I. INTRODUCTION In response to numerous public requests for detailed information on the fiscal impact of President Nixon's general revenue sharing proposal, the Treasury Department has prepared the tables contained in this publication. These tables show the first full-year effect of general revenue sharing for all 50 state governments and major county, city, and township governments. General revenue sharing will extend Federal financial assistance to states and localities in a broad and uncon ditional manner. Every county, city, and township will be included directly in the allocation of revenue sharing funds; local needs and priorities will determine their ultimate distribution. Specific allocations are defined by formulas, spelled out in the proposed law, and determined by the latest available statistics on population, incomes, and revenues. A complete explanation of the allocation formulas, method of calculation, primary data sources, and analytical assumptions is included in the following section. State area allocations are primarily determined by the state's share of national population. An adjustment for revenue effort rewards (or penalizes) those states making an above-average (or below-average) effort in taxing the incomes of their citizens. Within each state, the allocation of revenue sharing funds between state and local governments is based on the relative importance of each unit of government in the collection of total state and local general revenues. The tables are based on an assumed nationwide distribution of $5 billion. This is the estimated revenue sharing appropriation during the first full year of impact. II. TECHNICAL DESCRIPTION For those interested in a more detailed explanation of the President's revenue sharing proposal, this section contains background information on the method of calculation for state and local government shares. The primary sources of the basic data used in calculating the tables in this publication are also presented here, along with a listing of the assumptions made in the analysis. Method of Calculation State Area Allocation. As specified in the President's proposal, the state area allocation, S, for a particular state, j, is determined as follows; R = general revenues from own sources for a Y = total personal income for a state N = nationwide appropriation for revenue sharing i = index of state (containing particular That is, the payment percentage for any particular state can be found by multiplying that state's population by its revenue effort (defined as the ratio of general revenues from own sources to personal income for the state), and dividing the product by the sum of such products for all 50 states and the District of Columbia. In preparing the tables reprinted taken to be $5 billion. in this publication, N was Once the state area allocation is determined in accordance with the above formula, calculations must be made to determine the total allocation to local governments, the individual allocations to local governments, and the state government allocation. 2 For the District of Columbia this term includes the Federal payment authorized under section 47-2501(a) of the District of Columbia Code (81 Stat. 339). Total Local Government Allocation. Under the President's proposal, all general purpose local governments (counties, municipalities, and townships) are included in revenue sharing. The total amount, L. to be shared with these governments in state j is determined as follows: where: C = general revenues from own sources for all Thus, for every revenue-sharing payment allocated to a state, the general purpose local governments will receive the fraction of that payment which corresponds to the ratio of local general revenues to total state and all local general revenues. This fraction, of course, will vary by state depending on the existing division of public financing responsibilities. Each individual Individual Local Government Allocation. unit of local government, h, will receive an amount, X, determined as follows: where: = 1 G = general revenues from own sources for a z = number of municipalities, counties, and n = index of local governments. That is, each local government will receive a share which corresponds to the ratio of its general revenues from own sources to the sum of such general revenues for all eligible local governments. State Government Allocation. The amount, M. which the State government of state j will retain for its use is simply the residual after deducting the local share from the total state allocation: Data Sources The tables in this publication were prepared by following the calculations described in the previous section of this appendix. The sources of the data used in performing these calculations are presented below. Population. State populations (total resident population) as of April 1, 1970, were used in preparing the tables. The source of these estimates is: United States Department of Commerce News Release, "Final 1970 Census Figures," 1970. Income. Personal income, by state, for calendar year 1968 was used in preparing the tables. The source of these estimates is: U. U. S. Department of Commerce, Survey of Current Business, August 1969. They are conveniently reprinted in Governmental Finances in 1968-69 at page 52. Revenues. Data on general revenues from own sources for municipality, county, and township governments were obtained from the Governments Division, U. S. Bureau of the Census. The original source of these data, supplied to the Treasury in magnetic tape and punch card form, was the 1967 Census of Governments. This census covered general revenues collected during the fiscal year 1966-67. Data on general revenues from own sources for a state government and for all local governments in that state, were taken from U. S. Bureau of the Census, Governmental Finances in 1968-69, Series GF69, Number 5, pages 31-33. Murray L. Weidenbaum Robert L. Joss Assistant to the Assistant February 15, 1971 |