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Talking Points on Health Care Reform and Medicaid
I am pleased that we can continue to work together on health care reform. While we
had honest differences of opinion on some issues last year, and while I know that
mistakes were made, I am proud that we tried to pass meaningful health reform
legislation. It was the right thing to do then, and it is still the right thing to do.
As you know, I remain firmly committed to guaranteeing health insurance for every
American and to containing health care costs for families, businesses, and Federal,
state and local governments. I reiterated this commitment in a letter that I sent in
December to the Congressional Leadership.
I also noted in my letter that, this year, Republicans and Democrats can and should
work together to take the first steps toward these goals. We can reform the insurance
market. We can ensure quality and efficiency in the Medicare and Medicaid
programs. And surely we can make coverage affordable for families and children.
As I looked at your health policy statement, I was happy to see many areas where we
can agree.
We can do away with the need for waivers for states that want to implement
Medicaid managed care. We also can agree to remove restrictions on Medicaid
managed care (such as the requirement that no more than 75% of a managed
care plan's enrollees be Medicaid beneficiaries) as long as access and quality
are guaranteed.
We can do away with the need for waivers for states that want to implement
home and community-based care programs.
I recognize your concerns on the Boren amendment and can agree with many
of your proposals in this area as well. We can agree with your proposal for
safe harbors for hospitals. (NOTE: THERE ARE POLICY AND POLITICAL
CONCERNS WITH SAFE HARBORS FOR NURSING HOMES, so WE
ARE AGREEING WITH ONLY PART OF THEIR PROPOSAL). I also agree
that Boren should not apply to managed care arrangements.
MEDICAID AS A CAPPED ENTITLEMENT
[NOTE: The Governors have proposed that states be given the option to operate Medicaid
either as an individual entitlement or a capped entitlement to the state. Because of concerns
about this proposal, it may be best not to initiate discussion of this issue. If it is raised by
the Governors, the following are suggested talking points:]
1
We are looking closely at your proposal to provide states with the option to change
their Medicaid programs into capped entitlements to states. While I want to discuss
this more with you, I have some serious concerns.
Primarily, I am concerned that capping Federal Medicaid payments to states in
today's budget climate will result in significant loss of coverage under the
program. Over the past few years, coverage in Medicaid has been going up,
while employer-based coverage has been shrinking. Without a viable
Medicaid program as a safety net, our coverage situation would be even worse
than it is today.
I also am concerned that the reductions in Federal spending that will come
from capping Federal payments could cause a number of problems for states:
States would have a harder time coping with recessions if their
Medicaid payments were capped.
States also would have a harder time coping with aging of the Medicaid
population. If Federal payments were capped based on current
enrollment and growth, the states will be left holding the bag for these
growing long-term care needs.
States also will be unable to use Medicaid to expand coverage in the
future. For example, virtually every state has opted to cover one or
more of the optional coverage categories under Medicaid. A big reason
is that the Federal government pays between 50% and 78% of the cost.
If Federal payments are capped, states will have to pick up 100% of the
costs and probably won't be as able to increase coverage.
I believe these concerns need to be addressed adequately by Republicans and
Democrats and by states and the Federal Government before we take any action. I
think this is particularly the case in light of my desire and intention to be even more
responsive to states' legitimate needs to have additional flexibility in the operation of
their Medicaid programs.
ERISA
[NOTE: Our intelligence from the NGA to date indicates that it is doubtful that ERISA will
be raised by the Governors during their visit. Because of the political sensitivity of this issue
with big business and many within the labor community, it therefore seems wise to avoid
initiating a conversation on this subject. If the issue is raised, however, we suggest the
following talking points:]
2
I am well aware of the challenges ERISA poses to states desiring to move forward on
health reform and am sympathetic to the concerns and recommendations layed out in
your policy paper.
Given the fact that the big business community has made opposition to ERISA
changes their number one priority, it seems unlikely that Congress will take on the
ERISA issue in any significant way. Even if it does, there is at least as good a chance
that any interventions they are likely to pass may undermine current state insurance
reform efforts. (For example, the changes might well make it easier for small
businesses with healthy employees to self-insure and make the resulting pool even
more expensive to insure.)
Regardless of the debate, I remain sympathetic to your position and look forward to
working with you to develop workable and potentially "passable" approaches to the
ERISA issue.
3
EXECUTIVE OFFICE OF THE PRESIDENT
20-Jan-1995 04:05pm
TO:
Carol H. Rasco
FROM:
Christopher C. Jennings
Domestic Policy Council
CC:
Jennifer L. Klein
CC:
Jeremy D. Benami
SUBJECT: Dean's staff (rogan/alberghini) conversation
Carol:
I talked with both Theresa Alberghini and Bob Rogan today
re the Medicaid issue. Theresa pretty much deferred to Bob and
here is the summmary of the conversation:
1. Bob didn't know that the entitlement option provision that is
in NGA policy for welfare was also in the Medicaid section.
However, he said that is seemed to be the only realistic/pragmatic
political way to go at this time.
2. Bob said he thinks he agress with what he believes is Ray's
strategy: to lay low on the Medicaid issue during the NGA
conference. Otherwise, he fears it could go in uncontrollable
directions.
3. He thinks the Democratic Governors may want to briefly talk
about the Medicaid cap issue (and their concerns about it) amongst
themselves (and you and Leon) during the Saturday meeting.
However, such a conversation - -- if it took place would only
take place in order to raise general concerns and strategize for
future (post NGA conference) actions/reactions.
4. I said I would report all this to you. He said he has a DGA
staff meeting on Monday and if any changes occur he'd get back
with us.
THE END. CJ
NATIONAL GOVERNORS ASSOCIATION
Winter Meeting 1995
Domestic Policy Briefing
Issue: Employee Retirement Income Security Act (ERISA)
A.
Issues of General Concern to the Governors
ERISA preempts state regulation that "relates to" health
insurance plans except that states may impose regulations on
fully insured plans that are specifically directed towards the
insurance industry. This means that ERISA protects all self-
insured health plans from state regulation.
Last year, the National Governors Association took the
position that ERISA should be modified to give states more
flexibility to carry out their own health reform plans. The NGA
seemed most concerned that ERISA prevents states from
establishing state-wide employer mandates and guaranteed benefit
packages; collecting data from all health plans; establishing
uniform administrative procedures and forms; establishing all
payer rate-setting systems; taxing the premiums of self-insured
plans and imposing provider taxes.
Although the governors now may be less focused on this issue
than they had been in the past, the ERISA sections of their new
policy position paper have actually been strengthened.
Republican Governor Tommy Thompson of Wisconsin was heavily
involved in formulating the new language. The new ERISA sections
emphasize that the increased prevalence of self-insurance has
made ERISA a "formidable barrier" to state reforms. With respect
to what the NGA wants the federal government to do, the new draft
is far more specific than last year's position paper.
The NGA calls on Congress to take a "multidimensional
approach" to ERISA reform. The first component to this approach,
"statutory flexibility," would permit states to impose
requirements on self-funded plans if the state adopted or built
upon minimum national standards developed by the executive branch
or worked within a federal framework. The second component would
give the Department of Labor the authority to grant state waivers
from ERISA. States requesting exemptions in the areas of
financing or cost control would have to submit a plan for
expanding coverage. In addition, the NGA favors federal consumer
protection standards, similar to the standards states now apply
to commercial insurers, and the establishment of a limit below
which size no business could self-insure. The NGA staff believes
that the governors will ratify the new ERISA language without
substantial modifications.
The governors are closely following the ERISA-related
activity now taking place in the Congress:
Last session, Rep. Wyden and Rep. Williams held joint
hearings on ERISA. Rep. Wyden is developing legislation
that would modify ERISA by instituting federal requirements
for self-insured plans. The requirements would include
modest insurance market reforms, data collection standards,
and some consumer protections. Under the Wyden bill,
employers would be obliged to file an attestation of their
compliance with these federal requirements with the
Department of Labor and states would investigate complaints
of violations. The penalties for filling a false
attestation would include losing the exemption from state
regulation.
Sens. Hatfield and Graham hope to introduce an ERISA reform
bill, perhaps as early as next week. Rep. Wyden is talking
with them about trying to agree on a joint bill.
On January 11, 1995, Sen. Jeffords and a bipartisan group of
11 other senators asked the General Accounting Office to
study the current market impact of self-insured plans, the
impact of ERISA preemption on current state reform efforts,
costs and benefits of changing ERISA's preemption clause,
and the potential for increased insurance premiums if self-
insured plans are not included in insurance reform that
Congress may try to pass this year. Jeffords is drafting a
bill that includes substantial changes to ERISA.
Rep. Fawell announced plans to introduce legislation that
will allow small businesses and self-employed individuals to
band together and collectively self-insure -- for example,
by joining "umbrella" groups like the National Federation of
Independent Businesses -- and thereby escape state insurance
regulation.
Because of the strong opposition from employers (and to some
extent, organized labor) that will attend any proposal to change
ERISA, it may be best not to engage in much discussion of ERISA
at this time. If the Governors bring the subject up, a
reasonable response might be as follows:
We share your concerns about the need for federal standards,
which can provide assistance to states in better providing
protection to consumers enrolled in self-insured (or ERISA)
plans. We proposed such standards in the Health Security
Act. We want to work with you on the best way to bring this
about.
We are of cours. well aware of the challenges ERISA poses to
states interested in broader state reform effort, and we
continue to be sympathetic to states' concerns.
However, it seems unlikely -- given the big business
opposition to many of these changes -- that Congress will
take on the problems states have with ERISA in any
significant manner. If Congress does act, there is as good
a chance that the interventions they will consider will be
those that could undermine current state reform efforts (see
Rep. Fawell's statement above).
Regardless of the Congressional debate, we remain
sympathetic to your position and look forward to working
with you to develop approaches to problems with ERISA that
both have a chance of passing the Congress and are likely to
support (rather than undermine) our mutual efforts to
improve the health care system.
B. The states that appear to have the most immediate ERISA
problems include Washington, Minnesota, Connecticut and New York.
Washington: The core of Washington's 1993 reform law, an
employer mandate set to take effect on July 1, 1995 for
large employers and to include all employers by 1997, cannot
be put in place without change in ERISA. Now that
Republicans have gained control of the Washington House of
Representatives and the Democrats have slipped to a one vote
edge in the Senate, there is interest in modifying the
reform law and jettisoning the employer mandate.
Minnesota: Without an ERISA exemption or change,
Minnesota's plan to institute a fee schedule for doctors who
are not in integrated service networks will likely be
delayed. Minnesota is moving ahead on its intentions to
issue recommendations for a uniform benefits package and to
simplify plan administration.
Connecticut: In November 1994, a federal district court
held that Connecticut's tax on hospital services and gross
earnings to fund uncompensated care was preempted by ERISA.
The decision is on appeal.
New York: The United States Supreme Court will decide New
York's appeal from a decision of the Court of Appeals for
the Second Circuit that held that New York's rate setting
scheme was preempted by ERISA. Arguments were heard on
January 18, 1995.
I have attached "Examples of State Laws With ERISA
Complications, which was distributed at the Map Room meeting
about ERISA. Please note that the Massachusetts legislature has
voted to postpone in lementation of the state's "pay-or-play"
legislation for a year and that Governor Weld is opposed to the
pay-or-play scheme.
EXAMPLES OF STATE LAWS WITH "ERISA PROBLEMS"
Except where noted, the following state laws are either clearly
preempted by ERISA or are likely to be vulnerable to a colorable
claim that they are preempted by ERISA.
Except where noted, these state laws have been enacted but not
implemented. The list does not include laws that were seriously
considered by a state -- for example, through a task force or
interagency commission -- but not proposed in legislation (e.g.,
payroll taxes in Colorado and Vermont).
"PURE" EMPLOYER MANDATE
Washington
Hawaii¹
PAY OR PLAY
Oregon
Massachusetts
"EMPLOYER CONDUIT" (employers must offer, but need not pay for,
insurance)
Iowa
TAXES ON HOSPITAL SERVICES & GROSS EARNINGS (to fund
uncompensated care)
Connecticut2
PROVIDER TAX (to fund coverage expansion)
Minnesota³
RATE-SETTING
New York4
Maryland⁵
GLOBAL BUDGETS (limits on spending or rate of growth)
Vermont
New York
Washington
Minnesota
Montana⁶
REQUIREMENT THAT HEALTH PLANS ARBITRATE/MEDIATE MALPRACTICE
DISPUTES BEFORE GOING TO COURT
Washington
DATA COLLECTION⁷
Washington
Minnesota
New York
Vermont
BASIC INSURANCE REFORMS SUCH AS MODIFIED COMMUNITY RATING,
RESTRICTING PREEXISTING CONDITION EXCLUSIONS, RESTRICTING MEDICAL
UNDERWRITING, AND PORTABILITY
One or more of these types of reforms has been enacted (for
fully-insured plans) and/or implemented in every state
except Nevada, Michigan, Pennsylvania, Georgia, Alabama, and
Hawaii.
8
1. Hawaii has been able to implement its legislation because it
is the only state to be granted a waiver of ERISA preemption by
Congress. However, Hawaii's waiver limits the state to its
health plan as it existed in 1974. Currently, Hawaii is seeking
an expansion of its waiver to allow it to modify the mandated
benefit package, require coverage for dependents, and update its
cost-sharing formula for insurance premiums.
2. Connecticut's legislation has been implemented and challenged
in court on ERISA grounds. A federal district court judge held
recently that the legislation is preempted by ERISA. The system
Connecticut previously had in place to pay for uncompensated
care, an uncompensated care pool funded by a portion of each
insured patient's hospital bill, had also been struck down on
ERISA preemption grounds.
3. Implemented; challenged in court on ERISA grounds.
4. New York's legislation has been implemented and challenged in
court on ERISA grounds. The Court of Appeals for the Second
Circuit held recently that the legislation is preempted by ERISA.
The United States Supreme Court has agreed to hear the case.
5. Maryland's all-payer hospital rate-setting system has been
implemented; although it may be vulnerable to a court challenge
on ERISA grounds, no lawsuit has been brought at this time.
Maryland has announced that it is interested in changing its
rate-setting system to finance uncompensated care and medical
education more equitably and that it has not yet done so because
it does not want to defend a lawsuit brought against the state on
ERISA grounds.
6. Montana's legislation establishes a commission charged with
developing two health care reform plans; both plans must include
a global budget.
7. The data collection laws in these and other states are not
preempted by ERISA because they do not apply to self-insured
plans. The four states listed here have expressed a desire to
obtain data from such plans; currently, they request the self-
insured plans to contribute data voluntarily.
8. These laws are not preempted by ERISA because they do not
apply to self-insured plans.
EXECUTIVE OFFICE OF THE PRESIDENT
19-Jan-1995 09:21pm
TO:
Carol H. Rasco
TO:
Jennifer L. Klein
FROM:
Christopher C. Jennings
Domestic Policy Council
CC:
Jeremy D. Benami
SUBJECT:
Medicaid conversation with Alan Weil
Carol:
Following up on our meeting, I just talked with Alan Weil
re the Medicaid block grant/cap issue and the upcoming NGA
meeting. It was a very interesting conversation. Highlights were:
1. Very similar to what you were saying, Alan thinks the welfare
argument is lost and that Democrats should sign on as quickly as
possible to the best agreement they can get. He said any attempted
delay by Dems just prolongs the agony; in his words, "the
political winds assure that this one is lost." (By the way, he
has major regrets about this).
2. He thinks that Democratic Governors -- if they have at all
been talking to their financial officers -- are likely to argue
against the Medicaid capping idea. He thinks the issues most
likely to have most sway with them are the likely magnitude of the
cuts and the fact that the upcoming aging population boom, without
population adjustment in any formula, would kill the states.
3. He thinks (and is very frustrated with the fact) that the
staff at DGA don't yet comprehend the impact of a cap. In fact,
he reported that they were so into the "state flexibility" issue
that he said it was extremely lucky the NGA health draft had the
state option provision to choose either an individual entitlement
vs. a capped state entitlement. (He said if he and a couple of
others had not argued to the contrary, NGA might have signed onto
a straight Medicaid cap.)
4. He acknowledged that the current NGA Medicaid policy option
provision is not workable, but said it was better than the
alternative. He thinks that in the real world of legislating, an
explicit direction will have to be chosen by the Congress and the
Governors. While he believes that Republicans will amost
universally choose the Medicaid no/little strings and a cap
approach (even with much less Federal money), he thinks that most
Democrats will likely opt for a proposal with current Medicaid
spending and fewer Federal strings than now (but more than what
they would get under the Republican proposal.)
5. I said that we were concerned, however, that it would be very
risky to raise concerns about the Medicaid cap issue at the
upcoming NGA conference and meeting with POTUS because the
discussion might not end up where he wants it to go. He
acknowledged that was a risk, but he felt it was an even greater
risk to not use the opportunity by Democrats to focus national
attention on this issue. He argued that so much of the Medicaid
program is going for middle income people in nursing homes and
children that Dems could/should be able to win the argument. He
said if Dems did not make the argument when they had the national
media attention the result may be simply a continuation of the
welfare block grant debate and Republicans might win out.
I concluded our conversation, saying that I would talk to you
about this issue and get back to him later. I reiterated that he
should be very hesitant about starting a debate that he did not
know what direction it might end up. He said he understood and
would keep us informed of any intelligence he is picking up.
Carol: I am also going to talk with Theresa Alberghini of Dean's
office re this issue to get her read. However, even with just the
Alan conversation in mind, I am getting nervous (as always) about
not getting at least a little time with the President on this
issue before the Governors come in. Talk to you soon. Sorry
about the book like nature of this note. I am starting to get
like Brian
CJ
EXECUTIVE OFFICE OF THE PRESIDENT
17-Jan-1995 06:29pm
TO:
(See Below)
FROM:
Jeremy D. Benami
Domestic Policy Council
SUBJECT: NGA policy statements
A number of you received a request directly from Marcia Hale to
put together information on NGA's proposed policy changes.
Two things:
(1) The assignments made some mistakes. I know a number of you
have addressed this directly, but I want to be sure the following
is the right list of assignments:
Transportation Mike and Paul, I assume you gave both issues
to Michael Deitch if appropriate
Housing - Paul, please work with Lynn
Immigration Steve, please get info from Mike
Workforce Excellence Mike, please get from Bill Galston
Natural Resources Brian: assigned correctly
Health Reform - Chris and Jen Klein
Long Term Care/Medicaid Chris and Jen, could you please do
these as well.
Indian Gaming - Mike
HIV/AIDS Patsy, I will fax this to you
Equal Rights - Steve, I will get this to you
Child care Gaynor, I will get this to you, we should talk
Talking Points
Gaynor - They asked Bill to pull talking points on (1) Inter-
governmental Progress/Federalism, (2) Education and (3) Re
employment - could you please work with Bill, Elaine and
others as appropriate to pull the latest materials
Jen K -- Health and Medicaid
Brian -- Environment
Steve -- Immigration (not Mike obviously)
Jose -- Crime
(2) FORMAT
These should be very short, one pagers. Carol suggests the
following format:
Policy Number: EC-7
Committee: EXCLUDIVE
Title: Summary
Health Reform
3 sentence summary: (what law do they want to change, what would
they change, etc.)
of concern to the administration: what serious "red flags" does
the proposal raise. No need for a detailed policy
statement, just the red flags.
Please submit materials for this response through me so that we
can coordinate centrally - by c.o.b. Wednesday. If any problems,
please see me.
Thanks.
Distribution:
TO: Robert M. Berry
TO: Brian E. Burke
TO: Jose Cerda, III
TO: Julie E. Demeo
TO: William A. Galston
TO: Christopher C. Jennings
TO: Jennifer L. Klein
TO: Michael Levitan
TO: Cathy R. Mays
TO: Gaynor R. McCown
TO: Rosalyn A. Miller
TO: Lynn M. Margherio
TO: Bruce N. Reed
TO: Denise Ricketson
TO: Kimberly M. Ross
TO: Stacey L. Rubin
TO: Michael T. Schmidt
TO: FAX (9-632-1096, Jeff Levi)
TO: FAX (9-720-8819, Marion Berry)
TO: Michael Waldman
TO: Stephen C. Warnath
TO: Paul J. Weinstein, Jr
CC: Carol H. Rasco
01/18/95
12:10
001
Jennefer
6
2878
Policy Number:
7.2.3.2
Committee:
Executive??
Title:
EC-7 Health Care Reform
Summary:
NGA is proposing that each state be able to choose between continuing under an individual
entitlement or switching to a capped entitlement to states This appears to be a no-lose
proposition for states; they can keep what they have or make a change in program structure if
it appears more advantageous. However, by making this proposal, NGA is signalling that a
capped entitlement might be acceptable. This opens the door to deficit hawks in Congress
who want to use a program cap to dramatically reduce federal Medicaid spending.
Admin Comment:
Advocating transforming Medicaid into a capped entitlement is a risky strategy for
states. Given the current budget climate, capping the federal payments to states would
inevitably result in a reduction in the federal government's financial commitment to the
program. Reducing the "level" of a block grant payment is much easier than making specific
program cuts, because the hard choices about how to make do with the reduced payments are
devolved to the states. Even if initial payment reductions were a small (e.g., one percentage
point below baseline), over a reasonably short period of time the reduction in federal
resources provided to states would be tens of billions of dollars.
State and local governments ultimately will face the consequences of such a reduction,
because the need for medical and long-term care by the poorest and most vulnerable
populations will continue. States will be forced to respond either through increased state
spending or reductions in coverage and benefits. Cuts in Medicaid coverage and services not
only would result in severe hardships for needy populations, but would also result in more
uncompensated care and greater costs shifts to other private and public payers.
1.
As an individual entitlement program, Medicaid automatically adjusts federal
payments to meet the current level of need. During recessions or natural disasters, the
number of families without work and without insurance can increase dramatically.
Because of the entitlement nature of Medicaid, the amount of federal support will
automatically adjust to help states cope with the increased need for services. A capped
entitlement to states would not respond to changes in economic conditions, leaving
states to address the increased need on their own. Although states in theory could cut
off participation or benefits if funds were not available, as a practical matter states
would be unable to make significant reductions at times of recession.
2.
The demographic changes that are occurring in the Medicaid population increase the
risk that a capped entitlement to states will result in states getting fewer federal
resources over time. As the population continues to age, the growing need for
long-term care services will put increased stress on the Medicaid program. If federal
payments to states are fixed based on current enrollment and growth, the states will
would bear the burden for providing these services as the population ages.
3.
States that wish to expand coverage are better able to do so under Medicaid an
individual entitlement than under a capped entitlement to states. The current system is
01/18/95
12:11
002
a partnership, in which the federal government has agreed to match state spending.
For example, virtually every state has elected to expand coverage to one or more of
the optional coverage categories under Medicaid, in part because the federal
government is paying between 50 and 78% of the cost of each new enrollee. Under a
capped entitlement to states, expanding coverage would require states to pick up 100%
of the costs of the new enrollees, making it far less likely that states would expand
enrollment.
POTENTIAL AREAS OF STATE FLEXIBILITY
UNDER MEDICAID
Potential changes in the Medicaid program that would increase state flexibility
without shifting costs to states or threatening coverage include:
Eliminate the waiver process for Medicaid managed care programs. States
could implement managed care at their own pace without seeking a waiver.
Current limitations on provider contracting (e.g., requiring 25% private
enrollment) could be replaced with a system for demonstrating access and
quality.
Enable states to target policies to specific populations and communities.
Requirements that programs and services be uniform statewide could be
removed for:
Medicaid managed care programs.
Home and community-based care programs.
Optional services.
Amend the Social Security Act to create a mechanism for providing flexibility
under Medicaid outside of the 1115 waiver process.
While significantly greater flexibility can be accomodated in Medicaid, the
program should continue to assure that:
The vulnerable populations that Medicaid currently protects continue to be
eligible for benefits.
People covered under Medicaid are guaranteed access to a reasonable range of
services, including: hospital, physician and mental health services; prescription
drugs; diagnostic and treatment services for children; and nursing home, home
health care and other special services for the disabled.
Eligible people are able to obtain covered services of reasonable quality.
NATIONAL
Klein -fyi
Howard Dean. M.D.
Raymond C. Scheppach
Governor of Vermont
Executive Director
GOVERNORS
Chair
ASSOCIATION
Hall of the States
Tommy G. Thompson
444 North Capitol Street
Governor of Wisconsin
Washington. D.C. 20001-1512
Vice Chair
Telephone (202) 624-5300
March 1, 1995
MEMORANDUM
To:
Balanced Budget SAC
Bob Rogan, Vermont
Mary Sheehy, Wisconsin
Alan Salazar, Colorado
Liz Ryan, Delaware
Charlie Steele, Massachusetts
Ed Tobin, Massachusetts
LeAnne Redick, Michigan
Brad Douglas, Missouri
Jill Friedman, Missouri
Ted Hollingsworth, Ohio
Tom Needles, Ohio
Joanne Snow Neumann, Utah
LaVarr Webb, Utah
Judy Margolin, West Virginia
From: Ray Scheppach
R
Re:
Block Grants
Attached is a revised draft of the proposed block grant paper. There are a number of important
changes in this draft. First, the transportation grant has been dropped from inclusion. Second, head
start has been dropped from the Ready to Learn grant. Third, we have incorporated the NGA policy,
rewritten the first section, and have placed the specific proposals in an appendix.
One question that I would like the task force to focus on is the structure of how the individual
proposals are described. The current draft describes the purposes in the body of the report, but
duplicates the information in the appendix. An alternative is to drop the purpose section in one of the
two places, i.e., page 5-6 or in the individual descriptions.
I would like us to meet on Tuesday, March 7 from 1:30 p.m. to 2:30 p.m. in room 385 of the Hall of
the States for a discussion of this latest draft.
DRAFT -- FOR COMMENT ONLY
Options to Consolidate
Federal Categorical Grants
to States
March 1, 1995
National Governors' Association
Staff Paper
DRAFT -- FOR COMMENT ONLY
Table of Contents
Page
I.
Introduction
1
II.
Block Grants - A Federalsim Context
1
III.
Block Grants - The Policy Context
1
IV.
Background
2
V.
Block Grants - A Staff Proposal
4
A. The National Purpose
4
1. Ready to Learn
4
2. Youth Development
5
3. Children and Family Services
5
4. Education Reform
5
5. Education Discretionary
5
6 Crime Control and Corrections
5
7 Health Services
5
8 Public Health and Prevention
6
9 Substance Abuse Prevention and Treatment
6
10 Mental Health Systems and Treatment
6
11 Health Professions
6
12 Aging Services
6
13 Affordable Housing
6
14 Community and Economic Development
7
15. Agricultural Research and Extension Services
7
16 Environmental Mandates Assistance
7
17 Environmental Program Management Grants
7
18 Agriculture Conservation Programs - A Partnership
7
19 Workforce Development
7
B. Program Consolidation or Elimination
7
C. Determining the National Investment
8
D. Establishing Performance Expectations and Standards
8
E. Determining the Interstate Allocation of Federal Funds
9
VI.
Next Steps
9
APPENDICIES
A Program Consolidation and Eliminations
B NGA Federalism Policy
C NGA Policy on Principles to Guide the Restructuring of the Federal-State Parntership
DRAFT -- FOR COMMENT ONLY
I.
Introduction
The purpose of this paper is to begin a dialogue with federal officials regarding the simplification and
rebalancing of the federal system. It presents the National Governors' Association's positions regarding
the conversion of current federal categorical non-entitlement grant-in-aid programs into a system of
broad block grants. In addition, to provide illustrations of how these principles might be incorporated
into specific programs, it outlines a series of possible block grants organized around a set of national
purposes. It also suggests the current programs that might be terminated to provide the moneys needed
to fund the possible block grants.
While the policies reflect the formal views of the Governors, the possible proposals and suggested
funding sources do not. Those proposals have been prepared by NGA staff in general consultation with
state staff. They are intended as a starting point for discussions between the states and the federal
government, and are subject to significant modification as specific proposals are further developed and
discussed. NGA endorsement of any specific block grant proposal will require the adoption of interim
policy.
It is important to note that at its 1995 Winter Meeting, the National Governors' Association adopted
policy that states: "Governors have not yet reached agreement on whether cash assistance and other
entitlement assistance should remain available as federal entitlements or whether it should be converted
to state entitlements." As a result, the principles and proposals discussed here relate solely to categorical
non-entitlement grant programs.
II.
Block Grants - A Federalism Context
Historically, the Governors have considered four different approaches to the simplification of the federal
grant in aid system. Those approaches are:
broad block grants to support state and local activities in selected areas
consolidation of federal discretionary programs
turnbacks of tax resources and program responsibility
sorting out of federal and state and local responsibilities
Each of these approaches has merits, and the rebalancing of the federal system demands a willingness to
explore a broad range of alternatives. No single approach is appropriate for the full range of federal
programs and interests. However, it is clear that block grants are an important tool that needs further
development and discussion.
III.
Block Grants - The Policy Context
At the 1995 Winter Meeting of the National Governors' Association, the Governors adopted new policy
regarding the restructuring of the federal system. That policy stated:
"The simplification of the current categorical, non-entitlement federal grant-in-aid system must also be a
Congressional priority. Governors have argued that such simplification would both increase
administrative efficiency and encourage state efforts to develop more effective programs.
"The history of block grants is long, going back at least to general revenue sharing and the broad block
grants of the Nixon era. Block grants were also an important part of the Reagan "New Federalism" of
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DRAFT -- FOR COMMENT ONLY
the 1980s. At that time the consolidation of programs also came with funding cuts. While block grant
proposals have generally begun with a theme of simplification and consolidation, the actual legislation
has often retained significant federal restrictions. Equally important, over time the federal government
has tended to establish additional set-asides and place new restrictions within the block grants that have
been established. Future reforms must address these problems.
"Governors believe that such consolidations must:
Recognize the national interest in protecting and serving children.
Include a clear definition of national purpose and national objectives.
Avoid set-asides or other prescriptive conditions of federal funding.
Include significant transferability of funds between the block grants.
Preclude cost shifts to the states.
Be consistent with the way in which state governments deliver services to their citizens.
Incorporate distribution formulations consistent with the distribution implicit in existing categorical
programs.
Allow the flexibility needed to maximize efficiency and to minimize the expansion of state
government employment."
IV.
Background
The American Federal System established a strong union while preserving the diversity reflected in the
individual states. State and local governments - governments close to the people - provide the needed
opportunities for flexibility and innovation. By their decentralization of decisionmaking and responsive
nature, they encourage citizen participation and support.
Although there is a clear need for a national role in a variety of domestic issues, the principles of local
determination and diversity require a careful balance of federal and state roles. It is vital to ensure that
states have the authority and flexibility needed to respond to the needs and priorities of those who live
within their boundaries.
Over the past several decades, that balance has become threatened as the federal government has
attempted to implement its role through an increasingly complex and prescriptive system of grants in aid.
While many of these grant programs address legitimate national purposes and federal concerns, the
structure of the programs reduce state and local flexibility their accountability to the electorate.
In its permanent policy on federalism adopted in 1993, the National Governors' Association states:
"Steps also must be taken to overcome the imbalance that has resulted from the rapid expansion of
federal programs in the past. The proliferation of detailed federal programs must be ended, and states
must be given greater flexibility in policymaking. Toward these ends, the following changes are
recommended.
The number of joint federal-state programs should be reduced by a sorting out of responsibilities
between the two levels of government.
Where federal programs are to be maintained, grant conditions should not be used to force state
program changes not related to the specific program purposes for which the grant is provided, and
federal funding should not require state or local matching funds.
Federal regulations should rely on state laws and procedures for the administration of federal
programs.
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Where a joint federal-state role is to be retained, federal grants should be consolidated into general
block grants.
While local governments must be assured that resources will be made available for priority needs,
such as crime control, the federal government should end the bypassing of state governments."
In 1993 the federal grant-in-aid programs provided approximately $206 billion to state and local
governments. About $22 billion of this aid was provided through broad-based programs, largely the 15
block grant programs. The remaining $180 billion was provided through some 578 categorical
programs. In addition, the states received over $100 billion in partial reimbursement for the cost of
individual entitlement programs such as AFDC and Medicaid.
Over the past 10 years the number of broad-based programs has increased by 3 while the number of
categorical grant-in-aid programs has increased by 186. More significantly the percent of federal
assistance distributed through categorical programs has grown from 79.7 percent to 88.3 percent.
The current array of federal grant programs is outdated and contributes to public disillusionment with big
government. The public rightly questions the complexity of federal programs and recognizes that often
there is no single national solution to pressing domestic problems. Equally important, the public is
growing more concerned with the impact of federal decisions on the allocation of scarce state and local
resources. As a result, the electorate is demanding the flexibility to tailor programs to meet regional and
local conditions and a greater direct role in determining program and service priorities.
The mix of federal categorical grants is also inefficient and often is not cost effective. The
administration of an excessive number of federal programs creates unnecessary costs at both the state
and federal level. The continuation of separate programs in some areas often requires duplicate
applications and record keeping and can discourage needy individuals from seeking services. Moreover,
the complexity of the grant system discourages the development of coordinated community based
programs and often makes it difficult to secure the range of services needed to prevent or remedy
complex problems. Funding sources are often biased toward treatment and often do not offer the
flexibility needed to develop more cost effective investments in prevention. In addition, grant programs
often ignore legitimate differences between states and among localities.
A simpler, more rational, and more flexible system of federal grants offers opportunities for significant
administrative savings. More important it will encourage and reward state and local efforts to develop
more innovative and more cost effective programs and services. In addition, it offers a real opportunity
to enhance public involvement and to restore public confidence.
Over the past decade states have made considerable progress in improving their administrative capacity.
Equally important, they have demonstrated a willingness and ability to be creative and innovative. They
are at the forefront of reinventing government and ready for new challenges.
Vision
America's strength lies in its citizens and its communities. We must free ourselves from the inefficient
bonds of an overly complex array of national programs. An array of programs that too often substitutes
the cookie cutter solutions and convenience of a distant bureaucracy for the needs of those most in need
and the wisdom of the communities closest to the problems.
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DRAFT -- FOR COMMENT ONLY
American's deserve a government that is both cost effective and responsive. The consolidation and
simplification of current categorical grants programs into a few broad block grants will truly enable
states to reinvent government services in a manner that will:
ensure that the investment of government resources will address local priorities
focus investments on programs that produce measurable results
eliminate programs that are not cost effective
invest in prevention as well treatment
reflect the unique characteristics of each community
involve communities and program participants in program development and administration
build on the strengths of all sectors - government, non-profit, and business
eliminate unnecessary administrative overhead
reduce the proliferation of government programs and bureaucracies
allow for the better coordination of services
reduce red tape and other obstacles for those in need of service
The implementation of this vision requires hard work and dedication. There are a number of important
programmatic, financial, and political issues that must be resolved. They include:
defining the national purpose
identifying programs for consolidation or elimination
determining the national investment
establishing performance expectations and standards
determining the interstate allocation of funds
Each of these elements is discussed in the sections that follow.
V.
Block Grants - A Staff Proposal
A. The National Purpose
Block grants provide a vehicle for the federal government to assist states and localities meet high priority
domestic needs that they would otherwise be unable or unlikely to accomplish. The first step in
developing a system of block grants is to determine the national purposes that should structure such a
system. Clearly there are a variety of approaches, and the ultimate choice will depend upon a number of
programmatic and political factors. However, to provide a structure for possible discussions, the NGA
staff have identified seventeen major programmatic or functional areas for consideration. Those areas,
and the national purposes they address are outlined in the materials that follow.
1. Ready to Learn. The Ready to Learn block grant is designed to provide flexible funding to
support state efforts to ensure that all children, including those at risk of poor outcomes, are mentally,
physically, and emotionally prepared for formal learning and to help ensure their success in later life.
Specific activities covered would include services that promote healthy births for all children, enhance
parents' ability to be their child's first teacher, enhance parents' and other caretakers' ability to provide
stable and caring environments, and promote the health and well-being of all young children. (See
unresolved issues.)
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2. Youth Development. This grant would provide a base level of funding to states to support a
continuum of developmentally appropriate activities that promote the social development of youth and
facilitate their preparation for careers and lifelong learning. These activities will build the competencies
of young people, while respecting the dominion of the family, fostering scholastic achievement,
promoting self-reliance, and cultivating positive peer interactions. The range of activities to be funded
may include school-, community- and work-based experiential learning, mentioning, community service,
crisis intervention, and structured recreation and cultural activities during non-school-hours. These
activities and services would be fully blended into comprehensive community-wide strategies that would
enable all young people (in-school and out) to develop the knowledge, skills, attitudes, and values
needed to successfully make the transition from childhood to productive adulthood. (See unresolved
issues.)
3. Children and Family Services. The Children and Family Services block grant is designed to
provide funding to assist states in developing programs for intervention and follow-up services for
children and families who are experiencing crisis. Specific activities covered would include services
designed to strengthen parents ability to care for their children such as family support and preservation
and parenting education; services to secure permanent homes for children; services to care for children
who cannot remain in their home; and services to reduce violence in families.
4. Education Reform. To promote state-based systemic reform of the nation's education system
by providing a single federal grant that can be coordinated with new and existing state reform efforts.
The funds would be directed through the state planning panel to the appropriate states agencies and local
school districts who would in turn spend the monies in accordance with the state's education reform
plan. Funds would be used for capacity building and to provide direct services to primarily elementary
and secondary education students. If provided for under the state plan, the a portion of the funds could
be used to support the transitional programs for pre-school students, such as those students enrolled in
programs such as Head Start and other early intervention programs.
5. Education Discretionary. To provide the Secretary of Education with the discretionary funds
to support programs of national significance and help improve educational quality and support for special
populations.
6. Crime Control and Corrections. Crime control is primarily a state and local responsibility.
The purpose of this block grant is to assist states in defining the crime problem on a statewide basis; to
develop objectives and priorities; to identify appropriate strategies and resources to achieve these goals;
and to coordinate the justice system -- courts, corrections, prosecutors, defense, police-- with units of
government (county and city).
7 Health Services. This proposal will create a unified financing mechanism to support and
enhance the availability and delivery of a broad range of personal health care services. Predominantly,
these funds would focus on the treatment of disease. The types of activities that could be supported
through this consolidation include the provision of health care and related services: to address the needs
of uninsured and underinsured special populations, to reduce the rate of infant mortality and low birth
weight babies, and/or to enhance the delivery of emergency medical care for children and adults. States
could utilize these funds to implement innovative strategies such as developing integrated service
networks in rural areas to increase accessibility to health care services.
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DRAFT -- FOR COMMENT ONLY
8. Public Health and Prevention. This proposal will created a unified financing mechanism to
support a broad array of preventive health services as well as support the continued existence of core
public health functions. States would have the discretion to target prevention dollars to critical public
health activities, such as immunization of children, control of infectious diseases, and/or the prevention
of lead poisoning. Other public health initiatives could be supported by these dollars, such as smoking
cessation programs and childhood injury prevention programs.
9. Substance Abuse Prevention and Treatment. This proposal combines a variety of categorical
and demonstration programs with the existing substance abuse prevention and treatment block grant give
states greater choices in the design of prevention and treatment programs. A broad array of substance
abuse treatment activities could be funded, including inpatient chemical dependence programs,
methadone maintenance programs for narcotic dependent persons, or community-based social models,
like those that serve persons with alcoholism. Likewise a broad range of prevention activities could be
designed and implemented in communities to reduce the incidence and prevalence of drug and alcohol
abuse by young people, child-bearing women and other populations.
10. Mental Health Systems and Treatment. This proposal combines a variety of categorical and
demonstration programs with the existing mental health block grant to give states greater freedom to
address the needs of persons with mental illness. The consolidated funds would be available to states to
finance the treatment of a range of mental health problems for populations in need; for example, states
could support the continued development at the state and community level of systems of care for children
who are seriously emotionally disturbed by building linkages between public and private sector providers
of health and mental health services. Other types of activities that could be supported include
psychosocial rehabilitation programs, mental health peer support programs, and outreach and diagnostic
services.
11. Health Professions. States play a pivotal role in the financing of medical and other allied
health professionals education. This proposal would enhance that role by giving states more flexibility
and authority to direct federal funding for workforce development. Activities that could be supported
include financial assistance to colleges and universities to increase their capacity to produce well-trained
medical and allied health professionals, need-based scholarships to increase the number of practitioners
in primary care or under-represented specialty areas, and education/training centers designed to
compliment university-based development of health professionals.
12. Aging Services. This block grant is designed to organize services for the elderly based on
consumer needs rather than provider auspices. It would give states flexibility to fund the types of aging
services most needed by older consumers in their jurisdictions. A broad array of types of services to
meet the special transportation, nutritional and psychosocial needs of older Americans could be financed
through this mechanism; for example, home-bound elderly could have meals prepared and brought to
their homes, while other funds could be used to transport older persons to a community-based facility
where communal meals would be prepared. Assistance with financial planning could be provided to
those in need, as could help planning for the elderly's long-term health care needs.
13. Affordable Housing. Funding for a wide range of affordable housing services targeted
primarily to low income persons and families, including construction and rehabilitation funds; interest
rate buy-downs, downpayments, and other financial support; rent subsidies and vouchers; and supportive
services.
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DRAFT -- FOR COMMENT ONLY
14. Community and Economic Development. T 0 provide capital investment, training,
management and technical assistance, and research aimed at promoting job creation, community
enrichment, and economic growth within a community, a region, or an industry sector.
15. Agricultural Research and Extension Services. To promote research and the transfer of
technology aimed at strengthening industries in rural America including farming, forestry, and animal
husbandry.
16. Environmental Mandates Assistance. To provide assistance to local communities for
environmental infrastructure needs in a manner that will result in compliance with various federal
environmental requirements, particularly related to water quality. In order to enhance existing loan
assistance programs, Governors seek greater flexibility to combine infrastructure monies and coordinate
the expenditure of such monies based on state and local priorities.
17. Environmental Program Management. To provide administrative blocks grants which will
enhance the ability of states to use federal resources to meet national environmental protection goals
consistent with state-based priorities, while improving coordination of current environmental
management programs.
18. Agriculture Conservation Programs - A Parntership. To broaden the focus of existing
conservation-related agriculture programs while providing states with new tools to address
environmental and conservation problems associated with modern agriculture. Currently, most funds are
paid directly from the U.S. Department of Agriculture (USDA) to farmers for the purpose of taking
agricultural lands out of production or encouraging certain farming practices. The proposal is to
consolidate some of these program funds into one comprehensive program and allow states to set
priorities for the investment of these funds. A traditional "block grant" would not be necessary to
achieve this goal.
19. Workforce Development. To provide states a base level of funding for workplace skill
training, occupational education, labor exchange, and employment services for welfare recipients,
economically disadvantaged adults and older youth, dislocated workers who lose their jobs for any
reason, incumbent workers whose skills need upgrading, and disabled individuals in need of training and
placement assistance.
Activities to be funded include classroom and on-the-job training, basic skills instruction, literacy
programs, needs-related supportive services, individual assessment, job counseling, job search
assistance, career information, labor exchange, job matching services, administration of unemployment
insurance and related income support programs, development and management of labor market
information, and professional and capacity development. Labor exchange, job matching services, labor
market information, and career guidance would be available to all citizens of working age, irrespective of
economic need, through integrated intake, assessment, and referral systems in each community.
B. Programs for Consolidation or Elimination
Once agreement has been reached on the structure and purpose of block grants it is necessary to
determine what programs will be consolidated or eliminated in order to provide the funding needed for
the block grants. As in the case of the organization of the block grants themselves, there are numerous
alternatives and no single right selection. However, again to facilitate discussion, NGA staff have
developed for each of its possible blocks a listing of current grant-in-aid programs that might be
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DRAFT -- FOR COMMENT ONLY
eliminated. Those listings are contained in Attachment 1. Other approaches are possible and many
programs could reasonably be related to more than one block.
In reviewing the listings it is important to note that block grants are intended to create a new funding
mechanism and to redefine and simplify the relationship between the federal government and the states.
As a result, it should be clear that the programs mentioned as funding sources should not merely be
replicated as set-asides within the block grants. Existing program requirements must be terminated and
replaced with broad flexibility combined with a clear understanding of new goals and objectives.
C. Determining the National Investment
NGA policy states: "As the federal government begins to move toward a balanced budget the pressure to
reorder federal priorities and curtail federal grants will increase. Already, numerous proposals for
program consolidation and reduction are on the table.
"While federal budget cuts are needed, the Governors are concerned about the cumulative impact on
states of federal budget decisions. The federal budget must be balanced by true savings, not by shifting
costs to the states.
"Governors recognize the special responsibility of government at all levels in meeting the needs of
children. Governors have taken the lead in carrying out these responsibilities in the past. The Governors
believe that the federal government must maintain a financial role in assisting states and localities to
continue to meet these responsibilities."
In addressing the issue of funding for current entitlement programs, the Governors adopted additional
policy which states: "Block grant funding should be guaranteed over five years at levels agreed to among
the states, Congress and the Administration. Governors will work with the Congress to provide
appropriate budget adjustments that recognize agreed upon national priorities, inflation, and demand for
services." It is likely that Governors would support similar principles relating to the categorical
programs as well.
D. Establishing Performance Expectations and Standards
The Governors recognize the legitimate interest of the federal government in establishing accountability
for the funding that they provide. Again in adopting policy relating to concerns with an entitlement
grant, the Governors adopted policy which states: "The block grant should include a clear statement of
purpose including mutually agreed upon goals for the block grant and the measures that will be used to
judge the effectiveness of the use of the block grants Under this concept there should be no
micromanagement and states should be required only to ensure that the funding received is used (to meet
the goals of the program). While states would be required to describe their program in a state plan and to
provide periodic reports to the public, the plans would not be subject to federal approval or federal
revision. Financial and compliance audits would be conducted to ensure that moneys were properly
spent, and states would be required to pay back any misspent funds. Specific program outcome data will
be collected by the states and publicly reported."
Again, it is likely that Governors would support similar principles relating to the categorical programs as
well.
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E. Determining the Interstate Allocation of Federal Funds
Formula issues may be among the most difficult raised in the development of a block grant proposal. To
minimize the impact of this issue, NGA policy suggests that initial block grant allocations mirror the
actual distribution of funds among the states under the programs to be consolidated or eliminated.
As noted above in the section on the national investment, Governors have also suggested the need to
discuss and agree upon adjustments in federal funding that would reflect changes in a number of factors.
As adjustments are made in the commitment of national resources, consideration could be given to
similar adjustments in the state by state allocations as well. Such adjustments should not, however,
penalize states that have used the flexibility in the block grants to achieve improved efficiency or
program effectiveness.
While it is unlikely that the Governors can collectively address the issue of formula changes, individual
Governors will need to be actively involved in any formula discussions.
VI.
Next Steps
As noted initially, NGA policy supports the creation of broad based block grants as one mechanism to
simplify the current complex system of non-entitlement categorical grants. The proposals outlined above
suggest one means by which that block grants might be accomplished. There are other approaches that
might have equal or more merit. The challenge is to move ahead.
However, it is vital that these block grants not be the unilateral creation of the federal government. They
must be the product of frank and open discussion between the states and the federal government.
Governors must have a seat at the table. The decisions made over the next several months will have a
major impact on the ability of the states to effectively meet domestic needs and the Governors must be
involved in those decisions.
The NGA and the Governors stand ready to participate in this discussion.
Appendicies: Funding Sources; NGA Federalism Policy; NGA Principles to Guide the Restructuring of
the Federal-State Partnership.
9
APPENDIX A
FUNDING SOURCES
DRAFT -- FOR COMMENT ONLY
READY TO LEARN
Purpose
The Ready to Learn block grant is designed to provide flexible funding to support state efforts to ensure
that all children, including those at risk of poor outcomes, are mentally, physically, and emotionally
prepared for formal learning and to help ensure their success in later life. Specific activities covered
would include services that enhance parents' ability to be their child's first teacher, enhance parents' and
other caretakers' ability to provide stable and caring environments, and promote the health and well-
being of all young children.
Rationale
As reflected in Title XX of the Social Security Act, the federal government has long recognized that cash
assistance alone would not address the needs of the poor and that prevention and early intervention
services were of critical import. The Ready to Learn block grant also emphasizes prevention and early
intervention services. In addition, it increases parents and caretakers ability to become self-sufficient
and maintain their independence while addressing the developmental needs of children. By supporting
state efforts to help young children and their families, the federal government also strengthens states
ability to achieve Goal One of the National Education Goals: By the year 2000, all children will start
school ready to learn. Finally, combining a series of program and services that are now provided to
children and families through multiple categorical programs into a single funding stream enhances the
ability of families to obtain comprehensive services and improves the quality of these services.
As indicated in the introduction, states have not reached agreement on whether individual entitlement
programs (e.g., Title IV-A AFDC Child Care, $555, and Title IV-A Transitional Child Care, $156)
should be included in block grant proposals.
Potential Programs
FY 95
Budget Authority
($ in millions)
Child Care and Development Block Grant
935
Title IV-A At-Risk Child Care
300
State Dependent Care Development Grants
13
Child Development Associate Credential Scholarship
1
Child and Adult Care Food Program
1
Commodity Supplemental Food Program
84
Even Start
102
IDEA, infants and preschool
642
TOTAL
2,077
1
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YOUTH DEVELOPMENT
Purpose
To provide a base level of funding to states to support a continuum of developmentally appropriate
activities that promote individual responsibility and the social development of youth and facilitate their
preparation for careers and lifelong learning. These activities will build the competencies of young
people, while respecting the dominion of the family, fostering scholastic achievement, promoting self-
reliance, and cultivating positive peer interactions. The range of activities to be funded may include
school-, community- and work-based experiential learning, mentoring, community service, crisis
intervention, and structured recreation and cultural activities during non-school-hours.
Rationale
Pooling these categorical employment and training, education, and social service/prevention programs
into a block grant would facilitate state and community efforts to plan and develop comprehensive
strategies to promote positive youth development by meeting the fundamental needs of all youth without
being bound by the narrow parameters of current federal youth programs. In recognition of the national
implications of neglect, the federal government has traditionally provided states and communities with
significant resources to address the needs of vulnerable youth. Unfortunately, the current array of crisis-
driven, narrowly targeted prevention and intervention programs, scattered across federal agencies and
departments, are aimed at stratified segments of the nation's young people: those exhibiting behaviors or
experiencing problems commonly associated with a specific adolescent "pathology" (e.g., delinquency,
substance abuse, and pregnancy), or those deemed at-risk for developing such behaviors or problems.
Hence, public action frequently occurs after a problem has surfaced, rather than seeking to prevent the
problem from emerging in the first place. These programs have not significantly reduced the problems
associated with adolescence and in many communities, the problems have intensified despite intensive
interventions. Enabling states and communities the flexibility to strategically and comprehensively plan
a continuum of developmentally-relevant activities and services would more effectively prepare youth to
make the transition from childhood to productive citizenship.
Potential Programs
DEPARTMENT OF HEALTH AND HUMAN SERVICES
FY 95
Budget Authority
($ in millions)
Administration for Children and Families
Independent Living
70
Youth Gang Substance Abuse
11
Runaway and Homeless Youth Programs
Basic Centers
40
Drug Abuse Prevention
14
Transitional Living
14
Office of Community Services
National Youth Sports
12
Public Health Service
Adolescent Family Life
7
Center for Substance Abuse
Substance Abuse Block Grant (20% earmarked for prevention)
247
High-Risk Youth
65
2
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FY 95
Budget Authority
($ in millions)
Violent Crime Control & Law Enforcement Act of 1994 - -Title
III:
Community Schools Youth Service & Supervision Grant
Program (new program authorized in FY 95 under Crime Bill)
26
DEPARTMENT OF EDUCATION
Elementary and Secondary Education
Drug Free Schools & Communities
457
Violent Crime Control & Law Enforcement Act of 1994 -Title III:
Family and Community Endeavor Schools Grant Program*
(new program authorized in FY 95 under the Crime Bill)
11
DEPARTMENT OF LABOR
Employment and Training Administration
Job Training Partnership Act (JTPA)
IIB-Summer Youth Employment and Training Program
1,056
IIC-Year-Round Youth Program
599
Youth Fair Chance
25
Job Corps
1,099
DEPARTMENT OF JUSTICE
Office of Juvenile Justice and Delinquency Prevention
Part A-Management and Administration
5
Part B-Formula State Grants
70
Part C-Discretionary Grants
25
Part D-Youth Gangs
10
Part E-State Challenge (new program funded in FY 95)
10
Part G-Juvenile Mentoring
4
Delinquency Prevention Grants
20
Violent Crime Control & Law Enforcement Act of 1994 -Title III:
Ounce of Prevention Council (new, authorized for FY 95)
1
DEPARTMENT OF AGRICULTURE
Extension Service
Youth At Risk
10
DEPARTMENT OF HOUSING AND URBAN
DEVELOPMENT
Drug Elimination Grants (50% of total appropriation minus 10%
set aside for Native Americans)
130
DEPARTMENT OF TREASURY
Violent Crime Control & Law Enforcement Act of 1994-Title
III:
Gang Resistance Education and Training (new program FY 95)
9
TOTAL
4,047
*Grants to CBO's.
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CHILDREN AND FAMILY SERVICES
Purpose
The Children and Family Services block grant is designed to provide funding to assist states in
developing programs for intervention and follow-up services for children and families who are
experiencing crisis. Specific activities covered would include services designed to strengthen parents
ability to care for their children such as family support and preservation and parenting education;
services to secure permanent homes for children; services to care for children who cannot remain in their
home; and services to reduce violence in families.
Rationale
The Children and Family Services Block Grant would continue the role that the Federal Government has
historically played in improving the welfare of children in specific areas of national concern. All of the
programs listed are specifically designed to support families in crisis. The Governors believe that
services to this population could be significantly improved by permitting states to provide services to
children and their families through a single source. By providing a single stream of funds from the
federal government, states are also better to able to blend state and federal dollars into a seamless system
of services.
As previously indicated, there is no agreement among states about whether individual entitlement
programs (e.g., Foster Care, $3,128, Adoption Assistance, $399, or Emergency Assistance, $656) should
be included in block grant proposals.
Potential Programs
FY 95
Budget Authority
($ in millions)
Social services block grant
2,800
+Community services block grant
391
Temporary child care and crisis nurseries
12
Child welfare services (includes child welfare training)
296
Adoption opportunities
13
Abandoned infants
15
Child abuse state grants
23
Child abuse demonstrations (discretionary activities and
challenge grants)
15
Family violence programs
33
Foster grandparents
68
Family Preservation and Support Program
150
Family Support/Community-Based Resource Centers
39
TOTAL
3,855
+Includes only that portion allocated to states
4
DRAFT -- FOR COMMENT ONLY
EDUCATION REFORM
Purpose
To promote state-based systemic reform of the nation's education system by providing a single federal
grant that can be coordinated with new and existing state reform efforts. The funds would be directed
through the state planning panel to the appropriate states agencies and local school districts who would in
turn spend the monies in accordance with the state's education reform plan. Funds would be used for
capacity building and to provide direct services to primarily elementary and secondary education
students. If provided for under the state plan, the a portion of the funds could be used to support the
transitional programs for pre-school students, such as those students enrolled in programs such as Head
Start and other early intervention programs.
Rational
Create a state-level Education Reform Grant by combining a number of education categorical programs
into a single grant that would be allocated to the states based on a formula similar to the current Title
One formula. A portion of the funds would be allocated to local schools based on the state's allocation
formula. This grant would be administered by a state panel appointed by the Governor. The panel would
work with the Chief State School Officer and other appropriate state agencies in developing and
administering the plan. The state would submit a single plan to the U.S. Department of Education. The
plan would outline the state's current reform plan and would include a set of benchmarks and
performance indicators that would lead toward the achievement of the national education goals. Through
the panel, states would report to the Secretary and to the citizens of the state on progress in achieving the
benchmarks. This program would be phased in by amendment the existing Goals 2000: Educate
America Act.
Potential Programs
FY 95
Budget Authority
($ in millions)
Goals 2000: Educate America Act
372
Title I: Helping Disadvantaged Children Meet High Standards
7,222
Title II: Eisenhower Professional Development Program
320
Title VI Innovative Education Program Strategies
374
Education Infrastructure
100
Carl C. Perkins Vocational Education Act
973
TOTAL
9,335
5
DRAFT -- FOR COMMENT ONLY
EDUCATION DISCRETIONARY
Purpose
To provide the Secretary of Education with the discretionary funds to support programs of national
significance and help improve educational quality and support for special populations.
Rational
These categorical programs currently provide support for certain states to participate in programs of
national significance or meet special needs. By consolidating the programs into a single grant the
Secretary will be able to better prioritize and focus federal dollars on areas of special concern. This
block grant would include an administrative set-aside for the Department of Education.
Potential Programs
FY 95
Budget Authority
($ in millions)
School to Work Opportunities Act
250
Charter Schools
6
Education, Research, Statistics, and Improvement
355
Federal Goals 2000 Activities
22
Technical Assistance for Improving Elementary and Secondary
Education programs
45
Bilingual and Immigrant Education
245
Inexpensive Book Distribution
10
Arts in Education
12
Law Related Education
6
Christa McAullife Fellowships
2
Foreign Language Assistance
11
Title V: Programs to promote Equity (Magnet Schools,
Women's Education Equity Act and Drop-Out Assistance)
143
TOTAL
1,107
6
DRAFT -- FOR COMMENT ONLY
CRIME CONTROL AND CORRECTIONS
Purpose
Crime control is primarily a state and local responsibility. The purpose of this block grant is to assist
states in defining the crime problem on a statewide basis; to develop objectives and priorities; to identify
appropriate strategies and resources to achieve these goals; and to coordinate the justice system -- courts,
corrections, prosecutors, defense, police-- with units of government (county and city).
Rationale
The strength of a "crime control and corrections block grant" is the flexibility provided the states to
identify crime priorities, and initiate and experiment with new programs that address crime problems. It
allows for the development of a statewide plan of attack that is necessary in order to mount and sustain
an effective and coordinated crime fighting effort.
A block grant to states must not have any restrictions such as earmarkings, set asides or mandates for
special populations. States must have full flexibility to define the nature and course of the crime
problem to be addressed.
Potential Programs
FY 95
Budget Authority
($ in millions)
Edward Byrne Memorial Grant Program
358
Correctional Options Grants
12
State Correctional Grants/Boot Camps
0
Community policing
1,300
Violent Offender Incarceration and Truth in Sentencing
Incentive Grants
0
TOTAL
1,660
7
DRAFT -- FOR COMMENT ONLY
HEALTH SERVICES
Purpose
This proposal will create a unified financing mechanism to support and enhance the availability and
delivery of a broad range of personal health care services. Predominantly, these funds would focus on
the treatment of disease. The types of activities that could be supported through this consolidation
include the provision of health care and related services: to address the needs of uninsured and
underinsured special populations, to reduce the rate of infant mortality and low birth weight babies,
and/or to enhance the delivery of emergency medical care for children and adults. States could utilize
these funds to implement innovative strategies such as developing integrated service networks in rural
areas to increase accessibility to health care services.
Rationale
The proposed consolidation of these programs would allow states to determine the priority health care
needs and health services required by their residents and to target the resources to best meet the needs.
Without the categorical limitations of the existing programs, states would be able to better target these
service delivery dollars toward gaps in the existing health care system and would permit states to better
coordinate these services with the existing array of primary and specialty care services available in the
private sector and through the state Medicaid programs.
Potential Programs
FY 95
Budget Authority
($ in millions)
Supplemental Feeding Program: Women, Infants and Children
3,470
Maternal and Child Health Block Grant
684
Community Health Centers Grants
617
Family Planning (Title X)
193
Healthy Start
110
Ryan White AIDS
79*
Developmental Disabilities Basic Support & Advocacy Grants
70
Project Grants for Health Services to the Homeless
65
Migrant Health Centers Grants
65
Rural Health Outreach
27
Rural Health Research
13
Residents of Public Housing Primary Care Program
10
Linking Community-Based Primary Care, Substance Abuse,
HIV/AIDS, & Mental Health Treatment Services
8
Pediatric Emergency Medical Services
10
HIV/AIDS Dental Reimbursements
7
Trauma Care
5
Native Hawaiian Health Care
5
Black Lung Clinics
4
Developmental Disabilities Projects of National Significance
6
Operation of Offices of Rural Health
4
Health Services in the Pacific Basin
3
HIV Demonstrations: Children, Adolescents, & Women
2
TOTAL
5,457
*FY 94 figure
8
DRAFT -- FOR COMMENT ONLY
PUBLIC HEALTH AND PREVENTION
Purpose
This proposal will created a unified financing mechanism to support a broad array of preventive health
services as well as support the continued existence of core public health functions. States would have the
discretion to target prevention dollars to critical public health activities, such as immunization of
children, control of infectious diseases, and/or the prevention of lead poisoning. Other public health
initiatives could be supported by these dollars, such as smoking cessation programs and childhood injury
prevention programs.
Rationale
This proposal consolidates a myriad of categorical funding streams with the Preventive Health Block
grant to permit states to help state support the prevention of disease and meet the priority public health
needs of their residents. This consolidation would give states the resources and flexibility to conduct
needs assessments and design data/vital statistics systems to monitor their public health priorities, as
needed. In addition, states would have the flexible resources available to maintain emergency response
capacity, to address disease outbreaks, natural disasters, toxic spills, or any other public health crisis that
could emerge.
Potential Programs
FY 95
Budget
Authority
($ in millions)
Acquired Immunodeficiency Syndrome (AIDS) Activity
590
Childhood Immunization Grants
359
Preventive Health & Health Services Block Grant
158
Chronic and Environmental Disease Prevention
140
Tuberculosis Control Programs
114
Community Partnership Demonstration Grants
115
Sexually Transmitted Disease Control Grants
92
Cooperative Agreements for State-Based Comprehensive Breast
& Cervical
100
Injury Prevention & Control Research & State Grants Projects
45
Childhood Lead Poisoning Prevention
36
Minority Community Health Coalition Demonstration
22
HIV Demo. Research, Public & Professional Ed. Projects
16
Emergency Preparedness
2
HIV/AIDS Surveillance
45
Cancer Registries
15
Disabilities Prevention
8
Comprehensive School Health Programs to Prevent the Spread
of HIV & Other Important Health Problems
6
Community Health Promotion
5
Tobacco
3
Research, Treatment & Education Programs on Lyme Disease in
the United States
1
TOTAL
1,872
9
DRAFT -- FOR COMMENT ONLY
SUBSTANCE ABUSE PREVENTION AND TREATMENT
Purpose
This proposal combines a variety of categorical and demonstration programs with the existing substance
abuse prevention and treatment block grant give states greater choices in the design of prevention and
treatment programs. A broad array of substance abuse treatment activities could be funded, including
inpatient chemical dependence programs, methadone maintenance programs for narcotic dependent
persons, or community-based social models, like those that serve persons with alcoholism. Likewise a
broad range of prevention activities could be designed and implemented in communities to reduce the
incidence and prevalence of drug and alcohol abuse by young people, child-bearing women and other
populations.
Rationale
This proposal consolidates the block grant and demonstration funds (as well as smaller public education
and training programs) into a single block grant administered by the states. This consolidation would
free states to establish their own priorities for the demonstration of emerging prevention or treatment
protocols. With such flexibility, states would be able to reduce waiting lists for treatment services, could
direct funds toward maximizing coordination with other existing state programs, and would allow states,
that so choose, to focus more finances on coordination of prevention or treatment programs.
Potential Programs
FY 95
Budget Authority
($ in millions)
Substance Abuse Block Grant
987
Community Prevention
115
Prevention Demonstration: High Risk Youth
65
Treatment Improvement Demonstrations: Critical Populations
24
Prevention Demonstration: Pregnant Postpartum Women and
their Infants
23
Treatment Demonstrations: Target City Demo
36
Treatment Improvement Demonstrations: Criminal Justice
38
Treatment Improvement Demonstrations: Women and Children
54
Treatment Improvement Demonstrations: Comprehensive
Community Treatment Programs
27
Residential Treatment for Pregnant Women
25
Capacity Expansion Program
7
Training (prevention)
16
Prevention Public Education and Dissemination
14
Prevention Demonstration: Other Programs
7
Training (treatment)
6
Treatment Improvement Demonstrations: Campus Projects
0
TOTAL
1,444
1
This block grant does not include prevention dollars earmarked for youth. A number of states still
prefer to include those prevention dollars in this block grant.
10
DRAFT -- FOR COMMENT ONLY
MENTAL HEALTH SYSTEMS AND TREATMENT
Purpose
This proposal combines a variety of categorical and demonstration programs with the existing mental
health block grant to give states greater freedom to address the needs of persons with mental illness. The
consolidated funds would be available to states to finance the treatment of a range of mental health
problems for populations in need; for example, states could support the continued development at the
state and community level of systems of care for children who are seriously emotionally disturbed by
building linkages between public and private sector providers of health and mental health services.
Other types of activities that could be supported include psychosocial rehabilitation programs. mental
health peer support programs, and outreach and diagnostic services.
Rationale
The current categorically-based mental health programs have insufficient flexibility in their focus to
allow states to adapt to the rapidly changing health care environment. States simple need a more flexible
funding source. For example, a more flexible block grant would help states and providers adapt to
changes in mental health service delivery and financing as a result of the proliferation of health care
networks. Further, the operation and modification of comprehensive management information systems
are vital to evaluating the impact of services. Yet, current resources are inadequate to operate and
modify such systems. Compilation and analysis of data for policy formulation, program management
and evaluation is needed. This new block grant proposal would give states the flexibility to respond to
this changing environment. In addition, this proposal calls for the consolidation of demonstrations under
a block grant. While these demonstration funds are currently competitive, allocating them to states
would give states more authority to test innovations, such as testing mental health "carve-out"
management versus "integrated" management arrangements in the delivery of care in managed care
settings.
Potential Programs
FY 95
Budget Authority
($ in millions)
Mental Health Block Grant
275
Children's Mental Health
60
Projects for Assistance in Transition from Homelessness (PATH)
29
Demonstrations: Community Support Program
24
Protection and Advocacy
22
Demonstrations: Homeless Demonstrations
21
Clinical Training
2
TOTAL
433
T
This is a special CMHS, Housing and Urban Development, Department of Education, and Department
of Agriculture five year demonstration in 18 sites (9 states). It is designed to document the impact of
an integrated care model recommended by the 1992 report of the Federal Task Force on
Homelessness and Severe Mental Illness.
11
DRAFT -- FOR COMMENT ONLY
HEALTH PROFESSIONS
Purpose
States play a pivotal role in the financing of medical and other allied health professionals education.
This proposal would enhance that role by giving states more flexibility and authority to direct federal
funding for workforce development. Activities that could be supported include financial assistance to
colleges and universities to increase their capacity to produce well-trained medical and allied health
professionals, need-based scholarships to increase the number of practitioners in primary care or under-
represented specialty areas, and education/training centers designed to compliment university-based
development of health professionals.
Rationale
Currently, the majority of federal funding for workforce development flows directly to individuals and
universities within a state. This proposal would promote a more active role for state government in the
allocation of those scarce resources. States could the identify their own needs for primary versus
specialty care providers and target financial resources based upon these workforce patterns. The
proposal would also allow states to direct resources to the cultural and linguistic minorities which reflect
the demographics of the citizens. Finally, by increasing the state role in directing funds for health
professions, states would be better able to encourage beneficiaries of financial assistance to practice in
unserved or underserved areas of the state.
Potential Programs
FY 95
Budget Authority
($ in millions)
Grants for Family Medicine
47
Health Careers Opportunity Program
27
Area Health Education Centers
25
Programs of Excellence in Health Professions Education for
Minorities
24
Minority Health
21
Developmental Disabilities University Affiliated Programs
19
Health Professions Student Loans, Including Primary Care
Loans/Loans for Disadvantaged Students
18
Minority Scholarships
18
Grants for General Internal Medicine and/or General Pediatrics
17
Professional Nurse Traineeships
16
Nurse Practitioner/Nurse Mid-wife
17
Advanced Nurse Education
12
Exceptional Financial Need Scholarships
11
Nurse Education Special Projects
10
Grants for Geriatric Education Centers
9
HPSL Recapitalization
8
Public Health/Preventive Medicine
8
Grants for Physician Assistant Training Program
7
Scholarships for Health Professions Students from
Disadvantaged Backgrounds
6
Mental Health Clinical or Service Related Training Grants
5*
Interdisciplinary Training for Heath Care in Rural Areas
4
Allied Health Projects Grants
4
12
DRAFT -- FOR COMMENT ONLY
FY 95
Budget Authority
($ in millions)
Nursing Education Opportunities for Individuals from
Disadvantaged Backgrounds
4
Residency Training & Advanced Education in the General
Practice of Dentistry
4
Area Health Education Centers - Border Health
4
Grants for Nurse Anesthetist Faculty Fellowships
3
Health Professions Research and Data
2
Grants for State Loan Repayment
1
Health Administration Traineeships & Special Projects Program
1
Chiropractic Demonstrations
1
Grants for Podiatric Primary Care Residency Training
1
Demonstration Grants to States for Community Scholarships
TOTAL
354
*FY 94 figure
13
DRAFT -- FOR COMMENT ONLY
AGING SERVICES
Purpose
This block grant is designed to organize services for the elderly based on consumer needs rather than
provider auspices. It would give states flexibility to fund the types of aging services most needed by
older consumers in their jurisdictions. A broad array of types of services to meet the special
transportation, nutritional and psychosocial needs of older Americans could be financed through this
mechanism; for example, home-bound elderly could have meals prepared and brought to their homes,
while other funds could be used to transport older persons to a community-based facility where
communal meals would be prepared. Assistance with financial planning could be provided to those in
need, as could help planning for the elderly's long-term health care needs.
Rationale
There are two compelling reasons for consolidating and block granting these programs. First, these
programs are highly interrelated, and support and complement one another. For example, specialized
Department of Transportation funds are used to purchase vehicles that transport older people to
Department of Health and Human Services (DHHS) financed meal sites; DHHS funds are used for the
vehicle operating costs. Both the Senior Community Services Employment Program (Department of
Labor) and the Older Americans Volunteer Program (Corporation for National and Community Service)
pay stipends to older people who provide direct services tot he elderly (some of the services are partly
financed by DHHS). In short, these programs perform overlapping functions.
The second reason is administrative efficiency. Even though these programs all serve the same target
population (the elderly), their federal requirements and restrictions force states to; set-up duplicative
grants management and reporting systems; to cajole local providers serving identical populations S to
coordinate their efforts; and allocate resources to certain functions that may be of lower priority than
others due to the federal allocation of funds.
Potential Programs
FY 95
Budget
Authority
($ in millions)
Senior Community Service Employment Program
411
Congregate Nutrition, Title III-C1, Older Americans Act
376
Supportive Services - Title III-B, Older Americans Act
307
Commodities Support for Elderly Nutrition
151
Transportation for the Elderly and Adults with Disabilities -
Section 16(b)(2) of the Federal Transit Act
60
Retired Senior Volunteer Program
36
Senior Companion Program
31
Congregate Housing Services Program - Housing and
Community Development Act
25
Health Promotion - Title III-F of the Older Americans Act
17
Insurance Counseling Assistance - Sec. 4360, OBRA '90
10
Home Delivered Meals, Title III-C-2, Older Americans Act
10
In-Home Services, Title III-D, Older Americans Act
9
Alzheimer's Demonstration Grants to States - Section 398 of
Public Health Services Act
5
Elder Abuse Prevention- Title VII, Chapter 3, Older Americans Act
5
14
DRAFT -- FOR COMMENT ONLY
FY 95
Budget
Authority
($ in millions)
Long Term Care Ombudsman - Title VII, Chapter 2, Older
Americans Act
4
Pension Counseling - Title VII, Chapter 5, Older Americans Act
2
TOTAL
1,459
Note: The Foster Grandparent Program has been included in the Children and Family Services. A
number of states still prefer that this program remain in this block grant.
15
DRAFT -- FOR COMMENT ONLY
AFFORDABLE HOUSING
Purpose
Funding for a wide range of affordable housing services targeted primarily to low income persons and
families, including construction and rehabilitation funds; interest rate buy-downs, downpayments, and
other financial support; rent subsidies and vouchers; and supportive services.
Rationale
Depending on the per capita income of its residents and the inventory and condition of its housing stock,
a state may need relatively more funds for the promotion of affordable housing construction and less for
actual rental assistance or vice versa. These conditions also vary across a state and change over time. A
block grant would permit a state to use federal funds to address its priority affordable housing needs. In
addition, many existing federal housing programs are competitive grants, awarded after expensive
grantswriting investments. A block grant would save this expense, and, coupled with effective
management documents, still achieve continual improvement in program design.
By folding in programs from both the Department of Housing and Urban Development (HUD) and the
old Farmers Home Administration (FmHA), currently administered by the Rural Housing and
Community Development Service (RHCDS), the block grant would permit states to manage housing
programs consistently across the state, rather than having separate rules for urban and rural areas. This
proposal does not include any loan or loan guarantee programs because their operation is not consistent
with a block grant approach.
The federal government has established a wide array of programs and approaches to affordable housing,
including one that few states have adopted: ownership of properties. Thus, this proposal assumes that
any affordable housing stock that is owned and/or operated by the federal government (public housing,
troubled multifamily housing, etc.) or under long term contract (section 236, etc.) would remain as a
federal responsibility until the property was "market ready," meaning that renters with vouchers would
seek to rent the units. This requirement means that the funds available for the block grant may need
adjustment since HUD may need to hold additional funds to improve, repair, or demolish some portion
of its inventory.
While NGA does not generally support setasides in block grants, the housing arena is one where local
governments play a major role. Therefore, Governors would accept a pass through or setaside for local
government purposes in this grant.
Because of the major changes suggested by this block grant proposal, it is recommended that a transition
period be established. Portions of the overall proposal could be enacted on different schedules,
depending on the difficulty of coordinating federal agencies, measuring the required subsidy based on
the new mix of services, and creating a mechanism to determine the properties that would be transferred
on a state-by-state basis. For instance the production programs (HOME, Sec. 202, and Sec. 811) and the
homelessness assistance programs could each be consolidated on a faster schedule than the public
housing programs.
16
DRAFT -- FOR COMMENT ONLY
Potential Programs
FY 95
Budget Authority
($ in millions)
Housing Construction/Rehabilitation Programs at HUD
HOME
1,400
National Homeownership Trust
50
Housing Counseling
50
Elderly Housing (Sec.202)
1,279
Housing for the Disabled (Sec.811)
387
HOPE II & HOPE III
62
Lead Based Paint Hazard Reduction
100
Funding for Preservation of Existing Affordable Housing in
Areas Needing Such Units (Preservation)
175
RHCDA [formerly Farmers Home Administration (FmHA)
Housing Production Grant Programs
Sec. 504 Very-Low Income Housing Repair Grants
12
Sec. 516 Rural Housing for Domestic Farm Labor
11
Sec. 53 Mutual and Self-Help Housing
13
Sec. 509 Compensation for Construction Defects
1
Sec. 533 Rural Housing Preservation Grants
22
Subtotal: Construction and RehabilitationGrant Programs:
3,562
HUD Rental Assistance and Support Programs
Section 8 Certificates and Vouchers for Expiring Contracts
2,786
Section 8 Rental Assistance - Elderly
1,162
Section 8 Rental Assistance - Disabled
396
Section 8 Amendments
735
New Rental Assistance (incremental)
982
Flexible Subsidy
50
Elderly Housing Service Coordinators
22
Project-Based Service Coordinators
15
Tenant Based and Multifamily Service Coordinators
15
Family Self-Sufficiency Coordinators
17
Congregate Housing Services
25
Foster Child Care
72
Moving to Opportunity
50
Homeownership Assistance Program
7
RHCDA/FmHA Rental Assistance Programs
Sec. 521 Rental Assistance
516
Sec. 502 Rental Assistance
7
Rental Assistance Subtotal:
6,857
HUD Homelessness Assistance Programs
Shelter Plus Care
905**
Emergency Shelter Grants
157
Supportive Housing
**
Innovative Homeless Initiative
25
17
DRAFT -- FOR COMMENT ONLY
FY 95
Budget Authority
($ in millions)
Section 8 SRO (single room occupancy)
**
Housing Opportunities for Persons with AIDS
186
Homelessness Assistance TOTAL
1,273
** Program costs included within $905 milion appropriation.
HUD Public Housing Construction and Rehabilitation Programs
Public Housing Development
598
Public Housing Amendments
65
Public Housing Modernization (This figure includes Indian Housing)
3,285
HUD Public Housing Operating Programs
Public Housing Operating Subsidies
2,900
Family Investment Centers
26
Community Partnership Against Crime
290
Public Housing Service Coordinators
30
Lease Adjustments
13
Public Housing Subtotal
7,207
Block Grant Proposal TOTAL
18,899
18
DRAFT -- FOR COMMENT ONLY
COMMUNITY AND ECONOMIC DEVELOPMENT
Purpose
To provide capital investment, training, management and technical assistance, and research aimed at
promoting job creation, community enrichment, and economic growth within a community, a region, or
an industry sector.
Rationale
Efforts to promote economic and community development are primary goals of state government.
Consolidation of a wide range of existing federal resources into one flexible program would permit states
to use these resources more effectively to respond to local market and community situations, including
affordable housing. Most states have developed strategic plans for development which identify priority
areas for state action. Limited federal resources would be more efficiently spent in concert with state
efforts.
This proposal does not include loan or loan guarantee programs. It does include programs that are
currently delivered to customers or clients directly by the federal government, requiring a new federal
state relationship in those areas. However, most states already serve these same clients and offer
similar services. Therefore the transition will not be difficult for states. The proposal does bring
together programs from a number of federal agencies. The block grant is intended to free states from
different requirements within different federal agencies for essentially similar programs.
Potential Programs
FY 95
Budget Authority
($ in millions)
Community Development Program, administered by HUD
Community Development Block Grant: Small Cities Portion
1,287
Empowerment Zones
400
Special Purpose Grants
45
Economic Development Initiative (UDAG Recapture Funds)
125
Subtotal HUD
1,857
Economic Development Programs, administered by EDA
Development Grants
202
Planning Grants
26
Technical Assistance Grants
11
Economic Development and Adjustment Grants
45
Subtotal EDA
284
Rural Economic Development Grant Programs, administered by the Rural Business
and Cooperative Development Service (RBCDS) (formerly Farmers Home Administration)
Rural Business Enterprise Grants
48
Subtotal RBCDS
48
Programs for Farmers administered by the Farm Service
Agency (formerly FmHA)
State Mediation Grants
3
Farm Outreach and Assistance Grants
3
Subtotal FSA
6
19
DRAFT -- FOR COMMENT ONLY
The Appalachian Regional Commission
FY 95 Budget
Authority
($ in millions)
Appalachian Development Highway System
237
Physical Development Program
100
Human Development Program
24
Business Development Program
10
Local Development District & Technical Assistance
7
Subtotal ARC
378
Economic Development Programs administered by the Tennessee
Valley Authority
Rural Development
21
Subtotal TVA
21 **
The Small Business Administration
Economic Development
166
Small Business Advocacy
8
Subtotal SBA
174
Proposed Block Grant TOTAL
2,768
** denotes funds to be distributed only within geographic areas of current programs
20
DRAFT -- FOR COMMENT ONLY
AGRICULTURAL RESEARCH AND EXTENSION SERVICES
Purpose
To promote research and the transfer of technology aimed at strengthening industries in rural America
including farming, forestry, and animal husbandry.
Rationale
Cooperative state research can be managed by states within regions based on common problems, and
extension services can be managed by states to effectively meet the needs of farmers and other local
agricultural service providers. States fund other portions of state university budgets, and a stronger state
role can better target limited resources.
U.S. Department of Agricultural Research Programs
FY 95
Budget Authority
($ in millions)
Cooperative State Research Service Programs
1890 College Tuskegee
28
Animal Health/Disease
5
Coop Forestry
20
Hatch Act
171
Agriculture - Special
75
FY 95 Budget
Authority
($ in millions)
Extension Services Programs
1890 Colleges
25
D.C. Act
1
Farm Safety
3
Expand Food and Nutrition
61
Pest Impact Assessment
3
Pest Management
11
Renewable Resources
3
Smith Lever
271
Total Research Programs
677
21
DRAFT -- FOR COMMENT ONLY
ENVIRONMENTAL MANDATES ASSISTANCE
Purpose
To provide assistance to local communities for environmental infrastructure needs in a manner that will
result in compliance with various federal environmental requirements, particularly related to water
quality. In order to enhance existing loan assistance programs, Governors seek greater flexibility to
combine infrastructure monies and coordinate the expenditure of such monies based on state and local
priorities.
Rationale
Governors have consistently called for more state flexibility in administering the federal infrastructure
assistance monies to states and local communities. Specifically, the Governors propose consolidation of
federal environmental loan funds (i.e., state revolving loan funds for drinking water and wastewater
treatment construction) in order to enable states to target the funds to their greatest water quality,
infrastructure-related needs. A consolidated infrastructure loan fund would combine all capitalization
grant dollars for wastewater and drinking water state revolving loan funds (SRF) and other dedicated
water quality-related funds. States would be authorized to utilize funds to award loans and grants to
needy communities. Consolidation would increase efficiency in administering federal dollars from EPA
and USDA through states to local communities for environmental infrastructure projects and other
activities to reduce water pollution. Priority needs may include construction of a wastewater treatment
plant, enhancement of a public drinking water system, closure of a municipal waste landfill, or
groundwater treatment to clean up contamination from underground storage tank releases.
Potential Programs
FY 95
Budget Authority
($ in millions)
Wastewater State Revolving Loan Fund
1,235
Drinking Water State Revolving Loan Fund (appropriated but not
1,300
yet authorized)
FmHA Rural Water and Waste Disposal Loans/Grants (60
percent/40 percent)
1,155
Total Estimate
3,690
1. A portion of appropriated amounts may need to be reserved for debt servicing of existing loans.
22
DRAFT -- FOR COMMENT ONLY
ENVIRONMENTAL PROGRAM MANAGEMENT
Purpose
To provide administrative blocks grants which will enhance the ability of states to use federal resources
to meet national environmental protection goals consistent with state-based priorities, while improving
coordination of current environmental management programs.
Rationale
The federal government currently provides categorical grants to assist in the administration of
environmental programs. Existing grants are awarded (some by allocation formula and some on a
competitive basis) under priorities set by the federal government rather than by the states and funds are
severely constrained by federal grant conditions. Eliminating the specific program grant criteria and
allowing the states to use the money in a block over a five-year period according to their priorities would
advance state environmental activities, particularly in voluntary, non-regulatory areas. To make this
fully workable, states must be authorized, in consultation with local officials, to adjust timeframes for
meeting certain federal requirements to allow priority environmental problems to be addressed first. In
particular, adjustment of federal enforcement priorities and explicit statutory requirements and deadlines
would likely be necessary to enable Governors to target funds toward individual states' environmental
priorities. States may need a one to two-year transition period to obtain environmental block grants.
Potential Programs
FY 95
Budget Authority
($ in millions)
Air Pollution Control Program
Clean Air Act Section 105 Grants
181
Water Pollution Control Program
Clean Water Act Section 104(b)(3)
23
Clean Water Act Section 106 Grants
80
Nonpoint Source Management Grants
100
Water Quality Management Planning Grants
13
Clean Lakes Program Grants
0
Wetlands Program Grants
15
Drinking Water Program
Safe Drinking Water Act Public Water Supply Supervision Grants
70
Underground Water Source Protection Grants
10
Hazardous Waste Management Program
State Program Support Grants
96
Leaking Underground Storage Tank Trust Fund
70
State Underground Storage Tanks Program
10
Pesticides Enforcement Cooperative Agreement Grants
16
Toxic Substances Enforcement Grants
4
Radon State Grants
8
Lead Grants
13
Total Estimate
709
23
DRAFT -- FOR COMMENT ONLY
AGRICULTURAL CONSERVATION PROGRAMS - A PARTNERSHIP
Purpose
To broaden the focus of existing conservation-related agriculture programs while providing states with
new tools to address environmental and conservation problems associated with modern agriculture.
Currently, most funds are paid directly from the U.S. Department of Agriculture (USDA) to farmers for
the purpose of taking agricultural lands out of production or encouraging certain farming practices. The
proposal is to consolidate some of these program funds into one comprehensive program and allow states
to set priorities for the investment of these funds. A traditional "block grant" would not be necessary to
achieve this goal.
Rationale
This proposal would provide greater focus on state agriculture-related conservation and environmental
priorities by giving Governors a larger role in the targeting of USDA conservation monies.
Consequently, states would be better able to address priority objectives such as the clean water
requirements for which states are ultimately held accountable.
Potential Programs
FY 95
Budget Authority
($ in millions)
Conservation Operations
603.4
River Basin Surveys and Investigations
13.0
Watershed Planning
10.5
Watershed and Flood Prevention Operations
70.0
Great Plains Conservation Program
15.2
Resource Conservation and Development
32.8
Conservation Reserve Program
1859.0
Wetlands Reserve Program
83.2
Agricultural Conservation Program
100.0
Water Bank
0.9
Colorado River Salinity Program
0.6
Total Estimate
2788.6
24
DRAFT -- FOR COMMENT ONLY
WORKFORCE DEVELOPMENT
Purpose
To provide states a base level of funding for workplace skill training, occupational education, labor
exchange, and employment services for welfare recipients, economically disadvantaged adults and older
youth, dislocated workers who lose their jobs for any reason, incumbent workers whose skills need
upgrading, and disabled individuals in need of training and placement assistance.
Activities to be funded include classroom and on-the-job training, basic skills instruction, literacy
programs, needs-related supportive services, individual assessment, job counseling, job search
assistance, career information, labor exchange, job matching services, administration of unemployment
insurance and related income support programs, development and management of labor market
information, and professional and capacity development. Labor exchange, job matching services, labor
market information, and career guidance would be available to all citizens of working age, irrespective of
economic need, through integrated intake, assessment, and referral systems in each community.
Rationale
This block grant would afford states the opportunity to streamline their workforce development system,
create lifelong learning systems, and integrate access to services sought by employers, workers, and
labor market entrants. The block grant would provide resources for managing a state's workforce
development system; cultivating partnerships among state, local, and business interests from both public
and private sectors; developing and operating one-stop service centers providing access to the system;
and supporting basic and occupational skills training to meet the economic and social needs of the state.
Block Grant Structure
This proposal would establish a block grant with two components -- one supported by federal general
funds currently distributed through 24 programs; the other supported by some of the federal trust funds
derived from the payroll tax levied under the Federal Unemployment Tax Act (FUTA). This second
component includes only administrative funding allocated by formula for state employment security
programs -- i.e., unemployment insurance and Job Service. At a minimum, states could combine these
trust funds for maximum flexibility in administering their employment security programs.
In addition, states would have a new option to combine trust funds and general funds -- in proportions
chosen by the state -- to finance comprehensive workforce development systems. This would allow
states to use a portion of the administrative trust funds for other workforce development initiatives --
e.g., customized training, skills development for specialized industries, implementation of skills
standards systems, etc. -- that could strengthen the link between workforce and economic development.
To further reduce the number of categorical federal job training programs, this proposal also combines
10 other federal programs into a single fund from which the Secretary of Labor would make
discretionary grants for activities of national significance and programs to encourage innovation and
quality improvement and to address priority multistate issues.
25
DRAFT -- FOR COMMENT ONLY
TABLE 1 - Potential Programs
FY 95
Component A - General Funds
Budget Authority
($ in millions)
DEPARTMENT OF LABOR
Training and Employment Services
JTPA Formula Grants to States
JTPA Title II-A Training for Economically Disadvantaged
1,055
Adults
JTPA Title III Training for Dislocated Workers
1,037
JTPA Federally Administered Programs
Migrant Farmworkers Program
86
Veterans employment
9
Labor Market Information
5
NOICC/SOICC (Occupational Information Coordination)
5
State Unemployment Insurance and Employment Service Operations
Employment Service
Allotments to States (General Funds)
25
Trade Act Adjustment Assistance
TAA Training & Benefits
231
NAFTA Training & Benefits (New in FY 1995)
43
DEPARTMENT OF EDUCATION
Migrant Education
High school equivalency program
8
College assistance program
2
Vocational Education
Data Systems (NOICC/SOICC - Occupational Information
Coord.)
5
Student Financial Assistance
Pell Grants (Non-degree studies)
1,827
Adult Education
State programs
252
State Literacy resource centers
8
Workplace literacy partnerships
19
Literacy training for homeless adults
9
Literacy programs for prisoners
5
Vocational Rehabilitation
State grants
2,054
Client assistance grants to states
10
Training (Professional)
40
Supported employment state grants
37
DEPARTMENT OF AGRICULTURE
Food Stamp Program
Employment and Training
165
26
DRAFT -- FOR COMMENT ONLY
FY 95
Budget Authority
($ in millions)
DEPARTMENT OF HEALTH & HUMAN SERVICES
JOBS Program
Education and Training for AFDC Recipients
1,300
Total, General Funds
8,237
Component B - Unemployment Trust Funds
FY 95
Budget Authority
($ in millions)
DEPARTMENT OF LABOR
State Unemployment Insurance and Employment Service
Operations
Unemployment Compensation
State Operations
1,766
State Integrity Activities
367
Employment Service
Allotment to States (Trust Funds)
821
National Activity-Targeted Jobs Tax Credit
15
Veterans Employment and Training
State Administration
161
Total, Unemployment Trust Funds
3,130
GRAND TOTAL, STATE BLOCK GRANTS
11,367
TABLE 2 - Secretary of Labor's National Discretionary Fund
FY 95
Budget Authority
($ in millions)
DEPARTMENT OF LABOR
Training and Employment Services
JTPA Federally Administered Programs
American Samoans/Asian Americans
5
Rural Concentrated Employment Program
4
Pilots and Demonstrations
36
Research, Demonstration and Evaluation
12
Capacity Building
6
NOICC/SOICC
1
Skills Standards
6
Women in apprenticeship
1
Homeless job training
5
27
DRAFT -- FOR COMMENT ONLY
FY 95
Budget Authority
($ in millions)
State Unemployment Insurance and Employment Service
Operations
Employment Service
One-stop Career Center Grants
120
Total, General Funds
196
Additional Comments and Issues
Roll-Out Reforms. Under this proposal, two "roll-out" reforms would be excluded from the block
grants to states and retained in a national discretionary block fund administered by a federal department
secretary:
One-stop career center grants, funded at $120 million in FY 1995, are designed to be rolled
out to several additional states each year based on their readiness to implement a comprehensive
workforce development system. Including these discretionary grants in future block grants could
diffuse funds now focused on the states that are most ready to make maximum use of them. This
proposal would include the one-stop center grants in the Secretary of Labor's national
discretionary block fund.
School-to-work implementation grants, which also involve a roll-out each year to another
increment of states, are not included in block grants to states for similar reasons. These funds
would be included in the Secretary of Education's national discretionary block fund.
Vocational Education. Perkins Act vocational education funds could have been included in this block
grant or in Education or divided among them and Youth Development. Dividing them at the federal
level could cause problems in a number of states. Take basic state grants, for example. States currently
may use the federal dollars for secondary and post-secondary programs in ratios of their own choice, and
the split now varies from state to state in a range from about 18% to 85%.
To preserve maximum flexibility, these funds would be included in an Education block grant with the
understanding that up to 20 percent of its total funds would be transferable to the Workforce
Development block grant or the Youth Development block grant, or both, and that states would provide
an appropriate share of these funds for post-secondary vocational training and establish strong planning,
management, and operating links between activities under the three block grants.
Separate Block Grant For Youth Development Programs. This block grant does not include federal
youth employment and training programs. A separate Youth Development block grant combines these
programs with other categorical youth services to provide states with a foundation for comprehensive
youth programs that more effectively address the full range of youth needs and opportunities.
Specifically Excluded Programs
Several programs or program components have been excluded deliberately from this proposed block
grant and the related secretary's discretionary block funds. Some are included in other block grant
proposals, despite their apparent relevance to workforce development, because they have significant
28
DRAFT -- FOR COMMENT ONLY
links to purposes of the other block grants. Others are excluded because of their national significance or
applicability nationwide and would remain as discrete nationally administered financial assistance
programs. Programs that do not appear in the block grants to states or the secretary's block funds would
be left intact to operate as currently authorized.
29
APPENDIX B
NGA POLICY
PRINCIPLES FOR STATE-FEDERAL
RELATIONS
NATIONAL
GOVERNORS
NGA Policy
ASSOCIATION
PRINCIPLES FOR STATE-FEDERAL RELATIONS
1
Preamble
;
The American federal system established a strong union while preserving the diversity reflected
in individual states. State and local governments-governments close to the people-provide the
needed opportunities for flexibility and innovation, and by their decentralization of decisionmaking
and responsive nature, encourage citizen participation and support.
Although there is a clear need for a national role in a variety of domestic issues, the principles
of local determination and diversity require a careful balance of federal and state roles. It is vital to
ensure that states have the authority and flexibility needed to respond to the needs and priorities of
those who live within their boundaries.
While recognizing that a strong national government was necessary, the original thirteen
states, in adopting the United States Constitution, included provisions to limit the power of the
national government and to preserve the power and authority of states. However, the authority of
state government has been eroded over time due to constitutional changes, Supreme Court
decisions, and legislative changes. The legislative changes generally have reduced state prerogatives
by preempting state laws, by creating unfunded mandates, and by prescribing minute management
and administrative details for specific federal assistance programs.
Not only has there been a trend toward the erosion of state authority, but two Supreme Court
decisions, Garcia V. San Antonio Metropolitan Transit Authority and South Carolina V. Baker, cleared
the way for this trend to accelerate. These two decisions substantially reduced the Tenth Amend-
ment protection for state authority, forcing states to make their case with Congress much like a
special interest group. The key language in the Garcia decision holds that "the limits are structural,
not substantive, i.e., that states must find protection from congressional regulation through the
national political process, not through judicially defined spaces of unregulated state activity."
The Supreme Court decision in South Carolina confirmed the Garcia decision. Furthermore,
it eliminated any remaining constitutional protection regarding the doctrine of intergovernmental
tax immunity. The loss of reciprocal tax immunity, coupled with the huge federal budget deficit,
increases the pressure on Congress to change the current legislation so that a part or all of the
interest from general obligation bonds would be subject to federal income taxes. Other tax issues
that are of potential concern are the loss of deductibility for state and local income taxes (sales taxes
are no longer deductible) and the possible imposition of a national sales tax or value-added tax that
would preempt the states' major source of revenue.
Recently, the Supreme Court's Tenth Amendment decisions have evinced a more positive
trend. In Gregory V. Ashcroft, a statutory case that involved a state's authority to set a mandatory
retirement age for its judges, the Court went out of its way to speak approvingly of our constitutional
system of "dual sovereignty between the states and the federal government." The following term,
in New York V. United States, the Court restored at least some substantive content to the Tenth
Amendment by expressly holding that a provision of the Low-Level Radioactive Waste Policy
Amendments Act of 1985 was unconstitutional because it compelled states to govern according to
Congress' instructions. "[E]ven where Congress has the authority under the Constitution to pass
laws requiring or prohibiting certain acts," the Court reasoned, "it lacks the power directly to compel
the states to require or prohibit those acts."
It is too soon to tell whether Gregory and New York represent initial steps in a revival of the
Tenth Amendment or whether they are simply one more instance of the Supreme Court's vacillation
in this area of constitutional doctrine.
HALL OF THE STATES I 444 NORTH CAPITOL STREET I WASHINGTON D.C. 20001-1572 202-624-5300
2
Protecting State and Local Borrowing Capacity
State and local bonds are a significant revenue source for state and local governments. The
threat of federal action to tax the interest on such bonds in the future may have a measurable impact
on the cost and availability of such funding. Although no congressional action has begun to impose
such a tax, the uncertainty remains. Therefore, the Governors call on Congress to permanently
remove this threat by adopting and referring to states a constitutional amendment that would
specifically exempt state and local bonds from federal taxation.
3
Creating a Consensus for Action
The continuing federal deficit, and now the health care crisis, will force the federal government
to make a number of critical choices relating to the financing and administration of governmental
programs. Many of these decisions will have a fundamental effect on state and local governments
and the quality and availability of public services they provide and administer.
Such decisions should not be made in a vacuum. Therefore, the Governors call on Congress
to convene a commission, composed of members designated by the federal government and states,
to develop recommendations on the steps needed to retain or restore balance in the federal system.
Such a commission should address not only the issues of the allocation of intergovernmental
programs, but also the simplification of intergovernmental administration and the protection of
state and local revenue bases.
The Governors recognize that resolution of the federal budget deficit entails painful spending
and revenue choices and that some of these choices may have adverse effects on all or some states
and on local governments, as well as on recipients of services of federally funded programs. The
Governors urge that federal actions minimize such impacts and take into account the extent to which
state and local governments have contributed, during the past decade, to federal budget reduction
through lowered federal grant levels and shifts of funding responsibilities to the state and local
sectors.
4
Defining the Future Federal Role
To ensure that legitimate demands for federal actions are met in a responsible manner and
that the role of states and localities is preserved, several steps are needed.
4.1
State Responsibility. The Governors strongly support the principles of federalism, but the public
will insist on federal action should states fail to act collectively on issues of legitimate concern. The
states reaffirm their strong commitment to continued leadership and effective state action.
4.2
Federal Protection and Special Populations. The states reaffirm their support for a federal role in
ensuring equality of access and due process. The federal government also has a responsibility to help
states meet the needs of special populations.
4.3
Federal Forbearance. Not all problems require a uniform solution. Priorities and preferences may
vary from state to state. The lack of universal action or uniform solutions does not in and of itself
provide a sufficient rationale for federal action. Instead, Governors recommend that the develop-
ment of future federal programs be guided first by five fundamental principles.
Federal action should be taken where constitutional authority for action is clear and certain.
Federal action should be limited to problems that are national in scope, where the national
interest requires a universal or uniform solution, and should not merely address problems
that are common to all states.
Federal action should be sensitive to each state's ability to bring a unique blend of resources
and approaches to common problems.
Unless the national interest is at risk, federal action should not preempt additional
state action.
Federal action should depend on risk-based priorities and cost-benefit analysis and should
avoid inflexible earmarking.
4.4
Unfunded Federal Mandates. Although unfunded federal mandates may reflect well-intentioned
policy goals, they often impose substantial cost and regulatory burdens on states. Federal action
increasingly has relied on states to carry out policy initiatives without providing necessary funding
to pay for these programs, thereby robbing states of their right and responsibility to set priorities
and develop policies that best meet local needs.
In New York V. United States, 112.S.CT. 2408 (1992), the U.S. Supreme Court unequivocally
reaffirmed the vitality of state governments in the federal system as separate and independent
political entities. The Court held that state governments cannot and should not be treated as mere
subdivisions or agents of the federal government. States must be free to maintain the integrity of
their governmental structures and governing processes.
State governments cannot, however, function as full partners in our federal system if the
federal government appropriates states' ability to devise and legislate their own solutions to
domestic problems by requiring states to devote their limited resources toward complying with
unfunded federal mandates.
The Governors commend President Clinton for issuing Executive Order No. 12866 on
regulatory planning and review and Executive Order No. 12875 on enhancing the intergovernmental
partnership. The strong commitments made to the reduction of unfunded mandates, increased
flexibility, and regulatory restraint in these executive orders, combined with the administration's
vigorous reinventing government effort, create an important and extensive action agenda. The
Governors support the basic intent and direction of that agenda and pledge their cooperation in
carrying it out.
The Governors call on members of Congress to oppose, and the President to veto, legislation
that imposes further mandates without also providing adequate funding to cover the costs of
implementation. The following additional actions are recommended.
Governors must work with state legislators, county officials, mayors, and city officials in
support of federal legislation that provides state and local governments with real, per-
manent relief from the mandate burden. Congress should act to guarantee that costs to state
and local governments associated with all new mandates are reimbursed by the federal
government.
Legislation must be enacted to require the Congressional Budget Office to report on the
costs imposed by unfunded mandates on state and local governments prior to congressional
action by a full committee and the full House or Senate.
Congress should extend the principle of pay-as-you-go, revenue-neutral requirements, now
used for federal entitlement programs, to any new state and/or local mandate.
A point of order should be provided against any mandate on state or local governments that
violates the above three requirements, with a three-fifths majority necessary to override the
point of order.
State and local elected officials of general purpose governments and their representative
national organizations should be exempted from the Federal Advisory Committee Act and
the Administrative Procedures Act.
The National Performance Review recommendations for broad agency waiver authority and
bottom-up grant consolidation should be enacted.
Burdensome and costly reporting requirements should be reduced through enactment of
the Paperwork Reduction Act.
A summit conference on federalism should be formed to discuss the breakdown of
federalism and to renew our national commitment to the federalist system our founding
fathers envisioned.
4.5
State Task Force on Federalism
The Governors embrace the following four steps to create a process to bring a better balance
to the federal system.
A Governors' working group will be appointed and will extend an invitation to a similar
group that has already been created by the National Conference of State Legislatures
(NCSL) to establish a joint NGA/NCSL task force.
The NGA/NCSL task force will be charged with proposing to NGA and NCSL an action
plan to increase the ability of the states to preserve their constitutional role in the federal
system. The proposal may include a conference of states or other means for collective state
action, concentrating state power and focusing national attention on federalism.
This proposal is to be ratified by the full membership of NGA and NCSL.
The task force will consider legislative, legal, and constitutional means to address imbalance
in the federal system. It will seek fundamental ways states can leverage their ability to
compete. The National Governors' Association, Council of State Governments, Interna-
tional City/County Management Association, National Association of Counties, National
Conference of State Legislatures, National League of Cities, and U.S. Conference of Mayors
will be invited to support the plan and provide input on potential solutions. However, the
Governors, in their role as statewide officers, and state legislators, who have a constitution-
ally specified role in this matter, must be the primary organizers and participants.
5
Ensuring Program Flexibility and Accountability
Steps also must be taken to overcome the imbalance that has resulted from the rapid expansion of
federal programs in the past. The proliferation of detailed federal programs must be ended, and states
must be given greater flexibility in policymaking. Toward these ends, the following changes are
recommended.
The number of joint federal-state programs should be reduced by a sorting out of respon-
sibilities between the two levels of government.
Where federal programs are to be maintained, grant conditions should not be used to force
state program changes not related to the specific purposes for which the grant is provided,
and federal funding should not always require state or local matching funds.
Federal regulations should rely on state laws and procedures for the administration of
federal programs.
Where a joint federal-state role is to be retained, federal grants should be consolidated into
general block grants.
While local governments must be assured that resources will be made available for
priority needs, such as crime control, the federal government should end the bypass-
ing of state governments.
As a specific step toward this more rational allocation of services, the Governors support the
following action steps.
Enact a national policy on income security for the needy with a larger federal responsibility
in exchange for reduced federal responsibilities in other areas.
Develop a national program of medical care for the needy, financed by federal resources.
Provide funding for these programs and preserve the balance of costs within the federal
system by the orderly turnover to states of a comparably priced set of program respon-
sibilities, such as education, community development, transportation, and social services.
Ensure that all states have the fiscal capacity to meet the requirements of the national
income security policy and other federal goals.
6
Administering Intergovernmental Programs
To provide maximum flexibility and an opportunity for innovation, as well as to foster
administrative efficiency and cross-program coordination, intergovernmental grant legislation
should be designed to meet the following principles.
6.1
General. The following principles should apply.
Legislative authorization should be kept current, and all grant programs should be subject
to periodic review.
There should be a congressional determination of a compelling need for federal action.
Legislation should include clear statements of measurable program objectives to reduce
administrative confusion and facilitate judicial interpretation of congressional intent.
States should be actively involved in a cooperative effort to develop policy and
administrative procedures.
Grant requirements should be tied to the purpose of the grant.
The federal government should respect the authority of states to determine the allocation
of administrative and financial responsibilities within states in accordance with state
constitutions and statutes. Federal legislation should not encroach on this authority.
6.2
Financing. The following principles should apply.
Federal revenues that are earmarked for federal aid programs should be made fully available
for the purposes enacted.
Legislation should authorize and appropriate sufficient funds to meet identified program objec-
tives.
Federal assistance funds, including funds that will be passed through to local governments,
should flow through states according to state laws and procedures.
States should be given flexibility to transfer a limited amount of funds from one grant
program to another, or to administer related grants in a consolidated manner.
Federal assistance appropriations should be enacted on a timely basis, possibly even one
year in advance.
Federal funds or letters of credit should be provided in a timely manner.
6.3
Administrative Requirements. The following principles should apply.
Federally mandated administrative requirements should be uniform across federal agencies
and programs and should allow the substitution of comparable state requirements.
Federal grant programs should not impose unreimbursed administrative costs on
states or localities.
Congress should limit administrative authority over planning and reporting requirements
by specifying the product of planning rather than the process, by delegating planning to
existing state organizations, and by requiring that reporting requirements be clearly jus-
tified.
States should be given broad flexibility in establishing federally mandated advisory groups,
including the ability to combine advisory groups for related programs.
Governors should be given the authority to require coordination among state executive
branch agencies, or between levels or units of government, as a condition of the allocation
or pass-through of funds.
Federal government monitoring should be outcome-oriented and should not focus on
process or procedural measures.
Federal reporting requirements should be minimized, and states should be encouraged to
develop cooperative reporting efforts.
The federal government should not dictate state or local government organization.
States with prior programs and acceptable performance should be excused from detailed
federal requirements or certified as meeting federal requirements.
Federal agencies should accept state and local administrative structures and
program administration.
7
Avoiding Federal Preemption of State Laws and Policies
The Constitution assigns certain responsibilities to the federal government and reserves the
balance to states. Accordingly, the role of the federal government in areas reserved for states and
for local governments should be strictly limited. There should be highly compelling reasons to justify
federal actions that require changes in policies adopted by state and local officials, who are
accountable to the same voters and whose performance is reviewed by them at least as often as the
performance of Congress and the President.
In cases where Congress determines that federal preemption of state laws is in the national
interest, the federal statute should accommodate state actions taken before its enactment. Provision
should be made to permit states that have developed stricter standards to continue to enforce them
and to permit states that have developed substantially similar standards to continue to adhere to
them without change.
The principle of avoiding preemption by the federal government in areas of primary state
responsibility is applicable across the board, covering issues such as education; insurance
regulation; crime control; preservation of the dual banking system; preservation of state
securities regulation, including registration, licensing, and enforcement activities; and
management of state personnel programs.
The federal courts, as well as the Department of Justice, must practice restraint when deter-
mining states' responsibility versus deprivation of constitutional rights. As a result of litigation,
states have been required to impose restrictive standards in our state prisons and schools that go
far beyond the guarantee of constitutional rights.
To avoid state preemption, whenever the federal government is a party to litigation to
secure federal constitutional guarantees, in the area of primary state responsibility, the U.S.
Department of Justice should vigorously pursue termination of the litigation as soon as
constitutional concerns are alleviated.
Integral to the operation of state government is the freedom to structure state revenue systems.
It is essential that the federal government not preempt, either directly or indirectly, sources of state
revenues, state tax bases, or state taxation methods.
For example, increases to federal excise taxes, by raising prices, reduce demand and therefore
revenue from existing state excise taxes. At the same time, the federal tax preempts the tax base,
restricting future state use.
Similarly, new federal excise taxes on raw materials risk distorting the prices of final products,
reducing economic growth, and causing industries and states to bear costs unequally.
When considering excise taxes or increases in excise taxes, Congress should carefully consider
the fact that these options have an adverse impact on states' ability to raise revenue or result in a
disproportionate burden among various states. Where federal court decisions restrict state tax
actions, Congress should review these decisions and provide legislative relief when appropriate.
8
Preserving Intergovernmental Communication
The Governors recognize the need for open communication and the free flow of information
among officials at all levels of government. Such communication is essential to the effective and
efficient implementation and administration of intergovernmental programs. The Governors op-
pose efforts by the federal government to restrict employees of state and local governments from
communicating with members of Congress and other federal officials. Although federal funds
should not be used to retain private individuals and firms to influence federal legislation and
regulations, federal statutes and regulations should specifically exempt employees of state and local
governments from the restrictions on lobbying the federal government.
9
Conclusion
The Governors recognize the unique nature of the federal system and the critical importance
of developing a close working relationship with our federal partner. We recognize and support a
continued federal role in protecting the basic rights of all our citizens and in addressing issues
beyond the capacity of individual states. At the same time, the federal government must recognize
that there are problems that can be best addressed at the state and local levels.
The Governors are committed to a revitalized and strong partnership with Congress and
the administration to bring a new balance to federalism. We believe these issues are crucial to
the future viability of our separate governments and to a revival of citizen participation in the
affairs of government.
Permanent policy
Adopted Annual Meeting 1993; revised Winter Meeting 1994 and Annual Meeting 1994.
APPENDIX C
NGA POLICY
PRINCIPLES TO GUIDE THE
RESTRUCTURING OF THE
FEDERAL-STATE PARTNERSHIP
NATIONAL
GOVERNORS
NGA Policy
ASSOCIATION
EC-15. PRINCIPLES TO GUIDE THE RESTRUCTURING OF THE
FEDERAL-STATE PARTNERSHIP
15.1
Preamble
The Governors believe that the next two years will present an enormous opportunity to
restructure the federal-state relationship. The Governors urge Congress to take advantage of this
opportunity both to examine the allocation of responsibilities among the levels of government and
to maximize state flexibility in areas of shared responsibility. However, the Governors believe that
children must be protected throughout this process.
As the federal government begins to move toward a balanced budget, the pressure to reorder
federal priorities and curtail federal grants will increase. Already, numerous proposals for program
consolidation and reduction are on the table.
Although federal budget cuts are needed, the Governors are concerned about the cumulative
impact on the states of federal budgetary decisions. The federal budget must be balanced by true
savings, not by shifting costs to the states.
The Governors recognize the special responsibility of government at all levels in meeting the
needs of children and families. Governors have taken the lead in carrying out these responsibilities
in the past. They believe that the federal government must maintain a financial role in assisting
states and localities to continue to meet these responsibilities.
15.2
Welfare Reform
All Governors recognize the importance of a federal role in financing income assistance to
families and children. However, the continuation of the current welfare system is unacceptable.
Tinkering and changes at the margin will not be sufficient. Congress should create a new, simpler,
and more responsive federal role.
The Governors have not yet reached consensus on whether cash and other entitlement
assistance should remain available as federal entitlements to needy families or whether it should be
converted to a state entitlement block grant. They do agree, however, that in either case states should
have the flexibility to enact welfare reforms without having to request federal waivers. Although the
Governors recognize the legitimate interest of the federal government in setting broad program
goals in cooperation with states and territories, they also believe that states should be free from
prescriptive federal standards, including key aspects of the welfare system, such as work require-
ments, benefits to teen parents and to legal immigrants, and time limits on benefits.
15.2.1
A State Entitlement Block Grant Program. The Governors believe that block grants as discussed in
this section should be entitlements to states and not discretionary grant programs. The Governors
view any block grant proposal as an opportunity for Congress and the president to provide needed
flexibility for states, not as a primary means to reduce the federal budget deficit. Block grants
should include a clear statement of purpose, including mutually agreed-upon goals for the block
grant and the measures that will be used to judge the effectiveness of the block grant. The block
grants must recognize the nation's interest in:
services to children;
moving recipients from welfare to work; and
reducing out-of-wedlock births.
HALL OF THE STATES I 444 NORTH CAPITOL STREET I WASHINGTON D.C. 20001-1572 I 202-624-5300
Under this concept, there should be no micromanagement and states should be required only
to ensure that the funding received is used to provide services for poor children and their families.
Although each state would be required to describe their program in a state plan and to provide
periodic reports to the public, state plans would not be subject to federal approval or federal revision.
Financial and compliance audits would be conducted to ensure that funds were properly spent, and
states would be required to pay back any misspent funds. Specific program outcome data will be
collected by the states and publicly reported.
Block grant funding should be guaranteed over five years at levels agreed to among the states,
Congress, and the administration. The Governors will work with Congress and the administration
to provide appropriate budget adjustments that recognize agreed-upon national priorities, inflation,
and demand for services.
In return for this broad flexibility, states would consider an initial allotment based on the
average of several prior years. Federal funds would be automatically available under a capped
entitlement structure, instead of being subject to annual discretionary appropriations. There would
be no maintenance-of-effort provisions, and states would be allowed to keep all savings as long as
the federal allocation was spent. Unexpended federal funds would remain available to states to
maximize flexibility and to encourage the creation of a "rainy day" fund and would not be subject to
reallocation by the federal government.
To provide for significant changes in the cyclical economy and for major natural disasters, an
additional amount should be set aside each year for automatic and timely distribution to states that
experience a major disaster, higher-than-average unemployment, or other indicators of distress.
15.2.2
An Individual Entitlement Program. If the federal government preserves the federal entitlement of
all needy families to assistance, the Governors believe the current Aid to Families with Dependent
Children (AFDC) program should be replaced by a new national program that establishes clear
policy objectives and certain minimum standards, but provides states with broad flexibility to design
key program elements.
Federal policy objectives and standards could include, but should not exceed, the following.
15.2.2.1
Time-Limited Aid to Families with Dependent Children. Assistance in the form of cash grants
to families and children should be available for a time-limited period; during this time, activities
should take place to help recipients make the transition from welfare to work.
15.2.2.2
Social Contract. The expectations and responsibilities of both the recipient and the govern-
ment should be clearly defined, and incentives and sanctions should be designed to ensure that those
responsibilities are carried out. States should be granted broad flexibility in defining the components
of the social contract, including requirements to begin work before the maximum time is exhausted.
Receipt of assistance should be conditional upon ongoing compliance with the social contract.
15.2.2.3
Support Services. State programs could include, as appropriate, the education, training, and
support services necessary to help participants become self-sufficient. Such services should be
funded either as a component of the income support program or through broader block grants.
15.2.2.4
Long-Term Assistance. Continued federal, state, county, and local assistance under the nation-
al program after the time-limited period should be dependent upon a requirement of work or
work-related activities unless no job, community service work opportunity, or community service
placement is available. Federal funds equivalent to the assistance payment should be available to
the states to support the creation of needed work. States should be allowed to create work directly
and through subsidies to the private sector. The ongoing financial needs of children must be
addressed in any time-limited system.
15.2.2.5
Flexibility. States oppose prescriptive federal management of the AFDC program. Federal
guidelines should be reasonably general in nature and states should have broad statutory authority
to adjust benefit levels and to determine the form and condition of assistance. This flexibility should
be in the form of allowable options and should not require federal waivers or plan approval.
States should have the ability to extend assistance on a case-by-case basis, with full federal
financial participation, for a limited period beyond the federal standard in order to ensure that
recipients complete education or job training programs; complete treatment for substance abuse or
other physical or mental impairments; or resolve emergency situations, such as homelessness.
15.3
Program Consolidation
The Governors believe that maximum budget savings are possible only if the concept of
flexibility is extended beyond the income assistance program. The simplification of the current
categorical, nonentitlement federal grant-in-aid system must also be a congressional priority. The
Governors have argued that such simplification would both increase administrative efficiency and
encourage state and local efforts to develop more effective programs.
The history of block grants is long, going back at least to general revenue sharing and the broad
block grants of the Nixon era. Block grants were also an important part of the Reagan "New Federalism"
of the 1980s. At that time, the consolidation of programs also came with funding cuts. Although block
grant proposals have generally begun with a theme of simplification and consolidation, the actual
legislation has often retained significant federal restrictions. Equally important, over time the federal
government has tended to establish additional set-asides and place new restrictions within the block
grants that have been established. Future reform must recognize and address these problems.
The Governors believe that such consolidation must:
recognize the national interest in protecting and serving children;
include a clear definition of national purpose and national objectives;
avoid set-asides or other prescriptive conditions for the funding;
include significant transferability of funds between the block grants;
preclude cost-shifts to the states;
be consistent with the way in which state government delivers services to citizens;
incorporate distribution formulations consistent with the distribution implicit in existing
categorical grants; and
allow the flexibility needed to maximize efficiency and to minimize the expansion of state
government employment.
Block grants provide a vehicle for the federal government to assist states and localities in
meeting high-priority domestic needs that they would otherwise be unable or unlikely to accomplish.
15.4
Restructuring Medicaid
The Governors have adopted significant policy relating to the restructuring of the Medicaid
program and to health care reform overall. Because of the close link between income policy and
health policy, the Governors will be better able to achieve welfare reform if their health care policies
are enacted. The Governors recognize that Congress is considering substantial cuts in the federal
contribution to the Medicaid program. The Governors believe there may be potential for savings
in the acute care portion of the Medicaid program and direct NGA staff to develop the option of
restricting future program growth in exchange for the federal government assuming responsibility
for the long-term care program.
The Governors believe that there is some potential to attain savings in the acute care portion
of the Medicaid program and they are willing to consider reasonable restrictions on future program
growth. However, such restrictions must be accompanied by significant statutory flexibility in
program delivery, including flexibility in setting eligibility and benefits levels, much greater use of
managed care, and greater opportunity to define reimbursement methodologies. The Governors
also believe that there are savings to be realized in long-term care, including the use of alternatives
to institutionalization and adoption of strategies that will improve the cost-effectiveness of nursing
home care. The Governors look forward to working with Congress to address acute and long-term
care costs.
15.5
Equitable Treatment for Territories in National Welfare Reform
The Governors believe the territories should be treated equitably in any welfare reform
proposal brought before Congress.
Time limited (effective Winter Meeting 1995-Winter Meeting 1997).
Adopted Winter Meeting 1995.