Click for next page ( 18


The National Academies | 500 Fifth St. N.W. | Washington, D.C. 20001
Copyright © National Academy of Sciences. All rights reserved.
Terms of Use and Privacy Statement



Below are the first 10 and last 10 pages of uncorrected machine-read text (when available) of this chapter, followed by the top 30 algorithmically extracted key phrases from the chapter as a whole.
Intended to provide our own search engines and external engines with highly rich, chapter-representative searchable text on the opening pages of each chapter. Because it is UNCORRECTED material, please consider the following text as a useful but insufficient proxy for the authoritative book pages.

Do not use for reproduction, copying, pasting, or reading; exclusively for search engines.

OCR for page 17
1 Trends and Developments in Federalism: The Meaning for Urban Policy Charles R Waken THE EVOLUTION OF FEDERALISM Since the New Deal era of the 1930s, a steady expansion of the fiscal and programmatic responsibil- ities of the national government has characterized American federalism. First, national authority was exercised to remedy the social and economic impacts of the depression. Then, the federal muscle was flexed again after World War II to meet the domestic agenda neglected during the war. Attempts were made to reverse these centralizing trends during the Eisenhower adminis- tration with the appointment of the Kestenbaum Commis- sion in 1953, which was asked to sort out federal and state responsibilities. The commission's recommenda- tions met with little success, however, in Congress or in the various executive agencies. We had moved irre- versibly into the condition of Marble cake federal- ism.~ During President Johnson's era of the Great Society and Creative federalism,. there was a further increase in direct federal-local relations, the bypass- ing of state governments, and an emphasis by the federal government on urban programs and policies. The Nixon presidency renewed the effort to reverse these centralizing trends through its inauguration of a anew federalism,. which as David Walker (1981:104-105) explains, was ostensibly anti-centralization, anticategori- cal, and antiadministrative confusion. In posi- tive terms, it supported: greater decentraliza- tion within the federal departments to their field units; a Revolution of more power and greater discretion to recipient units; a 17

OCR for page 17
18 streamlining of the service delivery system generally; a definite preferring of general governments and their elected officials; and some sorting out of servicing responsibilities by government levels. Yet, despite President Nixon's philosophy, the trend toward centralization continued unabated. Federal aid to state and local governments rose from $20.3 billion in 1969 to $68.4 billion in 1977, when President Ford completed the Nixon term. President Carter launched an ambitious process to formulate and articulate a national urban policy that would, for the first time, make explicit the responsi- bility of the federal government to confront certain urban problems and work toward their resolution. Carter's announcement of MA New Partnership To Conserve America's Communities" in March 1978 was hailed as a major achievement by city officials. Yet, when put under closer scrutiny, the 1978 national urban policy could be characterized as little more than a post-hoc codification and refinement of earlier presidential and congressional initiatives. In addition, while federal policy toward urban areas had been articulated, the programs that were to be implemented were cast within a framework of fiscal conservatism. The demands of the mayors and other urban constituencies for a Marshall Plan. to save America's cities were rejected by the Carter administration as infeasible and unrealistic in light of growing public concern over inflation and demands for a reduction in federal deficit spending. The interest in urban and social programs expressed by the Carter administration was also coupled with an antibureaucratic philosophy. Campaigns to reduce paper- work, reform the regulatory process, and streamline administrative procedures were being mounted at the same time, and those objectives infused the urban policy process. While the Carter presidency embraced the concept of national leadership on urban policy and espoused a wide range of national goals, it also advo- cated a slowing of federal government expansion. A pragmatic philosophy of federalism had emerged that attempted to remain consistent with Democratic Party principles while still meeting the demands of fiscal austerity and appealing to the antigovernment, antitax- ation mood of the American people (Walker, 1981).

OCR for page 17
19 Federalism under the previous four presidents-- Johnson, Nixon, Ford, and Carter--was defined more by pragmatic and political considerations than by theory or ideology. President Reagan, however, came to office with an ideological concept of federalism based on strong con- victions that the domestic role of the federal govern- ment should be limited; the federal government should deal primarily with the states; and the reduction of fiscal and economic disparities between communities was not a national responsibility (USHUD, 1982). Reagan's New Federalism, in some respects, however, has continued the principles pursued by his predeces- sors: greater reliance on block grants, greater dis- cretion to states and localities, and regulatory reform. The need to curtail federal expansionism, reduce federal intrusion into state and local affairs, and work toward, if not for, a balanced federal budget has become a mainstream political objective. The devo- lution of program responsibility to state and local government and a reduction in federal assistance have become a continuing trend, regardless of the party in power. ECONOMIC CONDITIONS It is hardly debatable that our federal system has undergone a process of realignment. Yet, the extent to which the relevant balances of power and responsibility within the federal system will be altered in the future and the consequences of impending changes are less cer- tain. Ideologies aside, we can be certain that fiscal and economic conditions have and will continue to define federal-state-local roles. Fiscal austerity and ~budget- driven federalism,. accompanied or not by shifts in the public's expectations of government, will have major consequences for America's cities and force changes in the shape and content of national urban policy. National policy decisions and economic conditions substantially affect state and local government, yet additional forces are at work, including basic shifts in the economy, interregional migration of economic activ- ity and population, technological advances, public attitudes, and court decisions. All of these factors influence the evolution of federalism, and the combina- tion of a number of major developments can be expected

OCR for page 17
20 to produce long-term consequences for state and local government. The effects of the 1982 recession varied from region to region and from state to state, yet for most cities the result has been either a slowdown in growth rates or an erosion of tax base and revenues. Unemployment hit a record high of 10.8 percent in December 1982, but it has since declined to a stable 7.8 percent. However, unem- ployment rates in some cities reached levels above 20 percent, and for black teenagers they climbed to the 40-50 percent range (Seaberry, 1984). These levels of unemployment produce the double- whammy effect of reduced revenues from personal income and sales taxes and increased demands for social and welfare expenditures. (The 1982 budget cuts reduced Aid to Families with Dependent Children [AFDC] and Food Stamp payments by approximately 25 percent.) State economies dependent on such industries as timber, homebuilding, automobiles, and steel were especially hard hit--for example, Oregon, Washington, Michigan, Minnesota, and Illinois. Some state-local economies have become hyper-responsive to national economic cycles. As the old adage goes, when some parts of the country get the sniffles, others come down with pneu- mon~a. THE PUBLIC MOOD The prevailing mood of the voting public has been antitaxation and antigovernment. California and Massachusetts provided the starkest examples of voter- imposed propositions that rolled back property taxes and limited state tax increases. Limitations on state and local expenditures have spread. State revenues have been limited constitutionally in 9 states and statu- torily in 11 states. In 38 states, some type of limit has been imposed on the property tax (Gold, 1983). It is uncertain whether the tax revolt movement is abating or continuing. In November 1983, voters re- jected ballot measures to roll back tax increases in Ohio and Michigan. Yet in Florida, a constitutional amendment was placed on the ballot in 1984 that would have rolled back property taxes and limited state revenues. The state supreme court, however, struck it down as unconstitutional. Some states have increased taxes to compensate for the loss of revenues due to poor economic performance.

OCR for page 17
21 In most cases, these revenue ~enhancements. have been for specific purposes, such as education or highways. recent study of federalism led by Richard Nathan and Fred Doolittle of Princeton University has concluded that the states are generally ratifying the budget cuts at the federal level and not making an effort to replace the loss of federal aid (Nathan et al., 1982). The annual public opinion poll of Changing public attitudes on governments and taxes. undertaken by the U.S. Advisory Commission on Intergovernmental Relations (hereinafter ACIR) included a new question in 1983 on what the states should do in light of the cutbacks in federal financial aid to local governments. Their results show that 18 percent of those surveyed felt that the states should not try to make up any of the federal cutbacks; 46 percent chose to Make up only some of the federal cutbacks as their preference (U.S. Advisory Commission on Intergovernmental Relations, 1983a; here- inafter USACIR). The USACIR poll also reveals a clear public preference for the sales tax as the best method of raising additional revenues. THE DECLINE IN FEDERAL DOMESTIC SPENDING In 1978, federal intergovernmental assistance repre- sented 17.3 percent of total federal outlays, but that was an all-time high, and it has declined steadily since. In 1981, it was 14.4 percent; in 1984, federal aid as a percentage of total federal outlays was esti- mated at 11.3--an amount lower than it was in 1970 (USACIR, 1983c). In fiscal year 1981, federal aid was $94.8 billion. Fiscal year 1982 grants-in-aid declined to $88.8 billion, but were estimated to have risen to $93.5 billion in 1983 (USACIR, 1983c). Cuts made by President Reagan in the 1981 Carter budget totaled $58.9 billion--52 percent of which came from intergovernmental aid (Shirey, 1981). Increases in defense spending, the rising growth of entitlement programs, and interest on the national debt to finance deficits in the $100-$200 billion range may foreclose the possibility of any sig- nificant comeback in federal aid levels. THE SHIFT TO BLOCK GRANTS In 1981, Congress folded 57 categorical, grant-in-aid programs, mostly in the health and social services area,

OCR for page 17
22 into 9 block grants. Most of the new block grants were in traditional areas of state programmatic responsibil- ity; 2 of the block grants, however, did increase the state role. States now have the option to manage the small-cities portion of the Community Development Block Grant (CUBG) program, and about 40 states have taken that option. Funds from the Community Services program, which previously went directly to nonprofit organiza- tions and local public agencies, are now channeled through the states. The block Grants nave state Governments Greater flex- - _ _ ibility and discretion, although not as much as the governors sought. The Reagan administration made it clear that more block grants would be proposed. Pro- posals were transmitted to Congress for Four large block grants--quickly termed 'megablocks '--that consol- idate many categorical programs, general revenue shar- ing, one block grant, and eight of the nine block grants enacted in 1981. (USACIR, 1983b:4). Neither Congress nor state or local officials expressed any enthusiasm for these proposals and action on further New Federalism initiatives was largely stalled. The block-grant trend did continue with the enactment of the Job Training and Partnership ACt, which replaced the Comprehensive Em- ployment and Training ACt. It provided the states a much more significant role in the management and coor- dination of local manpower training programs. CHANGING FUNCTIONAL ASSIGNMENTS The 1982 and 1983 budget proposals provided some indication of the shifts in functional responsibilities that occurred over the next several years. Federal economic development and physical infrastructure pro- grams were curtailed. Abolition of the Economic Devel- opment Administration was proposed, but Congress kept it alive at a reduced scale. Farmers Home Administration grants and loans for rural facilities were reduced sharply. The popular urban Development Action Grant program was cut by one-third. And, the Environmental Protection Agency's water and sewer grants were no longer to be provided to accommodate population and eco- nomic growth. On the other hand, a five-cents-per-gallon increase in the gasoline tax, which took effect in April 1983, has expanded federal support of highway construction and

OCR for page 17
23 reconstruction. The Washington Post (Feaver, 1983:A3) reported that: Although precise figures are still being com- puted, federal road-building obligations will exceed $12 billion in the fiscal year that ended Sept. 30 [1983]. That is at least $4 billion more than budgeted at the federal level before the tax increase. Overall, the losses in federal support for state and local infrastructure programs outweigh the gains, and the trend toward greater reliance on user charges and borrowing to finance those needs has accelerated. PUBLIC INFRASTRUCTURE AND ECONOMIC GROWTH A special report by Business Week (1981:136) examined the relationship between economic growth and the physi- cal infrastructure of this nation. According to the report: So serious is the decay of the nation's infra- structure and so poor the prospects for its refurbishment that many sophisticated business- men and economists believe that the U.S. is entering a period of severe crisis for state and local government. The report claims that, historically, U.S. economic growth Was dependent on a balance between public and private investment. (p. 137). The report goes on to argue that the President's economic program could Abort if state and local government cannot find the where- withal to build the public facilities needed for sup- port. (p. 137). The arguments set forth in the Business week report are important to cities with declining populations and depressed economies. They raise serious questions about the extent to which services currently provided by the public sector can be ~privatized. and, more importantly, about whether the predicted austerity in public finances will, in turn, retard private-sector economic growth. A recent U.S. General Accounting Office (hereinafter GAO) report has documented the profound structural ^ changes that have occurred in the municipal bond market

OCR for page 17
24 and the adverse impact those changes are having on infrastructure financing. The GAO (U.S. General Ac- counting Office, 1983:11; hereinafter USGAO) points out that: Win 1970, over 95 percent of the $18.1 billion in municipal bond issues was used to finance traditional public infrastructure. By 1982, such use dropped to only 48 percent of new issues.. During the past decade, tax-exempt bonds have been used increasingly to finance multiple- and single-family housing, industrial develop- ment, student loans, and other activities. At the same time, the annual volume of municipal bonds rose From $43.3 billion in 1979 to $77.3 billion in 1982. (USGAO, 1983:11). Interest rates for municipal bonds also sharply in- creased, reaching a record high of 12.84 percent in January 1982, and while overall interest rates in general have declined, the reduced attractiveness of tax-exempt bonds to institutional investors has kept interest rates on state and local borrowing relatively high (USGAO, 1983:1). According to Business week (1981), the rates that states and cities have had to pay for money have almost doubled since 1977. Higher interest rates have led to delays and cancel- lations of bond sales and increased the amounts that must be dedicated to interest repayment. The increase in nontraditional uses of municipal bonds has reduced the amount available for capital construction. These factors, according to the GAO (USGAO, 1983:v), shave combined to contribute to lower investment in general, including reduced investment in state and local infra- structure.. PUBLIC-PRIVATE SECTOR RESPONSES Public-private sector relationships are a separate major topic of national urban policy, but they are also an important aspect of state-local adjustments to the major developments of federalism. Two aspects of this subject need to be highlighted: first, the question of the capacity and willingness of the private sector to assume some of the burden resulting from the reductions in public expenditures; second, the dependency of the private sector on public investment in human resources and capital facilities to enable economic growth. The Reagan administration created a task force on voluntarism to encourage public-private partnerships. A

OCR for page 17
25 number of national organizations, such as The Conference Board and the Business Roundtable, are also actively addressing this issue, and the Committee for Economic Development (1982) has just completed a major research and policy statement on the topic. Yet, members of the business community are also concerned that public expec- tations for private sector responses may be excessive and could place them in a no-win situation. Vernon Jordan (1981) has criticized the Reagan admin- istration's reliance on a private sector response: But there are limits to voluntarism that the Administration refuses to acknowledge. Recent studies indicate that the voluntary sectors will lose some $27 billion in federal aid between 1981 and 1984, and it is unlikely that private dona- tions can plug the gap. Most private giving is to religious organizations, and the social wel- fare institutions, currently most dependent on federal monies, represent the charitable pie. a shrinking sector of Jordan also pointed out that while the new tax law allows corporations to donate up to 10 percent (doubled from 5 percent) of taxable income, corporate contribu- tions have averaged only 1 percent of pretax net income over the last several years. And' the drop in the tax rate has reduced the incentive to give. INTERGOVERNMENTAL COOPERATION OR CONFLICT? A fundamental question for the decade ahead is: Will intergovernmental relations be characterized by greater cooperation and harmony or by increased conflict and competition? At the national level, the coalition of state and local officials, which was formed to secure general revenue sharing, and which stayed together to maintain its funding through successive Congresses, came apart in 1980 when local officials failed to join the fight to maintain the state share of the general revenue. The Reagan block-grant proposals, especially the state CDBG program, increased the conflict among the national, state, and local associations. During the summer of 1981, local officials (the mayors were the most outspoken) publicly condemned the

OCR for page 17
26 states for their ineptitude and insensitivity to urban problems. While these criticisms were part of a polit- ical strategy to dissuade Congress from granting states greater authority, thus constricting the federal-local aid pipeline, they also reflected a widespread disen- chantment with state policies. The cities' lobbying groups in Washington, D.C., had largely ignored the role of state governments; their policy platforms had been silent on state actions. AS the Reagan budget cuts were announced, the battle over federal aid appeared to be a zero-sum game between the states and the locals. When the cuts in federal aid became reality, however, there was a realization that state and local officials needed to join forces to avoid even more draconian reductions. Mayor Hudnut of India- napolis, 1981 president of the National League of Cit- ies, was invited to make a major presentation to the National Governors' Association (NGA). Governor Snelling of Vermont, chairman of NGA, attended confer- ences of the National League of Cities and the Confer- ence of Mayors and urged conciliation and cooperation between state and local officials. AS a consequence, the coalition of public interest groups was reestab- lished and joint positions were once again developed (Stanfield, 1981). changes in the federal aid system began to force the cities to pay more attention to their state capitols. Whether this was a shotgun marriage or a lasting alli- ance remains an open question. There have been some encouraging signs. A number of states brought local officials into planning the implementation of the block grants the Department of Housing and urban DeVelopment required consultation with local governments), and a few even shared review of grant applications with local officials. In December 1981, Nation's Cities Weekly (Reed, 1981) reported: State governments appear to be making a serious effort to involve local governments in designing their small cities community development block grants programs, according to information from a number of cities and state municipal leagues. The cooperation that seemed to prevail at the end of 1981 between state and local officials was partly due to the fact that most state responses to the Reagan federal

OCR for page 17
27 ism initiatives were made by the governors rather than the state legislatures. AS Rochelle Stanfield (1981: 2226) pointed out, The objects of most of the mayors' ire are the state legislatures rather than the gover- nors, with whom many mayors maintain cordial relation- ships.. It is in the legislative arena where the tough allocation decisions are made and where the potential for state-local conflict is high. But beginning in early 1982, when the state legislatures convened and began to prepare their annual or biennial budgets, the conflict and competition increased. If the states are unable, or unwilling, to make an adequate fiscal response to the federal reductions, the demands of city officials for increased local authority and autonomy will surely increase. Yet, it will be politically difficult for legislators to unleash their local governments by repealing existing tax and spending limitations or by endorsing measures that could lead to tax increases. State-imposed controls and local auton- omy will be a growing source of conflict between the cities and the states. The question of intergovernmental cooperation or con- flict will also be an interlocal issue, among cities, counties, and special districts. Competition may arise between local jurisdictions in an urban area when they share essentially the same tax base. Efforts by special districts to increase tax levies may be fiercely resis- ted by city officials, if those increases would restrict the city's own ability to raise revenues. On the other hand, fiscal scarcity could result in more interlocal cooperation in an effort to achieve economies in service delivery. Joint provision of services, transfer of some functions or parts of func- tions from the city to the county, or interlocal con- tracting could become increasingly attractive alterna- tives. Fiscal pressures could also lead to some forms of cooperative financial arrangements to capture growing regional tax bases. URBAN POLICY OPTIONS The trends and developments outlined in the previous section will require major adaptations by our state-local systems of government. A continued ~sorting-out. of responsibilities and resources among the federal, state,

OCR for page 17
33 Use of state regulatory powers in banking and in- surance to prevent ~redlining. and encourage community investment. Use of state pension funds to finance multifamily housing and other urban development projects. State reimbursement of the cost of mandates on local governments. Requirement of local fiscal-impact analyses on proposed state legislation. Encouragement of small business through the relaxa- tion of state regulations and creation of revolving capital loan funds. These are just a few of the actions that states can take to support urban areas. Some of these state actions, along with tax rebates or incentives, have been combined into Enterprise zone. legislation in 17 states, such as that enacted in 1981 by Connecticut, Illinois, Louisi- ana, and Maryland. Connecticut's program (USACIR, 1982b:39) provides a broad package of incentives to stimulate inner city economic development: employment training vouchers, venture capital loans, corporate business tax credits, property assessment deferments, job incentive grant increases, sales tax suspension on replacement parts. . . . A primary virtue of the enterprise zone concept is that it enables states to coordinate and bring together a variety of state tools to aid urban revitalization. State Organizational Alternatives Perhaps as significant as individual state actions is the capacity of state government, itself, to address urban policy issues. How state executive and legisla- tive branches are organized can have an impact on state- local relations. Generally, states have relied on Departments of Com- munity Affairs (DCAS) to provide a focal point for urban and community programs. The effectiveness of these agencies as an advocate for larger cities, however, has been limited. Many of the state DQS have considered their primary clientele to be the smaller communities

OCR for page 17
34 which lack staff expertise and welcome state advice and assistance. In other states, DCAs do not have the authority to coordinate the actions of other state agencies nor a direct relationship to the governor. The designation of a lead agency for urban policy that has a close relationship to the governor and a central policy and coordinating role should be con- sidered. A number of states have created strong offices reporting directly to the governor that combine the functions of budgeting, planning, and policy evalua- tion. A study of urban strategies in 10 states con- ~ _ ,, ~ _ _ ,,, ~ _ _ en, ,~ _ _ _ _ _ _ , _ eluded that the presence of such a central agency was critical to urban strategy implementation (Warren, 1980). Another organizational mechanism useful to state urban policy implementation is the Development cabinet,. such as the one established by Governor Dukakis in Massachusetts and emulated in Michigan. The development cabinet consists of the heads of the state departments or agencies with physical development re- sponsibilities--highways, water, sewer, housing--and serves to coordinate state plans and funding for infra- structure projects in cities. There has also been considerable experimentation with institutions or mechanisms to improve state-local rela- tionships. ACIR ( USACIR, 1981b:1) has recommended that the states create Ma state level advisory commission on intergovernmental relations that could serve as a neu- tral forum for the discussion of mutual interests and problems.. AS of 1981, 11 states had created advisory committees of local officials by legislation or execu- tive order of the governor. The North Carolina legisla- ture set up a Local Government Advocacy Council to in- volve local elected officials in the implementation of the state's balanced growth policy. Other approaches to improving state-local relations and involving local officials in urban policy decisions are temporary or permanent commissions on state-local affairs and local government study commissions . The organization of state legislative bodies also should be considered in developing state institutional responses to urban policy. Some states have standing senate and house committees on local affairs or inter- governmental relations, yet some of the most important legislative decisions affecting cities are made by the fiscal committees--ways and means, and appropriations. There are no pat answers to how state legislatures

OCR for page 17
35 should be organized to deal with urban policy, but a legislative mechanism that focuses on city issues would appear essential. Metropolitan or Substate Regional Alternatives Substate arrangements to meet fiscal disparities or alleviate problems caused by local government fragmenta- tion could offer substantial assistance toward meeting urban needs. Interest in metropolitan approaches goes back to the turn of the century. While the number of proposals and reform attempts has been substantial, accomplishments have been few. Urban researchers have suggested that one of the major reasons why metropolitan reform has met with little success is the lack of public crises of sufficient proportion and visibility to pro- vide the impetus for changing the status quo. Some of the trends and developments discussed in this paper may constitute the ingredients for that requisite crisis. It is difficult to predict, however, whether these changes in federalism will lead to an increase in the reliance on metropolitan approaches or to a withering of the regional institutions that are now in place. The federal program and budget changes initiated in 1981 have had a strongly negative effect on substate regional agencies. Bruce McDowell (1983) has detailed how the federal government had created a network of regional planning organizations over a period of 20 years and then in only 1 year had almost completely withdrawn its support. Federal financial support for regional planning had constituted, on the average, 76 percent of the budgets of generalist regional councils and 92 percent of the specialized regional agencies. A survey (Reid and Stam, 1982) of the federal budget reductions in the 39 programs that supported multi- county, substate activities described the impact on regional agencies: Many already have been forced to make cuts, often major ones, in staff and activity levels. Two 1981 surveys of regional councils found the average council expecting a cut in federal fund- ing of 40 to 50 percent. Even larger cuts are in store for some, and 5 to 10 percent either have been or estimate they will be forced out of busi- ness.

OCR for page 17
36 A 1981 conference at Princeton University on ~Assess- ing Regional Planning. provided a wide variety of per- spectives on prospects for the future and stressed the importance of state government to the continued viabil- ity of regional agencies (Warren, 1983:161): Yet, this meeting did result in a consensus that the future of regional planning rests primarily with state government. The future viability and utility of regionalism does depend upon the interest and support of the states. This con- clusion raises a further set of questions that are still unanswered. How can regional councils gain state support? Can regional councils serve both the state and local governments? Are re- gional councils politically useful tools for state government? Can regionalism contribute to better governance when there are less resources for government? Regional Programming and Interlocal Coordination Some have argued that an imperative for greater use of regional governance will be brought about because of the conditions of fiscal austerity expected to prevail through the 1980s (DeGrove and Stroud, 1981:45): Despite the changed federal presence, the need for planning and service delivery at the grass roots will not be diminished, but in fact will be intensified substantially, both in geographic areas of economic growth and economic decline. This is because in times of resource scarcity, the most efficient use of resources rises greatly in importance, particularly when the electorate demands greater efficiency from government man- agers. There is enormous duplication of effort and considerable inefficiency in the current system of service delivery, some of which could be reduced through regional arrange- ments. One alternative suggested for reducing service dupli- cation and improving resource allocation is the concept of Regional programming, defined as The explicit

OCR for page 17
37 linking of substate regional planning to the budgeting and funding processes of all units and levels of govern- ment in the regions (DeGrove and Stroud, 1981:55). A number of substate districts have used regional program- ming to coordinate capital improvement expenditures. Kentucky has had success in its use of 15 area develop- ment districts to integrate work elements and funding from federal and state programs. The districts develop regional plans for implementation of various capital projects. Their experience has shown that regional pro- grams can reduce administrative costs, as well as the implied costs of uncoordinated capital spending. A sim- ilar approach is being used by the Twin Cities Metropol- itan Council in Minnesota, which has adopted an ~invest- ment framework. to examine local government budgets and to ensure that state investments are consistent with regional development. Local Government Reform Structural reform can also contribute to urban prob- lem solving, and several options are available for reor- ganizing local government. There are 25 city-county consolidations in the United States. But since 1921, only 20 percent of those attempted have succeeded when put to a vote (USACIR, 1982a:396). City-county consoli cation may become a more attractive option because of the fiscal demands on local government, but its use is probably limited to the 73 entities that are single- county and smaller metropolitan areas. Annexation is another approach that should be made easier for cities by the states, yet, here again, its utility is limited to cities in areas where the suburban development is not already incorporated. A more applicable possibility is the creation of two-tier or multi-tier metropolitan governments, where the local units retain their identity but receive re- gional services from a new metropolitan entity. The Portland Metropolitan Services District is the only example in the United States of a directly elected regional government. The Municipality of Metropolitan Toronto is a long-standing Canadian example of this approach to areawide governance. Structural reform of general-purpose local govern- ments might become a more feasible alternative than it

OCR for page 17
38 has been in the past, but it will still be difficult to achieve. A more promising arena for institutional change should exist at the regional level. The most numerous form of government in the United States is the special district; their number totals 25,962. While most are small and have few or no employees, many of them are metropolitan in scope and deliver services across local government boundaries. Consolidation of regional authorities and special districts is one of many alternatives that should be explored. Short of merger, some special districts can be better coordinated by combining their separate policy boards or by requir- ing policy or budgetary review of their programs and activities. Metropolitan Financing It has been argued repeatedly that there are suffi- cient resources in our metropolitan areas to finance public services, if those resources were properly distributed or shared (Hovey, 1977). Aside from an arrangement that enables cities to annex the tax base that lies outside their boundaries, two metropolitan fiscal arrangements that could be adopted are tax-base sharing and regional financing. Tax-base sharing is in effect in the Minneapolis-St. Paul region, and, in a more limited form, in the Meadow- lands area of New Jersey. Under this system, a percent- age of the increased valuation of new commercial and industrial properties is pooled at the metropolitan level and added to the tax base of all jurisdictions in the region. Tax-base sharing provides one means of enabling the whole metropolis to share in a region's growth. It does, however, take a number of years for the property value increases to accumulate and make a significant contribution to the revenues of any single jurisdiction. This approach does not always benefit the central city as much as suburban governments, since they often have a lower per capita property valuation. Metropolitan-wide financing of regional services is another commonly proposed alternative. A number of facilities in the central city, such as the art gal- leries and museums, symphony and concert halls, zoos, and hospitals, serve an entire region and logically should be financed on a regional basis. The Portland,

OCR for page 17
39 Oregon, zoo, for example, is now financed through a property tax levied on residents of the metropolitan district. Regional transit facilities also require an assured base of region-wide financing, which could be achieved by a regional add-on to the local sales taxes of the jurisdictions served. Of course, many services, such as water and sewer, are provided by regional authorities and financed by user charges. CONCLUSION Some of the major trends and developments of American federalism identified in the preceding pages are summa- rized below. These statements are obviously generaliza- tions about a numerous and complex set of actors and conditions. The impact of these trends will vary enormously--some communities will hardly be affected, others will face tremendously difficult choices. The assertive language used in the statements is intended to help focus and sharpen the issues confronting urban policy in the changing American federalism. Federal aid to state and local governments will continue to decline in constant dollar terms and as a percentage of the national budget. Federal aid will be channeled increasingly through state governments and delivered via block grants rather than narrow-purpose categorical grants. States will exercise greater discretion over the use of their own federal aid and over federal funds passed through them to their local governments. The functional and programmatic responsibilities of state governments will increase as the federal govern- ment reduces its funding for, and involvement in, domes- tic program areas. Fiscal pressures on state and local government will continue to strain budgets and make resource allocation decisions difficult. State revenues will be volatile as the economy improves and recedes. Economic constraints and national restrictions on tax-exempt financing will reduce capital investment by the state and local sectors and in some communities retard economic growth. Financing of physical development and infrastruc- ture, with the exception of highways, will shift in-

OCR for page 17
40 creasingly to local governments, public authorities, and the private sector. o Public resistance to increases in state and local taxes, especially property taxes, will continue. Mar- ginal increases in sales tax rates and new or increased user charges will provide some added revenue for states and localities. Private sector responses to the cutbacks in public spending will increase, but will be markedly insuffi- cient in meeting problems of the chronic unemployed and of displaced workers from declining industries. State-local relations will improve in some areas; however, fiscal and local autonomy issues will continue to produce conflict between local governments and state legislatures. The existing and foreseeable developments in the federal system are leading to a serious evaluation and reappraisal of the responsibilities of federal, state, and local governments. These examinations, in turn, should result in major adjustments in the role of each level of government and of the private sector. On the positive side, a range of alternatives and options are available to prevent the chaos and governmental collapse which present-day doomsayers might predict. There is opportunity for viable urban policies within the New Federalism, but only if the necessity of change is accepted. The challenge is to ensure that the changes and adaptations that are made produce policies that are fair, just, and equitable. REFERENCES Business Week 1981 State and local government in trouble. October 26:135-155. W.G. Testimony before the Intergovernmental Rela- tions and Human Resources Subcommittee, House Committee on Government Operations, Hearing on the Federal Role in the Federal System, April 8, 1981. Committee for Economic Development 1982 Public-Private Partnership: Colman, 1981 An Opportunity for American Communities. New York: Economic Development. Committee on

OCR for page 17
41 DeGrove, J., and Stroud, N. 1981 Local and regional governance in the changing federalism of the 1980s. Pp. 45-59 in C. Warren, ea., American Federalism in the 198Ds: Changes and Consequences. Cambridge, Mass.: Lincoln Institute of Land Policy. Feaver, D.B. 1983 Nickel-a-gallon tax rise -may unsnarl Phila- delphia traffic. The Washington Post, October 11:A3. Gold, S.D. 1983 State-Local Fiscal Relations in the Early 1980s. Denver, Cola.: National Conference of State Legislatures. Hovey, H.A. 1977 State Urban Development Strategies. Washing- ton, D.C.: Council of State Planning Agen- cies. Jordan, V.E., Jr. 1981 What are the poor supposed to dot The Wash ton Post, June 13. McDowell, B.D. 1983 The federal role in regional planning: past and present. Pp. 29-38 in G.C. Lim, ea., Regional Planning: Evolution, Crisis and Pros- pects. Totowa, N.J.: Littlefield, Adams. Nathan, R.P., Dearborn, P.M., and others 1982 Initial Effects of the Fiscal Year 1982 Reduc- tions in Federal Domestic Spending. New Jersey: Princeton University Press. Reed, B.J. 1981 States bring local officials into block grant plans. Nation's Cities Weekly, December 14. Reid, J.N., and Stam, J.M. 1982 Funding cuts hit substate regions. Public Administration Times 5(2). Seaberry, J. 1984 Scope of government jobs programs questioned. The Washington Post, May 20:G3. Shirey, J.F. 1981 The Reagan budget and intergovernmental rela- tions. SIAM Intergovernmental News 4(4):1. Stanfield, R. 1981 Reagan's policies bring cities, states together in a marriage of convenience. The National Journal, December 19:2224-2228. U.S. Advisory Commission on Intergovernmental Relations

OCR for page 17
42 1976 Improving Urban America: A Challenge to Fed- eralism. Washington, D.C.: O.S. Advisory Commission on Intergovernmental Relations. 1981a Significant Features of Fiscal Federalism, 1979-80. Washington, D.C.: U.S. Advisory Commission on Intergovernmental Relations. 1981b State-Local Relations Bodies: State ACIRs and Other Approaches. Washington, D.C.: U.S. Advi- sory Commission on Intergovernmental Relations 1982a State and Local Roles in the Federal System. Washington, D.C.: U.S. Advisory Commission on Intergovernmental Relations. 1982b The States and Distressed Communities, 1981 Report. Washington, D.C.: U.S. Advisory Commission on Intergovernmental Relations. 1983a Changing Public Attitudes On Government and Taxes. Washington, D.C.: U.S. Advisory l Commission on Intergovernmental Relations. 1983b Intergovernmental focus. Intergovernmental Perspective 9(2):4. 1983c Significant Features of Fiscal Federalism, 1981-82. Washington, D.C.: U.S. Advisory Commission on Intergovernmental Relations. 1983d The States and Distressed Communities, 1981 . Report. Washington f D.C.: U.S. Advisory Commission on Intergovernmental Relations. U.S. Department of Housing and Urban Development 1982 The National Urban Policy Report. Washington, D.C.: U.S. Department of Housing and Urban Development. U.S. General Accounting Office 1983 Trends and Changes in the Municipal Bond Market As They Relate To Financing State and Local Public Infrastructure. Washington, D.C.: Government Printing Office. Walker, D.B. 1980 The states and the system: changes and choices. Intergovernmental Perspective 6(4):6-12. 1981 Toward a Functioning Federalism. Cambridge, Mass.: Winthrop Publishers, Inc. Warren, C.R. 1980 The States and Urban Strategies: U.S. A Comparative Analysis. Washington, D.C.: U.S. Department of Housing and Urban Development. 1981 Targeting of state assistance: opportunities

OCR for page 17
43 and realities. The Urban Interest 3(Special Issue):21-32. 1983 The prospects for regional planning. Pp. 153-163 in G.C. Lim, ea., Regional Planning: Evolution, Crisis and Prospects. Totowa, N.J.: Littlefield, Adams.