General Revenue Sharing : Background and Analysis (RL31936) / Steven Maguire.

Format:

Book

Author/Creator:

Maguire, Steven, author.

Language:

English

Subjects (All):

Intergovernmental fiscal relations.

Physical Description:

1 online resource (17 pages)

Place of Publication:

Washington, D.C. : Congressional Research Service, 2009.

Summary:

This report provides background and analysis of the general revenue sharing program (GRS) as authorized in the State and Local Fiscal Assistance Act of 1972 (P.L. 92-512, the 1972 Act). The GRS program was extended three times before finally expiring on September 30, 1986. Over the almost 15-year life of the GRS program (1972 through 1986), more than $83 billion was transferred from the federal government to state and local governments. From 1972 to 1980, states received approximately one-third of the grants and local governments received two-thirds. State governments were excluded from GRS beginning in the 1981 fiscal year (FY). In 2003, policymakers suggested using the original GRS program as a model for a new, short-term, GRS program. The FY2004 budget resolution contained a proposal (H.Con.Res. 95, Sec. 605) expressing a sense of the Senate that $30 billion should be set aside over the next 18 months for state fiscal relief. Congress ultimately approved $20 billion in aid to states; $10 billion through Medicaid and $10 billion distributed by population. By comparison, in 1972, the federal government authorized $8.3 billion ($42.1 billion in 2008 dollars) for the first 18 months of the original GRS program. More recently, the recession that began in 2008 has prompted similar proposals. The rationale behind GRS in 1972 cannot be traced to a single political or economic objective, such as economic stimulus. The turbulent economic and political environment that characterized the 1960s and 1970s led proponents and opponents of GRS to modify their political and economic arguments as that environment changed. Generally, GRS could be implemented to (1) initiate intergovernmental fiscal reallocation; (2) address state and local government liquidity crises; and (3) synchronize federal and state-local fiscal policy. A revised GRS program intended to help close state budget deficits (estimated to be $31.0 billion for the remainder of FY2009 and estimated to be $64.7 billion for FY2010) has been advocated based on the last two objectives. The budget crisis facing state and local governments in 2009 has generated renewed concern at the state and local level. A GRS program designed as a countercyclical initiative would encounter two primary implementation issues: fiscal policy time lags and variability in the state response to GRS grants. In addition, as with all fiscal policy, the overall size of the additional federal spending is critical to the impact of the fiscal stimulus. This report provides general background and analysis and does not track current legislation. It will not be updated. General Revenue Sharing: Background and Analysis.

Contents:

Introduction

Background on General Revenue Sharing

Amount

Allocation Formula

Economic Rationale for GRS Grants

Fiscal Reallocation

State and Local Government Liquidity Problems

Federal and State-Local Fiscal Policy Synchronization

Analysis of GRS for Economic Stimulus in 2009

Magnitude of Anticipated Pro-Cyclical State Action

Implementation Issues

Fiscal Policy Time Lags

State Budget Options.

Notes:

Description based on online resource; title from PDF title page (Congressional Research Service, viewed June 9, 2023).