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REVENUE SHARING AND ITS IMPLICATIONS FOR

PLANNING AND URBAN DEVELOPMENT

BY

James Alan Ragsdale

A RESEARCH PAPER

Submitted to
Michigan State University
in partial fulfillment of the requirements
for the degree of

MASTER IN URBAN PLANNING
Department of Urban Planning and Landscape Architecture

1973

ABSTRACT

REVENUE SHARING AND ITS IMPLICATIONS FOR
PLANNING AND URBAN DEVELOPMENT

BY

James Alan Ragsdale

During the past decade there has been an unprecedented
growth in the number of federal programs to aid local commun-
ities in the solution of urban problems. As the number of
programs have increased so has the bureaucratic structure of
the federal government to the point where many of the profes-
sionals involved in planning and governmental administration
spend so much time with exhaustive application and reporting
requirements that the actual needs of the people in urban
areas are neglected. The revenue sharing proposal was form-
ulated as an effort to give state and local governments
greater responsibility for identifying local priorities
and developing their own programs without excessive federal
constraints. This effort to decentralize decision-making
as a part of reducing the direct responsibility of national
government has been described as a policy of new federalism.

l

James Alan Ragsdale

This paper is an effort to describe the revenue sharing pro-
posals as a part of the broader concept of federalism and to
explore the implications of these factors upon the planning

profession.

The urban planning profession is in the process of
undergoing a reexamination of its goals and functioning
within the structure of government. The planning profes-
sion is faced with the alternatives of continuing to pre-
pare proposals and stand quietly by while its efforts and
ideas are ignored or the profession can begin to equip
itself to take a more active leadership position in the
process of governmental decision—making. The changes in
philosophy and focus manifesting in the planning profession
cannot be considered in isolation. As with the nature of
all social and political processes change is the result of
an interchange between environmental inputs and responses.
The environment conveys an attitude or mood which stimulates
a social response which in turn provides input to further
response.1 The United States at this time as a nation of
people is generating demands upon its professionals and
leaders to develop a new and more relevant way of solving

the problems of poverty, unemployment, and the continuing

 

lHarold Wolman, The Politics of Federal Housing
(New York: Dodd, Mead and Company, 1971), p. 59.

 

1

decline in the quality of life in our urban areas. If urban
planners are to effectively contribute to the alleviation

of these urban dilemmas then they must be more than program-
oriented technicians. They must help to shape the policies
which guide the daily planning activities. The planner as

a creative, socially conscious professional must be able to
recognize Opportunities in which his talents may affect
policy-making at all governmental levels. The purpose of
this essay is to accentuate the point that changes are
occurring in government and the structure of policy-making
at this time and that if planners are to have their say--

it is the time for them to understand what is going on and
to utilize their awareness of the merits and shortcomings

of existing urban development programs to help determine

the structure and policy of new approaches.

The Nixon Administration has for the past few years
been working steadily towards the formulation and direction
of major policy changes, which will affect the way in which
solutions to urban problems are administered and financed.
The assumption upon which the actions of the Nixon Admin-
istration are based is that the national government of this
country has grown into such a bureaucratic maze that the

urban programs developed at the national level are not

responsive to the needs of the people at the local level.
As urban renewal, model cities, and housing programs have
been formulated and allowed federal monies to be passed on
to the cities in quantities never before equaled in urban
expenditures, complex guidelines and controls inhibited
local administrators to actively pursue their objectives.
As the demands increased for solutions to urban problems
additional categorical programs were designed, additional
funds appropriated, and additional guidelines attached re-
quiring complex reporting procedures. As administrative
costs consumed an increasingly larger portion of the fed-
eral money, less funds were actually used to aid the low-
income population. Dissent was heard from all sides. The
Blacks and the poor could see all these programs supposedly
designed to aid them, and the only tangible results which
they could actually perceive were a lot of meetings and an
abundance of highly paid administrators. The conservative
and rural interests observed billions of dollars being
spent unproductively on people who would not help them-
selves. Most liberals felt that although as the result

of Johnson's War on Poverty more money was being spent in
the city, the sumgfgiill inadequate to allow a continuous

effective effort. Banfield (1968) and Norton Long (1972)

have argued to the contrary that many programs could have
been far more successful at the same funding level had they
been administered more effectively with more realistic
goals.2 To all interests there is agreement that something
should be done to sort out from the administrative quagmire
an approach to aid local government which would be more
responsive to the people with greater administrative effi—
ciency. The response of the Nixon Administration has been
the revenue sharing program.

Revenue Sharing has been discussed in concept since
the early sixties as a possible approach to financing pro-
grams to aid in the solution of urban problems. Economists
Walter Heller and Joseph Pechman formulated a revenue shar-
ing proposal in 1964. Heller further elaborated on the

idea in New Dimensions in Political Economy in 1966. These

 

writings in conjunction with the political environment of
the country were the prelude to a conserted effort by the
leadership of both political parties for some type of
revenue sharing legislation during the Nixon Administration.

While bipartisan agreement was present in concept, the

 

2Edward C. Banfield, The Unheavenly City (Boston:
Little Brown and Company, 1968); and Norton Long, The Un-
walled City (New York: Basic Books Inc., 1972).

 

 

nature of revenue sharing proposes many other questions as
to structure, administrative procedure, as well as govern-
mental philosophy have led to a continuous debate and con-
troversy on the legislation in Congress and elsewhere in-
cluding the planning profession. The debate continues
today on aspects of special revenue sharing even now that
general revenue sharing grants have been distributed to
state and local governments.

The conversion of demands for a new relationship
between state, local, and federal government through rev-
enue sharing legislation emerged from an atmosphere in
which many interrelated political trends were occurring
in the country. In order to understand the rational basis
of revenue sharing these factors are outlined below:

An increasing dependency for federal funding to
solve state and local problems. Direct federal
grants to the local governments has tended to
reduce the authority of the states.

An overabundance of categorical grants-in-aid
programs available to local government-~each
requiring complex application preparation and
reporting elements.

As a result of the Community Action Programs
and initial Model City Efforts--there was a
growing demand for participation of residents
in decision-making. This is generally a part
of a larger attitude of governmental unrespon-
siveness at all levels of government.

The increase in size and complexity of the
national government with accompanying bureau-
cratic confusion.

Decentralization of governmental decision making
and administration of urban programs is the fundamental
objective of revenue sharing. The President's philosophy
is based upon the belief that local and state leadership
is more sensitive to and more informed about the urban
problems in their area, and, therefore, they should be
better equipped to make policy decisions and adopt admin-
istrative procedures than the federal government. Thus,
the effort to return financial decision-making back to
the states has acquired the now prevalently used term of
the "new federalism." Much of the debate in Congress on
revenue sharing have implications as to the nature of the
nature of the new federalism. Does it constitute the re-
treat of the national government in trying to maintain
creative efforts towards solving urban problems or does
the new federalism propose a challenge to reduce ineffi-
ciencies in government at all levels? These questions will
be analyzed and discussed in more detail later. But the
essential point here is that revenue sharing as it related
to a philosophy of decentralization and a new return to
federalism raises fundamental questions which have been

ai‘so
argued since the Constitutional Convention,and.the bitter

debates between the Jeffersonian views of government and
those of Hamilton.

In early American political history our government
evolved from a loose confederation of states to that which
Tocqueville defined as a decentralist federalism. In the
Articles of Confederation a country with limited national
powers was conceived. According to Diamond (1970) one of
the major principles of pre-modern federalism as embodied
in the Articles is that the

“central federal authority does not deal with

the fundamental political problems of the indi-

vidual governments: all internal matters remain

wholly with them. The central federal authority

is confined narrowly to certain tasks of mutual

interest to the member states.3
Certainly neither Madison nor Hamilton could accept such a
limited national power. The concept of decentralized fed-
eralism, which characterized by Tocqueville as an "incom-
plete national government which is neither exactly national

or exactly federal," is the most accurate description of

. . 4
contemporary American federalism.

 

3Martin Diamond, Winston Fisk, and Herbert Gar-
kinkel, The Democratic Republic (Chicago: Rand McNally,
1970), p. 134.

 

4Alexis De Tocqueville, Democracy in America, p. 159
as quoted by Martin Diamond, "The Federalist's View of Fed-
eralism" in Essays in Federalism, ed. George C. S. Benson
(Institute for Studies in Federalism--C1aremont Men's Col-
lege, 1961), p. 42.

 

 

Yet, while the concepts of federalism and decentral-
ization seem to be closely related it is not always the case
that one necessarily implies the other. In a unitary or na-
tional government such as Britain a high degree of decen—
tralized, local level policy-making does occur. In the
United States, the growth of the central or national govern-
mental bureaucracy has been continuously increasing. The
centralizing tendencies of governmental organization has
created a point in history in which the chief executive has
attained more power than ever before. With the increased
bureaucratization of the national government it is felt that
it has become less responsive. The "new federalism" as pro-
posed by the Nixon Administration is an effort to stop the
trend toward governmental centralization and to force the
state and local governments to accept greater administra-
tive responsibility. It is difficult to determine just to
what extent the Administration is planning to go in the re-
duction of authority at the national level. Disputes be-
tween Congress and the Presidency are centered upon the
extent and types of controls or guidelines state and local
governments would have with the revenue sharing funds.

Since Madison's discussions of the organization of the

government in the Federalist Papers it has been apparent

that our governmental structure is as confusing as it is
unique. The "new federalism" may just add to that observa-
tion. Intergovernmental responsibility in the provision of
urban development programs may lead to a situation as de-
scribed below.
It is perfectly possible that the primary legal
responsibility for a given function may rest
with one government, the primary financial re-
sponsibility with another level of government,
and the primary administrative responsibility
with a third.5
Revenue sharing when described as a part of the new
federalism can be described as a redistribution of power to
the states, a move towards decentralization of authority or
possibly it could be interpreted as an abdication of social
responsibility by the national government.
The new federalism of the Nixon Administration re-
flects a philosophy that the national government should

concentrate upon foreign relations and upon domestic af-

fairs only as they relate to economic priorities.6 Curbing

 

5George C. S. Benson, The Politics of Urbanism: The
New Federalism (New York: Barren's Educational Series,
1972): PP. 32-33.

 

6Mary K. Nenno, "Housing and Community Development
Issues Looming for 1973: White House/Congressional Debate,"
Journal of Housing, 2 (February 1973), p. 64.

10

inflation takes preference over developing creative and
effective housing or urban development programs. Social
welfare programs should be administered at the state and
local level--responsibility should be shifted with funding
distributed without detailed guidelines. All of this leads
to a decrease in the scope of national involvement in urban
and domestic problems as well as an effort to reduce the
size of the federal bureaucracy. The philosophy has no
proven guarantees that it will lead to greater responsive-
ness to the needs of the cities.

To create a basis for the understanding of revenue
sharing as it relates to social and political environment
an analysis of the theory of federalism was essential.
Federalism is a complex issue as its longevity has proven.
As long as our society is based upon the Constitution ques-
tions as to the relationship of governmental responsibility
between the states and the nation will emerge. With this
background it is essential to turn to the structure of the
revenue sharing proposals and just how will the program
function. As with most proposals revenue sharing has been
modified considerably since it was first introduced to
Congress. Certainly there will be many more changes before

the special revenue sharing acts are passed.

 

11

In recognizing the need for a new way of financing
the needs of the state and local governments to deal with
their apparent fiscal crises, Walter Heller wrote that the
plan should have the following objectives:7

1. to relieve immediate pressures on state
and local treasuries, but make their
revenues more responsive to economic
growth.

2. build up the vitality, efficiency, and
fiscal independence of state and local
governments.

3. increase the progressity of our federal-
state-local tax system.

4. reduce economic inequalities and fiscal
disparities among the states.

5. stimulate state and local tax efforts.

6. insure that the plight of local and

especially urban governments will be

given full weight.

While these objectives are those of an economist
the social implications are easily recognized. As the
progressity of the tax systems at the state and local level
is subject to debate, a program of increased revenues
passed to the states and local communities from the federal

income tax could alleviate dependence upon the more regres-

sive sales taxes and inequitable property taxes. Heller's

 

7Walter Heller, "A Sympathetic Reappraisal of Rev-
enue Sharing" in Revenue Sharing and the City, ed. Harvey S.
Perloff and Richard P. Nathan (Washington: The Johns Hop-
kins Press, 1969). P. 5.

 

12

sixth point has most significance for urban problems. He
recognizes that many urban areas have serious social and
environmental problems. As he reappraises his original
ideas Heller does seem to feel that there should be some
way of ensuring that urban areas receive special considera-
tion and the formula for distributing revenue should re-
flect this factor.
The original revenue sharing proposal is best

stated in simplified terms by Heller himself:

The core of the revenue sharing plan is the

regular distribution of a specified portion

of the federal income tax to the state pri-

marily on the basis of population with next

to no strings attached or at least with no

hamstrings. This distribution would be over

and above existing and future conditional

grants.

This very general explanation of revenue-sharing

Opens the way for numerous operational questions, many of
which have not really been answered today when general
revenue sharing is in effect. The underlying assumption
which dominates the arguments of the proponents of revenue

sharing is that "given adequate resources state and local

governments can reinvigorate American Government at all

*

81bid., p. 6.

13

levels and generate renewed faith in our system."9 But be-
fore such a lofty goal can be achieved certain basic mechan-
ical details must be analyzed.

First, how is the money distributed? According to
initial estimates general revenue sharing would amount to
five billion dollars in the first full year of operation or
1971. This corresponds to 1.32 percent of the personal
taxable income of the United States.10 Each state would
receive an amount based upon population and the state's
tax effort. According to Heller the tax effort is defined
as the ratio of state-local general revenues to personal
income. The product of the population and the tax effort
for each state are added together. The percentage share of
an individual state is then determined by dividing the
total national share by the state's figure. An essential
feature of the program as pr0posed by Heller would be the
organization of a trust fund which would be the vehicle to
handle the funds. The fund would take much of the guesswork

out of the federal appropriations process. The states would

receive a designated amount automatically.

 

9Spiro T. Agnew, "The Case for Revenue Sharing,”
Georgetown Law Journal, Vol. 60 (September, 1971), p. 8.

loIbid., p. 10.

14

Once the funds are dispursed to the states the
revenue sharing act requires a mandatory "pass through" to
the cities and counties. The share is determined by a sim-
ilar formula as that of federal distribution. Each local
jurisdiction receives an amount based upon its percentage
of revenues contributed to the state total. On a national
average over fifty percent of the funds are distributed to
the urban areas.

It is obvious that the distribution and pass through
formula are complex. Deviations from the formulae are al-
lowed in the case of exceptionally impoverished areas in the
form of 10 to 15 percent supplements. The design of a fair
and just method of allocation is a major problem in the de-
velopment of the revenue sharing concept. The problem in—
volves the inevitable difficulties of balancing rural and
urban political interests as well as not creating an overly
mechanical device which is insensitive to areas with major
financial need.

One of the major purposes of revenue sharing is to
distribute to the states funds without prescribing detailed
guidelines and controls or in other words to promote
greater responsibility at the state or local level. In

this way the number of categorical grant-in—aid programs

 

15

can be reduced eliminating the existing overabundance of
administrative paperwork. The Heller-Pechman proposal of

"no hamstrings attached" does not indicate a complete ab-

sence of controls.11

States would be given wide latitude--near1y
complete freedom—-in the use of their revenue
shares . . . . Without sullying the basic no
strings character of these grants one would

1. ask the states to meet usual public audit-
ing, accounting and reporting requirements
on public funds.

2. perhaps even broadly restrict the use of

the funds to education, health, welfare,

and community development programs-~or at

least provide that they not be spent for

highways (which are already financed

through a special trust fund).

The Nixon Administration's revenue sharing plan
consists of general revenue sharing funds and six other
special revenue sharing proposals which are now under con-
sideration by Congress. The special revenue funds are
grant allocations to states replacing over 130 categorical
grants programs. Funding is estimated at 11.4 billion
dollars with 10 billion of the total obtained from existing

categorical programs. The six special revenue sharing

divisions are:

 

llHeller, p. 7.

16

1. law enforcement

2. manpower training

3. urban community development
4. rural community development
5. transportation

6. education

During the 92nd Congressional Session the General
Revenue Sharing Act of 1971 was passed. The special revenue
sharing proposals have been carried on to the 93rd Congress
for continuing debate. President Nixon submitted the Urban
Community Development Act of 1971 for introduction to Con-
gress which would consolidate four existing categorical pro-
grams. The existing programs include urban renewal, model
cities, water and sewer grants, and loans for rehabilitation
of existing structures. Funding for the first year would be
2.1 billion dollars.

In April of 1973 Congressman Widnall introduced a
revised version of the 1971 proposal which was co-sponsored
by every member of the Banking and Currency Committee. The
Better Communities Act of 1973 will provide 2.3 billion
dollars in revenue sharing funds as a part of the fiscal
year 1975 budget. This Act would replace seven categorical
programs including urban renewal (neighborhood development

programs, code enforcement, demolition grants, interim

assistance); model cities; neighborhood facilities; water

 

17

pand sewer grants; open space and historic preservation; re-
habilitation loans, and public facility loans.12 A basic
feature of the Better Communities Act is the Hold-Harmless
Provision which involves the flow of the funds to the cities
and counties. This provision assures local communities that
they will receive no less funds under the Better Communities
Act than they did under categorical grant programs.

The first 65 percent of the appropriations will be
divided among the metropolitan cities and urban
counties on a formula based on actual need . . . .
Some cities will receive considerably more than
they received in previous years. Of the major
users of the replaced programs none will receive
less than what they have received during the re-
cent past.

The remaining 35 percent of the appropriations
will be used primarily for a ”hold harmless" pro-
vision--that would insure a community that it
will receive as much under this act as it re-
ceived previously . . . . Of the funds not used
for hold-harmless provisions most will go to the
States for local community development activ-
ities.

Additional features of the 1973 Act include special
assistance for smaller communities and elimination of
matching fund requirements. The funds appropriated under

the Better Communities Act cannot be used for purposes in

 

12William Widnall, Congressional Record, April 19,
1973, p. H3077.

13

 

Ibid.

18

violation of the 1964 Civil Rights Act. Under the Nixon
Administration's proposal all activities pertaining to

urban development would be administered through a Depart-
ment of Community Development which would include the ex-
isting departments of Housing and Urban Development, Trans- r
portation, and Agriculture. While the proposed organiza-

tional changes are independent of the actual Better Commun-

 

ities legislation it is interesting to project how the two
actions relate to overall administrative policy. It seems
as if there are dual efforts to create a greater centrali-
zation of government control at the national level while
presenting increased Opportunities for local decision-making
and responsibility. An overriding concern of the President
is the existing fragmentation of programs as well as ambi-
guous administrative responsibility.

One of the most serious deficiencies in the
effort of the Federal Government to assist in
community development has been the fragmenta-
tion and scattering of Federal Programs among
a variety of departments and agencies. All
too often State or local officials seeking
help must shuttle back and forth from one
Federal Office to another wasting precious
time and resources in a bureaucratic wild
goose chase.

 

14Richard M. Nixon, "Message to Congress Of the

United States on March 8, 1973," as quoted by William Wid-
nall, Congressional Record, April 19, 1973, p. H3077.

19

It may be that the creation of a super agency such
as the Department of Community Development can help to
eliminate the fragmentation of offices. Such a depart-
mental reorganization could also be too all—inclusive which
might result in a decrease in emphasis upon certain vital
functions. A centralizing reorganizational effort such as
prOposed by the President seems inconsistent with the pro-
cess of decentralization suggested by the new federalism.

In the first six months of 1973 revenue sharing, at
least in regard to the general funds, has become opera-
tional. Reactions have been voiced as to the effectiveness
of the approach. Many local municipalities were totally
unprepared for the initial revenue sharing funds which were
distributed in December 1972. In the Lansing, Michigan
area there was considerable confusion as for what the ini-
tial funds were to be used. Ingham County, which was to
receive 1.3 million dollars proposed to use half of that
amount to reduce property taxes.15

Adding to the general uncertainty and confusion re-
garding revenue sharing, Nixon, in January, delivered his

message to Congress essentially freezing on additional

 

15Metro News Article, "Few Municipalities Ready for
$$$," Lansing State Journal, November 30, 1972. Sec. B,
p. 8-90

 

20

expenditures on housing, urban renewal, and other categor-
ical programs. In areas where such urban programs carried
high priority many administrators were stymied. Represen-
tative of such a situation was Dade County, Florida:

. . . the sharp cutbacks in federal funds
and the 18 month moratorium on new housing
and urban programs have forced a difficult
choice in the use of revenue sharing funds
between previously planned public building
construction and maintaining on going urban,
social, and housing programs, including the
Neighborhood Development Program . . . allo-
cation of revenue sharing funds are depen-
dent upon the outcome Of cutbacks of people
programs.

The process of transition from one type of program
or one set of procedures to another presents many diffi-
culties which must be anticipated. A gradual transforma-
tion is highly desirable especially when the programs have
considerable impact upon low-income families. This has
not been the case in 1973. In President Nixon's Special
Message to Congress on Special Revenue Sharing for Urban
Community Development on March 5, 1971, he stated:

I would emphasize that there will be no
lessening of Federal support for urban
development activities between now and

Jan. 1, 1972, the proposed starting date
for the new program. Our problems will

 

16Jack Bryan, "Revenue Sharing--For What?," Journal
of Housing, No. 2 (February, 1973), p. 72.

 

21
not take "time out" and neither can our
efforts to deal with them.17

It is evident that in the interval between January
1972 and January 1973 there was a major change in the Pres-
ident's approach. Although the actions taken in 1973 to
declare a moratorium on expenditures for housing and urban
development programs did not prevent previously committed
funds from being granted, the effect was to create major
uncertainty. Coupled with the switch to general revenue
sharing funds without special revenue sharing funding being
approved by Congress the result has been an incomplete and
less than smooth transition.

To this point in this analysis of revenue sharing
and its affect upon urban development programs, a summary
of the philosophy of federalism and the operational proce-
dures of revenue sharing have been presented. With this
background it is plainly seen that "the new fiscal federal-
ism" is a controversial but potentially effective adminis-
trative device. As with most new programs, especially such

efforts as the model cities or earlier the urban renewal

 

17Richard M. Nixon, "Special Message to Congress
on Special Revenue Sharing for Urban Community DeveloPment
on March 5, 1971," Public Papers of the Presidents of the
United States, Richard Nixon 1971 (Washington: U.S. Gov-
ernment Printing Office, 1972), p. 402.

 

22

and housing acts, there is a danger of the naive idealism
which acclaims the new legislation as the solution to all
our urban woes. The revenue sharing idea may be a stimulus
to the growth in creative judgment and responsibility at
the state-local level, but on the other hand it could be
the end of effective national leadership. Policy issues
must be analyzed in an objective manner in relation to the
benefits received and the costs involved. Although in any
such question it is difficult to separate factual data from
value projections. An effort will be made to review the
major arguments pro and con the revenue sharing proposals.
In the process of delineating the basis for the
revenue sharing concept many of the proposed advantages
have been mentioned. The central advantage to the plan is
that it would allow state and local leaders more flexi-
bility in efforts to implement programs. With greater
security of funding local governments could use the funds
according to the special priority needs of the area involved
without the burdensome and time-consuming paperwork of the
application process. Revenue sharing recognizes that the
needs of different areas may not be identical; therefore,
standardized operational procedures can lead to misguided

efforts.

23

What is good for New York City is not neces-

sarily good for Chicago or San Francisco, much

less for smaller communities with entirely

different economies, traditions, and popula-

tions . . . . Too often in the past we have

fallen into the trap of letting Washington

make the final decisions for St. Louis, De-

troit, Miami, and our other cities. Sometimes

the decisions were right, and programs have

succeeded. Too often they were wrong, and we

are still paying the price.18

If the responsibility for funding levels and prior-

ities are set by local leaders then there is a greater
chance that government will be more responsive to the needs
of the public. The new federalism in this way is claimed
to be a return of government from the bureaucratic com-
plexities of Washington to the people. Local political
interest groups will have more to say about what happens
in the community. With the decision-makers closer to the
people it will be much more difficult to blame the "feds"
for inaction and incompetence. Revenue sharing could lead
the way to a new sense of professionalism and public ac-
countability for those in public service at the state-local

levels. The planning profession must adjust to this new

role or face the consequences of not having projects funded.

 

18Richard M. Nixon as cited by William Widnall,
Congressional Record, April 19, 1973, p. H3077.

 

24

More attention will be given to this matter later; however,
an advantage of revenue sharing to the urban planner may
be that he will be forced into a more visible and respon-
sible role in the community.

Just as the arguments in favor of the revenue shar-
ing proposal can be stated in a convincing manner, the case
against the new federalism is formidable. The focus of the
attack upon the revenue sharing concept is the shifting of
the decision-making responsibility totally to the state or
local government. There seems to be general agreement that
indeed the local units should have a greater freedom and
authority to determine local priorities but just as the
proponents of revenue sharing have a distrust of the fed-
eral bureaucracy, those who attack the program feel the
local units are inefficiently administered and dominated
by narrow self-interest forces. The Administration's pro-
posals are formulated to act as a challenge to local ini-
tiative, yet many critics feel that local governments are
not ready to assume the complete responsibility. With the
existing categorical aid programs funds were directed
toward a particular stated end. The more generalized
grants with very minimal monitoring by the federal govern-

ment could easily allow more internal manipulation and a

25

potentially disruptive situation. A former Director of
Development in Columbus, Ohio states this possibility when
the absence of the "no-nonsense assertion" of the central
authority allows "petty parochial politics" to emerge.

The replacement of categorical aid programs

with revenue sharing means that the hiring

of political friends and hacks diversion of

planning funds to other political needs, the

flowering of political payday slush funds to

the party in power, and subversion of expert

planning advice twisted in order to irra-

tional ends will increase. Planners will no

longer be able to call upon Marshall Dillion

Federal Marshall if the local agency is tam-

pered with. Your friendly HUD Justice At-

torney will no longer be just around the

corner.

While this statement may reflect a general distrust
of local government it does emphasize the fact that if the
revenue sharing funds are granted to the state-local gov-
ernment there must be some form of control to ensure and
promote more competent and responsible leadership. Revenue
sharing is intended to finance programs and projects which
will benefit the people of the cities in ways which will

eliminate poverty, overcrowding, and crime. It seems that

the revenue sharing approach while demanding a reevaluation

 

19Carlton Reed as quoted by Frank S. So, "The Im-
pact of the New Federalism on City Planning," Planning,
Vol. 39, No. 4 (May 1973) (Chicago: American Society of
Planning Officials, 1973). P. 7.

26

of local government structure may be adding another barrier
to monies actually reaching the people. Certainly there is
a need to create more efficient and creative government at
the local level but at the same time the problems demand
immediate action. Many critics feel that revenue sharing
may become a way for the national government to abdicate
its responsibility for problems which are national in scope.
Urban problems such as discrimination, crime, poverty re-
quire national policies. In this respect the new federal-
ism is seen as a return to the states' rights doctrine and
a withdrawal from the progress achieved in the civil rights
area in the sixties.

Urban problems have occurred as the result of pat-
terns of behavior which have existed for a long time. To
create a change in this behavior creates opposition and
controversy. New and innovative ideas require a determina-
tion to overcome some degree of resistance. Planning solu-
tions, urban renewal, fair housing implementations, rede-
velopment must have strong leadership and support. The
question emerges with funding and priority decisions in
the hands of the local politicians, will they be willing
to experiment and stand behind controversial issues?

Opponents and skeptics of revenue sharing believe that

27

local leaders will opt for the programs which will make the
greatest visable impact and avoid innovation and experimen-
tation which have often been required under federal initia-
tive.

Another major criticism of the program has been
stated by Congressman Wilber Mills, Chairman of the House
Ways and Means Committee. His basic concern is the "no
strings attached" provisions of the proposals and also
questions the responsibility of state-local governments.
However, his criticism is based upon the premise that
revenue sharing while appearing to strengthen our federal
system of government could have the potential to destroy it.

The proposal separates the spending function
from the revenue raising responsibility

. . . . Sharing federal tax revenue violates
an important principle of good government--
the responsibility to collect taxes should
not be separated from the authority to deter-
mine how revenues to be spent.20

This implies that perhaps the question to be de-
cided is what is the definite responsibility of each sphere

of government. If the state is responsible for the solu-

tion of urban problems then perhaps there should be a

 

20James C. Corman, "Grave Doubts about Revenue

Sharing," Georgetown Law Journal, Vol. 60 (September 1971),
p. 29.

 

28

modification in the federal income tax system. Piggybacking
and tax credit system have been suggested as an alternative
to the revenue sharing system. However these proposals also
rely upon the efficiency of the IRS for collection.

The most serious operational criticism of revenue
sharing is based upon the formulae in which funds are passed
through to the local communities. While there are provi-
sions which would give those states with a low per capita
income moderately higher payments, there are no such assur-
ances that more funds will reach the areas with the greatest
need. "Those cities who are able to raise large general
revenues would receive the greatest proportion of the fed-
eral revenue sharing funds."21 There are reserve funds to
be used in areas which have special demonstrated problems.
However, it is likely that this supplemental feature de-
signed to correct the inequities of the pass-through foam-
ulas will not be enough to correct the rigidities of the
system.

An example may serve to illustrate the ina-
bility of the proposed revenue sharing plan
to efficiently meet its objectives by pro-
viding inefficient appropriations where

there is need and sizable amounts where
there is none. Under the administration's

 

211bid., p. 36.

29

proposal Beverly Hills, California, an afflu-
ent residential and commercial suburb of Los
Angeles with a population of 33,416 in 1970
and a median family income of $11,977 would
receive a total allocation of $812,000. In
contrast Bell Gardens, California, a lower
middle income suburb of Los Angeles with a
population of 29,308 and a median family
income of $5,567 would receive a total allo-
cation of only $50,021 . . . . The alloca-
tion of funds according to local tax effort
would not only ignore conditions of need,
but would reward affluent cities and punish
poorer cities or those with less substantial
tax bases.22

As the debate in Congress continues in respect to
the special revenue sharing proposals, and in particular
the Better Communities Act, the provisions for pass-through
to state and local government have become the center of
controversy. In spite of strong pressure by the Nixon
Administration, the U.S. Conference of Mayors meeting in
San Francisco in June, 1973, voted to reject support of
the Better Communities Act in favor of a Community Devel-
Opment Block Grant Program. Such a program would require
applications to be submitted by the local communities for
funding and retain federal guidelines. The American In-
stitute of Planners' Planning Policy Conference in Feb-

ruary, 1973, also decided that revenue sharing and block

 

221bid., p. 37.

30

grant programs should have performance standards and guide-
lines to help ensure efficient use of federal funds.23
This country in the midst of a period of reanalyzing
and reformulating its efforts to solve the major problems of
the cities. The Nixon Administration is not questioned on
the necessity of devising new solutions and more creative
methods of administering and funding programs. It is gener-
ally agreed that local communities should take a greater
responsibility for initiating and formulating plans and
programs specifically designed to serve local needs. Yet,
even two hundred years after the formation of our republic,
the debate lingers as the sc0pe and responsibility of the
powers of our nation and states. Population growth and
urbanization have created a stronger third voice in the
form of our cities. Decentralization of authority and
freedom for individual responsibility create serious ques-
tioning as to what degree of control is necessary to main-
tain a strong national unity. But if the national govern-
ment grows inefficient, wieldy in size and succumbs to the

Weberian malady, responsive government must be sought at

that level nearest to the people. The local governmental

 

23See A.I.P. Newsletter, Vol. 8, No. 4 (April,

 

1973).

31

organization also suffers from the same dysfunction to the
degree that such form of localized community control or
communal organization is being sought to reach the needs
of the people. Yet, our Constitution emphasizes the su-
premity of the national powers to handle those situations
and problems which are national in scope and effect.
Racism and poverty must be eliminated as part of a national
leadership and policy action. The debureaucratization of
society at the federal and local level should be a funda-
mental goal of good government and the planning profession
but such an effort should not result in the abdication of
national leadership.

On June 30, 1973, all funding for categorical urban
development programs such as urban renewal, water and sewer
grants, Open space was scheduled to be terminated. If the
Better Communities Act was passed funds would not be dis-
pursed until July 1974, creating a one-year period of no
assistance to urban areas. The rationale for such action
was to create political pressure for the rapid passage of
the Nixon Administration's proposal. The effort failed.
The question can be raised, as it has been by many housing
and urban interest groups, was it necessary to terminate

all existing programs before an acceptable solution had

32

been accepted? Were all the categorical aid programs com-
plete failures? While the continuing search for new solu-
tions are necessary, it has been demonstrated that our
urban areas have made significant progress under the model
cities programs, urban renewal, and others. If anything
has been learned as a result of the War on Poverty and the
Model Cities Program it is that there can be no one all-
encompassing solution to the multiple problems of urban
areas. Revenue sharing, categorical grants, block grants,
federal initiative, local control cannot provide an imme-
diate cure-all. A creative solution will require an effort
consisting of intergovernmental responsibility and program
responses based upon the interaction of various methods of
funding and administration.

It is clearly possible that in spite of the con-
troversy of the Administration's proposal the resulting
compromised legislation will have a positive impact upon
the planning profession. Although many planners may not
favor a greater political role for the profession, it seems
that there will be little choice in the matter. The poli-
tics of government has been described as the process in

which the disputed values of a society are authoritatively

33

allocated.24 Such decisions are based upon the different
values of the multiple social and economic interests, which
are always present in urban life. Revenue sharing or any
such program which delivers undesignated funds to the cities
and states will increase the dynamics of influence upon au-
thority positions. Urban planners, being just one of many
interests, will have to become more active in their influ-
ence efforts. This does not suggest that the planner must
resort to backroom or underhanded tactics; however, it does
mean that planners must be able to prepare rational and re-
alistic programs and courses of action and be willing to
actively seek popular and governmental support for such
proposals.

Planners will have to be more than professional.

They will need to be innovative, somewhat entre-

preneurial, and willing to compete with other

advocates for available funds. They will be

forced to understand the incentives and per-

spectives of the politicians with whom they

will have to deal and, in so doing, will admit

a larger political component into planning than

now exists . . . . The deepening interrelation-

ship between politics and planning may improve
the values that go into politics.25

 

24Harold Wolman, The Politics of Federal Housing
(New York: Dodd Mead and Company, 1971), p. 2.

25Norman Krumholz as quoted by Frank 8. So, "The
Impact of the New Federalism on City Planning," Planning,
Vol. 39, No. 4 (May, 1973) (Chicago: American Society of
Planning Officials, 1973), p. 7.

34

Perhaps as the professional planner is brought more
into the actual decision-making process of government the
change may create a greater sense of public accountability
which may generate greater efforts to critically evaluate
the costs and benefits of programs and to an increased
social responsibility by the profession as a whole.

This paper has attempted to trace the nature of
the revenue sharing program as it related to the theory
of the new federalism. The issues of federalism and de-
centralization reach far beyond any single fiscal proposal.
It is apparent that the urban planning profession must ex-
tend itself to understand the relationships between govern-
mental authority and responsiveness to community values.

As the profession continues to mature and to direct its
efforts to formulate new programs of action to alleviate
critical urban problems, it must also work to bridge the
gap between governmental responsibility and community
democracy.

Although the specific format and structure of spe-
cial revenue sharing for community development has not
been completely resolved, it is clear that the proposals

and the controversy have challenged the planning profession

35

to reconsider its function and direction. In this way
perhaps the new federalism may serve as an impetus for a

more creative and responsive planning effort.

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