State and Local Fiscal Assistance Act

Definition

The State and Local Fiscal Assistance Act, also known as the Revenue Sharing Act, was a federal program that provided direct financial assistance to state and local governments from 1972 to 1986. The act was designed to strengthen the intergovernmental fiscal system and help state and local governments meet their financial obligations.

5 Must Know Facts For Your Next Test

1. The State and Local Fiscal Assistance Act was enacted in 1972 as part of President Richard Nixon's New Federalism initiative, which aimed to decentralize power and increase state and local autonomy.
2. The act provided $30.2 billion in direct, unrestricted grants to state and local governments over a five-year period, with the funds distributed based on population and relative tax effort.
3. The program was designed to help state and local governments address budget shortfalls, fund essential public services, and reduce the reliance on property taxes as a primary revenue source.
4. The act was reauthorized several times, but the program was ultimately phased out in 1986 due to concerns about the federal budget deficit and the perceived lack of accountability in how the funds were used.
5. The end of the Revenue Sharing program led to increased fiscal pressures on state and local governments, which had become accustomed to the additional federal funding and had to find alternative revenue sources or cut public services.

Review Questions

• Explain how the State and Local Fiscal Assistance Act influenced intergovernmental relationships between the federal government and state/local governments.
  • The State and Local Fiscal Assistance Act, also known as the Revenue Sharing Act, was designed to strengthen intergovernmental relationships by providing direct financial assistance from the federal government to state and local governments. This program aimed to decentralize power and increase the autonomy of state and local authorities in managing their fiscal affairs, as the funds were unrestricted and could be used to address a wide range of local priorities. The act represented a shift towards a more cooperative and collaborative approach to federalism, as the federal government sought to empower state and local governments to address their unique financial needs and challenges.
• Analyze the impact of the Revenue Sharing program on the concept of fiscal federalism in the United States.
  • The State and Local Fiscal Assistance Act had a significant impact on the principles of fiscal federalism in the United States. By providing direct, unrestricted grants to state and local governments, the program represented a shift in the distribution of fiscal powers and responsibilities between the federal government and subnational authorities. This decentralization of funding sources and decision-making authority was intended to strengthen the intergovernmental fiscal system and give state and local governments more flexibility in addressing their budgetary needs. However, the eventual phasing out of the Revenue Sharing program in 1986 also highlighted the ongoing tensions and challenges inherent in the fiscal federalism model, as state and local governments had to find alternative revenue sources or make difficult budget cuts to maintain essential public services.
• Evaluate the long-term implications of the end of the State and Local Fiscal Assistance Act for the relationship between the federal government and state/local governments.
  • The termination of the State and Local Fiscal Assistance Act, or Revenue Sharing program, in 1986 had significant long-term implications for the relationship between the federal government and state/local governments. The loss of this direct federal funding source led to increased fiscal pressures on state and local governments, which had become accustomed to the additional resources and had to find alternative ways to fund essential public services. This shift towards greater self-reliance and reduced federal support for subnational authorities represented a move away from the cooperative and collaborative approach to federalism that the Revenue Sharing program had sought to foster. The end of the program also highlighted the ongoing tensions and power dynamics inherent in the intergovernmental system, as state and local governments had to navigate the challenges of meeting their financial obligations without the assistance of the federal government. The long-term impact of these changes continues to shape the complex and evolving relationships between different levels of government in the United States.

Related terms

Intergovernmental Relationships: The complex web of interactions, dependencies, and power dynamics between different levels of government, including federal, state, and local authorities.

Fiscal Federalism:

The division of fiscal powers and responsibilities between the federal government and state/local governments, including the distribution of tax revenue and funding for public services.

Devolution:

The transfer of power, authority, and responsibility from the federal government to state and local governments, often in the context of social and economic policymaking.