Local Leaders Fear They’ll Bear Weight of GOP Plans : Budget: Cities want tools to cushion fiscal impact of decentralizing government. Federal safety net in jeopardy.

Not long ago, as the Maryland Legislature weighed tough choices to balance the state’s budget, lawmakers voted to cancel a program that provided $157 a month in cash assistance to indigents. Within months, homelessness in Baltimore jumped 65%, panhandling soared and citizens voiced increased anxiety about going downtown to shop or visit tourist attractions.

Baltimore Mayor Kurt Schmoke was confronted with an unexpected crisis, one that reflected badly on his leadership. It seemed to matter little to his constituents that it was caused by circumstances largely beyond Schmoke’s control.

“There are all kinds of unintended consequences if you cut the only safety net out from under people,” Schmoke observed during a recent national gathering of city and county officials.

Baltimore’s experience is exactly the type of situation that local officials fear would arise if Congress succeeds in its effort to transfer authority over much of the social safety net from the federal level to the states. State governments could decide that the most efficient way to contend with reduced growth in aid from Washington is to cut social services to cities, towns and rural areas under their jurisdiction.

Although legislation now being considered in Congress to overhaul Medicaid, welfare and other safety net programs would give primary administrative responsibility to state governments, local officials are convinced that most of the burden ultimately will be borne by them. Worse yet, they say, no one seems interested in even hearing their perspective on the monumental decentralization process known as “devolution.”

Mayors and county officials say they were virtually shut out of the discussions in Washington this year. They are belatedly demanding a seat at the table as states develop new approaches to addressing social needs that soon will receive less attention from federal officials.

“We’re feeling the same pain,” Schmoke said. “It’s a true example that misery loves company.”

Schmoke and about 100 other mayors, county supervisors and other local officials from both parties met in Chicago earlier this month to develop a common agenda for responding to devolution. Among other things, they want Washington to give them new tools to mitigate the consequences, such as tax incentives to draw new businesses into poor communities.

Although the White House continues to struggle with Congress over the final shape of the budget package, local leaders signaled in Chicago that they are convinced most of the reductions dictated by the Republican congressional majority are inevitable.

Los Angeles County Supervisor Yvonne Brathwaite Burke said the local challenge will be particularly acute in areas where the percentage of residents relying on public assistance is large or expanding. In 1989, one out of 10 residents of Los Angeles County relied on public assistance. Now one out of five does. (The figures do not include disabled and elderly residents receiving supplemental security income.)

One of the biggest concerns for Los Angeles County officials is the prospect of a significant reduction in federal benefits targeted at legal immigrants. If the cuts are enacted, the county could be deluged with new applications for county-funded general assistance.

Seattle Mayor Norm Rice, a Democrat and president of the U.S. Conference of Mayors, said he will have to live with the GOP budget even though he does not like much of it. “My question to the federal government is: Can you give me tools to expand my economic base? The fundamental safety net for the poor has been . . . destroyed in the GOP budget. We need a new investment base so we can sustain these people.”

Rice wants new tax breaks for employers who hire welfare recipients or provide summer jobs to teen-agers, and federal grants for development projects designed by local groups.

Rice said the GOP budget, as drafted, would have the following effects on his city in 1996:

* Planned Medicaid payments to health clinics would fall by $1 million.

* The number of summer jobs for at-risk teen-agers would be reduced by 450.

* Energy subsidies for poor residents would decline by $2.2 million.

The impact on these programs would become more devastating over time, Rice said, because the GOP budget package would impose progressively bigger reductions in growth of spending over seven years.

It is less clear what the city would experience if the Republican welfare reform legislation is enacted. Washington state has not indicated what changes are in store as a result of the reform plan, which would consolidate existing programs into discretionary block grants, giving states much more flexibility to set benefits and determine eligibility.

It is that flexibility that Republican lawmakers emphasize as a key benefit of the devolution of power to the states, in addition to bringing an end to spiraling federal deficits.

For years, city officials have complained about the high cost of complying with rules and regulations attached to federally funded programs. They hope that in exchange for assuming more responsibility for social services, they will be freed of some of those restrictions.

The federal government has talked about working in partnership with local officials, but Washington still wound up setting most of the rules. If Congress truly wants to decentralize authority, it must free local governments from burdensome regulations and unfunded mandates that have increased costs and stifled efforts to develop innovative responses, local officials contend.

“The federal government has always been dominant,” said Chicago Mayor Richard M. Daley, a Democrat. “It has not been a partnership.”

If the federal government gets out of the way, Daley said, local governments and the private sector will assume more responsibility. Job-training programs, for instance, should be run by those doing the hiring, not by bureaucrats following Washington’s rules, he said.

But will there be enough money to go around for programs that local officials now rely upon?

Lucy Allen, mayor of Louisburg, N.C., a town of 3,000 near Raleigh, said her rural community has a high incidence of child abuse. She fears that there may not be adequate funding to intercede in abuse cases, protect children and help keep families together. In addition, Allen worries about the large percentage of working-poor families in her area who are just barely making it with the help of free school lunches and food stamps.

Like most local officials at the Chicago assembly, Allen advocates balancing the federal budget. But she argues that states and local governments need time to prepare.

“The fiscal pressure on the states will be passed on to the cities,” she said. “Because their budgets are going to be strained, the states will be increasingly tempted to pull back resources. . . .

“People don’t understand it,” Allen continued. “It sounds good to say: ‘Balance the budget’ and ‘Let’s make the people on welfare work.’ But the consequences of moving too fast could be devastating.”