REVENUE SHARING

While local tax revenues are declining because of the high unemployment rate, local units of government are facing increasing costs of operations. In addition to their own revenues, most localities must depend upon combinations of state and federal aid to fund public services.

Local governmental units must rely heavily on the property tax, considered by many to be the most regressive of all. Taxpayer resistance to increased property taxation has risen with unemployment, while at the same time local units of government have become less able to meet the increasing demands for public services arising from unemployment.

Neither categorical federal aid, which can only be spent on certain projects and under prescribed condi­tions, nor state assistance is enough to meet these increasing demands for public services.

Under the State and Local Fiscal Assistance Act of 1972, all state and most local governments are eligible to receive financial assistance under the General Revenue Sharing Program. A formula, based upon a combination of need, wealth and tax effort, determines the amount of money that an eligible jurisdiction receives. Two-thirds of the general revenue sharing monies are allocated to local governments and one-third to the state governments.

Congress limited the use of such revenue sharing funds by local governments to certain "priority expenditures," which reflect purposes of national importance:

Ordinary and necessary capital expenditures authorized by law,

Ordinary and necessary maintenance and operating expenses for public safety, environmental protection, public transportation, recreation, libraries, social services for the poor or aged, and financial administration. Maintenance and operating expenses include such expenditures as salaries and wages, materials and supplies, heat, light, oil, gasoline and similar recurring costs.

Congress did not place any limitations on the use of general revenue sharing funds by state governments, except that they may not be used for matching other federal funds. The Act places no categorical restrictions on the use of general revenue sharing monies for capital expenditures, other than those already established by law at the state and local level.

Because the school districts of our nation are not allowed to participate directly in the General Revenue Sharing plan, the program noticeably discriminates against the schools. Yet educational expenditures represent 42.2 percent of all state and local governmental expenditures.

This legalized discrimination, which cheats the schools out of their fair share of revenue sharing funds, has left the local school district as the only major governmental unit that must increase taxes in order to maintain constant levels of service. Yet taxpayer resentment towards increased taxes has caused defeat of millage increases and bond issues for education throughout the country.

Public education has become so desperate that some local governments have allocated portions of their revenue sharing funds to school construction, and some states have shared their funds with school districts directly. Even so, the total revenue-sharing monies which went to local school districts was only 21 percent of all revenue sharing funds during the 1973-1974 school year.

The AFT believes that federal revenue sharing must provide relief to school districts, as well as to state and local governments, all of which are facing increasing demands for services and decreasing sources of revenue. In order to accomplish this objective, five major improvements must be made in the General Revenue Sharing Program:

• Revenue sharing must be used for job creating activities, including education.

• School districts must be named as direct recipients of federal revenue sharing funds.

• The program must have a more effective accounting mechanism so that it may be possible to evaluate the uses of funds.

• Revenue sharing funds must be provided over and above, and not used to reduce, other federal categorical efforts.

• Since educational expenditures currently exceed 42 percent of total state and local expenditures, education must receive a proportionate share of the revenue sharing monies.