DEVOLVE AND CONQUER

By DAVID VAN BIEMA

On any other day, the obscenely long list unwinding from Michigan Governor John Engler's hands would not be one he would be eager to display. It seemed to extend forever. Aid to Families with Dependent Children was one entry; food stamps was another. In all, it contained 335 items, each a federal program. To Engler and his gubernatorial colleagues, each also represented a different federal bureaucracy to which he had to kowtow; a different process in which he had no say; and a specific amount of money he had to pay out of his state's treasury, whether he liked it or not. It was a Governor's nightmare list.

And yet Engler was grinning broadly. He was parading the specially prepared parchment not as a catalog of woes, but the way a general might display his enemy's head on a pike. Welfare entitlements, he announced, were dead. ``Over the weekend,'' he later joked, ``we went through the denial, the mourning and the wake.'' Nor did his diagnosis seem farfetched.

The National Governors' Association came to Washington for its annual meeting last week; but in contrast with their usual posture as supplicants, its members arrived as conquerors. Both Newt Gingrich and Bill Clinton paid them court. Their favorite piece of legislation, a restriction of the Federal Government's power to impose rules and make the states pay for them (otherwise known as unfunded mandates), became the first major chunk of the Gingrichian program to pass both houses of Congress. Clinton, for his part, announced that he was reducing 271 mostly unilateral federal programs to 27 ``performance partnerships'' with the Governors. Of Clinton's proposal, Engler said it was a good start. He knew Congress would outdo that.

Yes, 1995 is a fine year for the states, and perhaps something more. On one level, it appeared that the Governors were simply being freed to govern. But the repeated pledges of federal leaders and a blizzard of state-friendly legislation suggested something larger. Some thought they saw American government decentralizing itself, heading back to either the Jeffersonian ideals of local governance and part-time legislators (if you are a fan) or the social miseries of the 1920s and pollution of the 1970s (if you are not). Said Geoffrey Garin, a Democratic pollster: ``This is the opening debate over the radical Republican agenda.'' Senate Budget Committee chairman Pete Domenici's analysis was simultaneously more sanguine and more portentous: it might mark a change in ``how we define the role of the Federal Government in the next century.''

In any case, it was sudden. Only a year ago, Utah's young Governor, Mike Leavitt, conceived a grand confab for the fall of 1995 called the Conference of the States, to which he planned to invite his colleagues and state legislators. It was intended as a national forum on the skewed relationship between federal and state power. Most Governors considered a re-evaluation long overdue. Although the New Deal's assumption by the Federal Government of the U.S.'s primary responsibilities and powers may have been one of the century's noblest undertakings, at some point in the late 1960s or early '70s the pendulum had swung too far. There was, it seemed, no part of life too small for the Feds to micromanage. Or to mismanage, since most programs were fought over by multiple sparring congressional committees. Creative Governors like Engler, Wisconsin's Tommy Thompson and Massachusetts' William Weld, who have since been credited with operating ``laboratories of democracy,'' felt more like lab rats, constantly scurrying to Washington to procure federal waivers for any innovation. California's Pete Wilson and Florida's Lawton Chiles sued federal authorities for funds to pay for their immigration policies.

But until recently no one outside the states seemed to be paying attention. The Democratic-run Congress happily ignored the likes of Republicans Weld, Engler and Thompson, played down the lawsuits and appeared not to hear rhetoric like that of Arizona Governor Fife Symington, a Republican who recently speechified, ``Let the little potentates of the Potomac be warned; we are growing weary of your ways, so kindly get out of ours.''

Well, the little potentates got warned--in spades. ``Nov. 8 changed everything,'' says Massachusetts' Weld happily. It was not just that the midterm election's big winners were the Republicans, who traditionally favor state government over federal. It was that, as Leavitt says, ``The Governors are the embodiment of that level of government the people said they wanted.'' Weld, Engler and Thompson were perfect Gingrichian heroes--practical, agile, local. By the time the returns were in, any Washington pol who didn't want to hand them part of his power could be accused of being out of touch. All that remained to be seen was whether it was for real. The movement's name--devolution--has a nice millennial-Tofflerian ring. But veteran legislators remembered that Republicans--most recently Ronald Reagan--have promised this sort of thing before. While Reagan downsized many federal programs, he failed to exempt the states from picking up the slack. Result: big federal-budget cuts and big increases in state taxes. This time both sides of Pennsylvania Avenue were on board, but even as Gingrich looked on and Clinton talked about moving beyond the ``benign mistrust'' that he said had characterized federal-state relations, some of the Governors still felt benignly mistrustful.

The new legislation most straightforwardly pleasing to the Governors is the restriction of unfunded mandates, which the House, joining the Senate, passed by a 370-to-4 vote last week. Neither of the bills, whose differences must still be reconciled, scraps the mandates completely. Democrats especially maintained that there are some things, including achieving clean water and air, the states must be directed to do and pay for.

But to the Governors, the legislation's only flaw was that it might not prove binding on the balanced-budget amendment, another Gingrich juggernaut stalled--probably only temporarily--in the Senate. The Governors fear that the federal budget may be balanced through a Reaganesque dumping of burdens on the states. Technically, an unfunded-mandates law should prevent that, but a law could be easily repealed by a future Congress panicked at the amendment and willing to pick the states' pockets. Vermont's Howard Dean, chairman of the Governors' Association, maintains that the amendment will face stiff opposition among the states; in fact, he said, ``it would be a political sham, and I don't think it would be be approved.''

Perhaps the thorniest Newtonian gift to the nation's statehouses--and the one that has split the normally collegial Governors Association--is the block- grant proposal on welfare. Currently, the Federal Government determines how much money poor people get, but the states must administer the program and pay part of the bill. Dean and other gubernatorial Democrats opposed a plan, inspired by the ``Contract with America,'' that would bind the programs into larger aggregates, with each state receiving a fixed sum of money per aggregate, and more or less let the states do as they please. Simply put, the Democrats distrust the generosity of their colleagues. Referring to the 1950s and '60s, when Southern Governors used states' rights to justify atrocious segregationist behavior, Dean told he opposes giving the states free rein on welfare. ``Some states were responsible, and some weren't. I don't think we need to turn the clock back.'' But he was outgunned by the Republicans, at least within the Governors' Association.

Various Governors predict that after the welfare issue is settled, Congress will debate ``devolving'' the responsibility for Medicaid to the states (``It's four times bigger than welfare,'' says Mike Leavitt hungrily); Congress will follow that with what is sure to be a bruising battle over the Clean Air Act. It is possible that by the time Leavitt's Conference of the States rolls around in the fall, there may not be much more to talk about.

On the other hand, if Congress turns out to be playing three-card monte with its promises, Leavitt's convention could be the hottest ticket around. Many Republican Governors have promised tax cuts on the assumption that the balanced-budget amendment will not hit them too hard. Dean thinks that is wishful thinking. ``As soon as Congress passes the balanced-budget amendment and [House Budget Committee chairman John] Kasich comes out with a budget, there are going to be a lot of Governors moaning and groaning. They're going to look at their own numbers and say, `Oh Lord.' '' They may not be the only ones. Says an insider: ``If Newt screws the big Republican states, that will be the end of the Republican revolution.''

--Reported by Sam Allis/Washington, Jordan Bonfante/Sacramento and Richard Woodbury/Salt Lake City

With reporting by SAM ALLIS/WASHINGTON, JORDAN BONFANTE/SACRAMENTO AND RICHARD WOODBURY/SALT LAKE CITY