Inclosure 3

October 27, 1967

Recommendations Adopted by the Advisory Commission on
Intergovernmental Relations in Its Report "Fiscal Balance
in the American Federal System"

Secretggz Fowler's Dissent on Recommendation No. 1

Secretary Fowler expresses the following reservation:
I am in agreement with this recommendation insofar as it calls for a more
flexible grant-in-aid system and for consolidation of grants into broad
functional areas. I also strongly favor more State and local participa-
tion in the development of joint governmental programs. The Administra-
tion is taking action along these lines in carrying out the President's
directives in his message to the Congress on "Quality of American Govern-
ment" on March 20, 1967.

As to methods of giving additional assistance to State and local
governments beyond the present programs, many alternatives have been
advanced including: substantial Federal tax credits for State income
taxes; Federal assumption of a larger share of welfare costs (either
directly or through such devices as guaranteed income or negative income
tax); expanded urban programs with adequate funding of the Model Cities
program and more flexibility provided through an urban development fund
which merges different grant programs; and general support grants with a

wide range of proposed formulas for distributing funds to States and to
localities.

In my view, it would be premature to choose at this time between
these and other alternatives, and, consequently, I do not endorse making
a recommendation in this area at this time. He are faced with extremely
heavy demands on our Federal fiscal resources. Even in the post-Vietnam
period there will be many claimants for Federal expenditures and for tax
reduction. Each of the alternatives proposed involves large amounts of
money. Some of the new grant programs which are new small will certainly
increase, and the plight of our cities, so well documented in this report,
demands that our urban programs expand substantially. Furthermore, a
proposal in principle is far from being a fully developed proposal. All
the alternatives involve difficult problems of implementation relating to
techniques, intergovernmental relationships, standards and the like, and a

wide difference of opinion presently exists as to the proper solution of
these problems.