Impact of Antirecession Assistance on 21 City Governments

GGD-77-70: Published: Feb 22, 1978. Publicly Released: Feb 22, 1978.

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Title II of the Public Works Employment Act of 1976 established a program to provide state and local governments with antirecession assistance payments in order to help stabilize the economy. Emergency financial assistance was to be provided to governments substantially affected by recessions in order to reduce actions by the governments which could counteract federal efforts to stimulate the economy.

Almost all of the 21 cities visited took one or more counterproductive actions, such as employee layoffs, tax increases, or reductions in services. It was difficult to determine the effects of antirecession payments on city budgets because of the interchangeable nature of moneys, shifting priorities, changing revenue amounts from various sources, and the relatively small contribution the payments made to cities' resources. However, some effects noted were: (1) in six cities, antirecession funds helped balance the budget; (2) in two cities, the funds were used to maintain or augment surpluses; (3) in eight cities, they were used to increase authorized expenditures; (4) in four cities, the funds were included in the fiscal year 1977 budget; and (5) one city had no plans for the funds at the time of the review. The funds reportedly had a favorable impact on many cities' employment. The 21 cities appropriated nearly all of their first payments within 6 months, as required by the act. Problems caused by inflation and certain chronic factors seemed to have greater effects on the cities' revenues than the recession. Because of the difficulties in using excess unemployment as a measure of a recession's impact, the Secretary of the Treasury was directed to investigate other data for allocating payments.

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