Bush Proposes Shifting a Bigger Share of Programs for the Poor to States

Just as state governmental finances are going from bad to worse, the Bush administration is proposing to give the states more responsibility for running an array of programs for the poor.

Medicaid, public housing and even the popular Head Start program have this in common: In the fiscal 2004 budget that he submitted Monday, President Bush asked Congress to let the states choose to control more of the levers of power.

But some program advocates say that for the states, the price of more control would be less federal money than they could otherwise expect. As Washington withdraws from programmatic authority, they warn, it will also pull back in funding.

The timing could hardly be worse. The National Conference of State Legislatures reported Tuesday that state governments, after addressing a $49-billion shortfall earlier this year, still face a collective revenue gap of $26 billion. For next year, the group forecast a $68-billion shortfall. California, where revenues are forecast to fall at least 30% short of spending next year, ranks among the hardest-hit states.

For the Head Start program for impoverished preschoolers, critics warn that the states would be tempted to use their federal dollars to fill in gaps in their own education programs.

“We fear a lot of really poor children will not get the services they need,” said Sarah M. Greene, president and chief executive officer of the National Head Start Assn.

Her organization sent out a “legislative alert” Tuesday saying the president’s “radical” proposal would “essentially dismantle the Head Start program’s performance standards and turn it into more of a reading laboratory than the comprehensive program it is today.”

“The neediest children would be at risk of receiving markedly reduced services, especially in a time of nationwide state budget cuts,” the alert says.

Rep. George Miller of Martinez, the top Democrat on the House Education and Workforce Committee, predicted that with the cash-hungry states in charge of Head Start, “you can just start to see how the money leaks out of this program ... and all of a sudden we’re serving less children.”

Wade F. Horn, an assistant secretary of the U.S. Health and Human Services Department, replied: “This is not dumping Head Start on the states at a time when they’re having budget difficulties.” He pointed out that the administration’s proposal left it entirely up to the states to decide whether they wanted to take over the program.

An administration official who helped craft the Head Start proposal said the program was “stuck in its ways” and did not have to coordinate with the states, even though the states are responsible for their children’s education.

“Our plan says that the same amount of money that is going to Head Start will continue,” Bush said in his budget statement, “and whatever money the states are currently spending on their preschool spending, they have to maintain the same level of funding.”

His budget for Head Start includes a $148-million increase, to $6.8 billion, in the next fiscal year, an increase of slightly more than 2%.

The Children’s Defense Fund expressed concern that, regardless of the funding level, shifting responsibility for the program to the states could lead to a lowering of standards.

“Head Start is working, so there is no need to drastically alter it,” the group said in a statement.

In the area of housing, some critics expressed concern about the administration’s proposal to shift to the states authority over the $13.6-billion program for Section 8 vouchers.

“Some states run housing programs very well, but others tend to overlook the needs of the lowest-income people,” said Moises Loza, the Housing Assistance Council’s executive director.

Loza also expressed concern that the administration’s proposal could lead to making states fully responsible for rental assistance.

“If federal funding continues every year, that’s one thing,” he said, “but if federal funding is reduced or even stopped, that would require states to handle their renters’ needs, and state budgets are already overextended.”

For the joint federal-state Medicaid program, Bush proposed increasing the states’ authority over program administration and curbing the amount of federal money they would receive. This proposal also proved controversial.

Robert Greenstein, executive director of the Center for Budget and Policy Priorities, a liberal Washington research organization, called it “a fundamental change in how the federal government finances health care for the low income population.”

Rather than paying its share as costs rose, Greenstein said, Washington would contribute “a fixed amount of money ... adjusted upward each year according to some formula.” So far, he said, the administration has declined to say how the formula would work.

“One thing that is clear,” he said, “is that the formula would increase federal Medicaid contributions at a slower rate than would be expected to occur under current law.” For the states, he said, “the additional flexibility would largely be the flexibility to make deeper cuts.”

For the first seven years, the administration has said, the federal government would increase its payments to those states that decided to participate in the new Medicaid. For the next three years, however, the grants to states would be reduced below current levels by an equal amount.

That would leave the federal share of Medicaid’s costs the same under the new formula as under the old for the first 10 years. Greenstein said it would also leave today’s governors with a tough choice: whether to relieve their own short-term budget problems at the expense of their successors eight to 10 years from now.

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Times staff writers Warren Vieth and Elizabeth Shogren contributed to this report.