Washington
The fate of revenue sharing: Will big cities get a larger share?
AS ECONOMIC conditions got worse this year the outlook for extension of federal revenue sharing dimmed perceptibly in Congress. No one is preparing any funeral orations yet, but the long-term continuation of the huge revenue redistribution program in anything like its present form is in more doubt than at the beginning of the year's session. This is particularly true in the House of Representatives.
In hard times, generally, the legislative branch is under more pressure to put money where the need is most urgent and where the economic impact can readily be noticed. When it was enacted in 1972, revenue sharing represented a conscious decision to disburse funds more or less automatically as a matter of right among 39,000 units of government. Affluent and impoverished units were cherished alike. Since then, however, there has been a recession; congressional Democrats have trotted out various pump priming plans, not all of which President Ford found acceptable. New York, Detroit, and some other big city governments have plunged closer to fiscal ruin, and the House committee that has revenue sharing responsibility has been in no hurry about getting around to it. It now appears likely that the issue will carry into 1976 and the early part of the election year.
Several prominent Democratic senators, among them Edmund S. Muskie and Hubert H. Humphrey, positioned themselves early behind a supplemental form of flexible financial aid that they call counter-cyclical assistance to state and municipal governments. Wherever unemployment goes over 6 per cent in a jurisdiction, that government would qualify immediately for additional federal funds depending on the severity of unemployment and the comparative local tax load. As employment improved, the Payments would be reduced and eventually phased out altogether. What sense does it make, proponents of this approach ask, for the federal government to be cutting taxes and doling out money for public service jobs and accelerated public works when the state and local governments are required to raise their taxes, lay off employees, trim services, and defer construction projects? A state government might remove one worker from the payroll and use federal "public employment" resources to replace him with someone else. Similarly, a citizen might have to use his federal tax refund to pay higher and more regressive state taxes.
If coalition collapses
A strong case can be made for temporary federal aid that is turned on and
off quickly as an effective anti-recession stimulant. Money for public works
is notoriously slow in being spent, and
the recession is usually over by the time
the cash reaches the pockets of workers.
Muskie's plan is for one-third of the
total to go into a pot for the states
(which is about the same split as
revenue sharing) with the remainder for
the cities. Nevertheless, in testimony
before Muskie's subcommittee, the
League of Cities admitted to some
reservations about whether the states
were really that deserving. They
thought perhaps the mayors ought to
get a bigger cut. One of the secrets
behind the political accomplishment of
revenue sharing in the first place was
the alliance of state, municipal, county
and township officials. If the coalition
collapses, there are many in Congress
who would love to substitute categorical
grants. Relations between metropolitan
and rural Democratic congressmen
have deteriorated also, with the urbanites killing farm bills and the farm
representatives voting against housing
bills.
Many of the governors suspect that Muskie and Humphrey see their counter-cyclical plan ultimately as an alternative to revenue sharing. This the senators deny. Muskie says he favors the retention of revenue sharing with some changes that would give more to the governments with the most problems—like the older central cities—protect minority groups against discrimination, and spur the recipients to make their own tax systems less regressive. At their summer conference in New Orleans the governors voted down a resolution supporting countercyclical aid. The Ford administration, most Republican governors, and many Southern Democrats at the statehouse level are sold on revenue sharing about as it is and don't want it jeopardized.
It may be relevant, however, to note that Congress is not doing business in all the same old ways. The House and Senate now have Budget Committees and a mechanism at last for making coordinated spending decisions. Comparative needs can be assessed and a determination arrived at about the desirable budget deficit, before it's too late for adjustments here and there. Under the new system, a dollar of revenue sharing for some wealthy suburban community can be weighed against other purposes.
Although Muskie is chairman of the Senate Budget Committee, the real problems for revenue sharing are lodged in the House. If the accepted wisdom is correct, the many prospective presidential candidates in the Senate are too beholden to the big city mayors and big state governors to abandon an established program of such importance. In the House though, an escalating round of partisan economic policy clashes between the Democrats and a veto-brandishing President could make matters worse for revenue sharing. Any bill that comes out of the House is almost certain to give a bigger share to the neediest population centers. Then too, if the economy is still in a slump, some form of counter-cyclical assistance might be grafted on as a separate section of the legislation.
September 1975 / Illinois Issues / 287