This report focuses on the new intergovernmental relationships developing between cities, States and the Federal government as funds are "block granted." The first chapter discusses the historical background of federalism and the redistributive role of government, and puts the "new federalism" in perspective. The following three chapters deal with the impact of the new federalism on urban populations, the states' response to the new federalism, and the emerging relationships in governance and politics. The fifth chapter identifies the new participants in the state urban arena--community organizations and interest groups. An appendix, which makes up two-thirds of the document, contains four case studies on State implementation of block grants, in California, Michigan, South Carolina, and Texas. A further appendix provides research guidelines for studying the States' implementation of block grants. Five tables detail: (1) the decline in combined AFDC-Food Stamp Benefits adjusted for inflation, by State; (2) major features of Federal block grants; (3) income restrictions, fees, and services specified by block grants; (4) decline in combined AFDC-Food Stamp Benefits adjusted for inflation; and (5) funding levels for block grants and consolidated categorical programs. FY 1979-1982. (RDN)