The Impact of Tiering and Constraints on the Targeting of Revenue Sharing Aid

GAO examined the targeting efficiency of the Federal intrastate revenue sharing formula to provide Congress with useful information concerning renewal of the Federal Revenue Sharing Program. GAO compared the Federal revenue sharing formulas with New York State's revenue sharing program, which distributes funds to local governments under a completely different set of formulas. Both programs distributed roughly the same amount of aid to local governments in 1975. Both programs have the same objective, to relieve local fiscal pressures. The Federal formula tiers aid to geographic areas (counties) before distributing money to local governments. New York targets aid directly to the local governments. Constraints are placed on the Federal formula on how much aid is distributed to individual local governments, whereas no such constraints bind the State formula. GAO limited its analysis to county governments to ensure that only governments with similar service responsibilities were analyzed. GAO reviewed a measure of a local government's ability to pay for services, based on local levels of per capita income, and a measure of the degree to which local governments attempt to meet their needs through their own resources to determine which accounted for differences in per capita income.