Reducing Obligations to Local Governments

H.3374 would rename the Local Government Fund the “Local Government Revenue Sharing Fund” and would delete a requirement that the fund be appropriated an amount not less than 4.5 percent of General Fund revenues of the last completed fiscal year. The bill further states that the appropriation to the fund should be increased by two percent in any fiscal year in which General Fund revenues are projected to increase by at least four percent.

Nothing in the bill, however, specifies what the initial appropriation to the Revenue Sharing Fund should be. If the base appropriation to the fund is determined by the current year’s appropriation for the Local Government Fund, this will be a significant reduction in the legal funding requirement for the fund. Why’s that? Because the legislature is currently failing to meet its legal obligation to appropriate an amount equal to 4.5 percent of the General Fund to the Local Government Fund.

Local governments depend on monies from the Local Government Fund, and when the legislature appropriates less than what the law requires, local governments either increase taxes or reduce services. The state legislature has long attempted to arrogate local powers to itself while depriving local governments of funds and decision-making powers – a centralizing tendency that makes for bad policy and inefficient government. Depriving localities of revenue that belongs to them is one more instance of this longstanding trend.

Leave aside the merits or demerits of the state devoting 4.5 percent of its revenue to local governments. Maybe that amount should be zero, and maybe it should be more. The point is that, by law, that amount is 4.5 percent. When state lawmakers fulfill that legal obligation, then they can begin creating a more flexible funding system. Until then, they should just follow the law.

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