The Revenue Problem

Several years ago the mayor of a medium-sized American city identified his three major problems as “money, finances, and revenues.” ¹ He and other local officials, however, have had limited control over their city’s financial problems. They rely on whatever sources of income states are willing to let them tap and on whatever financial assistance the states and the federal government are willing to give them. They also face the constant prospect that other governments, especially when confronted with revenue difficulties of their own, will cut local aid, draw upon revenues going to localities and shift as many of their costs as possible to local governments. In a broad sense, state and local governments are in the same boat when it comes to gathering in revenues – both being subject to the ups and downs in the general economy and shifting public attitudes regarding taxing and spending. Still, there is much the states could do to give localities greater revenue stability.