FBDERALPSTATEIDCAL RBIAIIONS:
NHERE DO WE STAND?

Remarks by The Honorable Farris Bryant
Chairman, Advisory Commission on Intergovernmental Relations

before the
Assembly on Intergovernmental Cooperation
of the
Council of State Governments
Cleveland, Ohio

December 14, 1967

This is a happy occasion for me. My associations with the
Council of State Governments and its affiliated organisations span two
decades and have been for me both pleasant and rewarding.

I am glad to be with so many friends today, particularly as we
address ourselves to a most difficult and most important subject--
"federal-State-Iocal Relations: Where Do We Stand?

The theme of the morning session is too large, too complex, and
too fluid to be encompassed in an address, in a half-day session, or
in a lifetime. The role of each element of our federal system, the
connection of each segment of the structure to each other segment, the
relationship of the several parts to the whole fabric of isvarnment--
all these resist precise definition. Societies evolve governmental
structures; they do not build them overnight. By the same token, the
structures change as needs and conditions change.

The architects of the Constitution envisioned that except for a

few clearly enumerated functions the States would be the "chosen

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of our federalism is its truly remarkable ability to adapt to the
requirements of a world in which change is commonplace. In the final
analysis we must place our fsith where the founding fathers placed it--
in the judgement and determination of a free people and the leaders whom
they choose. There will be problems, of course. Problems are built

into our concept of divided responsibility and multilevel government.

But these are pert of the price of freedom and democracy, and to achieve

these ends, no price is too high.

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instrument" of domestic government. And, by and large, that use the
case for a century and more. They truly were laboratories for
experiments in the art of governing.

Let no one minimize the success of these State initiatives and
the skillful but often unsung manner in which State responsibilities
were fulfilled. The States have been the custodians of a major share
of our progress towards a stable society; the foundations of our
strength and prosperity, in large part, were laid by the States.

It is, nevertheless, true that the relationships among the several
levels of governments have changed. Earlier our federal system could be
described as one offering parallel citizenship and complimentary govern-
ments serving different levels of need--federal, State, and local. We
have moved increasingly toward parallel citizenship and overlapping
governments serving the same areas of need. Today, on the domestic
scene, almost no governmental activity is the exclusive responsibility
of any one level; virtually all domestic activities are jointly financed
or jointly administered, or both, by two or more levels of government.

To put it quantitatively, the States and localities have found it
politically difficult to raise the revenue needed to accomplish all the
things demanded by the people, and they and their citizens have turned
to the principal revenue collector--the Federal Government.

Despite the powerful centralizing trends of recent decades,

however, the fundamental bases of federalism remain strong. Federalism

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is imbedded in our Constitution. It is seared into our political value
system and it drews strength from social rsality--although we grow
constantly more interdependent economically and culturally, we remain,
none the less, a people of varying attitudes and needs and a nation of
widely diverse regions.

Those who visualise federalism as necessarily a static, stable
relationship among levels of government do not understand its nature;
they tenors its dynamic character. The constant and continuing struggle
among the several levels to reconcile and balance the forces for and
against centralisation is a distinguishing feature of our system. That's
the way the federal plan was conceived, and that's the wey it works.

The struggle--the pulling and hauling-~creates tensions and con-
flicts. The manner in which those tensions are eased and the weys in
which those conflicts are resolved will determine whether we maintain
a course of federalism marked by partnership among the several levels
or instead we veer toward a pattern of centralisation in which the
National Government emerges overwhelmingly dominant.

Intergovernmental problems offer an awesome challenge to federalism
as we now know it. And as government grows, intergovernmental problems
grow. with this in mind Congress, in 1959, set up the Advisory Commission
on Intergovermental Relations as a permanent, independent agency and
charged it with the dual task of analyzing intergovernmental problems and
formulating recomndations for their solution.

The Commission is s 26 member bipartisan body with representation

from all levels of government. A majority of the members are elected

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State and local officials-ofour governors, three State legislators,
four mayors and three county officials. The Federal Government is
represented by three senators, three congressmen, and three officials
of the executive branch. Three public members complete the Commission
roster. Because of its composition the Commission is uniquely able to
bring to bear on intergovernmental problems the judgement of experienced
lawmakers and executive officials from all levels of government and from
widely varied backgrounds.

In its examination of the ailments of federalism, the Advisory
Couudssion has attempted to isolate the primary source of infection and
to catalogue the major causes of intergovernmental tension and conflict.
In our recently completed two-year study of Fiscal Balance in the
American Federal SystemI three developments emerged as the most critical
sources of infection: (1) the startling, mushroom growth of federal
grant-in-eid programs, (2) the highly critical and potentially explosive
metropolitan crisis; and, (3) fiscal imbalance both within and among

levels of government.

Federal Grants-In-Aid

Between January and June of this year, during the time that I
served as the President's "Ambassador to the States," I led teams of
Federal officials to 40 State Capitals. A major purpose of this
"Odyssey" was to confer with each governor and his official family on

the operations of grant-in-aid programs and how they might be improved.

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In my report to the President following these visits, I expressed
my belief that the grant-in-eid system--which has deve10ped as a unique
feature of American federalism--ie basically sound and will be an in-
creasingly powerful force for progress in the years to came. But if the
grentin-aid system is to realise its full potential we must diagnose
its weaknesses and take steps to cure them. Many of the weaknesses stem
from rapid-cperhape much too rapid--expansion. Some two decades ago, in
1946, federal grents-in-aid to States and local governments totaled less
than $1 billion. By 1956 the amount had multiplied to $3.3 billion. In
the current fiscal year, federal grants-in-aid will be in the neighborhood
of $17 billion. And the end is not yet in sight.

The number of separate grant-in-aid programs is not easy to pinpoint;
partly it is a matter of definition. In 1962 the total number of authori-
zations in effect was 161. From 1963 through 1966, 218 new authorisations
were added; bringing the total to 379. With growth of that magnitude it
is not surprising that there are evidences of overlapping, duplication,
frustration, and confusion.

Obviously there are too many separate programs and too little
effective coordination. The Advisory Comission has reconnended that
Congress and the Executive Branch reduce the number of separate programs
by at least one-half. As one means to this end, we urged that Congress
give the President authority to propose grant consolidations subject to

veto by either House along the lines of the Reorganisation Act of 1949.

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The Administration already has taken steps to meet this problem:
(1) the new Fartnership-in-ealth Act; (2) the Presidential directive
requiring coordination with the States in setting the boundaries of
Federal planning and development districts; (3) the Presidential directive
requiring clearance through the Advisory Commission of proposed federal
regulations governing grant-in-aid programs; (4) the Budget Bureau study
aimed at designing a system for consolidation of grants; (5) procedures
for establishing more rational boundaries for Federal Regional offices;
(6) the assignment to the Director of the Office of Emergency Planning of
special responsibilities for Federal-State coordination.

Equally urgent is the need for the States and local governments
to strengthen their capacity to analyze accurately and, if they choose,
to utilise fully available Federal grants. The appointment of Federal-

State Coordinators; meetings such as this under the leadership of the
Council of State Governments; increased participation by State and local
officials in proceedings leading to Federal programs and legislation;
and very importantly, a new awareness of a need to be informed and to

be heard--all these are substantive evidence that this goal is being

achieved.

The Metropglitan Crisis

let me turn now to the second major snurce of intergovernmental

tension--the crisis in our cities. A year ago in its annual report the

Advisory Commission warned:

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The States are on the verge of losing control over the

metropolitan problem; if they lose this control they lose

the major responsibility for domestic government in the
United States and in turn surrender a vital role in the

American federal system. So, at the close of 1966, the
tremendous task of financing, servicing, and governing

Metropolitan America clearly poses the greatest challenge
to federalism since the Civil Uar.

Much of the current sickness of our large cities is rooted in the
increasing economic and fiscal disparities between central cities end

suburbs.

This disparity is strikingly illustrated by the fact that the
metropolitan areas of the United States account for:
...65 percent of the population

...70 percent of taxable assessed valuation

...at least three quarters of federal personal income
tax collections

...80 percent of bank checking acconnts

And, at the same time, the metropolitan areas suffer:
...most of the Nation's poverty!
...most of the Nation's crime and delinquency!

...most of the Nation's current disaffection, disarray, and
civil disorder!

Obviously, the States must become more involved in meeting urban
needs, and to do so must strengthen their own fiscal and administrative

capabilities. For example, we believe they must:

--provide more flexibility in their constitutions for long-
range State financing program

-require and enforce effective local use of the property tax

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--equip themselves vith a productive and broad-based tax
system capable of underwriting a major portion of the
State-local expanding expenditure requirements

--add to their school aid formulas appropriate fccora"
reflecting higher cost per pupil among disadvantaged as
competed to advantaged children, especially in areas of
high population density

--authorize an appropriate State agency to mandate the
establishment of county or regional school property
taxing districts

These actions are not solutions, but in a diverse Nation in which

federalism is virile, they are the sine gggggg of solutions. For balanced

 

federalism cannot be achieved without matching strength with strength.

As I'm sure most of you know Commission recommendations for State
legislative action of the kind I have cited are translated into hill form
and published annually in our State Legislative ngggam. OVer the years
the ACIR State Legislgtive Program has provided the impetus for a large

volume of constructive State activity.

Growing Piscal Imbalance

A growing "fiscal mismatch" is the third major source of inter-
governmental tension. Ihe enormous productivity of the Federal income
tax and the prospect of periodic Federal tax cuts or surpluses stand in
sharp contrast to the general State and local fiscal picture. Barnessed
to a less productive tax system and hobbled by the fear of interstate
tax competition State legislators move through a crossfire laid down by
those who demand tax relief and those who urge greater outlays of State

funds.

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lean than three years ago, there was a lively debate over the
alternative waye of distributing an impending Federal surplus.
Economists foresaw recurring Rational Government eurpluses--a "fiscal
drag" on the economy--created by the ability of the Federal tax eyetem
to generate more revenue than the National Government required. At the
eame time State and local governments were depicted as relative paupers
subeieting on an inadequate revenue eyetee and providing an inadequate
level of public aervices--a fiscal mismatch of classic proportions.

In the current fiscal year-~in contrast-due have a National
Government confronted with the prospect of a deficit of up to $20 billion
while State and local revenue needs continue to grow. In one respect the
situation remains unchanged. "any State and local governments continue
to limp along from one financial crisis to another despite the fact that
last year they collected twooand-one-half timee as much ae they did ten
years ago; and deepite the further fact that for the last 20 yeare they
have sustained annual increases in expenditures of 7 to 10 percent.

"hat does the future hold? Indications are strong that the
demands for State and local expendituree will continue to grow.
technological change, pepulation mobility, increased living etandsrds,
accelerated husineee activity, inflation-othese are only a few of the
forces fueling the demand for more and better governmental servicee.

Is our federal eyetem capable of weathering the storme that surely

lie ahead? I have no doubt that it can and will. A fundamental strength