GOVERNORS and mayors had hoped that they could get quick congressional reauthorization for the expiring revenue-sharing program. But revenue sharing has bogged down, along with much else, in the larger debate over the federal budget. This pause in the action affords additional--and, as far as local officials are concerned, unwelcome-- opportunity to think over the purposes of the program.
Although revenue sharing accounts for only a small part of local revenues--and states no longer receive any share at all--the program is every local official's favorite federal aid program. Because the money has no strings attached, localities can use it to fill unanticipated gaps or to buy extras not covered in their budgets. With most state and municipal treasuries in sorry condition, political pressure for continuing the program is very strong.
The major points of contention are how much money to authorize and how to distribute it among localities. The House Government Operations Committee has approved a bill giving localities an increase of $730 million a year over their currently allotted $4.6 billion. But the administration and the Senate Finance Committee want to keep the program at its current level.
Denying further aid to fiscally strapped cities, many of which will recover slowly if at all from the recession, is hard. But it's important to remember that the major conceptual underpinning for revenue sharing has evaporated. When revenue sharing was set up in the early 1970s, it was meant to let states and localities benefit from the superior and more equitable federal taxing power, which, it was then expected, would soon produce unneeded surpluses in the federal Treasury. We don't have to tell you what happened to that expectation.
Now what is at issue is not revenue sharing but deficit sharing. A case might be made that federal borrowing is more efficient than local borrowing, but the primary justification for the program must now depend on a second concept. That is the idea that local tax capacity is often least sufficient in areas where need is greatest, so that the federal government should step in to equalize local resources.
The current revenue sharing formula, however, gets low marks on almost any measure of fairness. The best that can be said for it is that it was an artful political compromise when it was devised and that even disadvantaged states and localities are afraid to raise the issue for fear of rocking the boat. As a result, many far-from-needy local government units--including some set up just to receive revenue sharing--receive funds and, sometimes, fritter them away on low-priority items. The Finance Committee adopted an amendment by Sen. David Durenberger requiring that any additional funds be allocated by a formula that would target funds somewhat more closely on localities needing them. That seems like the minimum sort of reform that should be required by a Congress that purports to be concerned about wasting scarce federal money.