Impact of Antirecession Assistance on 52 Governments:

An Update

GGD-78-56: Published: May 1, 1978. Publicly Released: May 1, 1978.

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Title II of the Public Works Employment Act of 1976 authorized emergency federal aid to state and local governments hard hit by recessionary pressures in order to reduce their need to take budgetary actions which would run counter to federal efforts to stimulate economic recovery. The assistance was designed to be selectively targeted to go only to those governments substantially affected by the recession.

Officials from 30 of the 52 governments studied believed that their fiscal condition had improved since a previous GAO review in February 1977, and an additional 14 governments had maintained a good fiscal condition. Improvements noted in states were strong revenue gains, due mostly to increased tax revenues from business activity and increases in state fund balances. However, 10 of 21 cities studied were considered to be in fair or poor fiscal condition. Cities' problems were caused primarily by tax base erosion and inflation. Most government officials cited inflation as the major impediment to fiscal stability. Although some effects of the recession continued, major recessionary pressures diminished. Most officials believed that antirecession funds, although representing a small proportion of total revenues, had favorable effects such as preventing tax increases or employee layoffs and enlarging surpluses. Although it is difficult to assess the effect of the funds on governments' budgets, they probably helped 12 governments fill a budgetary gap, permitted 20 to increase expenditures, assisted 4 in maintaining or increasing surpluses, and had compound effects on 15 governments. In spite of these benefits, the program has not effectively met its objective of selectively targeting aid.

Matter for Congressional Consideration

  1. Status: Closed

    Comments: Please call 202/512-6100 for additional information.

    Matter: Congress should consider the following alternatives in relation to renewal of the antirecession assistance program: (1) establish a revised program to better achieve the original objective of assisting state and local governments during recessionary periods; (2) if it concludes that it is no longer necessary to provide recession-related assistance to the governments, let the program expire; (3) use the existing general revenue sharing formula to allocate additional funds each year in order to provide general financial assistance; or (4) establish a new program designed to better target assistance to governments that are experiencing long-term economic decline.

 

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