Senate Refuses to Revive Revenue Sharing : Ignores Warning That It Will Mean Higher Property, Sales Taxes

The Senate, struggling to agree on a fiscal 1987 budget, blocked an effort Thursday to revive the general revenue-sharing program, which is scheduled to expire this year.

“If the general revenue-sharing program is eliminated, then there will be no other choice than for local governments to increase property and sales taxes,” Sen. Jim Sasser (D-Tenn.) warned. However, other senators argued that the federal government, which is running a deficit of about $180 billion, has no spare revenues to share.

The Senate voted 54 to 41 to table--and in effect kill--the amendment by Sens. Daniel Patrick Moynihan (D-N.Y.) and John Heinz (R-Pa.) to maintain revenue sharing for the next three years at $4.6 billion a year.

Both California senators, Republican Pete Wilson and Democrat Alan Cranston, voted with the majority to shelve the amendment.

The Senate Budget Committee’s spending plan for fiscal 1987 holds revenue-sharing funds to $1.8 billion and calls for the program to end at midyear, but backers of the amendment argued that the program should be preserved longer to continue what Sasser called “the consummate federal-state partnership.”

Unlike other federal grants to local governments, revenue-sharing funds come earmarked for no particular purpose, which means that local officials may decide for themselves how to use them.

At stake for Los Angeles County, for example, is the $80 million it uses each year to help defray the $115 million that Washington requires it to spend on health care for illegal aliens, said Melissa Scanlon, the county’s Washington representative.

She added that Proposition 13 prevents the county from raising taxes to make up the loss if the program expires, so the county will face the prospect of cutting services or laying off employees.

The City of Los Angeles receives about $55 million a year in revenue sharing, which is put to such uses as paying its electric bills and funding libraries and parks. Bill McCarley, the city’s chief legislative analyst, said Los Angeles officials have been anticipating the loss of about half the year’s funds as they plan for the fiscal year that begins in July.

McCarley said that although the loss for Los Angeles will be significant, the city has not been “naively counting on” the program’s being extended beyond the six-month reprieve proposed by the Senate Budget Committee.

The Republican-led Senate also set aside efforts to restore funds to several health and nutrition programs as it continued its drive to produce a budget that will reduce next year’s projected deficit by almost $40 billion, to $144 billion. Unless Congress meets that goal, the new Gramm-Rudman law will force automatic spending cuts in an array of popular domestic programs, just weeks before this fall’s congressional elections.

The law also adds new discipline to this year’s budget debate because it raises procedural hurdles that make it difficult for senators to offer amendments that add to the deficit. For every move to increase spending, they generally must find compensating spending cuts or allow for new taxes.

Senate Deeply Divided

Although it voted Thursday to hold the line on several programs that have strong political support, the Senate remains deeply divided over how to reach its deficit-reduction goal. Clouding the outlook was renewed talk of oil taxes, which President Reagan has promised to veto.

The Budget Committee’s proposed spending package has drawn criticism from many Republicans because it would include $18.4 billion in new taxes and would cut $25 billion from Reagan’s defense spending request. Moreover, the Senate voted Wednesday to add $300 million for additional spending on education.

“I don’t think the (committee’s) budget resolution . . . has any chance of passing,” Sen. Warren B. Rudman (R-N.H.) said.

The revenue-sharing issue was one of the first big tests of the Senate’s resolve to cut domestic spending.

Budget Committee Chairman Pete V. Domenici (R-N.M.) acknowledged the political appeal of revenue sharing but said: “I just hope everybody knows that (extending the program) is a vote to add $4 billion to the deficit or to add $4 billion to the $19 billion in taxes that are already prescribed in the budget resolution.”

Prospect of New Taxes

Separately, however, Domenici himself raised the prospect of new taxes by producing a Congressional Budget Office report exploring the benefits of several controversial proposals for oil-import fees or taxes on energy use.

Domenici said one of the options, combining a 6-cent-per-gallon gasoline tax and a $2.50 fee on each barrel of imported oil, “would reduce the deficit by as much as $10 billion per year.” Moreover, he said, it would help ease the U.S. oil industry’s financial woes and “have an equitable impact among the regions and income classes in our country.”