Federal tax and budget report.

NCSL believes that an important means of achieving federal fiscal responsibility while continuing to meet essential service needs is to devolve program authority to the states in the form of block grants. The idea is to consolidate a large number of federal categorical grant programs into one funding source, eliminate most of the grant conditions and mandates that prescribe in detail how the money is to be spent, set reasonable goals for program success and let the states get the job done while reducing overall costs, especially for administration and nonessential services.

In 1995 and 1996, the 104th Congress considered proposals for sweeping reform of the federal grant-in-aid system that would have substantially devolved authority to the states through block grants. Only one major experiment in devolution emerged at the end of 1996 - the welfare reform program - which provides a model for future devolution of programs to the states.

Less than two years ago, the federal government gave the states authority to reform welfare (building upon 37 state welfare reforms adopted prior to the federal law). That trust was well placed. The initial results are beyond expectation. State legislatures have enacted innovative programs targeted to the real needs of welfare recipients, caseloads are at their lowest in 25 years, and most important, many parents have found work that allows them to support their children without welfare.

The success of devolution is most clearly illustrated by the stunning decline of welfare caseloads around the country. Seven states have achieved reductions of more than 40 percent. In five states, caseloads have dropped more than 50 percent. Altogether, caseloads across the nation decreased 27 percent between January 1993 and July 1997.

Although welfare reform is the foremost model of successful devolution, there are at least three other examples that are worthy of mention: safe drinking water, children's health and Medicaid administrative reforms.

Virtually every state now has a new or revised revolving fund in place for safe drinking water. These funds will serve a program that now has fewer mandates and more flexibility, thanks to legislation enacted by Congress in 1996 with NCSL support.

NCSL also supported children's health legislation enacted by Congress last year. Again, while not perfect, it provides greater flexibility than the norm. Three state plans were already approved in...