Deciding to Provide: Local Decisions on Providing Social Welfare

Fiscal federalism predicts local governments will avoid social welfare expenditures, owing to capital mobility across local jurisdictions. Yet Census of Governments data consistently show that many local governments provide one or more social welfare functions, and moreover many jurisdictions provide these functions without federal or state intergovernmental support. This article finds evidence that, while local expenditures are largely driven by fiscal capacity and federal and state assistance, local decisions on providing social welfare functions and participating in intergovernmental revenues are primarily affected by degree of capital mobility and by local political factors. Consequently, local governments exercise much greater autonomy over social welfare policymaking than fiscal federalism suggests.     

Water and Federalism in the 1990s

Federalism has always been an issue in water management. Thephasing out of grants for the construction of sewage treatmentplants, the reduction of the federal contribution for constructionof water development projects, the decrease in federal expendituresfor basic water data collection, and the lack of federal fundsfor state dam-safety programs have all had an impact on watermanagement and intergovernmental relations. This article summarizescontemporary issues in intergovernmental relations and waterpolicy. First, the relationship between water, environmentalprotection, and federalism is examined. Then, the shifting financialresponsibility for water pollution control from the federalto state and local governments is reviewed.     

Effects of Federal Tax Reform on Local Finances

The federal Tax Reform Act of 1986 promised to be fair, simple,and revenue neutral to the federal treasury. Tax reform, however,was not revenue neutral with respect to all state and localtreasuries. Indeed, tax reform entailed a restructuring of thebalance of power in federal-state-local relations. In particular,new restrictions on the tax-exempt bond authority of state andlocal governments are requiring significant shifts in traditionallocal debt policy. Furthermore, the Supreme Courts recent decision,South Carolina v. Baker, raises additional concerns about thestatus of state and local tax-exempt bond issues. The natureof future relations between the federal government and localgovernments is likely to be molded more by the federal tax codeand by erosion in state authority over fiscal matters than byfederal grant-in-aid programs of the kind that have characterizedthe past quarter century of intergovernmental relations.     

Financing Homeland Security and Emergency Preparedness: Use of Interlocal Cost‐Sharing

Before this study, much of the research on interlocal collaboration has focused broadly on interlocal service agreements, of which interlocal cost‐sharing is but one dimension. This study is one of the first to examine the nature of interlocal cost‐sharing agreements for a specific (and critically important) functional area. A mail survey of Florida city and county finance officers finds that the most common interlocal cost‐sharing partnership is between local general purpose governments rather than with local special purpose governments. The strongest incentives for interlocal cost‐sharing are (1) inadequate funding for emergency management in a jurisdiction's capital budget, (2) the perceived inadequacy of federal and/or state homeland security funding, and (3) greater faith in horizontal (local‐to‐local) than vertical (federal‐state‐local) intergovernmental agreements. The research also highlights the importance of asking fiscal condition survey questions in a more functionally specific manner rather than as an “overall fiscal condition” question.     

State support under the new federalism

The new federalism will reduce total intergovernmental revenues to local governments. The reduction will be due to both the transfer to the states of much of the federal aid which previously flowed directly to local governments and reductions in total federal aid levels. Pass-through requirements on the shifted aid will not affect this general result but may soften the impact in many states. Because of differences in the extent to which state governments substitute federal pass-through aid for state aid from own-source revenues and in the degree to which different sources of revenues are treated differently by the states, local revenue reductions will vary greatly from state to state. The losses for local governments will range from 100% of the shifted aid in some states to as little as 15–20% in others.     

The cartelization of local governments

Intergovernmental competition can enhance efficiency. Centralization of government expenditures inhibits intergovernmental competition because it makes governments more homogeneous, and so cartelizes local governments. Cartelization reduces Tiebout competition, and limits benchmark competition in which one government??s performance can be compared with neighboring governments. Measuring fiscal centralization as the ratio of local to state and local government expenditures within the state, the evidence shows that more fiscal decentralization is associated with higher levels of state per capita income. Cartelization of local governments negatively impacts income.     

The Federal Role in State Fiscal Stress

This article examines the extent to which the federal government'spolicies were responsible for the fiscal stress experiencedby most state governments in the early 1990s. Federal policieshave contributed considerably to recent state fiscal stress,particularly through the Medicaid program—the fastestgrowing part of state budgets—and the recession, whichdepressed revenue and increased welfare and Medicaid spending.Federal aid reductions have not been an important source ofrecent state fiscal stress. The real value of per capita federalaid other than for welfare programs fell considerably in the1980s, but the reductions were much greater for local governmentsthan for states. The largest reductions were in the early 1980s.Federal policies have affected state finances in several otherways—through tax policy, unfunded mandates, and the federalfailure to cope effectively with problems like health and poverty.Federal court rulings have also caused budget problems (as havestate court decisions). In some respects, state fiscal problemsare not a federal responsibility. Rising school enrollments,new corrections policies, and inelastic tax systems have createdfiscal stress for many states. Excessive state spending in the1980s has contributed to recent fiscal problems in some states,but not generally.     

Life at the Bottom of the Fiscal Food Chain: Examining City and County Revenue Decisions

Any shifting of responsibilities from the state or federal governmentsto local governments would fall mostly on the shoulders of general-purposegovernments, namely, cities (municipalities) and counties. Thisstudy explores city and county revenue decisions associatedwith general funds—the governmental fund most likely tobe affected by state requirements for greater local financingresponsibility for new or devolved programs. The results suggestthat state control over local revenue authority affects decisionsregarding the imposition of financial burdens on residents,and that intergovernmental aid to cities and counties does notnecessarily mitigate those burdens. Despite evidence of healthyfinancial reserves, especially for cities, shifting responsibilitiesfrom the state to city or county governments could place citiesand counties in difficult fiscal positions. Given the importanceof own-source revenues to current budgets, and in view of thequestionable impact of intergovernmental aid on city and countyresidents' revenue burdens, questions persist about the abilityof city and county governments to maintain (and, if necessary,to expand) services during economic recession.     

Organizing the Federal System for Homeland Security: Problems, Issues, and Dilemmas

Improving the capacity of U.S. governments to provide greater homeland security will require numerous changes in the way federal, state, and local governments are organized and operate. It also will require significant alterations in intergovernmental relations. Changes will be required in intergovernmental dimensions, including operational, financial, legal, and political dimensions. A dual–track approach to rearranging intergovernmental relationships in order to provide a coordinated intergovernmental response to the requirements of homeland security is to be expected.     

Tragedy of the Fiscal Common?: Fiscal Stock Externalities in a Leviathan Model of Federalism

The paper deals with vertical tax competition between self-interested governments in a dynamic environment. In a federation, competition between the federal and the state governments arises when tax sources are not separated but pooled. Since dynamic inefficiencies will be stressed, the focus is on fiscal stock externalities rather than on flow externalities. The paper shows that the Leviathans in a federation tax the fiscal common resource more extensively than the single Leviathan in a unitary state. Furthermore, the positive impact of political stability on public consumption of the fiscal common will be discussed.     

The Fiscal Consequences of Changing Federal and State Revenue Policies: The Case of Small Oregon Cities

This article examines the fiscal consequences for twelve, smallOregon cities of recent changes in federal and state intergovernmentalrevenue policies. Many small local governments have experienceddouble revenue reverses in recent years—reductions inown-source revenues because of economic decline as well as decreasesin intergovernmental revenues, especially federal aid. The twelvesmall cities are compared with all 241 cities in Oregon andthe 136 Oregon cities in the 1,000 to 49,999 population range.Using aggregate and interview data, a major finding is thatalthough stabilization and/or decline in federal-state revenuesharing and entitlement program funds have accentuated difficultlocal revenue situations, economic decline has been the moreimportant contributor to the fiscal stress of the twelve smallmunicipalities. Most of the twelve cities had limited fiscalcapacity—as indicated by low assessed property valuations—makingit difficult to produce sufficient revenue to meet basic publicservice needs. These cities were also unable to get citizenapproval of increases in property taxes.     

Developing and Testing a Composite Model to Predict Local Fiscal Distress

One of the thorniest issues of intergovernmental fiscal relations is state oversight of local fiscal affairs. States have oversight responsibility and must take action when local governments run afoul of responsible fiscal behavior. Less accepted is how states can detect local financial difficulties before they become emergencies that require state takeover. Research in the 1970s provided some assistance to states wishing to recognize local financial emergencies. But the time has come to look at this issue anew, particularly with an eye toward predicting local financial problems before they become serious. This article describes a 10-point scale that predicts these problems and tests the scale to predict local fiscal stress in a sample of Michigan local governments.     

Managing Within the Matrix: Do Collaborative Intergovernmental Relations Exist?

The current state of managing collaboratively in an era of acceleratedUnited States national action is assessed against the earlierapproaches identified by Daniel f. Elazar and others duringperiods of cooperative federalism. The literature on the managementof intergovernmental relations within cooperative federalismis examined, as are Elazar's contributions to managing withina noncentralized federal matrix. Three management approachesassociated with increased national power and decreased collaborativeintergovernmental relations are identified: nation-centeredfederalism, growing emphasis on nationwide action, and executiveleadership. Collaborative management within intergovernmentalrelations is then reconstructed by looking at the extent ofbargaining and adjustment, shifting of program venues to stateand local governments, growing intergovernmental managerialsophistication, and limits on federal enforcement ability. Moreextensive field research needs to be conducted to understandthe true extent and depth of collaborative management in thefederal system.     

Two Cheers for Paperwork: The Value and Burden of Federal Reporting

In principle, reporting by state and local governments to thefederal government is essential to the design and implementationof national policy. In practice, reporting often engenders resentmentof federal intrusion and is often dismissed as a waste of stateand local resources. Is reporting useless? Does it strengthenthe federal government at the expense of state and local governments?We asked federal, state, local, and site officials about thevalue and burden of five specific reporting systems in elementaryand secondary education. Common assumptions about reportingdid not correspond to respondent reactions. Both value and burdencascade through the intergovernmental system, reaching policymakersin all governments. Although critics seldom discriminate betweentypes of reporting, we found that reporting designed to improvecompliance with federal standards evoked different judgmentsof value and burden than reporting designed for assistance.These results suggest some new approaches to federal policygoverning the collection of information and to the design ofindividual reporting systems.     

Money and Mandates: The Politics of Intergovernmental Conflict

The federal government's relationship with the states dependsin part on the level of federal aid and the number of federalmandates. Environmental policy, with less federal aid and moremandates, differs from education policy and health policy. Thevolume of intergovernmental litigation is heavier and rhetoricalreferences to intergovernmental partnerships by agency headsare more common in environmental policy. Waivers are more commonin education policy and health policy, but that appears to bea function of congressional policies largely barring environmentalpolicy waivers. Federal judges are more supportive of the federalgovernment's position on environmental protection and educationthan its position on health care. Overall, federal funding andmandates appear to have an impact on state governments, federalbureaucrats, and federal judges.     

Mandates As Both Hardship And Benefit: The Clean Water Program In Small Communities

No other intergovernmental policy has been so costly and difficultfor small local governments to implement as the 1972 versionof federal Clean Water legislation. This legislation has requiredthousands of localities to construct new or upgraded sewagetreatment systems. Rural governments have been hard pressedto cope with the demands of the anti-pollution standards, becauseof limited fiscal and managerial capacities and local valuesoften in conflict with national and state policy goals. Yet,as this study of eight rural California communities suggests,implementation can bring local benefits as well as hardship.As a result of their decade-long experiences with the CleanWater program, the small municipalities generally improved theirsewer system finances, acquired new organizational skills andresources, and increased their capacity to accommodate populationgrowth and stimulate economic development. These were long-runimpacts, occurring after initial problems and delays in theplanning, funding, and construction of the new plants.     

CANADA'S INTERGOVERNMENTAL RELATIONS SPECIALISTS*

Abstract: Over the last decade the federal government and each of the ten provincial governments in Canada have put in place in their administrations significant numbers of intergovernmental relations specialists. These specialists are public servants up to departmental head level who work solely on intergovernmental business. They are located in separate departments or as separate units within central agencies, and are responsible for the coordination of relations with other governments and of intergovernmental activities within their own government. Coming at a time of increasing intergovernmental tension within the Canadian federation, these specialists have been subject to a great deal of criticism. The critics have charged that the specialists have exacerbated and even produced intergovernmental conflict. Lately, some scholars have come to their defence, emphasizing the positive functions that the specialists perform, and arguing that their influence has, in any case, been exaggerated. Australia has its own relatively small number of intergovernmental relations specialists at both the federal and state levels. And it is possible that in the future additional positions will be created. The variety of the Canadian experience means that there are a number of models from which each Australian government, of whatever size, can learn.     

Fiscal Decentralization and Provincial-Level Fiscal Disparities in China: A Sino-U.S. Comparative Perspective

Since China's 1994 fiscal reform, increasing concerns have been voiced about fiscal disparities across the country. Can local governments fairly and effectively fulfill basic public services such as primary education, public health, and social welfare? This essay traces the evolution of intergovernmental relations in China since 1978. The fluctuation of provincial level fiscal distribution over time and the underlying factors behind fiscal inequality, as compared to a decentralized American revenue system, are analyzed. The author, Zhirong Jerry Zhao of the University of Minnesota, argues for additional research on alternative measures of local fiscal capacity.     

Intergovernmental Relations and the Advocacy Coalition Framework: The Operation of Federalism in Denver Water Politics

The relationship between intergovernmental relations and theformulation and implementation of public policies is not wellunderstood by scholars. Borrowing from the advocacy coalitionframework, this study contends that public policies reflectthe strategic choices of federal, state, and local actors operatingwithin policy subsystems. The success of various governmentalpolicy strategies is dependent on the autonomy of each actorand the level of policy fragmentation within the subsystem.These variables are defined, operationalized, and examined withinthe context of intergovernmental relations in Denver water politics.     

THE TYPOLOGY OF FISCAL DECENTRALISATION SYSTEM: A CLUSTER ANALYSIS APPROACH

The article suggests a novel theoretical framework for empirical measurement of fiscal decentralisation by taking the viewpoint that fiscal decentralisation should be regarded as a system. Then, we review in detail several institutional arrangements regarding fiscally decentralised systems including the following: federal versus unitary state, numbers of tiers of governments, taxing power, borrowing power and independence of local officials. After identifying these institutional arrangements, we can group different countries with similar institutionally fiscal decentralisation systems together in broad categories by using cluster analysis. This analysis reveals a typology of fiscally decentralised systems (FDS): high expenditure/revenue assignment FDS, low expenditure/revenue assignment FDS, revenue transfer FDS, most complete FDS, politically centralised FDS and unitary state FDS. We then employ regression analysis to examine the performance for each type of fiscal decentralisation system. Our empirical findings suggest that most complete FDS is positively associated with selective economic performance as well as various public governance indicators. Copyright © 2011 John Wiley & Sons, Ltd.