan program is a "wash" for states in fiscal year 1984, 1. This column reflects White House estimates of the revenue that states will receive from the new "Federalism Trust Fund" to be set up under President Reagan's proposal. 2. White House state-by-state estimates adjusted upwards by 44.2% to reflect the true FY 84 cost to the states of maintaining FY82 levels of service under the turnback programs. The New York State Washington office has reported that the turnback programs cost $37.5 billion in FY82. Adjusting for inflation based on the latest economic forecast by DRI (CPI increase = 7,8% in FY83 and 7.7% in FY84) gives a FY 84 current service cost of $43.538 billion, $43,538 billion is 44.2% greater than the White House cost assumption of $30,194 billion. 3. After adjustments, the net difference between the turnback program costs and the trust fund allocations are considerably larger than the White House projects. 4. 0MB estimates of the state cost savings from federalization of Medicaid. (The original White House version of the chart is internally inconsistent in that its cost estimates for the turnback, AFDC & Food Stamp programs assume enactment of the Administration's further cuts in FY83 while its Medicaid estimates ignore these cuts, AFSCME's chart corrects this error by stating all figures on a consistent current-services basis.) 5. White House state-by-state estimates adjusted upwards by 23.3% to reflect the true FY84 cost to the states of maintaining FY 82 levels of service under the Al-DC and Food Stamp programs. The Administration's cost figure of $16,382 billion understates this cost because it assumes enactment of new FY 83 Administration cuts in these programs, 0MB reports that without these cuts (that is on an FY82 current services basis) these programs would cost the states $20200 billion in FY84. 6. Again, after corrections, the net effect of the swap program is much more unfavorable to the states than the White House suggests. 7. The real total costs to the states in FY84 is shown in the last column. Far from being "held harmless" by New Federalism, the states will be faced with a loss of over $17 billion in federal aid in the first year of the Reagan program. Moreover, every state in the nation will be a loser. AMERICAN FEDERATION OF STATE, COUNTY AND MUNiCIPAL EMPLOYEES, AFL-CIO PAGENO="0620" 2 ~ 000ZZZZZZZZ Cl) ~ F. F. ~ ~. ~ 3 £ g~ ~<5~o ~ ~ :30O~. ~ ~ 3 ..~x33 .) ~ ~< * ~~j* ~s~q -. F. 0) C ~, ~ `-J 3 -. -. ~3 -~ ~) C.) 0) (.3 F.) (0-j -~ ~J ~ -~ (31 -~ C~) F.) F.) -4 (31 C.) -~ C.) C.) -~ -~ (.303 (.30) -~ F.) -~0) -~ -~ ~ D w --i 0 ~ o~ ~ (0(31.~&0)C.)-4-J03O ~ : -~ ~ ~m>~ -i-I ~-<~ I> mX zI ~L gg~ m ~T1~ ~Cl) mc!) ~j 0 -& -. -. ~ 0) /) 3 0 ~ - -~ 0 F.) F.) 0 F.)F.)-J ~ CO -~ 0) - F.) -. ~03C31 C.) (.~)CO -~ ~ F.)- ~ < m o~ -n b 0)03 -.4 -. 0 C.) -` (0 0) C.) (o CO -& ~- (0 0 0) 010) (31 ~-) C.) COb 0)03 cx~ Iii 1-) 03(0 CD -400) ~ -.4 0) -J ~ 0 -. 01 -.4 -4(0 ~ (31 (.3 -~ 0) 6 ~ o _Wm 01 ~ 0 0)(.)(.)(Ø0)D)COC.)4((04C3100~0C.)00000~0~°° 5~ D ~ c. m 3 C)~ -4 0122 cco' -. -. -- -. -. --- -~ - -~ -. -. 01 OlO)0C31.JC.)CO4C))01(0~0303~0)~000)(0%U.) ~o b. ~ 01 ~ ~g 030) PAGENO="0621" 617 -134- A~çerkitx B P~ EXPERI~ The block grant idea is not new. It has been discussed and tested over rrany years. ~ that it is beiog pressed with such vigor, it is essential to look back at the nation s experience with block grants in areas includiog health, crime prevention, camsunity developrent, social services and enployment. That experience sheds light on the problens that are likely to arise with new block grants. Included here are brief descriptions of past block grant programs, as well as a caru-nentary fran the New York Tines on some of then. PAGENO="0622" 618 -135- THE NEW YORK TIMES - Friday, March 20, 1981 WASHINGTON - In addition ~ local and state government control. seeking a cut of spore than $40 billion ~B1oc1~. -~ They' were develoised after it became .lndomestlc programs intheflscal 1982 `~- ~ .* *- absolutel)'clear that local and state at- budget, President ~eagan i~ 9~-o- . flclals were not addressing fundamen- posed a large-scale shift to theus~ of C'ránts tal education, health, and social needs. block granta~ He bold shift responsl- ~- ` `~ ` . Included is the Reagan proposals are bility for. more .th~an $15 billion ~ , energy assistance to low-income peo- education, social,'snd health services . .~. :, . ~.. pIe, the remainder of the "war on pov- testate andlocalgovernments. - ~` erty,"famllyplannlng, communityand Argurssenta for 4ecentrallzlng pro- By Andrew H. Mott mental health SesYlCes, and clinics for grams are familiar; The Government . migrants and black-lung victims. has grown too large, inefficient, unrè- that Federal offidaiscould not answer Education block grants would wipe out sponsive. Because local andstate goy- even the most baslc'questions about the theemphasisos schools that serve poor eroments are closertothe people, they $3 billion program's effectiveness and children, and eliminate special treat- are familiar with local seeds, can do- impact, because governors have stead- mentforbillngual education and deseg- velop responsive programs, and are fastly.reslsted an evaluation of the pro- regatingochools. more accessible and accountable to gram, apparently.fearing it WOUld th11 Considering local politics, toe likeli- the citizens thasiare Federalagencies. cover questionable spending, effective- hood of few Federal regulations, and But before agreeing to a further ness andaccountabilitlr. the competition for new block-grant shift to block grants, the country The $4 billion Comns'snity Develop- fundithatwould,is realdollars, becut should look at the last decade's expert- ment Block t~rast program also has almost 40 percent, how responsive is ence with `four block-grant programs been heavily criticized. After evaluat- Tesms likely to be to migrants' health - experience that is enough to make log 38 jurisdIctions, the Working Group ~d bthngual niucation needs? How anyone skeptical about C greater shift for Community Development Reform, fairly would Mississippi address Inthis direction.,' a coalition of 75 organIzations, con- blacha' needs? Os Kentucky likely to State adminla'tation of the first clOded that' many local governments support black-lOng clinics? Will ChI- block-grant progrpns- Law Enforce- are unable to plan and implement pro. cago suddenly become responsive to mentAssistanceAdnllflistratlon grants grams to achieve the primary obj~o- the' üeeds of desegregating schools? to the states - was often criticized by tivés set byCongress~ The group identi- wrn theMichlgan and New York legis- minorities and coosservative institu. tied several constraints `to the block- laturesloOkWithflew nensltlvltyon the lions `as wasteful, ineffective, sore- grant approach: Overseeing a massive needs of Detroit and New York City? sponsive. When Jimmy' Carter abel. decentralized program without en-site, What state is lIkely to give priority to ished it in 1980, therewas little regret independent performance monitoring legal services and energy assistance among résldentsO~crlme-rldden neigh- is difficult; the distribution of fwsds hi)' for the poor in the face of middle-in- borhoods. formula, rather than competition, comedemandsand vested interests? The early problemsof the ,Compre- creates a sense of entitlement among henaive Employment and Training Act local officials, causing them to resent If there are no national stanaaros, are well-known. `Many `local govern. eventhe mostbasic Federalstsndards the fuhds willbe dIverted from the na- monte passed oveF minorities and the the stress on local flexibility strength, tion's most-pressing needs, and there long-term unemployed, and instead ens this resistance to national stand- will be major problems of program ef. brought ineligiule people onto city and ards and priorities, leaving the pro fectivess5sandptbllc accountability. county CETA payrolls until Federal gram vulnerable to pressure agalnsl standards and enforcement were spending funds to benefit politically AfldrewH.MOitisViCepTeSldent.o!tlte strengthened. weaklower.inCOmePeople. Center Jar Commanily Change, which The (Titie XX) state social services Theprograiss thatPresident Reagan provides technical assistance to corn- block grant also-suffers severe prob- . proposes to decentralize are the very resnity groups representing low-mo. lenin. The Reaean transitioo staff found. ones thatwould be most endangered by come people. PAGENO="0623" 619 -136- PA~~ E~PERI~E The Law Enforcement Assistance Act (LEAA), the first block grant pro- gram for criminal justice, was enacted by Congress in 1968 to reduce crime and improve the criminal justice system in the wake of pnlitical assassina- tions, urban unrest and canpus disorders. It was the first block grant to be started fran scratch, not fran the consolidation of previous cata3or- ical programs. States ware given LEAA block grant funds to suppDrt the three can- pnnents of the state criminal justice system -- pDlice, courts and correc- tions. Block grant allocations, based strictly on papulation, want directly to State Planning Agencies (SPAs) once the Justice tapartnsnt approved the state's carprehensive plan for law enforcement. In general, LEPA was heralded as a virtually unconditional aid pro- gram sthich wauld help states and localities address criminal justice prob- lens without interference fran the overly bureaucratic, inflexible, out- of-touch federal government. By receiving funds directly, it was thought, states wDuld be able to pullrtogether the traditionally fragrnsnted ele- ments of the criminal justice system. Wnile many observers believe that LEAP made a contribution to law enforcenant by bringing together represen- tatives of the different canponents of the criminal justice system, there is no dispute that the program did little to reduce crime in the United States. Initially, the key assurption was that the core funds available, the greater the pDssibility of reducing crime. This did not prove true. Crime increased dramatically during LEAP's history, suggesting that crime is a deep-rooted carrnunity and social problem that cannot be solved with government financial intervention alone. A statistical analysis prepared by the Congressional Budget Office (CBO), based on data for 1960 through 1976, indicates that the level of crime is closely related to the size of the youth (ages 16 to 24) labor force and associated unanploysent. As LEAP funds made up only aboct 5% of a state' s entire criminal justice budget, LEAP provided little leverage to influence broader state actions. LEAP might have made a substantial contribution to the criminal justice area, however, by conducting and encouraging innovative research, experimentation and evaluations. Unfortunately, LEAP seems to have failed in that regard. The Justice Department estimates that less than 3% of 1978 block grant funds supparted innovative programs. If innovative programs to reduce crime and establish state criminal justice systems ware not the crux of LEAA block grant funding, what was the benefit fran the millions of federal dollars given to the states? The cities received only 52% of block grant funds, even though they had 83% of all reparted crimes. Conversely, the counties received 48% of funds with PAGENO="0624" 620 -137- only 17% of all rejx)rted crimes. Although the Idvisory Carnission on Intergoverrznental Relations (I~CIR) reports that high crime areas got a higher share than other areas, this was costly dt~ to the federal guide- lines ~thich established specific crime reduction programs in high crime areas, rather than to state action. Ccrnxrents by many state and local officials docunented in a 1978 report by the 20th Century Fund confirm their prob1~ with LEAA red tape and bireaucracy at the federal and state levels. This block grant, designed to provide flexibility, acquired a reputation of being less flex- ible than categorical programs. Critics report that the main product of LEAA was the establishment of a rigid bureaucracy - 4,000 people at the Justice Department and within the SPAs and Regional Planning Units (RPUs) -- ~thith caused nut~rous administrative probl~ns. Fbr example, even thDugh states had the freedan to establish their own funding processes within certain parameters established by the federal office, delays were constant. MDreover, changes in leadership and policy at the federal level -- LEAA had five administrators within seven years, each with his own philosophical and administrative approach -- contributed to changes at the state level. Local goverrinents were required to participate in the planning pro- cess, so nt)st SPAs set up Regional Planning Units (RPU5), and by 1975, there were 445 regional planning units in 43 states. lbwever, RPU5 made planning subgrants to localities in only 11 states, and the Justice Depart- ment never provided significant national direction to the RPU5. RPUs were required to operate under the supervision of a board male up of local goveranent officials, criminal justice agencies and the pub- lic. According to the 1977 ACIR report, police constituted the largest grcop on these ~oards, and the public imsnbers were ~he "least represented" and the "leastftnfluential." ~&reover, it is evident that throughout the history of this block grant, SPAS maintained control of the LEAA funds. Only rarely did citizen organizations obtain grants fran SPAS, and then the funds received were small. AS LEAA regional offices and SPAS became core sophisticated, there was a general tendency to place core specific guidelines on RPUs. This sophistication also led to increased representation of criminal justice agencies on regional planning boards, thus diluting the influence of elected officials. Another problan was that Congress constantly changed priorities for the LEAA program. In 1971, corrections was the main concern; in 1973, crime control; and by 1974, juvenile justice. As seans endanic to block grant efforts, there has been little evaluation, and thus little measuranent, of the successes and failures of these program efforts. It is clear, however, that the federal priorities did little to en- courage states to establish innovative approaches. On the average, states used alnost half of their annual block grant appropriations to continue PAGENO="0625" 621 -138- ongoing programs, rrakirzj it very difficult for the SPAs to respDnd to changing local needs or federal pDlicy direction. Throughout this process, as the states consolidated their control, the Justice Department failed to provide sufficient direction or leader- ship. In 1978, CBO recamrended that Justice place greater ~tphasis ulxn building evaluation into programs and projects before they were started, but little changed. It wes partially in reaction to this maze of problans and difficul- ties that Congress established changing priorities (as mentioned above) and began to eaxmark funds for different purpases. This atterpt to attain greater accountability, however, did not produce discernible results. In conclusion, the LEAA block grant wes beset b~r a large* number of administrative and prograienatic difficulties, and there is little evidence that this block grant made a difference. For the cost cart, funding went to very traditional sources, and states spent limited resources on innova- tive solutions to local problens. In addition, little attention was given to citizen participation or to the all-impDrtant area of civil riqhts. In fiscal year 1981, no funds for LEPA grants were included in the federal budget. 99-965 0 - 82 - 40 PAGENO="0626" 622 -139- PAST ~P~I~IE C~4D~nY ~o~r ~ ~A~r P~M The Carrnunity Developient Block Grant (CDBG) program was enacted into law in 1974, as Title I of the Housing and C irminitytevelq~ent Act of 1974. It replaced several HOD categorical programs -- including urban renewal, Mndel Cities, open space, water and sewer grants and code enforce- ment -- with a large, flexible block grant to local governments. The program represented an uneasy catpranise between the Ford Adminis- tration, which had sought a revenue sharing approach with virtually no federal controls, and the Congress, which was determined to enforce cer- tain federal priorities and safeguards. The result was a statute which left local governments with broad discretion in prograinning, but which also established certain federal priorities and safeguards. The Ccmnunity Develqment program includes a number of important provisions and safeguards: * all funds must be spent on specifi- cally eligible activities; * all funds must be spent on projects which benefit lower incaie people, address slum or blight conditions or meet other urgent needs; and the principal beneficiaries of CDBG spend- ing must be lower inccme people; * local governments must ccinply with civil rights, relocation and other federal standards; * there are citizen participation standards (which were weakened in 1981) and an administrative cam- plaint procedure. Under the program, all cities over 50,000 people and all counties with populations over 200,000 (excluding their larger cities) are entitled to receive an annual block grant for an acount which is set on the basis of a jurisdiction's population, poverty and other factors. Cotil the law was amended in 1981, however, release of the funds was contingent upon HOD approval of a relatively detailed application. Furthenrore, unlike the bigger cities and counties, smeller jurisdictions and rural areas had to ccxnpete for funding under the "&iiall Cities" CDBG program. They had to sutinit applications which HOD evaluated on the basis of a rating system which took local needs and the potential of the proposed program into account. The size of a &i~all Cities C1~G grant was not set by formula. PAGENO="0627" 623 -140- Co the basis of probl~ra which ~rged during the first several years and a number of program evaluations, including General Accounting Office studies, there were a number of changes in the program during the period fran 1977-1980. These included statutory changes with regard to the tar- geting of funds to benefit lower-inccme people and strengthened citizen participation standards. They also included clarification of the statute s housing assistance requir~i~nts and citizen participation and other federal safeguards. Then, in 1981, follcx~ing the Reagan Administration's initiative, the Congress reversed its direction and greatly increased local discretion. First, it eliminated the CDBG application and review by A-95 agencies and HUD. Secondly, it reduced citizen participation standards, eliminating the participation plan and the multiple public hearings. C~inions vary on ho~ well this block grant has reconciled local priorities and national objectives. The Brookings Institution rronitoring repart of 1980 argues that local preferences have daninated program plans in the CDBG program, but does not att~ipt to judge the program in terms of its econanic or social success. The National Citizens' ft)nitoriag Project on CDBG repnrts that many jurisdictions have written off their cost severely blighted and lo,q-incctre areas for CD projects and have had severe capacity and performance problams. General Accounting Office studies, including one issued April 30, 1981, argue that greater federal oversight and guidance are needed to ensure that national goals are net and that fraud, waste and abuse are minimized. The cost recent GAO study specifically painted to the need for: * better targeting to geographic area; * a narrower definition of what projects are eligible for CDBG funds; * the need for core specific information and greater verification of whether the funds are, in fact, being used to bene- f it the incane groups and areas which are cited in the applications; * the need to strengthen federal nonitor- irng to minimize fraud, illegality and ineffective progranuning; and * the need to improve local governrrents' fiscal rrenagenent and reparting of block grant expeoditures. In its August 30, 1978, repart ~ and Evaluaticri of the Qin minity I~e1c3i~nt Blod Grant Program Need to be Strer~thened), GAO PAGENO="0628" 624 -141- peinted to the importance of the application, the Performance Pepert and HUt)' s on-site nonitorimg and technical assistance. The Wc)rking Group for Ccrrvounity Developient Reform s evaluation of CE~G in 43 jurisdictions stressed similar concerns: * CDBG applications should have sufficient information to provide an adequate basis upen ~hich city and county councils, local citizens and the federal goverrment can understand and evaluate hov the funds are to be spent and ~that their likely impact is; * similarly, repDrts on performance should provide sufficient information to enable council n~ribers, citizens and HUH to understand hcw funds have been spent and to assess hov well a jurisdiction has performed under the program and ~thether it has ccrnplied with statutory require- nents; * the federal governnent should develq technical assistance, rronitoring and evaluation systams ~4iich help strengthen the capacity of local governmants to set goals, pursue those goals and evaluate their owe progress; and * the federal oversight respensibility should include sufficient repertimg, auditing and on-site rronitoring to guard against mismanagerent, fiscal irregularities and illegal use of CI~G funds. It is in light of these findings that the Coalition is concerned about the 1981 Arrendrrents rrentioned abo~, as well as the replacarent of the canpetitive "Reall Cities" program with a very loose block grant to the states for rural areas and smaller municipalities. Prepared by: Andre~i H. F'btt Center for Ccmurrunity ~range 202/338-3134 PAGENO="0629" 625 -142- PAST EXPERtENE ~TA The Ccxnprehensive flnployment and Training Act (CETA) enacted in 1973, consolidated federal categorical amployrrent and training programs admin- istered by the Labor Department into a special revenue sharing program administered by state and local officials, called prirre sponsors. S'~hile providing funds to prime sponsors to design their own programs, CETA retained basic federal standards and directives. CETA is a goa5 example of a block grant approach that proved too loose, causing Congress to intervene and impose further restrictions and federal standards. Many of CETA' s problarrs resulted fran this identity crisis, as well as the Labor Department's unwillingness to enforce CETA's numerous federal strings. CETA was to have been a major step towards decategorization of federal ei~loyment and training efforts. The program got off to a poor start, however, as the Department of Labor (DOL) assumed such a flexible role that it provided little federal guidance or technical assistance. Fran the beginning, [DL seamed core than willing to bend its regulations in order to get resources to prime sponsors. According to studies by the Advisory Canmissiom on Intergoverrinental Relations (ACIR), [DL regional offices approved all prime sponsor plans in the early stages of the pro- gram and returned few for changes. A further problam was [DL' a inconsistent policy vis-a-vis prime spon- sor autonany. At tines, the department adopted a hands-off policy ta~erd prime sponsor decisions; at other times, it damanded specific responses to federal initiatives. Car~ined with the lack of technical assistance, this led local goveranents to go of f in their own directions. With the country in a severe econcrnic recession in EY 1975 -- unenploynent had jurrped fran 5.5% to 9% -- DOL and Congress increased CETA funds and expected quick re- sults fran the localities. But the etphasis on short-teim goals precluded effective planning and coordination. By 1978 it was clear that DOL's lack of control was causing major managament problams, as Congress received extensive reports of fraud and abuse in local CETA programs. There also was evidence that the original intention of serving those "cost in need" had been thwarted. In enacting the 1978 CETA reauthorization, Congress sought to ameliorate sane of the program's problens. In some cases, such as the tightened eligibility and wage standards and the tine limit on an individual' s participation in the program, the changes did alter the pro- gram for the better. In other areas, however, such as the extensive pub- lic participation provisions, Labor Department enforcament continued to be lax. In addition, CETA' s public image was sufficiently marred by 1978 PAGENO="0630" 626 -143- that the real improve~ants in the program were never fully recognized, making CETA an easy target for the Reagan budget-cutters. CETA funding peaked at over $10 billion in 1978 and then began a decline that left the program at around $4 billion in fiscal 1982. CETA s original targeting language was very weak. Because costly white, educated males were benefitting fran the program, particularly the public service anployment canlx)nent, Congress, in the 1978 reauthoriza- tion, strengthened CETA s pDverty focus by adopted amendments targeting program services on the long term unanployed fran lcw-incare families. These changes also follo~d reported abuses such as patronage hiring of ineligible ~orkers in sass large cities, as well as estimates that 40-50% of CETA funds were being substituted for state and local funds. So in addition to the tighter targeting and eligibility criteria, the 1978 amendments included stricter requiranents that CETA jobs and services be in addition to, and not in place of, local efforts. Other 1978 changes, such as the time limit on CETA participation and requiranents that public service aTrployment prograrrs include a training canpnnent, were aimed at improving participants ability to nave into unsubsidized anplo~aent. According to a General Accounting Office (GAO) report, IX)L auditors were overruled 83% of the time by the Baployment and Training Administra- tion, and tX)L din not attarpt to uncover large abuses. It was necessary, by 1979, to create an Office of Special Investigation to lock into the CETA program. Of the 450 prime sponsors, however, only 70 were canpletely audited by late F? 1981. CETA was the first block grant to anphasize citizen participation, requiring prime sponsors to establish planning councils that were broadly representative of the canmunity. The councils were to advise the prime sponsors as to which projects were to be funded and `~fro should be served. ACIR reports that planning councils were fairly representative in cost areas -- about 35% of the maibers were fran client groups or can- munity based organizations, 25% fran business and labor, 15% fran educa- tional institutions, 15% fran local officials and 10% fran other groups -- though there is little documentation on the sex, race, handicap or age makeup of councils. What is unclear, however, is the extent to which the councils actually participated in the CETA planning and funding process. Reports fran canmunity organizations indicate that the councils usually "rubber stamped' decisions already made by prime sponsors and CETA staff -- decisions all too often made for political reasons. Citizens and ccmnunity organizations have had especially severe difficulty gaining access to the planning and implaTentation of CETA pro- grams in "Balance of State" prime sponsorships, particularly in rural and less pqulated areas. These problans are caused by a ccsbination of geo- graphical distance and lack of political clout at the state level, and they reflect the difficulties typically encountered with state-adminis- tered block grant programs. PAGENO="0631" 627 -144- In the area of civil rights, even the original CETA legislation con- tamed ~equivocal standards prohibiting inequities in selection or treat- cent on the basis of race, color, national origin and sex. In this area, too, hDwever, WL resolved conflicts in favor of a core limited federal role and greater local discretion, and local officials have not been effective in enforcing nondiscrimination. In the 1978 amendments, Con- gress adopted provisions to protect equity of enplo~ient conditions and to assure affirmative action. In evaluating local prime sponsors, DOL appears to have been inconsis- tent, with field staff scp-iasizing different issues in different jurisdic- tions. As indicated above, despite the clear statutory mandate to rronitor canpliance with the law and regulations, DOL has basically avoided over- sight and has not denanded strict adherence to federal standards. ~Ib suiimarize, DOL has viewed CETA as a block grant program ~fnich limited the federal role and eaphasized local discretion and control. As a result, many feel that DOL bears respDnsibility for seriously undermin- ing the standards and requirenents contained in the law and regulations. Prepared by: Melanne Verveer U.S. Catbolic Conference 202/659-6797 RDnnie Kweller Center for Camiiunity Change 202/338-6484 PAGENO="0632" 628 -145- P7~ST EXPERIEWE L ~ General Revenue Sharing was created by Congress under the State and Local Fiscal Assistance Act of 1972. PeauthDrized in 1976 and 1980, this program has appropriated billions of dollars to 39,000 state and local goverrments. Until 1981, states received one-third of the federal funds and localities tao-thirds. In 1980, Congress reauthDrized only conies for localities through 1983 -- approximately $4.5 billion each year. GRS was originally created with several broad restrictions on the use of federal ironey. Under changes made in 1976, eligible goverriTents con- tinue to receive revenue sharing payments autaiiatically and may use then for virtually any purpase. Such a broad mandate to local jurisdictions seams to have stretched the decentralization of the federal government to its limit. Although much broader in scope than the other block grant programs established by Congress since 1966, the General Revenue Program shares many of their problens. Originally GRS was vie~ev1 as a catalyst for state and local changes. Although General Revenue Sharing at its peak constituted only 3.14% of state and local general conies, the program was seen as the answer to the fiscal inibalance that existed on the state and local levels. But, accord- ing to the Congressional Research Service (CRs), the snall arrount of noney available and the lack of incentives prevented GRS fran inducing state and local governments to coge with fiscal problems such as declining tax bases, under-funded pension systems, wasteful uses of land and energy and fragmented governmental structures. Studies conducted by local, state and national monitoring groups since 1972 clearly document that localities instead used GRS funds to up- grade floundering programs and facilities. State and local governrrents spent fran half to tao-thirds of revenue sharing funds on prthlic goods and services. Approximately 30% was used for tax reduction and debt retire- ment and only about 5% was used to add to cash balances and services. Nn reliable study exists, according to CRS, to suggest that GRS has stim- ulated spending by state and local governments with `inadequate levels of services. The initial legislation required local governments to prepare planned and actual use reparts, but, according to G?~0, these have proven inade- quate, this is because once GRS funds are entered in the general accounts of state and local governiients, they becaTe indistinguishable fran other funds. Since 1972, the federal government has played a minor role in holding states and localities accountable for the GRS expenditures. The Office of Revenue Sharing (ORS) has constantly taken a noninterventionist pasture on GRS. It was not until civil rights groups forced ORS to PAGENO="0633" 629 -146- respond to major civil rights caiplaints that it took a core active role. Not until 1976 was there a major effort to expand the nondiscrimination clause of GRS and set up specific timetables for ORB action. The 94th Congress enacted amendments to GRB that established exten- sive hearing and caiipliance procedures to deal with discrimination. In order to dmronstrate canpliance with the nondiscrimination provisions of the Act, a recipient goverrn~nt must denonstrate by "clear and convincing' evidence that the program or activity over `~thich an allegation of discrimi- nation has been made is not funded in wbole or part with revent~ sharing funds. AlthDugh little data exists on the results of this expanded effort, it has been reported that there has been a sharp iliproveTent in ORB' a administrative procedures for dealing with discrimination can- plaints. After 1976, all priority expenditure categories were eliminated. Recipient goverrrrents were simply required to report to the Secretary of the Treasury on how funds were spent. respite other tight federal require- merits concerning the timetable for use of funds, auditing requireients and accounting procedures to be follc~ed by states and localities, the federal goverrsrent did not aggressively oversee the ORB program. It has been stated that ORB too often relied on carplaints fran citi- zens about the use of funds and adherence to ORB provisions, rather than building its ~n capability to conduct canpliance reviews in the field. Not until 1977 did ORB conduct reviews in caisnunities and significantly expand its canpliance staff. The national policy environment permitted state and local officials to establish their owa approaches. Citizen participation has always been recognized as an important aspect of the ORB program. The original act required recipient govern- ments to inform citizens about uses of shared revenue by publishing re- ports in a local newspaper. In the 1976 reauthorization arrendnents, the importance of the citizen participation process was enlarged. Recipient governrrents were required to bold tao public hearings on ORB unless there was a specific waiver fran the Treasury Secretary. Ci~e hearing, which took place before the locality's budget was presented to the legislature, was on the proposed use of the ORB funds. The other hearing gave citizens the opportunity to caruent on the proposed uses of ORB funds in relation to the government' s entire budget. According to cost knovledgeable sources, citizen participation had sare irpact on ORB allocations, but it was not nearly as important as other factors in the local budget process. Although ORB encouraged citi- zen participation, it made little atte~t to enforce this provision. Re- ports done by The Brookings Institution and the Survey Research Center in- dicated that cities holding ORB hearings were just slightly core prone to fund health and social service programs than those that did not, whereas counties that held hearings allocated less for health and social services. Not all of the active citizens desired core social services, nor were social action groups active in many ccmnunities. It is clear that despite citizen involvenent, state and local officials determined whether citi- zens' suggestions s~ould be irrplerented. PAGENO="0634" 630 -147- In conclusion, it is evident that the General Revenue Sharing Program has been the itost decentralized block grant program ever enacted by Con- gress. Throughout the years, federal oversight arx~ canpliance require- ments have been mininal, and this has made it difficult to assess the success or failure of the program. It is apparent, however, that the General Revenue Sharing Program has done little to change the fiscal inequities that exist at the state aiaf local levels or the setting of program priorities by elected officials. Prepared by: 1\bigail Havens 202/965-0066 Woody Ginsburg Center for Camiunity Change 202/338-6977 PAGENO="0635" 631 -148- PAST ~CPERIENE 314(d) PARI1~IE1~1IP FOR H~L![H Congress' original intention in rierging nine health programs into the Partnership for Health Act in 1966 wes to assist the develcpiient and expansion of public health services at the local level. Unfortunately, there is very little evidence that this attenpt at giving flexibility and control back to the states ssorked. The enabling legislation placed very few restrictions on the states on the use of this block grant rroney. The act required only that at least 15% of a state's allotnent be made available to the state rrental health authority, and that at least 70% be made avail- able for "services to carrnunities." Congress predicted that 314(d) would be a rrodel program with increased funding levels at the state level. Many factors contributed to the denise of 314(d) as an innovative health plan. With administrative decentralization caine a lack of national interest and funding. Because the program never received a large funding increase fran Congress, 314(d) funds accounted for no core than 3% of total reported state health department spending. Throughout its history this block grant barely. kept pace with inflation, and funding areas cut its last few years. All indications are that the flexibility that states received with the block grant funds did not prczrote changes in the services or administration of health programs. &nialler state needs could be addressed, but there ~sas little roan for broader, core innovative approaches. As reported by ACIR, the available data imply an absence of significant departures fran previous federal categorical programs. Bather, funds served to fill small gaps in federal funding. Nevertheless, 30 of the 44 state administrators of 314(d) surveyed try ACIR preferred the flexibility of this approach, although they cited the follovirig disadvantages: (1) lc~er and uncertain funding; (2) difficulty in obtaining political support; and (3) an inability to make major changes in funding patterns. Interestingly, there were no evaluations that indicate s~iether or not the recipients of health servic-as believed that they were better served. Poor performance try HEW resulted in little or no improveient as a result of 314(d). Regional offices qerated independently, and there was alnost no direction fran the central office except in interpreting policies and regulations. Federal efforts to carinunicate the evolving direction of the program were minimal and were reduced further sthen a simplified state plan was introduced in 1970. This lack of oversight was reinforced by an HEW regional office awareness that state financial PAGENO="0636" 632 -149- ability to transfer funds between budget categories made accountability provisions virtually unenforceable. Along with the lack of control over state plans, technical assistance, rronitoring, auditing and program evaluation also diminished. The accamtability mechanisms of the legislation became all but buried. The lack of available detailed data continued. The only ramaining check and balance systen was the state budget process. Forty-three states reported to ACIR that block grant funds were included in the regular budget review process. It was not evident, tcwever, that interested parties at the state level were sufficiently aware of or involved in this budget process to influence health departments in the use of 314(d) funds. The first ccznplete data on uniform program reporting revealed little shifting of priorities fran the 1960s categorical programs. t~spite the congressional hopes for innovation and local flexibility, state health directors maintained alrrost total control over the block grant funds. Evaluations were rarely conducted. In the first seven years of the program, only one evaluation was done. There has never been an evaluation of service delivery, nor any way to track funds through the states. The 314(d) administration has never been subjected to an audit, and very few state programs have been audited. Even in thnse instances when states were found to be out of ca~1iance, the central office never permitted withbulding of funds. This lack of accountability and evaluation, and the alrrost total state discretion with these funds, made it difficult to gauge the local irpact of 314(d). The legislation mandated that funds be used to "make a significant contribution" toward providing and strengthening public health services" in localities, and that they be made available to other egencies to secure "maximum participation" of local agencies and groups. However, there is little evidence that this happened, and the regulations failed to define what s'~ou1d be a significant contribution to or achievetent of maximum local participation. In conclusion, national, sstate and local health agencies dkl not s~ork together on the 314(d) program. As the block grant program continued, state health departments established bureaucratic control, and the national and local goverrtrents lost interest or found few ways to influence state health programs. There is rx evidence that recipients were better served as a result of this block grant. Prepared by: Abigail Havens 202/965-0066 PAGENO="0637" 633 -150- PAST EXPERI~E Title )CC Title XX of the Social Security Act was an approximately $3 billion federal program that reimbursed states for costs incurred in providing social services to lv incane persons. The program operated as a block grant to states, with broad federal guidelines and maximum decision-raking authrity at the state level. Title XX consolidated and replaced the autlorizations for services to welfare recipients previously found in Titles IV and VI of the Social Security Act. Althugh Title XX did not create a n~ program, it both rrade significant changes in the way social services were provided to lv incane persons and expanded eligibility for social services. The law required at least half of each state s federal expenditures to be used for services to AFJX~, SSI, or Medicaid recipients. H~ver, the reiainirxg funds could be used to provide services to anyone wiose incane was belv 115 percent of the state' s rredian inccme for a family of four, adjusted to actual family size. Three types of services -- information and referral, family planning and protective services -- could be provided to anyone needing the services, regardless of incane. Title XX established five broad goals (which are `retained in the new Social Services Block Grant): o achieving or maintaining econanic self-support to prevent, reduce or eliminate dependency; o achieving or maintaining self- sufficiency, including reduction or prevention of dependence; o preventing or ranedying neglect, abuse or exploitation of children and adults unable to protect their owa interests, or preserving, re- habilitating and reuniting families; o preventing or reducing inappropriate institutional care by providing for camnunity-based care, hane-based care or other forms of less inten- sive care; and o securing referral or admission for institutional care when other forms of care are not appropriate, or pro- viding services to individuals in institutions. PAGENO="0638" 634 -151- All services provided by a state were to be tied to at least one of these goals, and at least one service for each goal was to be be provided. Further, Title XX required states to offer at least three services for eqed, blind or disabled people receiving 551; and to provide family planning services to all AFDC recipients W1o requested tham. Beyond these reguiraments, states were free to determine their own mix of services based upon a needs assessnent and a mandatory planning process which, at the tine of Title XX' s enactment, was heralded as one of the mast significant aspects of the nev law. One of the major innovations of the Title XX program was the option for states to serve not only low incare persons vfro were already receiving federal assistance (Ssi, AFOC and Medicaid), but also individuals and families with inccnes within state-established limits, but below 115% of the state's median incane for a family of four. States ware required to impose reasonable fees for persons whose inccme exceeded 80% of the state' s median incane, and states had the option of imposing fees for persons with lower inccires. Wnen Title XX was enacted in early 1975, it inherited a $2.5 billion ceiling that had been adopted by Congress in 1972 in response to a trenendous increase in federal spending for social services during the previous five years. For statOs not yet at their Title XX ceiling, the availability of federal funds served as a catalyst to develop and expand their programs. As mare and mare states spent all of their Title XX funds, pressure was exerted on Congress to raise the Title XX ceiling. Congress responded by authorizing a series of increases in the Title XX ceiling. Still, Title XX appropriations did not keep pace with inflation. The $2.5 billion cap on Title XX imposed in 1972 weuld equal about $5.2 billion in inflated 1981 dollars. States increased spending for social services fran $600 million in FY 1972 to $1.5 billion (est.) in FY 1981, a real increase of about $244 million, or only about 10% of the federal loss. In its six years, the Title XX program experienced a variety of problans that raise serous questions about the effectiveness and efficiency of a block grant as the primary vehicle for the provision of social services. These problars include a critical lack of data about what Title XX funds actually purchased, unrealized expectations of how citizens would participate in the Title XX planning process, inadequate program and administrative accountability and serious issues of equity relating to the distribution of funds. All of these problams were canpounded by the $2.5 billion funding ceiling, which received no allowance for inflation between 1972 and 1979. The $2.9 billion appropriation for Fl 1981 was cut by 17%, to $2.4 billion, under the 1982 Budget Reconciliation Act, which also established the mew Social Services Block Grant. PAGENO="0639" 635 -152- The lack of hard data on exactly ~fnat was bought for the Title XX yearly expenditures plagued the program fran its inception. At the national level there was a continuirr need for inproved reporting of the ways in which federal dollars ware spent, who received `which services, how much was spent for administrative costs, etc. Equally serious was the lack of data useful to the states. A 1978 National Govercors' Association study on Title XX repeatedly aiphasized that state agencies need tighter and rrore accurate data." Che of the fundamental assunptions of the Title XX legislation was that citizen participation `would serve as a means of accountability. The vehicle for citizen participation was the Canprehensive Annual Services Plan (CASP) which spelled out what services ware to be provided, to whan and in what parts of the state. Citizens ware to be given at least 45 days to sttrnit their canments regarding the CASP; however, there was no mandate that the final state plan incorporate or reflect the citizen input received by the state agency. An analysis of citizen participation in Title XX programs conducted in 1978 found that while the overall level of participation ranained above the pre-Title XX levels, public participation. declined sharply after the first year of iinplanentation. The fact that nost states ware spending all of their Title XX funds -- and therefore were unlikely to fund new services -- probably discouraged citizens fran trying to influence service priorities. Title XX decision-making within the states became increasingly controlled by the state budget offices, the single state administering agency and the state legislature, further limiting citizen input. An Urban Institute study expressed doubts that public participation experienced under Title XX was representative of either consuners or the general public. This study found that menbers of the public who participated in Title XX priority-setting generally represented the special interests of providers or particularly articulate pipulation groups. When Title XX went into effect in October, 1975, it placed major aiphasis on developing irrproved planning and managament systans at the state level. It gave states the flexibility, within available funding, to rsorder existing programs and reallocate resources to create a canprehensive social services systan. The pranise of caliprehensive planning through Title XX never materialized. The NG~ study concluded that experience with Title XX raised questions about a state's ability to conduct a caaprehensive assessment of the need for services. HHS `s own 1980 report supported this conclusion, noting that states found needs assessments costly and thrdenscrne, particularly in view of funding limits. The lack of canprehensive planning at the state level was matched, if not exceeded, by a lack of evaluation of Title XX expenditures. The NG~ study reported that state officials viewed the PAGENO="0640" 636 -153- inability to evaluate program results as one of the major stuhnling blocks to better programs. Fk~ver, allocation of staff and resources to program evaluation did not always catch the abstract canrnitment to evaluation, despite the fact that the. states had considerable discretion to expand their staffs dewted to this function. A 1978 survey indicated that core than half the jurisdic- tions administering Title XX neither ccs~leted nor undertook a single study of the effectiveness of the programs they ware ailministering. Allocation of funds and/or services at the state level raised concern that individuals and/or groups cost in need of service ware not, in fact, receiving their fair share. In a recently canpleted exploratory study of the substate allocation of Title XX services, the National Association of Social 1~brkers found that rural areas, blacks and pDverty papulations generally receive less than their propartionate share of service dollars. As an example of a block grant, the Title XX program raises serious questions about the willingness and capability of the states to plan, evaluate and manage canplex social service systams. While Title XX served as a conduit for federal funds and brought increased services to our irost vulnerable families, it did not fulfill its patential as a vehicle for improved social service delivery at the state level. The much heralded needs assesanent process and related mandate for citizen participation did not, in reality, significantly change the decision-making process within the states, nor alter the traditional allocation of resources. While the services ware theoretically being delivered `closer to the people," the funding source of the programs (the Congress) has little useful data on the extent to ~hich the conies being expanded have met the five program goals specified in the legislation. Prepared bj: Pram Eizenstat Mary Lee Allen children' s tbfense Fund 202/483-1470 800/424-9602 0