July 20, 1973
Page 25159
GENERAL REVENUE SHARING – THE FIRST ROUND
Mr. MUSKIE. Mr. President, in March, the Subcommittee on Intergovernmental Relations, in a staff study, concluded that–
The vast majority of cities – both large and small – intended to spend the first round of revenue sharing in the following areas: capital improvements, including streets and roads, public safety, and salary adjustments, including hiring new personnel. Somewhat less frequently mentioned were various forms of tax relief and environmental improvement. Only a small minority of the cities ... indicated that revenue sharing money would be channeled into social services for the poor or elderly or other forms of recurring expenditures.
These conclusions were reached by the staff on the basis of a questionnaire on Federal grants mailed to more than 2,300 towns and cities in November 1972. Of necessity, the results were tentative and preliminary,
Since March, several other organizations, including the Office of Revenue Sharing, have conducted additional surveys of revenue sharing. This new data on the disposition of the first round of revenue sharing support the preliminary conclusions reached by the subcommittee staff.
For a number of reasons, local governments around the country have decided to spend most of the first round of general revenue sharing on capital, nonrecurring projects. This is borne out by another survey limited to the impact of revenue sharing on 25 of the Nation's largest urban parks and recreation departments which has been brought to my attention.
Mr. President, I ask unanimous consent that the "Preliminary Survey of General Revenue Sharing Recipient Governments," prepared by the Office of Revenue Sharing be printed in the RECORD.
I also ask unanimous consent that a reprint of an article, "Urban Parks and Recreation Under the New Federalism," written for the May 1973 issue of Parks and Recreation magazine by Dr. Diana R. Dunn and Linda K. Lee be included at this point.
There being no objection, the survey and article were ordered to be printed in the RECORD, as follows:
PRELIMINARY SURVEY OF GENERAL REVENUE SHARING RECIPIENT GOVERNMENTS
(NOTE.-Figures referred to are not printed in the RECORD.)
I. SUMMARY OF PRELIMINARY REVENUE SHARING
EVALUATION SURVEY
Introduction
The Office of Revenue Sharing (ORS) surveyed a sample of recipients of funds under the State and Local Fiscal Assistance Act of 1972 (the Act) to determine:
How they planned for and spent the initial funds distributed to them; and
How they felt about the administration of the program; i.e., whether improvements could be made to ORS operations.
The revenue sharing recipients surveyed included the 50 states and the District of Columbia, 19 Planned Variation Cities, and 715 units of local government of representative levels and sizes. A short questionnaire was mailed to 768 governments. An additional 17 recipients were interviewed in person to gain a perspective on the responses to the mailed questionnaire.
The questionnaires were designed and the survey conducted by staff members of ORS, assisted by Technology Management Incorporated (TMI), a consulting firm familiar with the revenue sharing program. The survey was conducted during April 1973. At the time they filled out the questionnaire, most respondents had received their first two payments (i.e., those sent in December 1972 and in January 1973) but had not yet received the permanent regulations, the April quarterly payment, or copies of any statutorily required report forms.
The recipient governments surveyed were randomly chosen within sample subsets of the total recipient population which were defined by a set of selected criteria, including type and size of government and the per-capita tax effort of the government. The conclusions of this study, therefore, can be viewed as statistically representative of each of the selected subsets. The more general findings and conclusions, while strongly supported by analysis of the individual subsets cannot be interpreted to statistically represent the "average" recipient or a proportionate share of the general revenue sharing funds distributed. Employing the data collected from both the returned questionnaires and the on-site interviews, TMI performed an analysis which generated the findings, conclusions, and recommendations reported below.
Findings
Recipient governments have had little difficulty in incorporating the planning, appropriation. and expenditure of revenue sharing funds into their normal fiscal procedures. Those who did have some difficulty relate their problem to the timing of the receipt of the initial funds.
Twenty percent of the respondents noted an increase in public participation in their planning and budgeting process as a result of revenue sharing. More than 40% anticipate an increase in public participation.
Capital projects and other nonrecurring expenditures were the most frequently mentioned uses of revenue sharing funds. Many respondents cited uncertainty regarding the long-term continuity of the revenue sharing program as having been a factor in their choice of capital projects.
Seventy-one percent of the respondents had appropriated some or all of the money received to date. Forty-two percent of the respondents had appropriated all of the money they had received; 29% had appropriated none of it. The average appropriation was 75% of the funds received.
The average amount spent of the funds received by responding governments was 14% as of April 1973; 631 of the respondents had spent no money at all.
Eight percent of the respondents intended to use revenue sharing funds to reduce taxes; 40% said that revenue sharing would allow them to avoid an increase in taxes. Seventeen percent of the respondents said that while property taxes were going up, the amount of the increase would be less because of revenue sharing.
The various government associations and the Office of Revenue Sharing were most frequently cited as sources of information regarding the general revenue sharing program and its operations.
Conclusions
The objective envisioned by the legislation's drafters that the planning for use of revenue sharing funds be relatively easy for recipient governments appears so far to have been achieved. It is possible that the permanent regulations and planned use report forms, issued after most recipients responded to the mail survey, might have the effect of either increasing or decreasing recipient planning difficulties (although the on-site interviews yielded no evidence to support this possibility).
Given that the normal budgeting process was used and that the statutory requirement for publicizing planned and actual use reports had not been implemented at the time of the survey, the increase in public participation, though modest, should be encouraging to those who felt this was an important objective of the program. There are indications that the recipients who experienced increased participation were those who encouraged it; e.g., by holding public hearings.
The initial choice of capital and nonrecurring expenditures by many respondents seems natural, in light of the receipt of two checks so close together with little or no advance notice and the much publicized data problems which produced variations between estimated and actual amounts. Several respondents in the on-site interviews, especially units of local government, commented that financing of needed capital projects was difficult if not impossible through their normal sources of funds. There is no way of learning from this survey whether the emphasis on nonrecurring expenditures will continue in future years.
The Act requires that recipient governments use the same procedures with regard to appropriation and expenditure of revenue sharing funds as are used with respect to their own revenues. Given the relatively short time between the receipt of initial funds and the conduct of this survey, the amounts which respondents said they had appropriated and spent appear realistic, and seem to reflect a sincere effort on the part of recipients not only to comply with the legislation, but to make careful decisions regarding the expenditure of these funds.
Since the setting of tax rates most often involves considerable future planning, and since there was, as of this report, little data upon which recipients could base long-range forecasts of revenue sharing receipts, the modest impact on local taxes is as might be expected. This survey, however, cannot provide any insight as to the future impact on local taxes.
Recommendations
The Office of Revenue Sharing should:
provide to recipients forecasts of their future general revenue sharing allocations;
urge recipient governments to encourage public participation in the local planning and budgeting process;
support the government associations and other public interest groups which are providing assistance to recipient governments;
provide suggested, not required, guidelines and planning aids to governments requesting assistance; and
continue to make reports, notices, and other forms simple for recipients to understand and prepare.
II. DETAILED ANALYSIS OF DATA
Introduction
This section provides a more detailed analysis of the major areas of concern to those involved with the general revenue sharing program. Under each major topic area, the answers to survey questions and highlights of the on-site interviews are drawn together to support the conclusions reported in the Summary. The appendices provide more detail on the design and conduct of the survey itself, a copy of the questionnaire used, and compilations of the data.
Planning for the use of General Revenue Sharing Funds
In general, most governments that responded to the mailed questionnaire had little difficulty in planning for the use of the funds received for the first and second entitlement periods (the checks sent in December 1972 and January 1973). Of the respondents, 75% of the units of local government and 80% of the state governments integrated the planning for the use of revenue sharing funds with their normal financial planning processes. That such a high percentage of respondents was able to blend planning for the use of funds which arrived only four months prior to the survey with "normal" budget cycles speaks well for the flexibility of the local planning process, especially given the considerable variations among governments in fiscal years and the timing of financial planning cycles.
Size and type of responding government had relatively little effect on this indicated ability to integrate planning. Counties with greater than average per capita taxes were least likely to answer that they had integrated planning. Yet 61% of the respondent minor civil divisions with lower than average population and per capita tax claimed that they had integrated planning for the use of revenue sharing with their normal budgeting program.
The interviewed governments were also able to integrate revenue sharing planning with regular budgeting. Although several interviewees explained that some "special" procedures had been employed (as part of the planning process) for the first revenue sharing dollars which came as somewhat of a surprise, no real problems materialized and planning was smoothly integrated.
Furthermore, it was explained that these special procedures would disappear since the continual flow of general revenue sharing funds could be anticipated. It was frequently added that reliable forecasts of the amounts of future checks would materially assist the planning process.
The timing of the receipt of funds was frequently indicated in both returned questionnaires and interviews as the major source of difficulty for those who could not integrate planning.
Twenty-nine percent of respondent state governments and 43% of respondent units of local government that could not (or did not) integrate planning indicated that the timing factor was the problem. Interviews with governments unable to integrate planning similarly reported that timing of receipt of funds was the primary reason.
In addition, in almost every case, the interviewee governments' fiscal procedures had not changed as a result of revenue sharing, thus illustrating the ease with which the funds had been handled from receipt through the planning process. Furthermore, the interviewees did not anticipate "forced" changes in fiscal procedures as a result of the final ORS regulations. Hence, existing local (and state) procedures were deemed adequate to handle general revenue sharing funds (and are expected to do so in the future), thus making a substantial contribution to the ease with which revenue sharing and normal budget planning were integrated.
Another factor (revealed in the interviews) facilitating the smoothness of planning for the initial funds was that the officials interviewed perceived little or no impact of any provisions of the State and Local Fiscal Assistance Act of 1972 (hereafter referenced as the Act) on their flexibility in using the funds. Some governments interviewed expressed reservations and substantial caution concerning this issue. In general, most governments felt that the latitude built into the general revenue sharing program enabled the application of funds to priority problem areas. This was based on their understanding of the information available prior to the release of the final regulations.
Public participation in recipient Governments' planning processes for general revenue sharing
The legislative history of the Act contains frequent reference to the concern of several legislators, especially in the Senate, that the public and public interest groups be involved to the greatest extent possible in the recipient government's decision as to how funds will be spent. As a result, the Act requires that recipients publish in a local newspaper and advise the local media of the contents of the statutory Planned and Actual Use Reports. At the time the survey was conducted, this important part of the legislation had not been implemented.
In response to a question regarding a change in the level of citizen participation to date (i.e., as of April 1973) as a result of general revenue sharing, 20% of the respondents noted more participation. Generally, more populous areas responded positively to this question. However, 48% of the smaller counties with relatively low per capita tax effort noted an increase.
Conversely, an increase in citizen participation was noted in only 3 % of the responding cities having a small population and a relatively low tax effort.
On-site interviews yielded a similar mixed set of reactions. One city, for example, established a series of public hearings at which administrative proposals for expenditure of general revenue sharing funds were discussed. Another city included the revenue sharing plans in its usual public hearing on the total budget; no one showed up at the hearing as compared to over 200 attendees the year before. In this case, the property tax rate was being lowered (revenue sharing accounted for a portion of the decrease) as opposed to an increase the year before. A New England town which has a town meeting form of government inserted in the annual budget warrant an article on revenue sharing. The article received the same public scrutiny as all other budget items.
The time at which the survey was conducted is critical because the publicity requirements of the Act had not been implemented. Thirty-nine percent of the survey respondents said they expected more citizen participation in the future. The expectation of increased public participation was higher than increases reported to date across all cells in the sample, although as earlier, the higher percentages of positive responses tended to be attributable to the larger, more populous areas.
The expectation of increased public participation is assumed to be related to the public requirements soon to be implemented. This assumption was reinforced during on-site interviews.
An additional point which was suggested during the onsite interviews was that the smaller governments were less familiar with the provisions of the Act; in one case, the interviewer had to explain the publicity requirement. It could be postulated, therefore, that the somewhat less frequent forecast of increased participation by smaller governments may have been in part attributable to their lack of familiarity with the statutory publicity requirements.
Only 9% of respondent state governments noted increases in public participation, and only 14% expected an increase in the future. During the on-site visits and numerous discussions with state government officials, most have indicated that public scrutiny of the state government's budgeting process is already at a very high level and that it would be unusual to expect significant increases attributable to revenue sharing. A contributing factor may be that, as a general rule, revenue sharing represents a smaller percentage (2% to 3%) of a state government's total budget than it does for a unit of local government.
Several conclusions may be drawn from the survey. First, it appears that those governments that experienced an increase in public participation had taken some initiative to encourage such participation. Second, given the large percentage of respondents who were able to integrate planning of general revenue sharing funds with their normal planning/budgeting process, it would seem unusual if a marked increase in public participation over that which normally accompanies the budgeting process were to have taken place. The on-site interviews indicated that most governments had accorded to their revenue sharing plans the same level and method of publicity given to plans for their own funds, and their revenue sharing plans were not the subject for separate publicity. In addition, some of the interviewed officials indicated that the increases in public participation could in part be attributable to the novelty of the program and the national publicity given the initial funds distribution. Public interest due to this activity could be expected to diminish over time. In summary, therefore, the question of sustained increases in public participation in the local decisionmaking process can only be answered in the future.
The uses intended for general revenue sharing funds
A majority of units of local government responding to the questionnaire indicated that capital expenditures (72% overall) and public safety operating/maintenance expenditures (57% overall) were among the top three priority applications of general revenue sharing funds. This was consistently true regardless of type, size, or per capita tax effort of the respondent government.
Fifty-seven percent of the respondent state governments included capital expenditures on their revenue sharing priority lists while 66% included education.
Priority areas least often identified by respondent local governments were library (6% overall) and social services (8% overall) operating/maintenance expenditures. Respondent state governments placed housing and community development (0 %) and economic development (0%) at the bottom of their lists.
Questionnaire responses indicated widespread intention to employ the funds received in the first two general revenue sharing checks in capital-type projects; this was strongly reinforced in the interviews. Buildings, roads, sewage lines, and various kinds of new equipment were felt to be sorely needed by officials of nearly all governments interviewed. The expenditure plans of many interviewees give some indication that some respondents to the mail survey may have included capital and other nonrecurring types of planned expenditures under the operating/maintenance categories. Therefore, the actual intent to use the first entitlement period's funds on nonrecurring expenditures may be even more pervasive than directly indicated by the percentage including these expenditures on their priority list.
The interviews also revealed a number of explanations for the apparent emphasis on capital-type applications to date. First, officials of the visited governments reported that capital improvement and development programs have been neglected in recent history. Several factors were mentioned as sources of this neglect. Local government officials cited statutory restrictions on the sources and amounts of funds available to them. A second factor mentioned by several officials was that bond issues for capital outlays for other than educational purposes have been poorly received at the polls in referenda. This was seen as related to frequent and sizable capital requirements for education.
Another reason given for the concentration of funds on capital expenditures was that certain public interest groups whose advice was respected had recommended capital-type uses for general revenue sharing funds to:
Avoid some of the possible difficulties posed by the prohibitions and restrictions of the Act;
Maximize the "visibility" of the use of the funds; and
Avoid the potential requirement to either reduce a service or raise taxes if the general revenue sharing program were discontinued.
This concern over the long-term continuity of the program is the third major explanation for the emphasis on capital uses. Fifty-one percent of the units of local government responding to the questionnaire and 49% of respondent state governments indicated that this uncertainty was a factor in their selection of capital rather than operating expenditure. Larger cities, with both above and below average per capita tax efforts, were even more emphatic in this answer (67% and 72%, respectively) while small minor civil divisions were somewhat less likely to voice this concern (36% of the respondents with above average per capita tax efforts, 38% of those below).
The dominance of capital expenditures is further indicated. For example, 49% of the respondent state governments and 44% of all respondent units of local government reported that they were planning increases in existing program levels in the capital projects area with the revenue sharing funds received to date (April 1973). However, while capital expenditures are the primary choice of many governments, they are seldom the only planned use. In the case of both state and local respondents, 80% indicated that at least some of the funds received to date were planned for operating or maintenance expenses.
This diversity of use with emphasis on capital projects was further documented by the interviews.
In every case, while the majority of the available funds might be targeted for a capital project or program, at least some money was planned for operating-type expenses. These expenses typically included at least a small amount of wages and salaries.
One other indicated use of general revenue sharing funds was in projects financed jointly with other governments. Overall, 21% of the respondent units of local government and 40% of respondent state governments answered yes to a question concerning their intentions in this area.
While the local figure may seem modest to those concerned with intergovernmental cooperation and regional problem-solving, the significance of the figure increases because cooperative efforts take larger and longer planning efforts than internal programs. The interviews provided supportive evidence that, while jointly financed efforts are not presently a widely planned use of funds, this is due primarily to the program's newness and the short time the funds had been available (as of April 1973).
In summary, it can be concluded that capital applications are the most frequent targets for the first entitlement period's funds. However, in most cases, some funds are being spent in noncapital programs across a broad range of categories and programs. Jointly financed projects are presently being planned by some governments, but only time will tell at what level this type of activity will be funded through revenue sharing. The present emphasis on capital expenditures is seen as attributable in large measure to the newness of the program. Many other factors external to the revenue sharing program have also contributed to expenditure decisions made by recipient. governments. It therefore remains to be seen whether future applications of revenue sharing funds will follow the present pattern.
Status of general revenue sharing funds as of April 1973
Respondent units of local governments indicated that, on the average, they had appropriated 58% of the funds received in the first two checks as of April 1973. Respondent state governments indicated an average of 48% appropriation. The average figure for units of local government was relatively constant across the various types of population size and per capita tax strata with a range from 33% (the average for small cities with higher than average per capita tax effort) to 74% (the average for small counties with lower than average tax effort). These average figures are, however, somewhat misleading. In general, most governments had appropriated all of the money received or none of it. This is graphically displayed in Figures 1 and 2. In the case of respondent units of local government, 29% of the recipients had appropriated none of the money received. Forty-nine percent of the respondent state governments had appropriated none of the funds.
Recipient governments were also asked to report how much of the funds received to date had actually been spent. Since expenditure normally follows the appropriation process, the responses, as expected, showed the same "all or none" pattern, with less of the funds having been spent than had been appropriated. While the average percentage expenditure of all the respondent units of local government was 14% (with relative consistency across type, size, and tax effort strata), approximately 63% of the responding local governments had spent none of the money received.
Figure 3 shows the distribution of funds spent by local governments. Only two respondent state governments had actually spent any of their money.
The interviews confirmed that, as of April 1973, approximately 50 % to 60% of the funds available had been appropriated. However, the interviews provided some insight into why these figures should not be higher. First, since it is a requirement of the Act that governments employ all local procedures in spending the funds, the normal administrative process (timing of public hearings, meeting dates for the legislative body, etc.) was applied to general revenue sharing funds. Given that about three months had passed between the recipients' receipt of their second check and their response to this survey's questionnaire, it would seem unusual if recipients had completed the appropriation process on (let alone actually spent) a higher percentage of the funds received.
Another factor mentioned in the interviews was a note of caution indicated by officials of some governments visited. Even though the final regulations (issued in late April) do not apply to the first entitlement period's funds (which were disbursed under interim regulations), several interviewed officials indicated that they were awaiting arrival of the final regulations prior to any decision-making. If this cautious approach is at all widespread, which is possible given the number of recipients dealing for the first time with the Federal Government, it would affect the length of time between receipt, action, and end use of the funds by many recipient governments.
Overall, it seems that the recipient governments are progressing well in appropriating and expending general revenue sharing funds. It takes time to plan, budget, propose, appropriate, and expend public funds. It will continue to take time in the future. With reliable forecasts of future payments, recipient governments may be able to plan for the expenditure of revenue sharing funds further into the future thereby shortening the time between receipt and expenditure of these funds.
The general revenue sharing funds not yet spent by the governments interviewed had been invested through their standard investment vehicles and in their standard money instruments. The most frequently mentioned instruments were Treasury Bills and Certificates of Deposit. In some cases, the funds have been mixed with available funds in a commingled investment account with proceeds periodically allocated back to the revenue sharing trust account. In other cases, the funds were kept in a segregated investment account or resided in a separate bank account earning standard interest rates. The rates of return earned by the interviewed governments varied between 4.5% and 6.5% per annum.
Anticipated impact of general revenue sharing funds
Given the short time between the receipt of the initial funds and the conduct of this survey and the rate of appropriation and spending of these funds, data on the actual impact of the funds was not available. However, some information was collected on the anticipated and intended effects of general revenue sharing.
Overall, 8% of the respondent recipient units of local government intend to reduce property taxes as a result of revenue sharing's availability, while 17% of the respondent state governments reported similar intent for their income taxes. Among the various sample cells, the only pattern indicated was that minor civil divisions and counties were somewhat more likely to forecast tax reductions than cities.
While these aggregate percentages of respondents planning to reduce taxes are modest, it must be remembered that part of the stimulus for the entire program was the fiscal pressure on local and state governments to raise taxes. In spite of revenue sharing, 17% of respondent local governments indicated their intention to raise taxes, although they indicated that the increases would be smaller than they would have been without revenue sharing.
More frequently, the anticipated impact on local finances of general revenue sharing funds was to enable governments to avoid tax rate increases. This was indicated by 40% of respondent local governments and 63% of large cities (with above average per capita taxes). Twenty-three percent of the respondent state governments reported that revenue sharing funds would forestall income tax increases.
In the interviews, revenue sharing was most often described as having enabled the avoidance of increasing an already heavily burdened property tax or of reaching the statutory limits on the tax rate. Even with revenue sharing funds available, some interviewees cited rising costs and service demands, statutory rate barriers, and voter concern with higher taxes as combining to give their governments a severe financial squeeze.
The interviewees also anticipated the following additional impacts of revenue sharing:
Accelerated trend toward development of planning/budgeting systems and the use of these systems in the planning process;
Increased understanding of local problems on the part of elected or other officials due to citizen participation in revenue sharing planning;
Improved cooperation between units of government due to making funds available for joint projects;
Tax increase avoidance, reducing pressure for emigration from central cities; and
Passage of certain forms of expenditure programs for which no local substitute had been available.
In general, however, these impact statements must be viewed as speculative comments on the part of survey respondents. It will be some time before the true impact of these funds can be accurately measured.
Recipient government sources of information and assistance
The primary sources of information and assistance for units of local government appear to be ORS and public interest/government association organizations; e.g., the National League of Cities, National Association of Counties, National Governor's Conference, and their state and regional subsidiaries and counterparts. The questionnaire returns indicated that, to date, the respondent recipient governments had made little use of paid consultants, accountants, or legal advisors with regard to revenue sharing.
From the interviews, it was learned that the reason local governments have not sought "outside" help was that both ORS and various public interest organizations have provided adequate information. Furthermore, it was frequently explained that the program is simple enough for the recipient governments to "take care of themselves." Several interviewees contrasted revenue sharing with some federal categorical grant programs, in which paid advisors were frequently brought in to assist with the preparation of grant applications, which are not required by the revenue sharing program.
In the interviews, the states were not generally cited as a source of assistance by their subordinate governments. In the case of Massachusetts, however, the State was commended for its aid to local units of government (concerning the revenue sharing program) by the government visited.
Advice to the Office of Revenue Sharing front recipients
The last question on the questionnaire, and usually the last asked in each interview, asked about "other issues" not previously covered. In most cases, there was no reply. Some of the issues raised pertained to the final regulations, which were released after the survey. The remaining replies yielded three specific suggestions to ORS. In paraphrased form it was suggested that the ORS:
Provide to recipient governments forecasts of the amounts they will receive in future periods.
Governments of all types and sizes asked for this information to support their planning efforts. Forecasts will greatly facilitate future planning for revenue sharing funds, thereby reducing the time from federal disbursement of funds to local expenditure, especially for those recipients whose budget schedule does not coincide with ORS's quarterly payments.
Provide very general guidelines (on request) to those governments inexperienced with federal funds and who feel they need help. This was not a request for specific requirements or restrictive guidance, but rather for suggestions, ideas, and general advice concerning planning processes, uses of funds, accounting and reporting approaches, and general legal concerns. Corollary suggestions included a newsletter and a step-by-step checklist of the "do's and don'ts" associated with each required report.
Minimize, to every degree consistent with the requirements of the Act, reporting and other paperwork associated with the program. This suggestion was frequent, particularly from small-sized governments of all types. The explanation of the urgency of this request was that most small-sized governments had only small and often part-time staffs available to deal with administration. Excessive detail or volume of reports required by the ORS would, it was suggested, be burdensome in many of these cases.
[From Parks & Recreation magazine, Vol. 8, No. 5, May 1973, pages 22-25, 52-55]
URBAN PARKS AND RECREATION UNDER THE NEW FEDERALISM
(By Diana R. Dunn and Linda K. Lee)
(NOTE.– Dr. Dunn, former NRPA research director, is associate professor and head, Graduate Program in Recreation and Leisure Studies, Temple University, Philadelphia. Ms. Lee is an attorney in Washington, D.C., and a lecturer in law at George Washington University.)
Will it make any difference?
Probably not.
This is the preliminary conclusion drawn from an analysis of estimates by local decision-makers on the allocation of first-year general revenue sharing funds for parks and recreation. Despite the rhetoric of the Administration and its critics, it appears likely that the nation's urban park and recreation systems will be no better off under a system designed to shift decisions about program priorities from federal to state and local governments – but probably no worse off either.
Cities now recreationally disadvantaged with respect to others will remain so; park and recreation departments now lagging behind police and fire departments in their claims on the local treasury will continue to do so; and special population groups who now say they receive only marginal attention from local park and recreation departments will continue to say so.
Based on past experience it should not be difficult to see the logic of this conclusion, but the numbers game being played in Washington, the uncertainty in federal regional offices and the promise of more for everyone under the New Federalism have produced rampant confusion.
Part of the confusion is semantic. Revenue sharing has been used to describe both the general program enacted by the Congress in 1972 and the Administration's proposals to include in four special revenue packages more than 100 categorical, or line item programs previously funded separately. Three of these, community development, education, and law enforcement assistance, require legislative enactment. The fourth, manpower, is to be implemented by executive action.
One way to distinguish the various forms of federal assistance being discussed is according to the degree of federal control to be exercised.
General revenue sharing funds are received by the states automatically according to a formula based on population, income and tax effort indicators. No application is required. A substantial portion of these funds pass through to local communities automatically according to a similar formula.
Special revenue sharing funds may be apportioned by formula and may require an application. The funds are to be spent on broad subject areas such as community development or education, but there are no prior federal restrictions on how the funds may be spent within a category.
Block grants do require an application. They may require prior federal approval of projects and some degree of federal control and supervision.
Categorical grants require an application, prior federal approval of specific projects, and supervision right down to the type of building materials to be used, subcontracting provisions, etc.
Definitions under special revenue sharing still must be qualified since none of the proposals have been enacted and available funding for existing programs depends both on their legislative progress and on what is left in the pipeline at the end of the fiscal year.
As of this writing (late March 1973), only the law enforcement assistance special revenue sharing proposal has reached Capitol Hill. The general outlines of community development and education have been spelled out in presidential State of the Union messages, but have not yet been put into legislative language.
Manpower will be implemented through executive action. The President did not request extension of the Emergency Employment Act (PEP), which has focused on providing year-round public service jobs for adults, nor did he seek line item appropriations for the neighborhood youth corps summer recreation or summer youth transportation programs. Some 812,000 jobs were provided through these efforts in 1972, but communities must fund them this year, if they can, through remaining PEP and Manpower Development and Training Act (MDTA) funds for which legislation and $1.3 billion have been requested for 1973, a 20 percent reduction from 1972.
Community development revenue sharing is of most interest to urban park and recreation administrators. On March 8, 1973, the President sent the fifth portion of his State of the Union message to the Congress and discussed his proposed Better Communities Act (BCA). It would provide $2.3 billion a year to "communities to be spent as they desire to meet their community needs." Until it becomes effective, moneys already obligated or programs approved will continue, but no new projects will be authorized (Table 1).
As presented, the BCA is very much like a measure proposed by the President in 1971. A version of it was passed by the Senate in 1972, but the House did not act. The basic provisions of the BCA are as follows:
1. Community development programs, such as open space, neighborhood facilities, model cities, and basic water and sewer facilities, now separately funded categorical programs, are to be included. Although communities may continue to fund these activities, "it would be up to local leaders."
2. BCA funds will flow directly to cities and urban counties on the basis of objective standards, but, according to the President, "in the years immediately following enactment, funds would be used to assure that no city receives less money for community development than it has received under the categorical grant programs."
3. Special provisions are to be included for smaller communities and to define the role of the state governments.
4. Shared revenues under BCA do not need to be matched by local contributions.
5. Recipients "would be required to show the federal government only that they are complying with federal statutes in the way they are spending their revenue sharing money."
(Anti-discrimination, federal wage guarantees, and environmental impact statement requirements are included here.)
To assist communities in managing these shared revenues, the President proposes to replace the present Comprehensive Planning Assistance Act (Section 701 of the Housing Act of 1954) with the Responsive Governments Act (RGA) to be funded at a level of $110 million in fiscal 1974.
He was critical of the earlier program for placing too much emphasis on planning and too little on budgeting, management, personnel, administration, and information-gathering. "Planning," in the President's words, "has often been irrelevant to the problems and the actual decisions." The RGA would broaden the 701 program and assist state and local governments in "developing reliable information on their problems and opportunities; developing and analyzing alternative policies and programs; managing the programs; and evaluating the results, so that appropriate adjustments can be made."
With problems of legislative language still to be resolved so that the two measures can be sent to Congress for the necessary round of authorization and appropriations hearings and floor enactment, only the most optimistic observer could predict final action by the end of the fiscal year, June 30, 1973. Remaining pipeline funds may lessen the impact of adjustment from categorical to revenue sharing funding, but local park and recreation administrators meanwhile must confront the calendar and budget their activities practically in a vacuum of leadership and information.
As previously noted, general revenue sharing funds are received automatically by states and cities according to formulae. The $30.2 billion included in the 1972 Act for a five-year period amounts to a return of about one percent of federal income tax revenues to the states. Of this total, one-third is reserved to the states without limitation except that it may not be used to provide state matching for remaining categorical programs or for highway construction (due to the existence of the Highway Trust Fund for this purpose). The other two-thirds automatically pass through to the local communities for "ordinary and necessary maintenance and operating expenses" in priority areas including public safety, environmental protection, public transportation, health, recreation, libraries, social services for the poor and aged and financial administration. Education is excluded and is the subject of a separate revenue sharing proposal. Ordinary and necessary capital expenditures authorized by law may also be financed through general revenue sharing funds.
As the details of revenue sharing implementation became known, the reaction of state and local officials was mixed. Originally presented as a supplement to existing forms of federal assistance, revenue sharing received the enthusiastic support of many mayors and governors of both political parties, many of whom testified in favor of the general revenue sharing bill in 1972. But despite earlier rhetoric to the contrary, the Administration's 1974 budget justified the elimination of a number of categorical programs on the grounds of the existence of federally shared revenues. The elimination of the urban open space program is a case in point. The budget explanation stated:
"Provision of local open space is a low priority use for federal resources, since benefits accrue to local residents and should be supported from local financial resources. Local communities may continue to provide public open space through the use of federally shared revenues."
To the beleaguered city official, in the absence of the community development special revenue sharing package, this language appears to put open space in direct competition across the board with all local services, not just those within the community development rubric. The Conservation Foundation summed up the reaction of many local officials:
"They like the idea of revenue sharing, with its greater flexibility and local control. But many mayors and others are not so sanguine about the prospect for these programs in competition with other municipal activities over limited funds."
There is also considerable dispute over how much there will be to divide among competing public service needs. Testifying before the hearings of Senator Edmund Muskie's Subcommittee on Intergovernmental Relations, former HUD Under Secretary Robert Wood described the Administration's revenue sharing program "in effect a $10.9 billion withdrawal" terminating or phasing out 112 social action programs previously costing $16.9 billion with an annual $6 billion general revenue sharing program. Boston, he pointed out, would receive $17 million in general revenue sharing in 1973, "while watching at least $100 million cut from programs such as
model cities, the public service employees programs, and public housing."
Even though some of these programs would presumably be funded through a combination of new special revenue sharing and/or block grant legislation, pipeline funding and local resources, local officials found themselves nearing the end of the fiscal year with a confusing numbers game going on in Washington, total confusion at the federal regional office level and a host of unmet needs in every sphere.
In November 1972, Senator Muskie's Subcommittee addressed a questionnaire to 2,359 mayors and city managers to "uncover the pressure points in our current system ... (and) to discover the attitudes ... toward different kinds of federal assistance." The senator released an analysis of the information received from more than 700 small- and medium-sized cities and 71 large cities in late February.
As expected, local officials were enthusiastic about the idea of less red tape and restrictions under block grant or special revenue sharing proposals but were "adamant that block grants or special revenue sharing must not be used as an excuse to lower the dollar amounts of federal money going to the cities." A majority of the mayors of the 71 large cities "oppose any cutbacks in categorical aid." Typical comments released by the subcommittee suggested that the goals of revenue sharing and categorical programs are not the same, and stressed that categorical programs are essential to deal with environmental problems transcending political boundaries.
This last observation was in line with pleas from the recipients of categorical grants who claimed that federal funds provided the catalyst for experimentation in meeting social service needs.
On the basis of the first questionnaire, subcommittee staff analysts concluded that the priorities selected by the cities, large and small, were:
Capital improvements;
Public safety;
Personnel adjustments.
Programs mentioned less frequently were tax relief and environmental improvement. Only a small percentage reported plans to use general revenue sharing funds for services to the poor and elderly. The subcommittee report added:
"It is important to note that most of the cities responding to the subcommittee survey did so before the Administration's budget for fiscal year 1974 was announced and before local officials had any indication that they were expected to use revenue sharing funds to replace federal money cut back from social programs."
In an effort to supplement the subcommittee's information, another questionnaire probing some of the same areas was sent in late February to parks and recreation administrators in 25 of the nation's 56 cities over 250,000 population. These were the same cities on which a considerable amount of data had already been gathered in connection with the 25-city study of inner-city open space and recreation opportunity conducted by NRPA for HUD. By then, these officials were presumably aware of the President's 1974 budget message and its implications for federally funded parks and recreation programs. Information received from these administrators on four major questions is revealing.
1. Preferred Types of Assistance.
A small majority of the respondents (56 percent) feel that the federal system of furnishing assistance in the form of categorical grants prevents them from using federal money in a manner which is best for their communities' park and recreation system and prefer federal assistance in the form of block grants or revenue sharing rather than categorical grants. However, more than two-thirds (69 percent) of the respondents believe that parks and recreation will receive less money through revenue sharing than they did through past categorical grants and a full three-fourths of them think it undesirable for the federal government to cut back its categorical grant program.
2. Capital or Operating?
Park and recreation administrators estimated or verified that 62 percent of all general revenue sharing funds received in their cities will be directed to capital expenditures; only 38 percent will be used for operations.
3. Who Will Benefit?
Eighty-two percent of the park and recreation administrators believe that the federal revenue sharing funds received by their cities will be spent generally to benefit evenly the entire city population rather than special population groups such as the poor, aged, inner-city, etc. The same percentage of responding administrators also believe that revenue sharing received by their cities and then earmarked for park and/or recreation purposes will be spent generally to benefit evenly the entire population.
4. How Will Funds Be Spent?
Tables 2 and 3 reflect the estimates of general revenue sharing funds to be allocated (1) among all public services, and (2) among park and recreation budget categories. Tax relief, public safety, and transportation are expected to receive over half of general revenue sharing funds allotted to these cities; parks and recreation together would receive about 13 percent, forecast the respondents. The administrators were asked to predict how general revenue sharing funds tagged for parks and recreation would be spent. As shown in Table 3, capital improvements and land acquisition will receive the lion's share – 63 percent. Programs or facilities for special population groups (poor, aged, handicapped, etc.) are not targeted for substantial special help.
Thus a paradox occurs, for, while parks and recreation administrators bemoaned past categorical grant spending restrictions which forced spending for hardware, now that more local control is possible, the same pattern will largely be followed. General revenue sharing will apparently cause no about-face.
As noted, these figures are only estimates and represent wide variations. Houston and Kansas City park and recreation administrators expect to receive a full 30 percent of general revenue sharing funds; Phoenix anticipates 37 percent. On the other hand, estimates for Los Angeles, Seattle and Newark are 3, 4, and 5 percent respectively. Atlanta and Boston administrators expect no funds at all for park and recreation purposes. Atlanta had intended to use its entire general revenue sharing allocation for rebates to water-bill payers, and Boston is earmarking 90 percent for tax relief and 5 percent each for public safety and health.
Overall conclusions based on supposedly sympathetic crystal-ball gazing are confusing and very possibly misleading. A review of other trends does not yet seem to warrant the optimism currently expressed by some park and recreation administrators who expect substantial proportions of general revenue sharing funds to flow into their departments. For example, eight administrators report they anticipate between 9 and 37 percent of their cities' entire general revenue sharing funds – or an average of 20 percent for the eight cities. However, only two of these departments exceeded the average 1970 per capita operating expenditures for cities of their size. That is, local support for public parks and recreation in six of these cities has been below average.
The mayors' estimates may be more realistic. According to their responses to Senator Muskie's survey, only one of these eight cities should anticipate any general revenue sharing funds to flow into its park and recreation system.
The opinions of the mayors will be crucial if the Better Communities Act and the transition from categorical grants to the full program of special revenue sharing take place. One of the tenets of the New Federalism, as President Nixon and his aides have described it, is the concentration of control over federal funds in the hands of locally elected – not appointed – officials. The funds will be allocated according to community priorities as perceived by those elected officials.
Thus, unless parks and recreation administrators can mobilize their constituencies at City Hall, they not only will not get more from the New Federalism, they may even get less. One thing is clear. For urban parks and recreation systems, the New Federalism is not a new dollar.