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GO October 26, 1972
OUTLINE OF GENERAL REVENUE SHARING BILL
H.R. 14370
"The State & Local Fiscal Assistance Act of 1972"
Signed by the President, October 20, 1972
1. Amount of assistance: A total of $30.2 billion over a five-year period. Annual
amounts on a calendar year basis are as follows: 1972 - $5.3 billion; 1973 - $5.975
billion; 1974 - $6.125 billion; 1975 - $6.275 billion; 1976 - $6.425 billion. With
the exception of 1972, the revenue sharing funds will grow at a rate of $150 million
per year. This increase is divided one-third to States and two-thirds to local govern-
ments.
2. Funding mechanism: Not tied to a percentage of the federal personal income tax
base or collections; rather, a permanent, five-year authorization/appropriation into
a "local government high priority expenditure trust fund."
3. Retroactive payments: Payments will be made retroactively to January 1, 1972 with
first checks due first week of December, 1972, for the January 1 through June 30
entitlement period.
4. Eligibility: All States and general purpose local governments (counties, townships,
and incorporated municipalities) . There is no population cut-off for local governments.
Local jurisdictions may not receive over 50 percent of its adjusted taxes plus inter-
governmental transfers. There is a $200 minimum allocation. In addition, a local
government may not receive less than 20 percent of the per capita allocation to all
local governments in that State, nor more than 145 percent.
5. State and local government trust funds: State and local governments must create
a trust fund in which to deposit all revenue sharing funds. Purpose to facilitate
proper federal auditing and accounting procedures. Must use amounts in trust fund
within whatever reasonable time period specified by Treasury regulations (twenty-four
months) .
6. Restriction on use of funds
a. High priority expenditure items: Such restrictions apply to local governments
. - a are no restrictions on the use of state funds. The local funds must
ST •' <<'`' ; _ 'us Gitfo certain "high priority expenditures designed by Congress. For
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f led the a c and operating expenses, the funds may be used for public safety,
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WCountyrdyCommisiIiN6 u.ing, but not limited to, law enforcement, fire protection and building code
Q C T 2 no rcemen ) ; environmental protection (including, but not limited to, sewage
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disposal, sanitation, anu pollution abatement) ; public transportation (including,
but not limited to, transit systems and streets) ; health; recreation; social
services for poor or aged; financial administration (including, but nott limited to,
budgeting, auditing, and tax collecting) ; and libraries . For capital expenditures,
there are no limitation. Funds may be expended for any and all capital expenditures
which are authorized by law, as long as they meet an "ordinary and necessary" test.
b. "Matching" federal programs: State and local governments may not use revenue
sharing funds to match federal funds for other federal grant-in-aid programs
where there is a requirement for matching with either federal or non-federal funds.
Revenue sharing funds may be used to supplement other federal grant funds.
c. State maintenance of fiscal effort to local governments: Provides that state
governments may not reduce the financial aid they have been giving to local govern-
ments from non-revenue sharing funds. There is no "maintenance of effort" require-
ment for local governments.
d. Non-discrimination: Prohibits state and local governments from using revenue
sharing funds in a manner that discriminates on the basis of race, color, national
origin or sex.
e. Davis-Bacon: Requires that state and local governments provide that all laborers
and mechanics employed by contractors or sub-contractors on construction projects
financed by revenue sharing funds be paid wages not less than those prevailing
on similar construction in the locality in accordance with the Davis-Bacon Act.
This provision would only cover projects financed by 25 percent or more of revenue
sharing funds.
f. Prevailing wage rate: The state and local governments must pay wages not lower
than the prevailing rates of pay for persons employed in similar jobs by that
government if 25 percent or more of the wages of all government employees of the
recipient government in such categories are paid from revenue sharing funds.
7. State and local distribution formula: The Conference Committee agreed on a formula
which would give each State the higher amount of either the House formula or the Senate
formula each year. The House version of the bill essentially would have distributed the
funds to state and local governments on the basis of population, urbanized population,
and population inversely weighted for per capita income. The Senate version essentially
would have distributed the funds on the basis of population, state and local tax effort,
and inverse per capita income (the so-called poverty factor) . By taking the higher
amount for each State, the total program for the first calendar year (1972) should be
$5.825 billion (this is the base figure for the program and its future growth) . However,
the Conference Committee determined that federal government should expend only $5.3 billion
the first calendar year. Therefore, after the higher figure for each State is determined,
it will be proportionately reduced so that the totals for all States will equal $5.3
billion (this means an approximate reduction of 9.1 percent for each State) . State and
local shares under the Conference Committee agreement and social services ceilings for
States are shown on the attached chart.
After this higher amount is distributed down to the state level, it is divided one-third
to the state government and two-thirds to the local governments within that State. The
two-thirds local pot for each states is then: 1) distributed to the county area on the
basis of county population, tax effort, and inverse per capita income (i.e. , each county
area's share is determined by its population multiplied by the tax efforts of the county
and its municipalities and further multiplied by its inverse per capita income) ;
2) split between the county and its municipalities on the basis of "adjusted taxes" .
Adjusted taxes are defined to include property, income, sales , growth receipts , corporate
income, etc. , with the exception of those taxes levied for or attributable to education.
This step in the formula ,. termines the amount that a givt. 'county government would
receive; and 3) divided among the municipalities within that county on the basis of
the same three factors of population, tax effort, and inverse per capita income.
After the first twelve months (starting January 1, 1973) , a state may adopt an alter-
native formula for distribution of the two-thirds pot to local governments by using the
optional factor of population multiplied by tax effort or population multiplied by
inverse per capita income. The weighting of the factors may vary from zero to 100
percent. The change may be applied at the county level, the municipal level, or both.
Any change must be applied uniformly throughout the State. A State may adopt an
alternative formula only once.
8. Reporting procedures: Provides that each state and local government must submit
an annual report to the Treasury Department detailing the purposes for which the funds
are intended to be spent. They must also submit reports at the end of the year showing
how the funds have been spent or obligated. Reports must also detail amounts and
sources of non-revenue sharing funds used for matching federal grants. Each state and
local government must also publish a copy of these reports in state and local newspapers.
9. Budgeting procedures: State and local governments must follow the same budgetary
laws and procedures for expending revenue sharing funds as it does for its own revenues.
10. Audit procedures: State and local governments must use such fiscal, accounting,
and audit procedures as established by the Department of the Treasury. The Treasury
Department may accept a certification from local officials indicating valid auditing
procedures.
11. Social Services program: Title III of the revenue sharing bill contains a $2.5
billion ceiling on the social services program beginning July 1, 1972. This amount is
merely an authorization, and still must go through the annual appropriations process.
The funds would be distributed among the States on a straight population basis. Eligible
services include most of those that are eligible under existing law such as: retarded
persons, child care, family planning, narcotics treatment, alcoholic treatment, and
foster home may be spent on potential, present, and prior welfare recipients. However,
90 percent of the remaining funds (after the funds have been spent by the State for the
six programs just mentioned) may be spent only for applicants or recipients of welfare.
Child care services are defined only as those services needed to enable a member of a
family to work, take job training, or to provide necessary supervision for a child whose
mother is deceased or disabled. The program matching features still contain the 75
percent federal, 25 percent state ratio.
72-I-23
'"l
REVENUE SHARING
TOTAL
STATE LOCAL REVENUE
STATE SHARE SHARE SHARING
. Alabama 38.7 77.4 116.1
Alaska 2.2 4.6 6.8
Arizona 16.7 33.4 50.1
Arkansas 18.0 37.0 55.0
California 185.2 370.6 555.8
Colorado 18.2 36.4 54.6
Connecticut 22.1 44.0 66.1
Delaware 5.2 10.5 15.7
Dist. of Columbia 7.9 15.8 23.7
Florida 48.6 97.3 145.9
Georgia 36.6 73.2 109.8 .;
Hawaii 9.3 18.8 28.I _
Idaho 6.6 13.2 19.8
Illinois 91.5 183.1 274.6
Indiana 34.7 69.6 104.3
Iowa 25.6 51.4 77.0 -
Kansas 17.6 35.2 52.8
Kentucky 29.1 58.2 87.3
Louisiana 37.8 75.8 113.6
Maine 10.3 20.8 31.1 '
Maryland 35.6 . 71.3 106.9
Massachusetts 54.3 108.6 162.9
Michigan 73.9 147.8 221.7
Minnesota 34.6 69.2 103.8
Mississippi 30.2 60.4 90.6
Missouri 32.9 65.8 98.7
Montana 6.8 13.8 20.6
Nebraska 14.3 28.6 42.9
Nevada 3.7 7.4 11.1
New Hampshire 5.0 10.2 15.2
New Jersey 54.5 109.0 163.5
New Mexico 11.0 22.2 33.2
New York 197.0 . 394.1 591.1
North Carolina 45.0 90.4 135.4.
North Dakota 6.5 13.2 19.7
Ohio 68.9 138.0 206.9
Oklahoma 19,8 39.6 59.4
Oregon 18.8 37.4 56.2
Pennsylvania 91.2 182.6 273.8
Rhode Island 7.8 15.8 23.6.
South Carolina 27.1 54.3 81.4
South Dakota 8.3 16.8 25.1
Tennessee 32.8 65.6 98.4
Texas 81.4 163.0 244.4
Utah 10.4 21.0 31.4
Vermont 4.9 9.9 14.8
Virginia 35.0 70.2 105.2
Washington 28.0 56.0 84.0
:lest Virginia 17.4 34.9 52.3
Wisconsin 44.6 89.3 . 133.9
Wyoming 3.2 •
W6.5 9.7
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