An analysis of revenue sharing's performance in achieving its formula goals

Abstract

The State and Local Fiscal Assistance Act of 1972, otherwise known as the revenue sharing act, distributes $30.2 billion to nearly 39,000 state and local governments over a five year period. The purpose of this study is to determine whether or not the actual workings of the program are consistent with the goals its supporters set for it. Other formula studies of revenue sharing begin by selecting a goal, or qoals, that revenue sharing is supposed to advance (or should advance), and then proceed to develop alternative distribution formulas which are more responsive to the predeternined goal(s). This study, by examining the structure of the distribution formula, uses a revealed preference technique to ascertain four program goals inherent in the structure of the distribution formula.