The nation's governors voted unanimously to endorse bipartisan proposals to rewrite the federal Medicaid and welfare programs, potentially paving the way to re-open deficit reduction talks between the White House and GOP. The proposals, adopted at the National Governors' Association annual Washington meeting, would provide for block granting the largest federal entitlement programs that serve the nation's poorest families in cities, but would retain guarantees or entitlements to medical service for many categories of the poorest children and citizens in communities.
President Clinton, Senate Majority Leader Bob Dole (R-Kans.), and Speaker of the House Newt Gingrich (R-Ga.) praised the governors' bipartisan proposals as steps in the right direction. The gubernatorial proposals would appear to address two of the most difficult issues that have obstructed agreement between the White House and Congress on a balanced budget.
NLC President Greg Lashutka welcomed the efforts of the governors to help pun the nation together, achieve a consensus about getting the federal government back to work, and accepting the task of making tough choices:
"Just as we committed to making the hard decision together as Republicans, Democrats, and Independents, necessary to achieve a balanced budget; I am pleased the nation's governors have joined us in spirit in telling the Congress and President to put aside the partisan bickering and get on with the job. We look forward to working with the governors to spell out the details to ensure they address the roles and responsibilities of our cities and towns, and to joining with the governors to bring the Congress and President on board."
For the nation's cities, the potential consequences of the proposals could be far reaching and could lead to permanent changes in the future shape and role of local governments.
At risk is as much as $100 billion in federal assistance to states and local governments over the next seven years. Some of the cuts could fall in the current budget year; others could radically alter the role and responsibility of the three levels of government - potentially imposing significant, new unfunded liabilities and responsibilities on local governments.
Proposed federal changes could lead to significant changes in state budget priorities. Federal changes could shift the responsibility for the care and nutrition of millions of children to local governments, but with. substantially reduced resources.
Where the emerging Medicaid and welfare plans would make the most significant changes in the federal role would be in altering the federal government's social contract with low income families in cities and towns.
The plans would provide for sweeping changes, forever altering federal responsibility for the health and welfare of the nation's poorest families. But the governors' plans make no mention of the roles and responsibilities of local governments.
Medicaid: Medicaid is the federal health care program that guarantees or entitles every poor American access to medical treatment and nursing home care.
The governors' proposal would provide for block granting federal Medicaid dollars to each state, but retain a guarantee of Medicaid for certain groups of poor people in cities and provide an assurance of additional federal funds to meet economic downturns or migration of eligible citizens into a stow. The proposal would ensure coverage for hospital services, nursing home care, family planning services and other medical benefits for these guaranteed eligible citizens in cities. The proposal would give states "complete flexibility in defining the amount, scope, and duration of services." The proposal does not resolve the difficult issues of treatment for immigrants, legal or illegal.
In all, the proposal takes some middle ground between Congressional goals and Administration plans.
Republicans have proposed to end the federal guarantee of health care coverage, to turn the program over to states in the form of block grants, and to make severe cuts from projected spending levels. The administration wants to preserve the federal guarantee, offer states greater flexibility to design their own programs, and impose per capita limits on growth in federal assistance.
For cities and towns, the proposal could mean a net reduction of more than $100 billion in medical services for children, families, and elderly citizens in nursing homes in communities over the next seven years. How those reductions in benefits and services would be allocated within states would likely affect hospitals, health care clinics, and employment within the health care sector of local economies. Because the proposal would allow states to reduce their match, families in communities no longer served would most likely become the responsibility of cities and towns.
Governors John Engler (R-Mich.), Tommy Thompson (R-Wisc.), Michael Leavitt (R-Utah), Bob Miner (D-Nev.), Roy Romer (D-Colo.), and Lawton Chiles (D-Fla.) negotiated out the Medicaid compromise over the last two months. Translating their resolution into legislative language and obtaining an accurate estimate of its potential impact will take several weeks.
The issue of guaranteeing benefits, but providing total flexibility to states to define those benefits alone could be especially difficult.
The most critical entitlement change for local governments to prepare for could come from Medicaid. Changes in this nearly quarter century old program will effect the state budget, will affect health care providers in every community across the state, and could lead to significant consolidations and job losses in the health care sector. Because Medicaid today provides 40 percent of total federal aid to states and local governments, major changes in funding could have significant consequences for state budgets and state priorities towards local governments.
For cities and towns, the potential changes raise questions about different impacts on communities with higher levels of poverty, on employment from a major downsizing of the health care sector - public and private, and on how a state would propose to pass on responsibilities and priorities to local governments.
It is in the entitlement area, such as Medicaid, where many cities and towns currently have no responsibility or liability, that major changes could happen with consequences far outweighing cuts in programs currently incorporated in municipal budgets. For it is here there could be a shift: a shift of responsibilities to state and local governments, while the federal government puts off for another day the real choices about the nation's priorities. A shift where a state could also reduce its commitment and pass on responsibilities and liabilities to local governments.
Welfare: The governors agreed to end the entitlement status of most federal welfare programs and convert them to block grants. Relying on the version of welfare reform passed by Congress but vetoed by President Clinton, the governors proposed to add $4 billion for child care and a $1 billion rainy-day contingency. The proposal would offer greater flexibility in meeting work requirements to remain eligible for welfare benefits and retain the entitlement status of foster care and adoption assistance, food stamps, and school nutrition. The proposal would limit reductions in the earned income tax credit (EITC) to $10 billion over the next seven years.
The welfare reform bill the President vetoed proposed to end the federal guarantee of or entitlement to welfare programs for the poor - such as Aid Families with Dependent Children (AFDC), Supplemental Security Income (SSI), and Food Stamps - and convert the reduced dollars into block grants to states. The bill would have cut federal welfare assistance to states by more than $60 billion over the next seven years. Congress also proposed over $23 billion in reductions in the Earned Income Tax Credit (EITC), a program created during the Reagan administration to provide incentives for families to leave welfare for work.
The White House has proposed $38 billion in welfare savings, but preservation of the federal safety net and entitlement status of the programs and opposition to any reductions in the EITC.
As with Medicaid, the potential impact of changes in these two programs on cities would be mostly indirect and complex. Because few cities currently have responsibilities for these programs, there would be few direct municipal budgetary impacts; there could be significant impacts on revenue and expenditure costs for cities. The changes could affect sales tax and other local revenues through the cuts in cash benefits to municipal residents. The changes could have impacts on child protection and police budgets.…