---
title: "Revenue Sharing — AP Gov Definition & Exam Guide"
description: "Revenue sharing is federal money given to states with almost no strings attached. Learn how it fits fiscal federalism in AP Gov Topic 1.7 and how it compares to block and categorical grants."
canonical: "https://fiveable.me/ap-gov/key-terms/revenue-sharing"
type: "key-term"
subject: "AP US Government"
unit: "Unit 1"
---

# Revenue Sharing — AP Gov Definition & Exam Guide

## Definition

Revenue sharing is federal funding distributed to state and local governments with virtually no restrictions on how it can be spent. In AP Gov (Topic 1.7), it represents the loosest form of fiscal federalism and is the least used type of federal funding today.

## What It Is

Revenue sharing is the [federal government](/ap-gov/unit-1/challenges-articles-confederation/study-guide/GxWDHHakDmG2u6BkzBkH "fv-autolink") handing money to states and localities and basically saying "spend it however you want." No spending categories, no detailed conditions, no federal standards to meet. That makes it the most flexible form of federal aid, and the rarest.

The big example is the State and Local Fiscal Assistance Act of 1972, which sent billions in federal tax revenue to state and local governments with almost no strings attached. The program was phased out in the 1980s, and here's the logic behind why. Money is leverage. If [Congress](/ap-gov/unit-1/principles-american-government/study-guide/BXlQvFOiaKwhntWYhgKP "fv-autolink") gives states cash with no conditions, it gives up its ability to steer state policy. That's why [categorical grants](/ap-gov/key-terms/categorical-grants "fv-autolink") (tight strings) and block grants (loose strings) dominate fiscal federalism now, while revenue sharing (no strings) has essentially disappeared. In CED terms, revenue sharing sits at one extreme of the debate over the balance of power between national and state governments (1.7.A).

## Why It Matters

Revenue sharing lives in **Topic 1.7 (Relationship Between States and the Federal Government)** in **[Unit 1](/ap-gov/unit-1 "fv-autolink"): Foundations of American Democracy**, supporting learning objective **[AP Gov](/ap-gov "fv-autolink") 1.7.A**, which asks you to explain how the constitutional allocation of power between national and state governments affects society. Fiscal federalism is the modern battleground for that allocation. The Constitution doesn't say who controls highway funding or education spending, so the federal government uses money to influence states. Revenue sharing matters as the baseline case where states keep maximum power. Once you can place revenue sharing, block grants, categorical grants, and mandates on a spectrum from "states decide" to "Washington decides," you can answer almost any federalism funding question the exam throws at you.

## Connections

### [Block Grants (Unit 1)](/ap-gov/key-terms/block-grants)

[Block grants](/ap-gov/key-terms/block-grants "fv-autolink") are revenue sharing's closest cousin. Both give states flexibility, but block grants confine the money to a broad purpose like community development, while revenue sharing has no purpose attached at all. Think of block grants as a gift card for one store and revenue sharing as cash.

### [Cooperative Federalism (Unit 1)](/ap-gov/key-terms/cooperative-federalism)

Federal grants are the machinery of [cooperative federalism](/ap-gov/key-terms/cooperative-federalism "fv-autolink"), where national and state governments work together like a marble cake. Revenue sharing is the version of cooperation that trusts states the most, since Washington provides the funds but states make every spending decision.

### [Dual Federalism (Unit 1)](/ap-gov/key-terms/dual-federalism)

Under [dual federalism](/ap-gov/key-terms/dual-federalism "fv-autolink"), the layers of government stayed in separate lanes, so big federal-to-state money transfers barely existed. The rise and fall of revenue sharing is evidence that the federalism story isn't a straight line toward national power; it swings back and forth, which is exactly the debate 1.7.A wants you to explain.

### [Enumerated Powers (Unit 1)](/ap-gov/key-terms/enumerated-powers)

Congress's power to tax and spend is enumerated, but most policy areas grants touch (education, policing, local infrastructure) are reserved to the states. Grant money, including revenue sharing, is how the federal government reaches into state turf without claiming a constitutional power it doesn't have.

## On the AP Exam

Revenue sharing shows up almost exclusively in multiple-choice questions about fiscal federalism. Common stems ask you to identify the State and Local Fiscal Assistance Act of 1972 as the origin of general revenue sharing, explain why it's the least used form of federal funding (Congress loses leverage over states when there are no conditions), or trace its historical trend of being created in the 1970s and eliminated in the 1980s. Watch for scenario questions too. If a prompt describes funding that "can only be used for highway construction" with "specific federal standards," that's a categorical grant, not revenue sharing. The flip is your tell. No conditions means revenue sharing; narrow conditions mean categorical. No released FRQ has used the term verbatim, but it's useful evidence in a Concept Application or Argument Essay response about federalism, especially when arguing that states retain meaningful power.

## revenue sharing vs Block Grants

Both are flexible federal funding, which is why they get mixed up. A block grant must be spent within a broad policy area (like welfare or public health), so the federal government still sets the general direction. Revenue sharing has no designated purpose whatsoever; the state can spend it on anything. On an MCQ, look for a named purpose. If there's any category at all, it's a block grant. If the money is truly unrestricted, it's revenue sharing.

## Key Takeaways

- Revenue sharing is federal money given to state and local governments with virtually no restrictions on how it can be spent.
- It was established by the State and Local Fiscal Assistance Act of 1972 and phased out in the 1980s, making it the least used form of federal funding today.
- It died out because unconditional money gives Congress no leverage to shape state policy, which is why categorical and block grants replaced it.
- On the federal funding spectrum, revenue sharing gives states the most control, block grants give moderate control, and categorical grants give the least.
- Revenue sharing supports AP Gov 1.7.A by showing how fiscal tools shift the balance of power between national and state governments.

## FAQs

### What is revenue sharing in AP Gov?

Revenue sharing is federal funding given to state and local governments with almost no restrictions on its use. It began with the State and Local Fiscal Assistance Act of 1972 and is now the least used form of federal aid to states.

### Does revenue sharing still exist in the US?

No, general revenue sharing was phased out in the 1980s. Federal aid to states today comes mainly through categorical grants and block grants, both of which attach conditions to the money.

### What's the difference between revenue sharing and block grants?

Block grants must be spent within a broad policy area like public health or community development, while revenue sharing has no spending restrictions at all. Block grants give states a lot of flexibility; revenue sharing gives them total flexibility.

### Why is revenue sharing the least used form of federal funding?

Because no-strings-attached money gives Congress zero influence over how states behave. Federal funding is a policy tool, and conditional grants let the national government steer state priorities, so revenue sharing lost out to categorical and block grants.

### Is revenue sharing an example of cooperative federalism?

Yes, it's a form of fiscal federalism within the cooperative model, since the national government funds state activities. But it's the version that leaves the most power with the states, because Washington provides the cash without dictating how it's used.

## Related Study Guides

- [1.7 Relationship Between States and the Federal Government](/ap-gov/unit-1/relationship-between-states-federal-government/study-guide/kp9bW6CAUn0T0GiGqDUO)

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