The Fiscal Impact of Revenue Sharing

Federal revenue sharing will have much more effect on state-local finances than nationwide revenue and spending aggregates might suggest, because of the impor tance of changes at the margin and the differing relative benefits of various areas and jurisdictions. It will be a long time before data needed for sophisticated efforts to measure the program's impact can be applied. The real fiscal effects undoubtedly differ from those that might be inferred from official reports about the use of shared revenue, which take no account of other, resulting changes in the budgets of recipient governments. Summary trend data suggest that the program has increased state-local spending for payrolls and construction, but the magnitude and composition of these developments cannot yet be closely gauged. Fiscal effects for various areas and jurisdictions will differ markedly due to the diversity of their relative gains, which range consid erably from state to state and much more so at the local level. The program apparently will, to a very modest degree, improve the competitive fiscal position of metropolitan central cities relative to their suburbs. Otherwise, however, the fund distribution seems likely to permit relatively more easing of local taxes or more increases in local government spending in thinly populated areas, where levels of taxation and financing are comparatively low, than in urbanized higher-cost areas.