General revenue sharing

Definition

General revenue sharing is a fiscal arrangement where the federal government allocates a portion of its tax revenues to state and local governments with minimal restrictions on how those funds can be used. This approach aims to promote local autonomy and flexibility, allowing governments to prioritize their specific needs while fostering intergovernmental cooperation. It highlights a shift towards decentralization in federalism, where local governments can tailor their spending to better serve their communities.

5 Must Know Facts For Your Next Test

1. General revenue sharing was introduced in the 1970s as part of a broader effort to improve the financial health of state and local governments.
2. The program was designed to give local governments greater control over their finances, thereby increasing accountability and responsiveness to local needs.
3. General revenue sharing was phased out in the 1980s due to budget constraints and concerns about how funds were being utilized by state and local entities.
4. The allocation of funds through general revenue sharing was often based on formulas that considered factors such as population size and local needs.
5. Although general revenue sharing is no longer in effect, its principles continue to influence discussions about fiscal federalism and intergovernmental relations today.

Review Questions

• How did general revenue sharing impact the relationship between federal, state, and local governments?
  • General revenue sharing significantly transformed the dynamics between federal, state, and local governments by granting more financial autonomy to state and local entities. By providing funds with fewer restrictions, it allowed these governments to prioritize their spending based on unique community needs rather than federal mandates. This shift promoted a more collaborative intergovernmental relationship where local authorities felt empowered to make decisions that directly benefited their constituents.
• Discuss the reasons behind the eventual phasing out of general revenue sharing and its implications for local governance.
  • The phasing out of general revenue sharing in the 1980s was primarily due to budgetary pressures and concerns over how effectively states and localities utilized the funds. Critics argued that without strict guidelines, some local governments mismanaged the money, leading to inefficient use of resources. This change has implications for local governance as it returned control to the federal government through categorical grants, limiting the financial flexibility that had previously empowered local leaders to address specific issues in their communities.
• Evaluate how the concepts of general revenue sharing might influence current discussions about fiscal policies and intergovernmental relations in the United States.
  • The principles of general revenue sharing are relevant today as discussions around fiscal policies increasingly focus on balancing federal oversight with state autonomy. The lessons learned from past experiences with revenue sharing inform current debates on how best to allocate resources while maintaining accountability. As policymakers consider new funding mechanisms, there’s a renewed interest in finding a middle ground that allows for flexibility at the local level while ensuring that federal objectives are met, reflecting a continuous evolution in intergovernmental relations.

Related terms

federalism: A system of government in which power is divided between a central authority and constituent political units, like states or provinces.

categorical grants:

Federal funds provided to state or local governments for specific projects or programs, typically with strict guidelines on how the money should be spent.

block grants: Federal funding allocated to states or localities for broad purposes, giving them more discretion in how to use the funds compared to categorical grants.