THE KYOTO PROTOCOL: Lower State anD FEDERAL TAX REVENUES WOULD REDUCE FUNDS FOR METROPOLITAN AREAS LIMITING THEIR ABILITY TO MEET INCREASED DEMANDS FOR SOCIAL SERVICES This concentration of jobs is key to attracting population. Generally, workers who move to metropolitan areas are better off. Estimates of the increase in metropolitan area factor productivity (output per unit of input) range between 4% and 6% for each doubling in size of the metro area. Ratifying and implementing the Kyoto Protocol would seriously harm metropolitan areas. The impacts would be far-reaching with both economic and social implications. Metropolitan areas' vulnerability stems from two sources: ■ First, most small metros and large counties immediately surrounding large cities have shared less than proportionately in the economic growth of the nation since the recession in the early 1990s. As the analysis shows, metropolitan areas would suffer output and job losses that would meet or exceed the percentage loss of jobs in their state. As a result, ☐ there would be an increased demand for social services due to increased unemployment, and ■ metropolitan areas' own sources of funds, which are derived from output and employment, would be reduced. ■Second, metropolitan areas rely upon state and federal transfers to meet the needs of their constituencies. As federal tax revenues are projected to be $94 billion (925) less than baseline estimates, and state tax revenues are projected to be $93.1 billion (925) less, the impact on metropolitan areas would be devastating BACKGROUND In 1940, about 50% of the U.S. population lived in a metropolitan area. By the mid1990s, that percentage had risen to almost 80%. The key reason for this movement to urban areas has been the steady movement from agricultural and other rural occupations to manufacturing, service, and trade-based occupations, which are concentrated in the more densely populated environment of cities and their surrounding counties. This concentration of jobs is key to attracting a population, and generally, workers who move to metropolitan areas are better off. In 1996, threequarters of the top 60 U.S. metropolitan areas had unemployment rates below the national average. Nonagricultural businesses have been drawn to metropolitan areas in the search for proximity to inputs, customers, and distribution systems. In fact, the larger the metropolitan area, the greater the advantages from proximity and economies of scale. Estimates of the increase in metropolitan-area factor-productivity (output per unit of input) range between 4% and 6% for each doubling in size of the metro area. The original impetus for metropolitan business concentration was distribution; industrial companies clustered around ports and railroad hubs. As freight transportation has shifted to the roadways, businesses dependent on access to transportation systems have moved to suburban locations on the edge of metropolitan areas, where they are still close to local markets -- but have greater capacity for movements of goods to distant markets. Meanwhile, the central cities at the core of metropolitan areas have built up concentrations of services and trade, which flourish with proximity to consumers and other service businesses. As communication systems, the key element of service sector distribution, become more electronic and more convenient at greater distances, these businesses may well migrate toward the periphery also. However, they will likely remain within the boundaries of metropolitan areas. GLOBAL WARMING: THE HIGH COST OF THE KYOTO PROTOCOL Compared to center-cities, inner-ring suburbs have faced shrinking tax-bases compounded by increasing needs for infrastructure maintenance and for social services. Infrastructure needs and efforts to enhance public safety topped the list of issues needing immediate attention for all cities. Big cities spend much larger shares on social services, including: ■ public welfare ■ housing development ■ health and hospitals The movement of jobs from center cities to the suburban portion of metropolitan areas has continued unabated for 50 years and has been significant. In 1970, 70% of metropolitan area jobs were in center cities. Now, that proportion is under 50%. The population has also moved. Two-thirds of the metro population now live in the suburban counties of metropolitan areas and many center-city and inner-ring suburban populations have actually fallen. While two-thirds of the total population has moved to the suburban areas, the proportion of the total black population in the suburbs is only one-third. As a result, the proportion of black people in the center-cities has substantially increased over the last several decades. Although urbanization brings job growth and economic prosperity for many, the benefits of urbanization have not been equally distributed. New suburbs, which are generally incorporated and taxed independently of their metro-area center cities, have in many cases siphoned the tax-base from center-city areas. This has encouraged a process of decay in older, inner-ring suburbs and center-cities. Within-metro geographic income distributions have also tended to polarize. This has left a large proportion of the poorer populations, with their demands on government support systems, in city centers and inner-ring suburbs. Metropolitan Area Spending Recent studies report that infrastructure needs and efforts to enhance public safety topped the list of issues needing immediate attention for all cities. About one-third of cities reported an increase in the need for survival services, including food, shelter, and healthcare, and most expect this trend to intensify as the reformed welfare systems begin to force some recipients off public assistance. For larger cities, intergovernmental pressure points were cited, such as environmental mandates and reductions in state transfers. For smaller cities with populations under 50,000, the rising cost of employee health benefits were issues of great concern. Small cities and large counties that make up the inner-ring suburbs of large cities spend disproportionately less on social services than do large cities. As a result, they have much weaker infrastructures in place to withstand the increasing demands on social services that would come with economic stress. The table below summarizes government expenditures in 1992 for counties with populations exceeding 500,000 and for cities with populations 300,000 and above. These counties in many cases comprise the inner-ring suburbs around big cities, while the figures for cities represent the aggregate of center cities from small to large. The share of total expenditure used for public safety, education, and highways was about the same in aggregate for cities and these large counties, between 31% and 34%. Expenditures on public welfare and health and hospitals took a much larger share in large counties, 32% of total expenditure. Shares of expenditures in cities vary significantly by size. Big cities spend much lower shares of funds on services like police and fire protection, and on infrastructure, such as sewer and sanitation services and highways, as compared with smaller cities. On the other hand, they spend significantly larger shares on social services, including spending on public welfare, housing and community development, and health and hospitals. GLOBAL WARMING: THE HIGH COST OF THE KYOTO PROTOCOL Metropolitan Area Sources of Funds: On Average 33% of Funding Comes from Intergovernmental Sources While there has been a call for a more comprehensive local approach to sharing the burden of infrastructure and social services across all of the businesses and consumers that benefit from urbanization, the concept is still under development. Current funding of metropolitan areas still relies heavily on transfers from federal and state funding sources. The table below shows the extent of fiscal dependence of counties with populations above 500,000 and cities with populations above 300,000 on intergovernmental revenues. About 37% of total revenues of these large counties came from intergovernmental transfers, with about one-third of all revenue coming from state government sources. About 60% of revenues in both large counties and cities with more than 300,000 population was self-funded. The cities were also very dependent on state and federal government funds; intergovernmental transfers to cities accounted for 28% of funding. SUMMARY Metropolitan areas have complex inter-relationships among the various communities and with state and federal government. All metropolitan areas rely on federal and state funds: ■for many smaller areas, the funding may represent 25% of their budget ■ for larger areas, the funding may exceed 40%. The projected reduction in state and federal tax revenues, $93.1 billion and $94 billion (925) respectively, would have a devastating impact on metro areas ability to meet the demand for social services. GLOBAL WARMING: THE HIGH COST OF THE KYOTO PROTOCOL MPACT ON METROPOLITAN COMANTIS |