Clinton, Congress and change.

Change drummed through the 1992 campaigns like a litany. "Now that we have changed the world," Governor Bill Clinton said to the Democratic national convention, "it's time to change America."

Newspaper headlines continued the litany after the election. "Clinton Writing Agenda for Economic Change," proclaimed the Washington Post. "Change Carries the Day," shouted USA Today. "Sea Change: Democrats and Republicans Face a Transformed Political Landscape," intoned The New York Times.

Changes began in Congress before the campaign was even under way. Perhaps Congressman Dennis Eckart of Ohio started it. A young, five-term member of the Energy and Commerce Committee, he announced on Sept. 30, 1991 that he would not seek re-election. Colorado Senator Tim Wirth and North Dakota Senator Kent Conrad followed, citing congressional ineffectiveness in their dramatic retirement announcements. Then there were the primary election defeats: Illinois Senator Alan Dixon and Arkansas Congressman Beryl Anthony were among those 20 victims. In all, there were 99 vacancies in Congress to fill before the general election campaigns began.

Indeed, the climate in Washington should be congenial for change over the next several months. For the first time since 1980, the presidency and Congress will be controlled by the same party. Congress will have 123 new members, the largest freshman class since 1948. At least 18 members of the House Appropriations Committee will be serving there for the first time; so will seven members of the powerful Energy and Commerce Committee and 13 of the Ways and Means Committee. Important committee and subcommittee chairmanships will also have turned over throughout the House and Senate.

The heightened possibility for change in policy direction poses substantial challenges, risks and opportunities for state governments. Major Clinton priorities, such as economic recovery, deficit reduction and health care are issues with critical implications for states. In addition, the altered political conditions improve the chances that items on the states' agenda, for example, mandate relief and notification when Congress pre-empts state laws, will also be adopted.

What, then, can states expect in this different climate? As the Clinton administration begins, what do they have at stake?

State legislators recognized long before most federal officials the devastating effect the deficit has on the economic health of the country. The deficit has affected private investment and productivity. It has drastically reduced spending on critical long-term needs, such as education and infrastructure. It has sapped the federal government's ability to assist state and local governments. Indeed, the federal government's ad hoc response to the deficit--imposing unfunded mandates on the states and raising revenues traditionally ceded to the states--has exacerbated state budget problems and stifled innovation. Ohio Senator Richard Finan summarized the state's plight in testimony before the National Economic Commission in 1989. "Don't," he implored, "export the federal deficit to the states."

It isn't easy to find a set of solutions to the deficit problem that does not impose further harm on states' fiscal systems. In fact, several recent spending and revenue proposals have the potential for exporting even more of the federal deficit to the states.

An example of this is the September 1992 report of the Strengthening of America Commission, co-chaired by U.S. Senators Sam Nunn of Georgia and Pete Domenici of New Mexico. The report is a comprehensive, step-by-step plan for eliminating the deficit. It has two key elements--a spending proposal and a revenue proposal. Both have serious implications for state governments.

The spending proposal would cap federal contributions to all entitlement programs except Social Security. The commission anticipates this would save $660 billion over 10 years. Because state and local governments share in the cost of some of these mandatory programs--especially Medicaid--their officials are naturally concerned about how a cap would affect state and local budgets.

Culminating a six-month project, the National Conference of State Legislatures, the National League of Cities and the National Association of Counties released in October 1992 a joint statement designed to call attention to the intergovernmental implications of entitlement reform. New York Senator James Lack, who co-chaired the effort on behalf of NCSL, points out, "Our joint task force did not oppose entitlement reform. Indeed, we believe it is essential to deficit reduction. We are concerned, though, that the cap approach could merely shift the costs of the programs to state and local governments. And we suggest that meaningful entitlement reform cannot occur without comprehensive reform of the nation's health care system."

The Nunn-Domenici plan has a dramatic proposal for altering the federal revenue system. Advocated in several variations by some economists, including Alice Rivlin and other public officials, this proposal would substitute a consumption-based tax for the current federal tax system. State officials have long been wary of such plans. For example, official NCSL policy on this question states, "A national sales tax in any form would seriously erode the sales tax base which has been the domain of the states and a mainstay of fiscal policy in most state and local governments." State legislators, like Arizona's Minority Leader Art Hamilton, argue, "The worst effect of a national value-added tax on state finances would be on depressing consumer demand. Economics 101 tells us that if we raise the price of goods, we all buy less. If we buy less, that means less revenue for state governments."

President-elect Clinton made economic recovery the major theme of his campaign and is expected to offer a stimulus package almost immediately upon assuming office. State legislators, like many other public officials, are torn between wanting economic growth and believing that recovery should not be accomplished at the expense of reducing the deficit. Some would agree with Colorado Senator Tilman Bishop: "Tell the federal government not to spend money on us that they don't have." Others, including California Assemblywoman Gwen Moore, assert that some short-term stimuli would create jobs and promote investment that will eventually help bring down the deficit.

NCSL's executive committee, in a statement adopted in March 1992, suggests a structure if the federal government were to act in this area. Its position emphasizes the need to preserve the integrity of the intergovernmental fiscal system. Its key elements include:

* Allocating new spending through existing programs,

* Reducing state match requirements,

* Preserving the integrity of state budget requirements,

* Not increasing the deficit over the long term.

The states have a strong interest in both short- and long-term health care reform. Although the combination of a Democratic president and a Democratic Congress increases the chances for comprehensive federal health care reform, some state legislators are not sanguine that it will occur soon. "In the meantime," says Maryland Senator Paula Hollinger, "state governments need more tools to experiment with different approaches to health care." Among these tools are allowing states to avoid the cumbersome Medicaid waiver process, adopting legislation to let states try out alternative approaches such as managed care and obtaining exemptions from current ERISA preemption provisions.

The altered political climate increases the chances that other legislation may move through Congress with a greater likelihood of concurrence by the president. Legislative proposals that would promote the states' ability to innovate and others that would provide some fiscal relief may benefit from this changed situation.

Several members of the 102nd Congress introduced legislation that would offer states relief from unfunded federal mandates. They offer a range of approaches. Some, for example, would allow members to raise a point of order against legislation containing an unfunded mandate. Others, based on similar state laws regarding local governments, would require the federal government to provide sufficient funds to the states to comply with the mandate. Virginia Congressman Jim Moran, sponsor of one of these bills, says the legislation would "make Congress aware of the costs being imposed on shrinking state and local budgets." A recent NCSL study, for example, estimated that legislation proposed in Congress in 1990 would have cost states approximately $16 billion.

Many state legislators also support legislation, originally introduced in the 102nd Congress by U.S. Senator Carl Levin of Michigan and Wyoming Congressman Craig Thomas, that would require Congress to include a "pre-emption notification" clause in legislation that preempts state laws. The clause, according to recommendations approved by the U.S. Advisory Commission on Intergovernmental Relations in 1990, would serve two purposes. It would clarify for judges whether or not Congress meant to preempt, and it would explicitly raise preemption as an issue for congressmen weighing their support or opposition for particular legislation.

Legislation that would allow states to require mail order companies to collect their sales taxes provides some fiscal relief for state and local governments. This legislation, whose prime sponsor has been House Judiciary Chairman Jack Brooks, would reverse the Supreme Court's 1967 Bellas Hess decision. The Advisory Commission on Intergovernmental Relations estimates that states lose as much as $3 billion each year in uncollected sales taxes.

Congress' agenda in 1993 will be crowded with many other issues. Some, such as reauthorization of the Resource Conservation and Recovery Act, education reform, and extension of tax credits for low-income housing and mortgage revenue bonds, were left unfinished in 1992. Others are items with which Congress will deal for the first time in several years. They include reauthorization of three major environmental programs--the Clean Water Act, the Safe Drinking Water Act and Superfund--and Chapter 1 of the Elementary and Secondary Education Act.

This month Governor Bill Clinton becomes the 42nd president of the United States. The Congress he will work with is one drastically altered by retirements and election results. The president and Congress will be consumed by policy initiatives that will attempt to alter the country's direction. State government's stake in policies that result from the change is incalculable. Nearly every domestic policy decision, whether deficit reduction, mandate relief or health care reform, will affect how states continue to function as partners in the federal system.

Their Roots Are in State Legislatures

There are 123 new members of Congress this year. They form the largest freshman class since 1948. There are 110 new members in the House (25 percent) and 13 new senators (13 percent).

In the freshman class are 61 members--57 in the House and 4 in the Senate--who formerly served in state legislatures. Forty-eight were legislators during the 1991-1992 term; 13 served earlier in their careers. Former state legislators continue to comprise about 48 percent of the total membership of the U.S. Congress.

Among the new congressmen are former NCSL leaders U.S. Senator Paul Coverdell (Georgia), New York Congressmen John McHugh and Maurice Hinchey, Pennsylvania Congressman Jim Greenwood, Texas Congresswoman Eddie Bernice Johnson and Virginia Congressman Bobby Scott.