General Revenue Sharing Program Message to the Congress Transmitting Legislation.

To the Congress of the United States:

I am transmitting to Congress today legislation titled the "Local Government Fiscal Assistance Amendments of 1980." This legislation authorizes a five-year extension of the general revenue sharing program for local governments. It amends and extends the current authorization for the general revenue sharing program, which expires on September 30, 1980.

In my January budget, I indicated that I would support a $6.9 billion extension of the General Revenue Sharing program, with full participation by the States. Since that time, inflation has accelerated considerably and it has become imperative that we restrain Federal spending and balance the Federal budget. I therefore am proposing today that the revenue sharing program be extended only for local governments. I also am recommending that funding for the program be reduced to the transitional level of $5.1 billion in the next two fiscal years and $4.6 billion in fiscal years 1983 through 1985.

When the general revenue sharing program was first enacted in 1972, State and local governments confronted significant fiscal needs. Many States and localities faced growing demands for services, which they were unable to finance with their own tax resources. At the same time, Federal revenues were expected to grow rapidly, providing the resources for additional aid to States, counties and cities.

Today the economic situation is quite different. Most State governments are stronger fiscally than they were just a decade ago. They have broader and more responsive tax systems, which have produced rapid growth in revenues. In the last decade alone, State government revenues have grown sixty percent faster than the Gross National Product. Some States, as a result, have accumulated substantial budget surpluses.

While the fiscal condition of the States has improved substantially, many local governments continue to have difficulty financing essential services with their own tax resources. These cities, counties and towns are squeezed between growing demands for services and shrinking tax bases. This fiscal squeeze is particularly severe for the cities and counties with large numbers of poor or disadvantaged citizens.

Finally, the high rate of inflation has made it necessary to restrain Federal spending and balance the Federal budget. As a result, the Federal government does not have sufficient resources to meet all of the demands on its budget.

These changes in the economy make it essential that Federal policies and programs be adapted to current requirements. We need to achieve a balanced budget and disciplined restraint in Federal spending. We need to recognize the fiscal resurgence of the States and ask them to join us as full partners in solving our domestic problems, including the fight against inflation. And we must face the fact that many local governments confront responsibilities beyond their capacities, and that Federal assistance must go to those with the greatest needs.

This legislation embodies my commitment to a strong and vital Federal system and responds to the need for greater fiscal responsibility at all levels of government. The legislation retains the most important features of the current revenue sharing program.

—I am proposing that the program be funded for a full five years and that entitlements to local governments are continued on the same basis as the current law. This long-term extension will allow cities, counties, and towns to plan their budgets for several years and to use Federal funds efficiently.

—I am proposing that the flexibility provided to local governments in the current revenue sharing program be retained. This will ensure that revenue sharing funds are distributed with minimal administrative cost and little red tape. It will also allow local governments to be responsive to local needs, rather than to priorities set in Washington.

—Finally, I am proposing that the citizen participation and anti-discrimination provisions of the current program be reauthorized in their entirety. This will ensure continued progress in making local government more accessible and responsive to all citizens.

The legislation I am transmitting also includes important changes in the current program. These changes will make the revenue sharing program more responsive to the needs of local government and more consistent with the current economic situation.

First, I am proposing that the States no longer receive general revenue sharing assistance. While I recognize that this recommendation will cause difficult adjustments in a few States, it reflects the improved fiscal health of the States and the need for greater fiscal responsibility and a balanced Federal budget.

Second, I am proposing that $500 million be added to the local share of general revenue sharing in each of the next two years. This $500 million of transitional assistance is intended to help local governments adjust to reductions in State aid resulting from the discontinuation of revenue sharing for the States. The $500 million will be concentrated in the States that provide the greatest amount of aid to their local governments. Without these funds, many cities and counties will be forced to lay off essential workers or to raise already high property tax rates.

Third, I am proposing modest changes in the intrastate formula for allocating general revenue sharing funds. These changes will provide increases in aid to local governments with large numbers of poor and disadvantaged citizens and with very high tax burdens. They will help reduce the large disparities that exist between wealthy and poor communities in many States.

Finally, I am proposing that local governments that receive revenue sharing aid be audited every two years. This provision will facilitate continued improvement in local government financial management practices.

During my Administration, we have built a new partnership between the Federal government and State and local governments. This partnership has brought new vitality to our Nation's States, counties and cities. It has provided consistent and stable funding for critical State and local needs. And it has given State and local officials an opportunity to help shape the legislation that affects them.

My proposals for renewing general revenue sharing strengthen the partnership that we have forged in the last three years. I hope Congress will join me in this effort.

JIMMY CARTER

The White House,

April 16, 1980.