say 12. 1969

The President
The White ouse
Washington. D.C.

Dear Mr. President:

In a study directed initially at improving the system of
State aid to local governments. the Advisory Cc-ission un-
avoidably faced the question of financing public assistance.
After many hours of debate and discussion extending over two
meetings. the Commission voted to recommend that the Federal
Government assume full financial responsibility for the pro-
vision of public assistance (including Medicaid and General
Assistance) to needy people. The purpose of this letter is to
present the Commission's views and review briefly the rationale
behind its recommendation. The full text of the recommenda-
tion is attached.

As you know. vast differences have developed in welfare
benefits and eligibility requirements among the States. These
work in perverse fashion and give rise to intergovernmental
inequities. States that provide a higher level of public
assistance find their welfare rolls expanding. while states
that provide a lower level find their share of caseloads de-
creasing. Moreover. State policymakers fear that tax increases
dictated in large part by rapidly rising welfare costs will
tend to exert a locational push on individuals and businesses.
In addition. Governors and Mayors point out that greater re-
liance on a State-local revenue system heavily dependent upon
consumption and property taxes as the source of welfare financ-
ing tends to make the rising welfare costs fall rather heavily
on taxpayers with lower incomes. In short. States and local
governments are under heavy fiscal and political constraints
when it comes to providing adequate welfare assistance.

Court decisions and Federal regulations have largely removed
public assistance policy from State-local control. The recent
Supreme Court decision eliminating residence requirements un-
doubtedly will increase the welfare caseload. It has eliminated

1e President -2-

1y possibility that the more generous States could use resi-
ance requirements to discourage in-migration of individuals
astined to go on welfare rolls. Both these impacts will ex-
:erbate the State-local fiscal strain already imposed by
lblic assistance.

Federal assumption would free up nearly $5 billion of
:ete and local revenue. It promises (a) to benefit most those
:ates and cities where the poor have tended to congregate. (b)
3 reduce tax differentials between the city and suburbs. and
2) to diminish pressures on the local property tax.

Federal assumption need not be regarded as a final'
>lution. indeed. the Commission believes it should not be so
hgarded. with complete Federal financing the Federal Govern-
Int would have a far stronger incentive to explore alternative
>proaches for dealing with poverty.

I should report, in a related connection. a second recom-
mdation voted by the Comission: That State governments move
I assume substantially all the non-federal costs of elementary
Id secondary education. A few States have already moved to
Iis stage and California is giving serious consideration to it
; the present time. The effect of the two recommendations com-
.ned would be to lift from the back of local government the
10 largest categories of expenditure--welfare and education--:
Lereby enabling a deployment of the property tax and other
cal revenue sources to meet other pressing local problems
Ich as law enforcement. delinquency control. and urban re-
.talization.

Respectfully.

Farris Bryant
Chairman

.closure