Perspectives on Intergovernmental Policy and Fiscal Relations

Nationalization of the country's industrial structure and mass communications, as well as the increased mobility of the American people, are factors that have contributed to the transfer of allegiances from geographic-based entities to nationwide organizations and interest groups. The twin forces of nationalization and specialization have fostered unprecedented growth in the scope of Federal programs and regulation. Issues that once were the preserve of State and local governments have become national concerns. These nationalizing trends are reflected in growing demands for uniformity among States in regulatory policy and service levels. Changes in the future of intergovernmental relations will be heavily influenced by the following basic forces: (1) the problems facing society; (2) the process and structure of Federal, State, and local governments; and (3) the size and scope of the public sector. The interrelationships among Federal, State, and local governments have become increasingly complex as Federal funds to State and local governments have grown to an estimated $82 billion in 1979. These Federal funds now account for about 25.4 percent of total State and local expenditures, compared with 10 percent in 1955. The growing role of Federal funds and its implications for future roles and costs are forcing Federal, State, and local officials to become more concerned with Federal assistance programs. These concerns have led to increased efforts to rationalize the intergovernmental grant system, make grant requirements more uniform, and provide general management relief.

The problems created by the complex intergovernmental system have been grouped into the following basic research areas for study purposes: (1) need to standardize and simplify federal assistance administrative requirements; (2) need to improve federal, state, areawide, and local coordination; and (3) need to assess intergovernmental fiscal interaction and associated problems. Future developments in the intergovernmental system will have four sets of trends: increased management reform, structural changes, further extension of federal involvement in state and local affairs, and a changing focus of federal assistance as federal aid is used to subsidize general operations of state and local governments on a continuing basis (as opposed to encouraging new categorical efforts in areas of federal priority).