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Unformatted text preview: ducation (see Evans, Murray, and Schwab,1997). Almost all states use some type
of an equalization grant for education, often determined through a foundation formula. Foundation formulas are
positively related with need for expenditures and negatively related with local capacity to raise revenues (usually
measured by the property tax base). One state, Hawaii, finances all of local education spending, and one state, North
Carolina, provides a flat per pupil grant amount. States provide specific grants for many other purposes, including roads,
police and fire protection and so forth.
Both situs of collection and formula based revenue sharing are common across the states. For example, Tennessee
shares its sales, corporate income, and narrowly defined personal income taxes on a situs basis. The motor fuel, gross
receipts, and alcohol taxes are shared based on simple formulas. Revenue sharing from these taxes equaled 8.6
percent of state tax revenues in Tennessee during 2000. 23 Commission on Fiscal Imbalance 6. CONCLUSION There is no single answer to whether the U.S. is becoming more or less decentralized. The extent of devolution depends
on the metric used. A true increase in devolution would suggest that certain services were shifted from federal to state
and local governments for delivery, state and local governments had greater independence in delivering certain
services, or state and local governments had greater authority to raise revenues.
The federal government is responsible for a greater share of expenditures and revenues now than in the pre-World War
II era suggesting greater centralization. But the pattern in the post war period has been a rising role for state and local
government in terms of both expenditures and revenues suggesting decentralization. But the extent of devolution is
much more difficult to determine since state/local control over both their revenues and expenditures can be much less
significant than it appears. There has been no significant outright transfer of responsibilities to state and local
governments with the possible exception of states taking over administration of some income maintenance programs. By
and large, these governments continue to deliver the services for which they have traditionally had responsibility. At the
same time, state and local governments’ ability to generate revenues has been curtailed by federal control over
Much of the political rhetoric in recent years has centered on the importance of decentralizing government. Perhaps the
single most important reason was that the Republican Party, many of whose members are very interested in restraining
the federal government’s size, gained control over Congress during the mid-1990s. There is discussion that President
Bush will issue an executive order establishing a federal watchdog intended to ensure that the federal government will
not undertake any function that state and local governments can perform (Washington Post). Of course, movement
towards decentralization is not so simplistic and there are many other causes as well (see Kincai...
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