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Recommendation No. 3--Nationa1 Government Ass tion of Full
Financial Res onsibili for Pu lie Assistance (including
General Assistance and Medicn
The Commission concludes that maintaining a properly functioning
and responsive public assistance program as presently operating is
ghglly bgyond the severely strained financial capacigx of State and
local government to support. The Commission therefore recommends
that the Federal Government assume full financial responsibility
for the provision of public assistance. The Commission further
recommends that the States and local governments continue to admin-
ister public assistance programs.
The Commission wishes it understood that these recommendations
are designed to relieve inoguitieg of resource capacity among the
levels of government and apply until such time as Congress and other:
shall determine a more efficient and appropriate method of welfare
administration applicable to the complex social problems of our timo.llg/
l/ Congressman Fountain, Congressman Ullnan, Senator Knowles and
Comnissioner McDonald dissented from this recoauendation and
stated: "The Comnission's recommendation that the national
government assume full financial responsibility for public
assistance is incompatible with a fundamental premise this
country has always operated on-~that people in the same com~
nunity have responsibilities toward their neighbors. By calling
for continued State and local administration, it divorces the
essential link between the spending and revenue raising responsi-
bilities. Moreover, by simply shifting financial responsibility
to the Federal Government, the recommendation does not come to
grips with the more fundamental weaknesses in the existing wel-
fare structurc--its extremely high administrative costs and
unequal treatment of people in like circumstances. We believe
it more desirable to give immediate attention to finding better
ways of dealing with the poverty problem, rather than attempt to
modify existing arrangements for the sake of relieving State and
local government of a fiscal burden. we all recognize that State
and local governments are in financial difficulties and that
changes in financing arrangements must be sought but we do not
believe that the solution of this problem can be found in the
expedient proposed by the majority with respect to public welfare."
3/ Commission members from the Federal Executive Branch (Secretary Finch,
Secretary Romney and Budget Director Mayo) abstained from voting on
this recommendation because of insufficient opportunity to review and
analyze its implications.
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A sense of urgency presently surrounds the public welfare
debate. Although State and local governments contribute almost
half of the $10 billion needed to underwrite public assistance
programs in 1968, an intergovernmental "showdown" is imminent.
The crisis is the product of many [acrors--recent court decisions
striking down State residence requirements, great variations in
State welfare benefits, the rapid rise in A300 and Medicaid costs
particularly in the lore urbanized States, and the growing expendi-
ture demands of programs that are more favored at the State and local
level than public assistance.
Full Federal assumption of financial responsibility for
providing public assistance, however, need not be regarded as a
"final solution. Rather, alternative approaches--such as the
negative income tax or family allowance plena--nay ultimately prove
note effective in meeting the needs of the poor. For the present,
however, assumption of public assistance programs by the National
Government stands as the most readily available proposal to acct
this complex problen.
Because of their limited jurisdictional reach and fiscal
capacities, State and local governments simply cannot adequately
provide necessary public assistance services. Neither of these
govern-ental levels can afford to get too.far out of line with its
neighbors regarding either expenditures for such programs or the
necessary tax rates. To do so would introduce further eleuents of
locational pull-ass recipients or potential recipients seek higher
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program benefita~-or locational push, as individuals and businesses
seek to leave high tax areas. Such expenditure or tax differentials.
however, can set off counter-reactions having the effect of nulliiying
initial intentiona--a danger that is further highlighted at the local
level where the greater homogeneity of other factors make expenditure
or tax differentials all the more prominent.
In point of fact, differences among States in program
benefits and eligibility requirements work in a perverse direction.
States that are unable or unwilling to provide a minimum level of
public assistance compatible with family needs find their share of
caseload: diminishing while States meeting this obligation find
their welfare rolls rapidly expanding. A women travelling from
Mississippi to New York with nine of her twelve children was
recently denied public assistance on the ground that going on wel-
fare was her solo aim in moving to New York City. By coming to New
Vork, a woman with twelve children would receive about $640 more per
month than she would in Mississippi. For the more typical family of
four, Mississippi provides an average monthly payment of $35
while in New York, the recipient is eligible for $241 s month--a
nonthly differential that exceeds the total travelling costs by
bus from Jackson, Mississippi, to New York City. Hhilc it is not
possible to determine the number of people who are lured solely
by such differentials in program benefits, it is nonetheless clear
that these variations-~0vcr and above Accounting for cost differences
among geographic areas-~tend to promote an uneconomic flow of
s
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Perhaps the more important forces, however, are unemploy-
ment and underemployment which force many of the employable poor
onto the welfare rolls. Lack of job opportunities for the less
well educated and unskilled results ultimately from national forces
that have transformed the economy--Iorces beyond the control of State
and local governments. Thus, the search for better jobs--a search
that promotes the national interest--nonatheless becomes a penalty
for State and local jurisdictions when job seekers are frustrated.
As a more practical matter, State and local governments
simply do not fully eXploit the individual income tax--the logical
tax levy for redistributing income. While there is potential use
for this tax levy by State governments. it is not well-suited (or
localitica--exccpt the large central cities. As a result, State
and local financing of public assistance tends to fall harder on
the poor than would an individual income tax--the mainstay of
Federal revenues. Thus, the use of State and local revenues to
provide services aimed at the poor in a sense results in dispro-
portionate support by the poor.
Shifting financial responsibility for public assistance
programs to the Federal Government would tend to reduce or eliminate
constraints that presently hamper State and local government efforts
to provide other public services. While relieving all sub-national
units of this responsibility would free up about $4.6 billion of
State and local revenues, it would be of particular benefit to those
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States and/or cities where the poor have tended to congregate. As
such it would reduce tax pressures between city and suburb, for
example, and at the sane time. serve to reduce the pressures on the
local property tax.
To some, a proposal to remove State and local governments from
financial responsibility for public assistance programs poses the
danger that the nation will lose control of this problem. Hore per-
suasive, however. is the argument that States and particularly
localities now have little effective control over such progr --
witness, for example, the recent Supreme Court decision prohibiting
State residence requirements. The immediate effect of this decision
is to increase the welfare caseload since those not meeting the
eligibility criteria solely because they failed to reside in a
jurisdiction a sufficient length of tine are now able to receive
public assistance. By striking down residence requirements, the
decision also hen the effect of reducing a barrier to migration which
may add to the flow of individuals seeking the eore generous States.
Both effects then will serve to exacerbate the State-local fiscal
strain imposed by public assistance.
To the extent, however, that State and local governments are
forced to tril welfare rolls to their budgetary capabilities rather
than the legitimate needs of the poor, then there is no truly national
welfare program. To assure an equitable system both among individuals
and governments, it lust therefore be nationally financed.
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Such a national welfare syst-s, however, lust be flexible
enough to acconssodate its benefit schedule to the diverse living
costs of the rural South and high cost urban areas. particularly
those located in the North. Pull Federal assumption of the welfare
system should not work to the detriment of recipients who presently
reside in States with the more generous benefits; it should assure
a basic standard of living regardless of geographic area.
The advantage of the National Government assuming full
financial responsibility for public assistance progrens far out-
weigh the above reservations. Such advantages are the achievement
of a more equitable and adequate standard of benefits throughout the
country, and the rsmval of a contributing source of fiscal pressures
on those State and local units beset by diminishing fiscal resources
and disproportionate shares of the poor.
Federal assueption of full financial responsibility for public
assistance raises the question of administrative responsibility.
Would it be desirable to continue State-local ministration, per-
haps under stronger Federal guidelines and direction. or shift to
direct Federal administration?
Direct Federal administration could be effected by using the
700-odd district and brancu offices now edeinistering Social Security
and Hedicare programs. A second possibility would be to transfer
State and local personnel currently administering public assistance
to the Federal wroll aid place than under the supervision and
direction of the HIV regional directors.
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Other programs provide precedents for continued State ad-
ministration under full or near-full Federal financing. The United
States Employment Service is run by the States but for all practical
purposes is a Federal operation since Federal funding of administra-
tive costs is 100 percent. In addition, for three years the Cemmunity
Action Program under the Office of Economic Opportunity has been
funded at 80 to 90 percent by the Federal Govornmant, with a liberal
allowance of in-kind contributions by local bodice which in many
casee effectively meant 100 percent Federal financing. Yet these
programs were essentially carried out at the local level by non-
Federal personnel and organizations.
On balance, the Commission believes that the continued via-
bility of our federal system and widespread public support for keeping
this program "close to the people argue in favor of retention of
adeinistratiVe responsibility of the public welfare program at the
State and local level while nationalizing its funding.
PAGE 1
Rcgni'l1gl f.3 fi1inl oeir1ngg-g31a :._
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-16 prof;r;1ei be--efits--or 10CaLional [1113 as indbidua]S and businesses seek to leave hj.g[1 ta,: Ereas, Such expel1tli L..ye or tax differe:iitials, however, can I-01 off co';ntec-reactions having the effect of ar.illifyin' iniLial 5:Rellt io-m,--a da-ger Glat is furt.her highligjtted el the lucal levc] whol e :he gctater honiger.city of other &c-_ors make extie,,!iaire er tetx t' Ef'~e:-enti7.-s C: t-Im r.or:! pres|1:en. In point of '~nct, c's TEercnee. arnag S!n1-c:s jo [>rugral:a benef~ ts sud el i gihElj i y re:il:frerlental work in a perverse c~ireeLinn. Statna th-se 071: cririljle or umrillinr1 to pr;:vide a 1: icir.':lt.1 ]con] of pil':lje missisLaller conpatible w~ th {:11li]y needs fi:1d I h:d r sh:!re of casclo-idr. :!! I:i r.fuin[: Ojl r Sut: es recting this chligation find their ve] i;tre roijri t'llpic'l.y exilenrlini;, A wrian travell i ng is:--. 1[j sn j e us.;>p). tr: New York vi Eb r.inr of her [:velvo chi ] dree. vn.; recenl-ly der:tr.il psi!:1ic misim-arce m-. t|tc grounti rist?.03:18 en wel Otto was ;1ec sol.e ai'.1in irovirg to Ne'.; Nork Ci ty, By (::1;njng to 1:cw York, a =:n;!.1 1:sth !wt:1ve ehCdcen would receive about M40 :mre per E;:er.Lil ik:n 91:0 1:s:td in 11i:sj 2:sp|d F:;r the: more typical] fa'-.li ty DE four, M~ssirx'pill provides ar avers ;c: rio:1t I:1y payrne.nt of 05 while ill in'u York, t~nc recipi er.1 is eliginje for p/i]. g, -nontb-a E.Der|tly <11'~fer-:ntial thac exceed:t the tatal trave.Ui-g osts by bus frt::n :r.:-2:son, 1[ississini, to 30-.: York C.itv. KI:s Je iL is not prissible to del er::li:w tile number of ;:aup]-. w-ao are lured e]cly by such di frei:s-.itisils in pr::g;ral:3 be;-ofits, it is iuricieeless ciety that Lhese variat ions--Over and abcvc Acco:nting foic:Ist difR.renec:c, amrmt; geographic areas--terci to prn:-.elT an v.necc:no:de. flou of Illdividuals.
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States ~ ~ ~ ~ ~ ~ ~ ~ .../o ..ie .hr .h .orhv edd ocnrgt. A....
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