Intergovernmental Fiscal Assistance Message to the Congress Transmitting Proposed Legislation.

To the Congress of the United States:

Three years ago, at the lowest point of our Nation's deepest recession since the 1930's, many urban and rural communities were experiencing severe fiscal distress. The recession had weakened their revenue bases at the same time that their unemployment and service costs rose sharply.

In 1976, Congress enacted the Antirecession Fiscal Assistance program to provide emergency fiscal assistance to these distressed States and localities. When I came into office, I strengthened this program as part of my Economic Stimulus Package. Since 1976, approximately $3 billion has been spent under this program, which was effective in avoiding excessive layoffs of essential employees, service reductions and counterproductive tax increases in many areas.

Fortunately, nearly four years of national economic recovery have produced great progress in restoring the fiscal health of most of these communities. However, a number of communities still are experiencing severe fiscal problems and need more time to recover. The unexpected and abrupt termination of this program last fall has threatened many of these localities with painful reductions in vital services and with costly layoffs.

To assist these communities in regaining their financial stability and to protect State and local governments against unexpected future downturns in the economy, I am hereby transmitting to Congress the Intergovernmental Fiscal Assistance Amendments of 1979. These amendments outline a two-tier program, which meets the fiscal needs of our Nation's communities and which is consistent with the overall austerity of my budget.

The targeted fiscal assistance portion of this legislation (Title I), is designed only for those local governments with significant fiscal need—those urban and rural communities with unemployment rates of 6.5 percent or more. I am requesting that $250 million be spent in FY 1979 and $150 million in FY 1980 for this program. These funds would be distributed only to those local governments that face the most serious economic and fiscal problems—1231 local governments in FY 1979. No community will receive less than $20,000 annually or will be eligible if its per capita income exceeds 150 percent of the national average.

The legislation also provides a standby program of Federal fiscal assistance (Title II), to State and local governments through 1980. This assistance would be provided if national economic conditions deteriorate sharply, as evidenced by a national unemployment rate of 6.5 percent or higher in any quarter. In that event, governments with quarterly unemployment rates of 5 percent or more would receive aid. This program should not involve any budget outlays in the next two years. The Administration does not expect the national unemployment rate to rise above 6.5 percent. But, I urge the Congress to authorize this standby economic insurance program for State and local governments as a hedge against economic adversity and as an insurance policy in the event of an unexpectedly large downturn in the economy.

Our ability to act quickly to prevent the problems resulting from an economic downturn can reduce both the severity and duration of any downturn. Help that is delayed too long often takes effect after the crisis, and contributes to inflationary pressures during the economic recovery.

Together, this two-tier program addresses both immediate and prospective needs: a carefully targeted program for a limited number of fiscally strained communities and a more comprehensive standby program for State and local governments to protect them against an unexpectedly severe economic downturn. This proposal meets a pressing and immediate need and allows our Nation's communities to plan sensibly for the future. I urge Congress to enact this important legislation.

JIMMY CARTER

The White House,

March 6, 1979.