Life at the bottom of the fiscal food chain: Examining city and county revenue decisions

Any shifting of responsibilities from the state or federal governments to l ocal governments would fall mostly on the shoulders of general-purpose gove rnments, namely, cities (municipalities) and counties. This study explores city and county revenue decisions associated with general funds-the governm ental fund most likely to be affected by state requirements for greater loc al financing responsibility for new or devolved programs. The results sugge st that state control over local revenue authority affects decisions regard ing the imposition of financial burdens on residents, and that intergovernm ental aid to cities end counties does not necessarily mitigate those burden s. Despite evidence of healthy financial reserves, especially for cities, s hifting responsibilities from the state to city or county governments could place cities and counties in difficult fiscal positions. Given the importa nce of own-source revenues to current budgets, and in view of the questiona ble impact of intergovernmental aid on city and county residents' revenue b urdens, questions persist about the ability of city and county governments to maintain land, if necessary, to expand) services during economic recessi on.