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*. . . * ~k' * * '* ~k * * * ~r * * * ~' * * * * * * '* '* '*' *
* * `'
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Printed in U,5,A,
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Foreword
The expenditures and taxes of state shortage of money seem to
plague state sand local governments play a major role and
localities? What are the facts, thein American life.
State-local govern- problems, the alternatives? Such ques
-'ments employed about 7.8 million indi- tions involve complex
issues and canno tviduals in 1966, compared with Federal be
answered easily, We can, however ,employment (excluding the armed
survey the general situation today an dforces) of 2,6 million.
State-local pur- discuss some factors which , bear uponchases "of
goods and services now exceed the choices ahead,those of the
Federal government for
This Handbook was prepared as part_
:non-defense purposes . Expenditures of of the broad research
and educationalstates and localities have been growing ' `program
of the Tax Foundation . Unlikemore rapidly than population, their
1965 other Foundation studies, however, thi sper capita expenditure
of $387 was 90 rests, not so much upon new researc hpercent larger
than in 1955, and their conducted for the specific pruject a s1965
taxes of $266 per capita were more ' (upon my own work extending
over manythan 87 percent above the 1955 level, years, supplemented
by aid from th e-
Money figures, of course, cannot re- - Foundation's staff. I
have sought toveal the "flesh and blood" effects. Serv- : -maintain
the Foundation's standards o fices provided by state and local
govern- objectivity, but at some points there arements influence
profoundly everyone's evaluations and judgments, both impli -Aaily
life. And our future -- as individ- cit and explicit . These are my
responsi-uals, as families, as communities, and as ' bility. They
do not necessarily representa nation —will depend in part upon the
views of the Foundation staff : orwhat states and localities do in
fiancing membership .'schools, streets, and other governmental The
Tax Foundation is a private, non -functions. The necessary taxes,
how- profit organization founded in 1937 to, ever, reduce our
ability to buy manyprivate things we need and want. State-
engage in non-partisan research and
local taxes also influence the economic public education on the
fiscal and man -
outlook of the communities where we agement aspects of
government. Its pur-
work and live .pose is to aid in the development of mor
eefficient and economical government. It
Pressures to increase state-local ex- serves as a national
information agenc ypenditures remain powerful, Why? And for
individuals and organizations con-why, despite increases in tax
rates and cerned with government fiscal problems .the imposition of
new taxes which to -gether have increased total yields by Lowell
Harrissabout 120 percent . in 10 years, does a I; pcember 1966
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Table , of ContentsPAGE
I. INTRODUCTION 7Historical Background 7Growth : The Amounts . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . 9Reasons for Growth of Expenditures 10Government
Structure 12Relative Roles of Types of Government 14_
Service and Transfer Spending 14II. STATE-LOCAL FUNCTIONS AND
EXPENDITURES 16
General Nature of Governmental Functions 16Education 18Streets
and Highways 20Relief Aid for the Poor ,.. . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . .
22Unemployment Benefits 24Health and Hospitals 25Police and Fire
Protection 25Other Functions and Expenditures
-
TABLE
PAGE1. Local Governmental Units in the United States, by Type,
1962 72. 'Expenditures of All Governments by Selected Functions and
Level of Gov -
ernment, Selected Years 1932 — 1965 + 9
3. Per Capita Amounts-of Selected Items of Governmental Finance,
Selecte dYears 1932 — 1965 ` 10
Number of 'Residents Served by Local Government Units, Selected
States ,1962 , 13
5.1 `Per Capita General Expenditure of State and Local
Governments, and Per -cent Allocable to Each Level of Government,
Selected States and Functions ,Fiscal 1965 : 15
6. Expenditures for State-Local Governments, Total and Per
Capita, Selecte dYears 1950 -.1965 ` '17
7. Tax Receipts, by Level of Government, Selected Years, 1902
-1965 31
. ` ;
8 . Percentage Distribution of State Tax Collections, by Source
, 37
9. State Tax Revenue by Source and Number of States Imposing
Tax, 1964 38
:40. "Per Capita Property Taxes Collected by State-Local
Governments, Selecte dStates, 1965 `41
11. 'Property Tax Revenues as Percentage of Not National
Product, Selecte dYears, 1927 — 1965 42
12.r
' :'Distribution of State-Local Tax Burden by Income Class and
State-Local ' rTax Burden as Percent of 'Income, 1964 47
13. Benefits of State-Local Spending as Percent of Income by
Income Class, 19 6,1 48
14. Ratio of Benefits of Stat4, and Local Expenditures to Tax
Burdens for allFamilies by Income Class --1961 49
15, Gross Debt of State and Local Governments, Total and Per
Capita, SelectedYears, 1927 --1964 51
-.16 . . Intergovernmental Revenue as Percent of Total Revenue,
Selected Years ,1922--1965 57
17. Intergovernmental Expenditure by Selected Functions and
Level of Govern -meet, Selected Years, 1953 -1965 59
.
FIGURE
1. Expenditure as Percent of NNP by Level of Government,
Selected Years ,1913—1965 8
2, State-Local Expenditures, Tax Receipts and Debt Per Capita 1
1
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. .. ..
. .. .. .. .
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Handbook of
'State and Local Government Finance
Introduction
Americans use thousands of govern- portant, cost little .
Federal spendingments, in a three-level structure, to pro-
- and taxation had little direct bearing onvide services and to
collect the dollars the life of the individual, on state' o rto pay
for them . The national (or Fed- local governments, or on,business
. '2eral) government, of course, exerts in- Nor , did state
governments spendfluence over everyone . Everyone also is much to
provide services . They paid fo rsubject to a state government—the
mid- courts and prisons, mental and tuber -dle level of the
structure — and to a cular hospitals, some colleges and alms-group
o f local governments, the third houses but not much more . State
taxes ,'level — city : or town, county, school dis- by today's
standards, were low . In con-trict, and often one or:. more special
.districts. (Table 1 .)
Table 1Historical Background Local Governmental Units
Until the late 1940's (except in time in the United States, by
Type, 1962of war), local government was the gov-ernment so far as
the rendering of serv- Total, all local government units-1 . ,
91,185:'ices to the public was concerned . Fig- Counties( a
)
3,043ure 1 shows Federal-state-local expendi- " Townships and
towns
17,144tures and taxes in relation to net national
Municipalities
17,997product over the period 1913-1965 . Be- School
Districts(b)
34,678fore World War I and in the 1920 's the Special
Districts(c)
18,323national government provided only a
_few services.' It ran the postal service, a .
Excludes areas corresponding to counties bu thaving no organized
county government .
operated courts, maintained national de- b.
Excludes local schools stems operated as partof state, county,
municipal or township govern -fense, and represented the country
:meets .
abroad, Various other functions — rant -abroad, c.
approximately
1,700 entities
previously con -mentsareecountedasspecial districtsIno1962.ing
patents, regulating money, manag -ing a huge public domain — though
im- source : Depart of Commerce, Bureau of the Census .
1 .
Moreover, It did relatively little to transfer income, as
discussed later,2 .
Some regulatory activity exerted influence much greater than
would be suggested by the modest spending .Federal tax rates were
low compared with those of today, World War I tax rates rose to
high levels, but they ,kinlike those of World War II, proved to be
tempporary ; wartime rates were reduced greatly in the 1920's a
sTreasury Secretary Mellon sought to use tax reduction to encourage
economic growth, Relatively few indi -viduals paid any Federal
income tax, even during the prosperous-to-boom years of the 1920'x
. The tax rate oncorporation earnings was only about one-fourth
that today . Payroll taxes for social security were unknown ,and
the only consumption tax of importance was 6 cents a package on
cigarettes .
7
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Figure 1Expenditures as Percent of Net National Product ,
trast with 1965 per capita state taxes o f$136, for instance,
1913 per capita statetaxes amounted to $3 and those of 1927were
$14, Gradually, however, by un-even stages, use of state government
in-creased. More state money went int ohighway construction as the
growinguse of autos and trucks required tha tlocalities be
connected by hard-surfac ehighways, costing more than local
gov-ernments were prepared to pay . Somestates also developed
systems for pay-ments to local governments to help
finance schools and occasionally, othe rservices.
The 1930 's brought great change . TheFederal, and most state,
governmentsincreased their roles (1) as providers ofservices and
(2) as suppliers of fundsfor activities carried out by "lower
level"governments. (Tables 2 and 3.) Local-ities faced rising
demands for welfareaid at a time when collection of rev-enues,
chiefly from property taxes ,dropped. Along with the dollars
"fromabove" came control over their use, Th e
8
-
process has continued -more money eral from state-local
responsibility an dand more supervision . Consequently, in
performance .many cases it is now almost impossibleto draw a clear
line between the func -tions of a state government and those of
Figure 2 summarizes the growth inits localities - or even to
separate Fed- state-local finances . To allow for the
Table 2Expenditures of All Government s
BySelected Fu!~ctions and Level of Government
-- ' Selected Years, 1932 -1965
(Millions)_ Total direct expenditures( a )
Year and Levelof Government
Tota lIntergovernmental
generalExpenditures
expenditureso) Education HighwaysPubli cwelfare Health an
dhospital s
Federal :1932 $
232
3,983 $:
14 $
25 $.
1 $ 1271934 976,
4,905 " . .".',174 "320 90 11 71936 908
8,191 188 520 170 :
1251938 762
:7,516 162 500 164 .12741940 884
8,896 189 604 158 1231950 :
2,371
37,914 2,470(4 ) 69 24 9631960 6,994
76,724 685(d ) 137 58 1,4501965(c ) 1,062
99,067 1,050(d) 127 105 2,309,State :
.
:1932 801
1,965 278 843 74 21 51934 1,318
`2,009 228 738 363 2031936 1,417
2,223 297 754 422 22 11938 1,516
2,576 347 815 453 2681940 1,654
2,730 375 793 527 3001950 4,217
8,033 1,358 2,058 1,566 9471960 9,443
17,784 3,396 X6,070 2,221 1,896-
1965(c) 14,174
26,141 6,181 8,214 2,998 2,701Local ;
1932 (e)
5,800 2,033 898 370 24 11934 (e )
5,172 1,603 771 526 21 51936 (e)
5,421 1,880 671 405 246
- `1938 (e)
6,181 2,144 835 616 2831940 (e)
6,499 2,263 780 629 3091950 (e)
14,754 5,819 1,745 1,374 80 11960 209
34,092 15,323 3,358 2,183 1 18981965(c ) 262
48,813 22,790 4,007 3,317 2,66 1
a .
Direct expenditure consists of total expenditures for the
function minus grants in aid or other pay -ments to other
governments ,b .
Includes, in addition to the four listed, police protection,
fire protection, sanitation, parks and recre -ation, natura l ,b
..,urces, housing and urban renewal, financial administration,
general control, Interes ton general f,ebt, and other and
unallocable direct general expenditure .c .
Fiscal yeard.
Includes a lucational benefits for veterans ,e.
Minor amounts of intergovernmental payments to states cannot be
separated from direct expenditure .Source : U.S . Department of
Commerce, Bureau of the Census,
9
-
fact that prices generally have risen, the to $283 in 1965,
State-local debt perchart shows amounts in dollars of 1965 person
also went up from $71 to $516 _ .purchasing; power.; To adjust for
rising in dollars of 1965 buying power ,population, per capita
figures are used. "."
_State-local spending per capita, in 1965 Reasons for Growth of
Expenditures
dollars, rose from $126 in 1946 to $387 Many forces have
operated to raisein 1965. For a family of 5 the 1965 state-local
spending . A few, such as pop -
of state-local spending was $735 ulation growth and increases in
the pric eabove the total of 10 years earlier in level, apply
generally ; others, such as
of the same buying power . State-. ..dollars increasing reliance
on the auto, bearlocal taxes per capita in dollars of 1965 upon one
or another function in parti -
-;.purchasing power rose from $51 in 1946 cular. Looking
further, we can identify
3 .
Use of per capita figures does not take account of changes in
age distribution . Government spending perperson tends to be higher
for the young and the old than for those between, say, ages 18 and
65 .
-4, The adjustment for price level change rests upon the
consumer price index compiled by the Bureau of LaborStatistics
.
Table 3Per Capita Amuunts of Selected:Items of Governmental
Finances
Selected Years, 1932 -1965
F U N C T 1 0 N SInter.
Total( h )Year and Level
Rovernmental
Genera lof Government
Expenditures
Expenditures
EducationPublic
Highways
Welfare
Health
Hospita l
Federal :1932
$ 1 .86
$ 31 .88
$
.11 $
.20
$
.01
$
.11
$
-901934
7 .72
38.78
1 .38 2.53
.71
.08
`- .851936
7.08
63.90
1 .47 4.06
1 .33
.12
.861938
5.86
57.83
1 .25 3,85
1 .26
.24
.741940
6.69
_ 67.33
1 .43 4.57
1 .20
.27
.661950
15.63
249.95
16 .28(d ).
,45
.16
1 .96
`4,39
_1960
38.86
426.26
3 .81( d )
.76
,32
2 .62
5,431965(x)
57.07
511,13
5,42( 4 )
.66
.54
5 .00
6.91State and local :
1932
(a )
62.15
18.50 13.93
3.55
.86
2 .791934
ta)
56.77
14.48 11.93
7 .03
.86
2.441936
(a)
59.63
16.98 11.12
6 .45
.90
2.741938
( a )
67.38
19.17 12.70
8 .23
1 .16
3.081940
(a)
69.85
19.97 11 .91
8,75
1.20
3.41
_. . . _; .. .
_
-" 1950
( a )
150.22
47.31 25.07
19.38
2.40
9 .121960
( a )
288.21
104.00 52.38
24.47
3.11
17.971965(c )
(a )
386.73
149.47 63.05
32.58
4 .31
23.35
a. Duplicative transactions between levels of governments are
eliminated in combined total .b. This total reflects all items
making up general expenditure in addition to those listed ; police
protec -tion, fire protection, sanitation, parks and recreation,
natural resources, housing and urban renewal ,financial
administration, general control, interest on general debt, and
other and unallocable directgeneral expenditure ,c, Fiscal year.d .
Includes educational benefits for veterans ,Source: Department of
Commerce, Bureau of the Census.
10
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Figure 2State-Local Expenditures ,
Tax Receipts, and Debt per Capita1965 Dollars a
Selected Fiscal Years, 1940 . 1965
Expsalihns
;- - -Taxes opt
;
yet other influences on the expansion ofstate-local spending
.
America has become more urbanized ,and the factors which lead to
urbaniza -tion also tend to increase local govern- 60 0
went spending per person.' As more and 55 0more people move to
large cities, the ytend to seek governmental provision of 50
0services which families in smaller com- ,450munities and less
dense areas go with -
-out, provide for themselves, or get from aoo_ . ..
-government
to
a
lesser
extent.
The 35 0spread of population to suburbs require soutlays on new
streets, schools, sewers, 300:and other fixed and "overhead"
capital 25 0facilities. Some of these are very costly,;per capita,
if only because each mile of 20 0street or water main serves fewer
fam- 5 0ilies than do those in built-up areas .The people who
approve such projects, I00often voting to borrow now and tax "
`Iater, have frequently been more expan -i
1
1940
1946
1950
1955
1960
196 5
a . Consumer price index, 1965 — 100Source: U.S. Dept. of
Commerce, Bureau of the Census .
leads to rising burdens of interest an ddebt repayments .
provide the impetus . The extent of pop-
The Federal government has beenular support for better public
servicecannot be measured, but such support is putting pressure on
states and localitie s
unquestionably a fac o-or in the growth to spend more . By
offering to pay part o f
of expenditures . Risi,ig income has en-' the cost, as discussed
later, it has virtu-
abled Americans to provide state-local ally compelled them to
assume ne w
governments with more and more reve- functions and enlarge older
ones .
nues, sometimes more or less automati-
In trying to explain the growth of .tally, sometimes by specific
acts approv- state-local spending, we must recogniz eing higher tax
rates or even entirely new a fundamental problem . Rarely can th
etaxes . Willingness to incur debt makes value of an activity be
measured accu-higher expenditure levels possible — and rately
enough for meaningful compari -5 . Detailed analysis reveals that
population density and degree of urbanisation may not in and of
themselve s
account for as much difference in state-local spending as once
believed . But the forces that operate to enlarg ethe role of
cities relative to rural communities also work to increase
state-local spending . on the other hand ,when population in an
area declines, total cost of government may tco down only slowly ;
per capita costs ma yactually rise, at least for some years,
because nearly the same total of facilities must be provided .
Factor sinfluencing expenditure levels are examined in the
following articles : Glenn W . Fisher, "Interstate Variatio nin
State and Local Government Expenditure," National Tax Journal,
March, 1964, pp . 57-74, Seymour Sack sand Robert Harris, "The
Determinants of State and Local G(-vernment Expenditures and
Intergovernmenta lFlows of Funds," National Tux Juurnul, March,
1964, pp . 75-85 : R . W . Bahl and R . J . Saunders. "Determinant
sof Changes in State and Local Government Expenditures," National
Tux Journal. March, 1965, pp . 50.57 .
sive than cautious in mood .
Americans have desired better qualit yof schooling, highways,
and other gov-ernmental services . The expression ofsuch desires is
by no means always clear .Relatively small but forceful groups
may
11
-
son with its cost. Perhaps unconsciously ,and often wron&,
voters expecting t obenefit from spending proposals willsupport
them in the belief that someon eelse will be forced to pay a big,
part `ofthe taxes required .
Governments almost never get rid ofolder functions as new ones
are added.Not often do voters, or lead .e.-s of gov-ernment, exert
strong pressure to reduceor terminate a service no longer worthits
cost, so long as it seems to pleasesome of the public." In
contrast, a busi-ness firm would go bankrupt if it kep ton
producing goods or services whichcustomers do not value as highly
as theircost. Governments at all levels are
'largely free from the insistent pressureof market competition
to abandon func-tions . Consequently, a governmen tAgency can
continue to provide serviceswhose worth, in relation to cost, is at
bestdubious. Public employees get some -thing of a vested interest
in what exists ,rand taxpayers do not put up effectivechallenges.
Similarly, insistence that th echarges for a service, such as local
trans-portation, be under cost has in som ecases discouraged
private suppliers t o.such an extent that government mus t
- -take over if the service is to continue.
The next chapter, in discussing par-ticular governmental
functions, willhave more to say about reasons for thegrowth of
expenditures .
Government Structure
When the 13 colonies "created" thenational government, they
surrenderedsome of the authority they had held assovereign powers .
, Each state subse-
quently admitted to the union cam eAth powers equal to those
retained by
the 13 original states, except as modifie dby amendments to the
Constitution, o rby their own state constitutions . Underour basic
national law, therefore, all 50states have the same legal
power..
The legal powers of local govern-ments, in contrast, ha re been
determinedby 50 different state governments . Indesignating
reponsibilities for local gov-ernment spending, and mi
grantingpower to impose taxes and incur debt,states have followed
policies which dif-fer widely, not only from one to another ,but
even within states . Ordinarily, non eof the three or more local
governmentswhich exercise authority in an area havethe same
boundaries . Moreover, fromone state to the next, cities, counties
,school districts, and other types of lo-calities often have
different responsibili-ties and financial authority . Almost all
,,however, have power to impose atleas tone tax, spend, and incur
debt.
The data on the number of governments of each type shown in
Table 1do not reveal the great diversity existin gat the local
level . Table 4, however, indi-cates for 1062 the number of
residentsserved by units of local government ina few state. .,,
Why so many units of government?Some of the answer is more or
less obvi-ous. Because this country covers a largearea, settlement
naturally occurred i nstages. Settlers wanted local
autonomy.Moreover, no large units of governmen twere in fact
equipped to perform suchfunctions as the provision of policing
,streets, and schools . To get such serv-
6. Some individuals and groups will benefit from a service whose
total value may be only a small fraction of it stotal cost . The
persons who do benefit can he expected to show more vigor in
defending the continuation o fsuch a service than any group will
exert in favor of reducing or abandoning the service to save taxes
for th egeneral public.
7. The framers of the Constitution thought of the national
government they were creating as one of limite dpowers . The scope
of its authority over states and localities was to be very much
narrower than what exist stoday .
12
-
ices, people formed local units which the debt it may owe; but
by organizin gwere usually small in area as well as pop- a special
district, much the same public
°- = ulation. As transportation and communi- -n-►ay do what has
technically been for-
-action improved, many local govern- bidden. The results include
wasteful du
"finents proved to be too small to perform plication and the
weakening of estab-, "functions as efficiently as possible under
lished controls over spending .new conditions. A gradual process
then The multiplicity of governments ac -combined units to provide
better serv- cen,tuates the obstacles to getting highlyice or
reduce cost . For example, 74,000 desirable cooperation among local
gov -school districts were eliminated " by con- " ernments. In some
metropolitan area ssolidation from 1942 to 1962. the problems are
especially difficult . The
. :,
During this same period, however, the existence of many local
governments ,number of municipalities and special 'however, creates
an opportunity whichdistricts grew, with increasing popula- should
not pass unnoticed : Americans
'tion and the building up of sparsely can influence the
governmental unit ssettled 'areas . In addition, new Federal
"closest to home, more so than can theprograms, especially those
for agricul- people of almost all other lands . And in
''tural areas and public housing, have led our state governments
we have unitstc.~ the establishment of special units sep- which,
while much bigger and more re -arate from the county or city. Many
new `mote than localities from the individual ,governments owe
their existence to a de- still are less enormous than the
Federalsire to escape restrictions on existing government .
Elsewhere, national gov -units. State law, for example, may limit
--ernments generally exert much more in -
: h. a tax rate which a city may impose or fluence relative to
"lower" levels than i n
Table 4Number of Residents Served by Local Government Unit s
Selected States, 1962(Thousands)
-
Average Number of residents per government uni tTownships
School
Specia lStates
counties
and town:
Municipalities
districts
districts
California
298.8 (a)
45.7
10.4
8.7Colorado
30.5 (a)
7.5
6.1
3.3Connecticut
( a )
17.3 77.2
328.1
12 .9Kansas
21.1 1.4
3.6
1 .0
"2.5Kentucky
25.7 (a )
8 .4
14.8
17.2;Michigan
96.7 6.4
15.8
4 .3Mississippi
27.6 (a)
8.5
., 14.3
8 .5New Jersey
302.7
27.3
19 .0
12 .4
21 .5New York
307.0
18.8
28.6
14.2
18.0North Carolina
47.0 (a )
10.5
( a )
37 .3Texas
39.9 (a)
11 .7
6.9
13 .8
a .
Unit not used In state .Source: Department of Commerce, Bureau
of the Census .
13
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this country. Visitors from abroad who society imposing
conformity to a singleobserve our government often express
.pattern. Our freedom to use differentsurprise at the independence
of our local systems, for example, enables us to adap tschool
authorities, and of town and city to conditions which differ
because o fofficials, from direction by the national such things as
historical background an dgovernment. American localities also
traditions, industry and income, topog-'Impose the taxes to pay for
a much big- raphy, and density of population . In ager fraction of
their spending than do country as large and varied as ours,local
governments in most other lands, would not any national system for
pro-
Changes over the years have multi- viding local services
—schools, streets ,; plied Federal influence over state-local
policing— include avoidable ineffi -governments as well as state
influence ciencies? A police system or public
:over localities. Yet even so, the voters of health organization
which would be ex- '.. :each community retain considerable au-
ellent in some cases would be unwork-thority over their local
government and, able in others . Diversity also permitsof course,
have some power to influence experimentation
ind the testing an d. both state activities as such and state ,
comparison of one procedure with others .controls over local
government ., . `
Service and Transfer Spending:, Relative Roles of Types of Some
government spending pays fo rGovernment services, such as teaching
and policing ,
Table 2 showed state-local spending or for products, like street
surfaces orby major function . From state to state, `hospital
equipment, which will servehowever, the sharing of responsibility
the public . Other governmental spend-between the state and the
various local ing, about 10 percent of the 1965 state-governments
differs greatly. Table 5 pre- local total, consists of transfer
payments,sents for a few states figures on the rela- such as funds
given to the poor. Al-tive roles of state and local government
though such payments may 'clearly bein spending for various
purposes ." In desirable for societ y, they do not pro-Connecticut,
Louisiana, Missouri, and vide tangible services for the
generalKentu(,ky, for example, the state govern- public. The
recipient of a transfer, ofment performs most of the welfare ad-
course, benefits from the dollars he gets ;ministration. But in
California, Nebras- but he does so without giving the com -ka, New
Jersey, New York, and Ohio, munity something in return -- as
doeslocal governments — the town or often the school teacher,
judge, or municipa lthe county — administer welfare even nurse." In
providing dollars for trans-though most of the funds may come from
fer payments, the taxpayer must give upstate and Federal sources .
In a few cases, some of what would be his purchasingthe city
operates the schools' but in power so that others can use it withou
t
_
most communities a separate agency has_
rendering him u« equivalent in services .responsibility for
public education, The
economic,
social,
and
politica lSuch variety, it is argued, provides a effects of
transfer and service spendin g
source of strength compared with a can differ significantly.g
.
This table shows the level which performs the variou sone whose
taxes will provide the dollars .
functions . This level is not necessarily the same as th e
9 . In estimating the production of a whole economy (gross
national product), the spending for governmen tservices is assumed
to pay for output which is part of the economy's total production .
Transfer spending o fhowever, i sgovernment,
not included as buying final output ; the goods and services
purchased by recipient sof the funds are treated as products of the
food, clothing, and other such industries .
14
-
Table 5
Per Capita General Expenditure of State and Local Governments,
and PercentAllocable to Each Level of GoverninenP :
Selected States and FunctionsFiscal 1965
Percent of expenditures by local unitsPer capita state and local
general expenditures Percent of expenditures by state
state Education NiabwaysPublic
WelfareHealth an dHospitals
Publi cEducation
Highways
-WelfareHealth an dHospitals Edici0ii `
. Highways-PublicWelfare
Health an dHospitals
California $203 $61 $56 $33 17.4
.-64.8
1.7
- 37.8 82.6 35.2 :98.3 62.2Connecticut 140 72 32 23 16.4
82.0
- `90.7 85.3 83.6 18.0 9.3 14.9Illinois 138 57 35 30 22.3
59A
74.0 62.3 77.7 41.9 26.0 37.7Kentucky 110 66 32 20 26.3
90.2
.95.9 57.4 _
73.7 9.9 4.1 42.6Louisiana 123 76 58 22 26.5
79.7
= 99.7 82.9 73.5 20.3 3 17.1Missouri 121 64 33 25 18.4
78.2
97.1 46.0 81.6 21.8 2.9 54.0Nebraska 144 80 20 21 `22.0
VA
10.7 57.4 78.1 39.5 89.7 A2.9New Jersey 136 48 19 24 -12.0
-61.8
10.4 42.7 88.0 38.2 89.6 57.3New York 165 49 40 49 14.0
:48.3
1.5 40.6 86.0 51.7 --
98.5 59.4
r
Ohio 126 60 26 20 16.0
62.2
35.5 4 5.6 :84.0 37.8 64.5 54.4
_
a_ [expenditures are shown by the level which performs the
function, not by the level which raises the funds .
Source . Department of Commerce, Bureau of the Census.
-
II. ,State-Local . FThe discussion in this chapter will not . :
Ards of sanitation, formulating buildin g
distinguish between state and local out- ;codes, zoning, and
registering sales of-lays . It will focus. on :the .functions per.-
" property.l People acting privately could;formed .
- not do all that is required for each indi -
Table 6 "gives the amounts which vidually or f or the group as a
whole .
State-local governments have spent for Most state-local
government expendi-
""their major functions in selected years Aures, however, do not
go for thingssince 1950. These figures include spend-which are
inherently governmental .!ing which is paid for by (1) non-tax
rev-enues, such as charges for water, univer- The principles
underlying our con-sity tuition, and parking (but not the
'stitutional law approve governmenta lcosts of operating liquor
stores in the activities, and the expenditures to finance
_
16 states in which the state government -them, only when the
general public in- ',engages in the sale of liquor), (2) funds
terest is served. This rule reflects, among:from the Federal
government, and (3) other things, recognition that govern-
_borrowing, aswell, as (4) ` ax, revenues . . > .: ment spending
represents the use of
-funds obtained by the exercise of th eGeneral Nature of
- ,-power of compulsion to force the pay-Governmental Functions
nlent of taxes, The use of tax money, re -
A few state-local services are inher-sulting from the exercise
of coercion i sto be restricted to functions which serve
ently governmental, i.e., their very na- 'a "public purpose,"
one which will pro-, , ,,ture consists of governing or ruling .
Such duce a general benefit -for the, people as
activities are a type which, with few ex- a whole .,ceptions,
only government can perfor mefficiently, They require the use of
com- Immediately, however, one asks suchpulsion (frequently to
prevent or re- perplexing questions as : What, really, isstrict the
private use of force by one the general welfare's' How can we defin
eperson over another) . The provision of it? When we agree that it
exists in some-a police force, the maintenance of courts, case, can
we measure the extent? The
=and the operation of prisons are inher- ;tendency for 20 years
or so his been toently governmental services, Various reg- endorse
reasons which seem to justify anulatory activities must also be
conducted ever-expanding definition of "generalby a government to
be effective—such welfare." The result has been a philoso -public
health functions as the control of phy which supports heavier
spending ofcommunicable diseases, enforcing stand- tax funds, and
for more things, than
1,
Not all regulatory activities can be counted on to serve the
public interest . Some are adopted as the result o finfluence of
special groups who hope to benefit but at the expense of others,
Moreover, regulations which ar ewell designed are not always
enforced effectively, Sometimes they get rather badly out of
date,
16
