By Ellen Moyer // Photo by Tony Lewis, Jr.
In 1972, economist Walter Heller developed a program for sharing Federal Revenue with state and local governments. Having more money in localities closer to the people, he theorized, would better address the variety of local needs.
President Nixon agreed. In October, 1972, he signed The State and Local Assistance Act that allocated $30.2 billion spread out over five years for local use.
The law specified that one-third of the allocation would remain with its respective state and two-thirds would be allocated to local counties and towns. As government needs varied, oad discretionary powers were given to local authorities to decide on how to spend the money. Community meetings and public forums to identify spending priorities were a part of the program. Annual audits were required. During the 14 years of this popular program, which served to depress local taxes, the Feds shared $89 billion with state and local governments.
But in 1987, President Reagan changed this public participatory community development revenue program to a Block Grant program of earmarked funds. Financial aid to states was to be used for social welfare, law enforcement, and health services. Shared dollars were reduced and the system of federal controlled spending replaced the system of local autonomy, non-earmarked spending.
States scrambled to aid local governments that could not absorb state revenue loss. Property taxes, the principal source of revenue for local governments, were increased. In Maine, the Bangor Daily Newspaper described a rancorous legislative debate over $40 million of State revenue to be shared with the State’s towns. The allocation passed despite the negative partisan shouts of “welfare for municipalities” from the Republican legislators.
The source of revenue to support programs to serve the public good at all levels of government comes from you and me, from taxes on our income, property, spending, transportation, and entertainment. The vast majority of us live in cities and towns. So it is the other way around—cities and towns are the fuelers of the federal and state coffers. In the revenue sharing department however, municipalities, with the least authority to raise self-supporting revenue, are at the bottom of the ladder.
In Maryland, the State is the great revenue collector and keeper of the dollars. Of its approximate $32 billion budget, it gives back 23 percent in aid to local governments for education, li aries, community colleges, and health managed by the counties. About 30 percent of the State’s revenue comes from the Federal Government for ear-marked programs in health, human resources, public and higher education, and transportation. Local city budgets reflect about four percent of state and federal revenues to dedicated programs; county budgets about 30 percent. Support for all local governments comes from additional revenue raised on property and service charges.
Discretionary budget dollars, the ones the public can lobby for or against, are few. Recreation and parks, economic and community development, representing about eight percent of local budgets, take the unt of program reductions.
Control of the purse strings is about power and power relationships. Dedicated and ear-marked funding principles established at the federal level and passed to the states leaves little room for public discourse. Currently in a representative form of government “of, by, and for the people,” for the people dominates our revenue sharing policies and puts pressure on local governments to raise its own income to meet local needs. Perhaps this is as it should be.
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