Federal Grants in Large Sunbelt and Frostbelt Cities: An Overview

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Texas Business Review


Federal grants to cities, once confined to relatively small amounts to relatively few cities, became big-ticket items in the budgets and politics of many cities during the 1970s. Direct federal grants to cities, which amounted to $1 .3 billion in 1970, increased by more than sixfold between 1970 and 197 8. This increase was more than three times greater than the growth in city-generated revenues over the same period. Estimates by the Advisory Commission on Intergovernmental Relations for forty-seven of the nation's forty-eight largest cities indicate that total federal grants rose from an amount equivalent to less than 10 percent of own-source general revenues generated by the cities in 1967 to an amount equal to about half of those revenues in 1978. Over the same period, the geographic distribution of federal funds among cities and the control over these funds within cities have also shifted. The categorical programs (such as urban renewal, model cities, and manpowertraining) of the Great Society period were distributed by administrative action to relatively few cities. By contrast, the major expansion in federal support over the past decade has come through programs, such as the New Federalism of the Nixon administration and the Carter administration's economic stimulus package, that distribute funds by formula using less restrictive eligibility criteria. The major effect of these changes has been to spread funds to local governments that had received relatively little federal support in the past. Two major trends are particularly worthy of note. The first is an increase in the proportion of federal grants going to smaller governments. In 1968, cities under 100,000 in population received 20.4 percent of federal grants going directly to city governments; in 1977, they received 45.S percent. The second major trend has been an increase in the share of these funds going to cities in the South and West. The major increases in federal grants over the last decade have been in programs that provide funds almost exclusively to city governments. In the 1960s, many grants for manpower and community development had gone to nonprofit community and quasigovernmental agencies. By contrast, the formula grants of the 1970s allocated funds to city governments. Such programs as model cities, community action, and urban renewal, which once dealt more or less directly with federal agencies, now petition city hall for program support. This shift in the level and form of federal grants to cities has not gone unnoticed, but systematic assessments of its consequences are rare. While academics and policy makers have studied the operations of individual federal programs, little attempt has been made to define the aggregate of federal grants flowing into American cities and to assess the budgetary and political consequences of these funds. The studies of the impact of federal grants on Houston, New Orleans, Phoenix, and Tulsa (reported in pages 80-1 OS of this issue) are among a series of case studies designed to address these questions. These studies are being conducted under the auspices of the Princeton Urban and Regional Research Center and the Brookings Institution under a contract from the departments of Labor and Commerce. In addition to the cities reported here, studies are being conducted in New York City, Boston, Rochester, Cleveland, Detroit, Los Angeles, San Francisco, Chicago, and St. Louis. These studies are being prepared according to a common analytical framework that will allow comparisons to be made among cities that are confronting different economic, budgetary, and political conditions. Each study addresses four major sets of questions. The first, and perhaps most important, set of questions involves the extent to which cities have become dependent on federal grants to support their basic services. In addition to reporting the relative size of federal grants in city budgets, these studies also describe the types of functions supported by federal funds, policies of cities toward the use of grants, the capacities of cities to replace federal money, and the strength of constituent support for the activities supported by grants. This analysis assesses not only how much grant money cities get, but also how they use it and what they would do if grants were to be curtailed. The second set of questions these studies address relates to the effectiveness of the Carter administration's economic stimulus package in reducing unemployment. The package consists of three programs-local public works, antirecession fiscal assistance, and public service employmentthat approach the use of grants as countercyclical policy devices in three different ways. Although these three devices have been evaluated comparatively as a group, their operations and results in particular places have seldom been compared. These studies assess the general effectiveness of the stimulus-package programs in promoting local economic recovery and describe the major local advantages and disadvantages associated with each approach. The third set of questions is concerned with the income groups that benefit from the programs supported with federal funds. Federal grants vary in their stringency regarding which income groups or areas may receive funds. Some grant programs can only fund certain specified services to particular income groups, others specify the intended beneficiaries but allow for more discretion in the types of service to be provided, and still others regulate only the types of service to be provided and do not specify a particular income group as the beneficiary. These case studies describe the major direct beneficiaries according to a common classification of benefits, with particular attention to programs in which local governments exercise some control over deciding who will receive the benefits. The final set of questions relates to the political process involved in allocating federal grants. The changes in the local allocations of federal funds over the last decade were instituted to change the distribution of power in local politics by increasing the control of generalist officials (such as mayors, city council members, and city managers) over the allocation of federal funds rather than having these decisions made by department staff, nongovernmental community groups, and federal officials. These studies of individual cities describe the political process surrounding the allocations of federal grants, define the groups and actors influential in this process, and assess the impact of federal grants on local decision making and politics. We focus here on the first and last of the major sets of questions: the extent to which selected Sunbelt and Frostbelt cities have become dependent on federal grants to support ongoing city services, and the differences in the decision making and politics surrounding the allocation of federal grants to these two groups of cities.

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