ABSTRACT
This chapter provides new evidence that one tool for furthering such an objective is the provision of general fiscal assistance money without strings attached to local governments. Economists expect general assistance funds to be spent much like locally raised revenue. The dramatic rise in the percentage of city leaders who said that the primary use of revenue sharing funds was to maintain existing services can be explained fairly easily. Survey responses and interviews confirmed that the preference for using general revenue sharing grants for capital improvements was due to the well-founded fear that these grants might be terminated. Capital improvements offered the perfect hedge against an uncertain future. New buildings, facilities, and equipment purchased with revenue sharing funds would benefit the community after the program ended and would require no more than operating expenditures in local budgets. The data reveals that cities have had to cut back or postpone their capital-improvement projects due to the loss of federal funds.
