Distressed Communities:

Capital Investments Were Postponed in Texas as Local Economies Weakened

HRD-91-14: Published: Feb 6, 1991. Publicly Released: Feb 6, 1991.

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GAO provided information on the condition of basic public services in two economically distressed communities in Texas, focusing on: (1) the changing federal-local fiscal relations due to declining federal aid and the loss of general revenue sharing; and (2) local efforts to cope with fiscal problems and whether state policies helped to offset those circumstances.

GAO found that: (1) federal aid to municipalities and counties declined sharply between 1980 and 1990, and the general revenue sharing program ended in 1986; (2) Texas experienced wide swings in economic fortune between 1970 and 1990, primarily due to the instability of its oil and gas industry; (3) Texas remained fiscally conservative at the state level during the economic swings, although many localities increased their tax efforts; (4) state aid patterns placed heavy financing responsibilities on Texas counties and municipalities, which consistently financed a greater share of total state-local spending for most public services than other states' localities; (5) Texas' local governments had many local tax sources that were comparable to those of other states' localities, such as property taxes, general sales taxes, and some selective sales taxes; (6) poorer communities had more difficulty than other localities in providing public services because they had greater needs but fewer resources; (7) general-purpose state aid to poorer communities did not address all of the demographic and socioeconomic factors contributing to localities' fiscal distress, but the aid helped to lessen public service problems; (8) the gap between poorer and more affluent communities in Texas remained high compared to most other states; and (9) when public service needs exceeded revenues, local governments used such coping strategies as management improvements, revenue actions, reductions in spending, and postponement of capital investment.

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