About InterGovernmental Revenue

Intergovernmental revenue consists of monies obtained from other governments and can include grants, shared taxes, and contingent loans and advances. In this section we describe funding that flows from the federal government to state and local governments, and from state to local governments. Tracking the flow of intergovernmental revenue-both in terms of its source and intended purpose-can potentially provide valuable insights into how roles and responsibilities for delivering intergovernmental programs have changed over time.

Financial arrangements for funding and delivering intergovernmental services are complex, reflecting the variability of government structure, organization, roles, and responsibilities. For example, in 2008, support for elementary and secondary education was shared by all levels of government: The federal share was 9 percent, while the state and local shares were 46 percent and 45 percent respectively. Government support for elementary and secondary education includes direct funds from the federal government that are "passed through" state and local governments to local educational agencies. Funds are also transferred from local governments to state governments for costs related to elementary and secondary education including rent on school buildings constructed by state authorities and the local cost share of school construction projects.

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What are the key categories of federal grant funding to state and local governments and how has this funding to state and local governments shifted over time?

The amount of federal funds devoted to public welfarePublic Welfare (Intergovernmental Revenues):
federal aid for categorical programs-Temporary Assistance for Needy Families-TANF (formerly Aid to Families with Dependent Children-AFDC); medical assistance programs (Medicaid) even if received by a public hospital; care in nursing homes not associated with hospitals; food stamp administration; child welfare services; low-income energy assistance; social and community services block grants; refugee assistance; work incentives program (WIN); and related administration.
(which includes categorical assistance programs and Medicaid) greatly surpassed that spent on other assistance to state governments. The value of this assistance grew from $55 billion in 1977 to $284 billion in 2009 (in constant 2010 dollars), a jump of 417 percent. When considered as a proportion of all federal assistance received by state governments, public welfare, a majority of which consist of Medicaid payments, steadily increased from 41 percent to 59 percent during this period. In contrast, the amount of funding for the next largest category of federal assistance to state governments, educationEducation (Intergovernmental Revenues):
federal aid for federally-impacted areas; migrant and bilingual education; Indian education; Head Start program; federal grants for school nutrition and milk programs (and grants and contractual amounts received by institutions of higher education for education or for research and development programs.
, grew more modestly during this time period, from $27 billion in 1977 to $83 billion in 2009. The remaining top categories of federal assistance to state governments include: transportationTransportation (Intergovernmental Revenues):
includes air transportation, highways (including roads and streets), public transportation, and public mass transit systems.
, otherOther (Intergovernmental Revenues):
includes all other, water supply systems, electric power systems, and gas supply systems.
, healthHealth (Intergovernmental Revenues):
health and hospitals that provide federal aid for alcohol, drug abuse, and mental health; communicable disease control; maternal and child health; special supplemental food program (WIC); environmental health; and care of veterans in state hospitals, including construction of facilities.
(which excludes Medicaid and Medicare), and housingHousing (Intergovernmental Revenues):
federal aid for construction or operation of public housing; rent subsidy programs; and rural, urban, and community development.
.

Source: GAO analysis of U.S. Census Bureau Government Finance Statistics. Although the original sources for finance statistics are accounting records of governments, the data derived from them are purely statistical in nature. Consequently, the Census Bureau statistics on government finance cannot be used as financial statements or to measure a government's fiscal condition.

Select Federal Assistance to State Governments 1977 - 2009: TXT PDF

What are the key categories of federal assistance to local governments and how has this assistance changed over time?

Between 1977 and 2009, the use and objectives of federal assistance to local governments changed considerably. In 1977, a collection of federal assistance programs to local governments categorized as "otherOther (Intergovernmental Revenues):
includes anti-recessionary fiscal assistance and temporary employment assistance, as well as funding for public works projects such as water, electrical and gas supply systems.
" provided funds to localities for local public works projects, anti-recessionary fiscal assistance, and temporary employment assistance. Over the years, the value of this assistance declined steadily, falling off steeply in the late 1980s. During the same period, the value of assistance programs targeted for program areas such as housing and transportation increased significantly. For example, housing and community development assistance increased from $6 billion in 1977 to $25 billion in 2009, while transportation assistance increased from $332 million to $12 billion during the same period (all in constant 2010 dollars).

Source: GAO Analysis of U.S. Census Bureau Government Finance Statistics. Although the original sources for finance statistics are accounting records of governments, the data derived from them are purely statistical in nature. Consequently, the Census Bureau statistics on government finance cannot be used as financial statements or to measure a government's fiscal condition.

Note: Federal assistance to local governments include amounts received directly from the federal government and do not include federal aid "passed-through" states, which is reported as state assistance to local governments.

Select Federal Assistance to Local Governments 1977 - 2009: TXT PDF

What are the key categories of state assistance to local governments and how has this assistance changed over time?

EducationEducation (Intergovernmental Revenues):
state aid for support of local schools; redistribution of federal aid for education; handicapped, special, and vocational education and rehabilitation; student transportation; equalization aid; school health; local community colleges; adult education; school buildings; and property tax relief related strictly to school funding.
was by far the single largest category of local government revenue from state assistance and it grew nearly threefold from $107 million in 1977 to $327 million in 2009 (in constant 2010 dollars). State assistance to local governments includes amounts received directly from state government, such as federal assistance passed through the state government and state assistance channeled through intermediate local governments (e.g., counties), which have no discretion as to its distribution. The remaining six top categories of federal assistance to local governments include state government supportState Government Support (Intergovernmental Revenues):
includes general revenue sharing, tax relief, and general local government support.
, transportationTransportation (Intergovernmental Revenues):
includes highways, public mass transit systems, and public transportation.
, otherOther (Intergovernmental Revenues):
includes all other, water supply systems, electric power systems, and gas supply systems.
, healthHealth (Intergovernmental Revenues):
health and hospitals that provide state aid for local health programs; maternal and child health; alcohol, drug abuse, and mental health; environmental health; superfunds; nursing aid; hospital financing (including construction); and hospitalization of patients in local government hospitals.
(which excludes Medicaid and Medicare), and public welfarePublic Welfare (Intergovernmental Revenues):
state aid for public welfare purposes; medical care and related administration under public assistance programs (including Medicaid) even if received by a public hospital; care in nursing homes not associated with hospitals; federal categorical assistance; noncategorical assistance (e.g., home relief, emergency assistance); and administration of local welfare programs. For the federal government (intergovernmental revenue from the states), this category includes revenue from state governments for increased benefits under the Supplemental Security Income program (SSI).
(which includes Medicaid and Medicare).

Source: GAO Analysis of U.S. Census Bureau Government Finance Statistics. Although the original sources for finance statistics are accounting records of governments, the data derived from them are purely statistical in nature. Consequently, the Census Bureau statistics on government finance cannot be used as financial statements or to measure a government's fiscal condition.

Note: State grants to local governments include amounts received directly from state governments, such as federal aid passed through the state government and state aid channeled through intermediate local governments (e.g. counties), which have no discretion as to its distribution.

Select State Assistance to Local Governments 1977 - 2009: TXT PDF