As the following chart shows, federal aid to state and local governments has almost doubled in real terms over the past decade:
It’s not a coincidence that the states find themselves in a fiscal bind. [Source]
Originally Published in January 1973
On February 12, 1972, as Richard Nixon and his entourage prepared to wing their way toward Red China on Air Force One, an Executive Order numbered 11647, which the President had signed two days earlier, appeared in the daily Federal Register. With all eyes on the precedent-setting excursion to Maoland, this monumentally dangerous Executive Order went virtually uncommented in the press. Carrying all the authority and power of a law passed by Congress, it was every bit as revolutionary as Mr. Nixon's trip to Red China.
Without so much as consulting the Congress, President Nixon had by Executive Order divided the United States into 10 federal regions to be run by "Federal Regional Councils." Excused as a new means to develop "closer working relationships between major Federal grant-making agencies and State and local government," the Federal Regional Councils represent a major step toward the era of Big Brother predicted by George Orwell.
Executive Order 11647 creates, along with the 10 regions, 10 sub-capitals through which the federal bureaucrats will reign over the natives. The Order states:
"There is hereby established a Federal Regional Council for each of the ten standard Federal Regions. Each Council shall be composed of the directors of the regional offices of the Department of Labor, of Health, Education, and Welfare, and Housing and Urban Development, the Secretarial Representative of the Department of Transportation, and the directors of the regional offices of the Office of Economic Opportunity, the Environmental Protection Agency, and the Law Enforcement Assistance Administration. The President shall designate one member of each such Council as Chairman of that Council and such Chairman shall serve at the pleasure of the President. Representatives of the Office of Management and Budget may participate in any deliberations of each Council ..."This Executive Order had been "telegraphed" on March 27, 1969, in a policy statement by Professor Daniel P. Moynihan, then a top Presidential advisor. Professor Moynihan, who is a former chairman of the Fabian Socialists' Americans for Democratic Action, told newsmen at a press conference that the creation of Federal Regional Councils "has been something Presidents have been trying to put into effect for almost 20 years now." And Daniel Moynihan's assistant added:
"No President has ever been willing to bite the bullet. Now we have done so."The division of our country into federal regions was so radical a step that neither John Kennedy nor Lyndon Johnson had dared make the move. It took a Richard Nixon to so hypnotize the American public that our very form of government could be changed without eliciting so much as a yawn.
But what is so radical and revolutionary about establishing 10 federal regions? Are they not just a mechanism for "improving the delivery system" for federal programs? After all, we have Federal Reserve Districts and Federal District Courts. We seem to have survived them. Why be excited over Federal Regional Councils? Read on Macduff.
The Federal Regional Councils are part of something variously known as Regional Government. Metropolitan Government, or "Metro." In a nutshell, Metro is the governing of an area or region by a central body of "experts" -- planners who are usually appointed and vested with great powers, and who are not directly accountable to the people.
Metro policies and programs, goals and methods, appear in a variety of forms designed to deal with varying state and local laws. But the basic strategy involves merging and consolidation of local city or town governments into it larger area government. Cities are merged with other cities and/or with a county. The counties are merged with other counties, erasing state lines.
The distinguished columnist Jo Hindman, who has for fifteen years specialized in watching this business, sums it up this way:
Metro proposes to collect independent units of municipal government under a big super-government and to maintain control of such bodies through something described as "appointed executive" administration. Since these proposed metropolitan districts frequently cross state lines, the very concept of government units corresponding to them makes hash of our Constitution which vests all reserved governing powers in the several states.The legions of Metro promoters, dubbed "metrocrats" by columnist Hindman, are either government bureaucrats out huckstering the wonders of myriad federally-funded programs, or they are connected with one of the organizations collectively known as "Thirteen-Thirteen."
Thirteen-Thirteen is at once an idea, a "movement," and a clearinghouse address. The term is applied to the complex by its own people, and is used to designate 22 separate organizations with heavily interlocking officers, directors, and trustees -- all headquartered in a building erected to house them at 1313 East Sixtieth Street in Chicago. The building is located on land provided by the University of Chicago and was built with funds given for the purpose by the Rockefellers. Out of this headquarters operate the "planners" and social engineers of Metro -- men and women who feel they are a class apart; people keepers who see their role in life as that of managers of hoi polloi.
Ten regions, run by Federal Regional Councils, were created in February by Executive Order 11647.
- Capital: Boston includes all the States east of New York.
- Capital: N.Y.C. includes States: New York and New Jersey.
- Capital: Philadelphia includes Pennsylvania, West Virginia and Virginia.
- Capital: Atlanta; includes States: Kentucky, Tennessee and all east and south.
- Capital: Chicago includes States: Ohio, Indiana, Illinois, Wisconsin and Minnesota.
- Capital: Dallas-Ft. Worth includes States: Arkansas, Oklahoma, New Mexico and all south.
- Capital: Kansas City includes States: Kansas, Missouri, Iowa and Nebraska.
- Capital: Denver includes States: Colorado, Utah, Wyoming, Montana, North and South Dakota.
- Capital: San Francisco includes States: Arizona, Nevada, and California.
- Capital: Seattle includes States: Idaho, Oregon, and Washington.
- taxing (Federation of Tax Administrators);
- rezoning for higher taxation (Municipal Finance Officers Association);
- prefabricated Metro systems (Public Administration Service);
- masterplanning (American Society of Planning Officials);
- international affairs (international City Managers Association and Committee for
International Municipal Cooperation);
- mental health propaganda (interstate Clearing House on Mental Health);
- erasing state sovereignty (Council of State Governments); and,
- retroactive building codes (Building Officials Conference of America).*
*See the author's paperback book, None Dare Call It Conspiracy.
The Thirteen-Thirteen operation is an avatar of the National Municipal League, founded in New York City in the 1890s. It is not without meaning that the National Municipal League is today located on East 68th Street in New York City, right across the street from the Establishment Insiders' Council on Foreign Relations. Metro has often been described as the domestic arm of the Council on Foreign Relations, and the connections go far beyond mere location as we shall see.
In the beginning the National Municipal League held meetings which were attended by prominent citizens sincerely interested in ending corruption in municipal affairs. By the 1930s, however, the League was being run by highly trained (and highly salaried) "urban specialists," city planners, radical university professors, and an assortment of fanatically ambitious city officials. The National Municipal League quickly became the executive "brain" of the Metro movement and established Thirteen-Thirteen in Chicago as a base for its operations.
Many of the arguments heard in town council meetings from Bangor to San Diego and from Tallahassee to Seattle are now little more than restatements of materials distributed by one or more of the 22 organizations centered in the Thirteen-Thirteen complex. Chances are that your own city manager and other city, county, and state officials are members of one or more of these organizations, subscribe to Thirteen-Thirteen publications, have been trained by the Metro staff, or have attended one of its seminars.
The vast Thirteen-Thirteen operation requires, and spends, great sums of money. Who finances it'? Who would lie interested in promoting regional amalgamation pursuant to elimination of governments below the federal level?
Students of the operations of Establishment Insiders will not be surprised to learn that the Rockefeller clan has been the major sugar daddy of the Metro movement. The Laura Spelinan Rockefeller Memorial created the Spelman Fund in 1928, with capital of tell million dollars, and it has received further capital from the Rockefeller Foundation. According to the Fund's annual report of 1947-1948: "The Spelman Fund assumed as its major responsibility an exploration of the possibilities of cooperation with public bodies for the improvement of public administration." The report also speaks of the Fund's role in creating Thirteen-Thirteen:
In 1938, a new building at 1313 E. Sixtieth St., Chicago, (constructed under grants front the Spelman Fund) was completed to provide adequate quarters ... for the use and occupancy of the national governmental organizations. This building has come to be known as "1313" ... An agency known as the Public Administration Clearing House was set up ... Endorsement of the public Administration Clearing House came from the National Municipal League, the American Municipal Association, etc. ... The Public Administration Clearing House manages the building at 1313 E. Sixtieth St., Chicago ...The report of the Rockefellers' Spelman Fund adds:
"The Public Administration Clearing House ... has no members and no independent means of support."Further bankrolling of Thirteen-Thirteen has since been provided by such perennial cornucopias of the Left as the Carnegie Corporation, the Julius Rosenwald (Sears Roebuck & Company) Fund, and the Russell Sage Foundation. But, as with most Insider projects, the primary funding now comes from the Ford Foundation. Ford has poured tens of millions of dollars into scores, possibly hundreds, of regional government projects.
It is no coincidence that it is these same foundations which have financed the Establishment Insiders' Council on Foreign Relations. The CFR's primary objective is the creation of a World Government. The replacement of local governments by regional governments is the domestic version of the same program, by which socialism is to be used as a means to control the people from central headquarters.
This building at 1313 East Sixtieth Street in Chicago houses the twenty-two Metro organizations that form the vast Thirteen-Thirteen complex, the purpose of which is to remove local control from the people and place it in the hands of appointed "experts" and "managers." The structure was built to house this operation by the Laura Spelman Rockefeller Fund, and it all was long supported exclusively by the Rockefellers. The major funding now comes from the Ford Foundation ...
When the Reece Congressional Committee was charged with investigating the tax-free foundations, its chief investigator Norman Dodd personally interviewed H. Rowan Gaither Jr., then president of the giant Ford Foundation. Gaither blithely admitted to Dodd that the purpose to which the Ford Foundation would be applied "was to so alter American society that it could be comfortably merged with that of the Soviet Union." Regional government is a major and necessary step toward that merger. Its objective is to prepare our economy to be merged efficiently with that of the USSR by placing all authority in the hands of the elite planners.
For those who have sought to create the New World Order abroad and the New Society at home, the unique American form of government -- specifically the division of powers between the Legislative, Executive, and Judicial branches; and between federal, state, and local units of government -- has been an almost insurmountable obstacle. To overcome this system of checks and balances, schemes had to be devised which appear to ameliorate problems, but which result in the concentration of more and more power in the Executive branch of the federal government. Indeed, we have been unable to find a single piece of legislation passed by Congress during the last four decades that has not done this -- including Mr. Nixon's vaunted "revenue sharing" program, which is ballyhooed as doing exactly the opposite.
"After nearly 20 years in Congress," said John Ashbrook of Ohio, "I continually witness a gap between the stated intention and the real goal, between the alleged and the actual, between the reported and the unreported." Americans would do well to keep Congressman Ashbrook's observation in mind, as well as these words of the sagacious Thomas Jefferson:
"When all governments shall be drawn to Washington, as the center of power, it will become venal and oppressive."American government was built upon the political theory of divided sovereignty -- the concept known as a republic. The Constitution declared that "The United States shall guarantee to every State in this Union, a Republican Form of Government." The law books say that a
"Republican Form of Government" is a government of elected representatives, wherein no basic power of government can be withheld by appointees. Metro is designed to reverse this system. It is government by an elite corps of experts. These metrocrat appointees replace or assume authority over locally elected officials.
It is a hoary cliché that you can't fight City Hall. Sometimes that has been true. But there have been a lot of City Hall gangs unceremoniously dispatched by the voters to the ranks of the unemployed. It is nonetheless a fact that when City Hall is run by appointed bureaucrats you are not likely to receive satisfaction. You have a complaint. You take it to your friendly local bureaucrat. He may even be sympathetic. But he explains to you that the matter is out of his hands. Just where the jurisdiction lies to deal with your problem is hard to determine. Your town government has now been merged with 10 others into a countywide government. The county government has its own rules and regulations, and then there are the federal guidelines established by the Federal Regional District. Your only recourse is to bang the metrocrat over the head with a copy of Atlas Shrugged -- a prospect which is seldom productive.
Our Constitutional Republic was based upon the rule of law, not on the whims of bureaucrats. But, as we have seen, regional government reverses the process. With regional governments becoming more and more enmeshed with the federal government through Urban Renewal, the Model Cities Program, air and water pollution control, road construction, "aid" to law enforcement, transportation control, War on Poverty programs, manpower training, welfare, and a ton of other schemes, local government is being turned into an administrative arm of the federal bureaucracy.
The many federal bureaus with which you must now deal operate on general grants of power given to them by Congress at their creation. But Congress lets the bureaus set up their own day-to-day procedures by non-statutory administrative rules and regulations that carry the force of law. This is nearly the same situation, except at a lower level, as the one we discussed earlier whereby the President issues Executive Orders that amount to royal decrees. Metro administrators, armed with these administrative rules and regulations, run their fiefdoms with all the impunity of the agents of King George III. The Declaration of Independence cites the arbitrary power of such "swarms of officers" as one of our grievances against England. Today we are enthroning precisely the system against which our colonial forebears once rebelled.
Closely related to the replacement of our Constitutional system of rule by law with rule by bureaucratic edict is the regional government policy of disregarding state lines. One of the major checks and balances (or "counterveiling powers") established by the Constitution in the Tenth Amendment was the retention of all powers, not specifically given to the federal government, in the hands of the states and the people. This makes for sovereign states whose internal affairs are their own business. But by tying federal grants to the new federal regions, each of which encompasses a number of states, the state lines are made to have no more meaning than traffic lights in New York City.
The attitude of Metro proponents towards the states is typified by the Council for Economic Development (CED), an important study group closely tied with the Council on Foreign Relations. In one of its studies on local government, the CED declares:
Fiscal realities have modified the legal concept that the states are the fountain source of all governmental power. The states created the national government, assigning it certain functions and granting it essential powers. The powers of local units were also granted by the states. Realistically, however, capability of response to public desires and adequate financial resources take precedence over legal theory. The states seem less "sovereign" with 20% of their total annual revenues drawn from the federal treasury.The point is that the sovereignty of the states is meant to diminish as the percentage of annual revenue received from the federal government rises. This explains the real purpose behind "revenue sharing" and similar Metro-backed proposals.
Ironically, some Metro programs are promoted under the guise of increasing the power of the states, others purport to increase the jurisdiction of the counties, while others are said to increase the independence of cities. In each case Metro plays the bigger government against the smaller, the objective being to centralize power at an ever higher level. The purpose is to place all power in the hands of the federal government and to turn state, county, and city governments into administrative cogs in one big bureaucratic machine.
Metro is a mechanism for changing a limited Constitutional Republic into an unlimited autocracy without altering the apparent form of our government. The State of Kansas will still exist. The City of Seattle will still exist. The County of Los Angeles will still exist. But their independence will not. Our entire form of government will have changed. And we hardly need remind you that when a government is run by bureaucratic edicts which for all practical purposes cannot be reversed by the people, dictatorship exists.
You doubt that it will happen? You think this is an exaggeration? Think about your own experiences in trying to obtain justice from the Bureau of internal Revenue where bureaucrats act as prosecutor, judge, and jury.
Control over taxation is a very important aspect of the Metro movement. Thomas Jefferson advised us long ago that the power to tax is the power to destroy. We might add that the power to tax is also the power to control. That is why Metro units are so eager to get their hands on the power to tax. One of their main arguments is that the big city politicians, through vote-buying welfare schemes, have chased productive taxpayers to the suburbs -- leaving the central cities between a fiscal rock and a financial hard place. The woebegone taxpayer who accepts Metro taxation to improve the tax base for the cities is then caught between a vice of rising taxes levied by regional government (often raised to obtain matching federal grants), and increased federal taxes to finance the myriad federal programs said to be designed to "improve the quality of life" at the city, county, and state level. Voters can still deal with the problem at the federal level because Congress controls the purse strings, but in the local Metro areas taxes can be set by metrocrats in what amounts to taxation without representation.
While taxation is used to make a direct attack on private property, it is not the only such attack made by the metrocrats. The Metro Planners have used their foundation grants to develop a variety of programs to control and confiscate private property. One of the most successful is Urban Renewal, and such related schemes as Public Housing and Model Cities. Promotion of these programs has long been a priority for the organizations based at Thirteen-Thirteen. It was their lobbying that first put the federal foot in the door of local housing when they persuaded Congress to pass the Title I Housing Act of 1949, establishing federal financing for slum clearance and redevelopment. The Housing Act of 1954 broadened the provisions of Title I to include not only slum clearance but slum prevention.
Then, in 1954, the Warren Court produced a swamp of sociological jurisprudence giving unlimited power to the government to seize anything it wanted through the formerly very limited "right of eminent domain." According to the Supreme Court, the government could use eminent domain to seize any piece of property it wanted. Karl Marx proposed this concept somewhat differently: he said it in German. The Court blasted selfish owners, stating:
If owner after owner were permitted to resist these redevelopment programs on the ground that his particular property was not being used against the public interest, integrated plans for redevelopment would suffer greatly. The argument pressed upon us is, indeed, a plea to substitute the landowner's standard of the public need for the standard prescribed by Congress... Once the question of the public purpose has been decided, the amount and character of land to be taken for the project and the need for a particular tract to complete the integrated plan rests in the discretion of the legislative branch.Here is an uncomfortable thought for the future: If forced sale of property for Urban Renewal and related programs is Constitutional, why not forced sale for agrarian reform? Sorry I mentioned it.
One would have thought that associations of property owners would have held court and put the Warren gang on trial with Judge Lynch presiding. They did not because Urban Renewal amounted to a federal subsidy for realtors (appraisals are required), for bankers (who financed rebuilding), for construction workers and contractors, and for lawyers who defended the practice with great vigor. The Chambers of Commerce loved it. And no one said that compulsory Urban Renewal is nothing but politically legalized theft.
Besides the immorality of Urban Renewal, it is also a monumental flop from the standpoint of the "humanitarian" purposes that were ascribed to it by the Thirteen-Thirteen lobbyists. During the nineteen-year period from its inception to the end of January 1968, Urban Renewal has depleted the nation's housing supply by 315,451 units. Only 124,175 replacement dwellings were built, but 439,626 were demolished under Urban Renewal programming. During this period, $7.1 billion was spent on these projects.
Over a million people and an uncounted number of small neighborhood businesses have been the victims of the federal bulldozer. Who weeps for them? Private land which Urban Renewal confiscates from hapless owners is divided by the bureaucrats between public and private interests. About 16 percent has remained tax exempt in public ownership (raising local taxes), while valuable acreage is sold at cut-rate prices to privileged interests which build high-rise office complexes and shopping centers rather than housing. Meanwhile the former residents of the area find it harder and harder to locate alternative low-cost housing. This leads to over-crowding in adjacent areas. It has in some cases (Cleveland, for example) been blamed as a contributing factor in massive rioting.
With the creation of the Department of Housing and Urban Development (HUD), and the passage of the Model Cities Act, the Urban Renewal concept went regional. Model Cities programs now involve 150 cities -- or, to be more accurate, areas -- forcing regional government by tying federal funds to its creation. Such payoffs became necessary because, despite all of the pro-Metro propaganda about (whenever Metro government was offered on the local ballot, voters almost always rejected it by a ratio of two to one; it took promises of "free" federal funds to overcome their better judgment).
Under Title II of the Omnibus Cities Bill of 1966 -- the Metro title -- all applications for federal aid under 10 programs to provide sewers, construction of hospitals, highways, libraries, airports, etc. must soon be submitted for recommendation to a Metro government before they are forwarded to Washington. The Metro government to which the applications are to be submitted must be a joint planning body for the central city and suburbs. As a result, the big city Urban Renewal projects have been integrated with the suburbs, forcing "scattered-site" public housing upon quiet, formerly pleasant, suburban communities. Just as with busing, President Nixon decries what his own appointees are doing, but he lets them go right on doing it.
Taxation and the direct seizure of property are not the only ways in which the metrocrats attack private property. Thirteen-Thirteen literature boasts of plans to use practices common in Urban Renewal and Model Cities programs to place complete control of all land in the United States in the hands of Metro. Now, whenever land is even temporarily held by Metro Authority, land-use controls are applied by covenants which pass with the land. Forever after, that land is subject to the control of the Metro Planners. Robert C. Weaver, former Secretary of the Department of Housing and Urban Development (HUD), was quite frank about it, declaring:
Regional government means absolute Federal control over all property and its development regardless of location, anywhere in the United States, to be administered on the Federal officials' determination. It [regional government) would supercede state and local laws... through this authority we seek to recapture control of the use of land, most of which the government has already given to the people.Land control is people control. Already Model Cities programs have forced communities to integrate their schools under preposterously racist schemes; to establish sensitivity training for community leaders, teachers, social workers, and the police; and to accept federal guidelines concerning health, education, employment, recreation, and housing. The Metro Planners also have an abiding interest in the police. Not only do they promote sensitivity training for the local constabulary, they often require the establishment of the highly discredited "civilian review boards."
Even before HUD became involved, Thirteen-Thirteen pushed for consolidation of local police departments and sheriff's offices into metropolitan police forces under a political appointee responsible to a Metro manager. A manual published by the International City Managers Association of 1313 East Sixtieth Street, Chicago, states:
The Police function should be administered through a regular city department headed by a police chief directly responsible to the chief administrator of the city [manager] ... Appointment of the police chief should be made by the chief administrator of the city ... rather than by a separate board, commission, or the city council.One should keep in mind that among the federal bureaus that will have offices in each of Richard Nixon's 10 regional districts is the Law Enforcement Assistance Administration (L.E.A.A.). Only those who are still moist behind their hearing apparatus will doubt that L.E.A.A., working through the federal sub-capitals, is laboring to produce regional police as a step toward a federal police force. When they start recruiting in one region for duty in another region, or begin the transfer of police from one region to another, you will know that Fedcop is here. Loss of jurisdiction and control over our local police is a certain step toward Orwell's 1984.
But this is only part of what is involved when one recalls that in addition to Executive Order 11647 of February 10, 1972, and the Revenue Sharing Act that has given the federal government dictatorial power in setting guidelines for our local communities, we also face Executive Order 11490 of October 30, 1969, "Assigning Emergency Preparedness Functions to Federal Departments." This Order, discussed at length in Alan Stang's article beginning on page one, empowers Regional Council members, under the color of law, to control all food supply, money and credit, transportation, communications, public utilities, hospitals, and other essential facets of human existence. That is what regional government really means!
America has genuine urban problems. But regionalization can hardly be cited as a solution so long as communities can voluntarily contract with each other to work together in their solution. Such things as fire, police, or trash collection services, for instance, can be shared by contract. Pollution problems can be solved by state legislatures and the courts -- so that if someone is pouring sewage in your drinking water, you can settle the matter in court. Curing pollution hardly requires the abolition of our Constitutional Republic. But the metrocrats are not interested in these genuine solutions, they are after power. They are working to carry out what the Ford Foundation's Rowan Gaither described as the plan to merge the United States with the Soviet Union.
Certainly Richard Nixon is carrying out part of this program by making the United States dependent on Soviet natural resources. Does it not seem odd that our government will not allow a pipeline to be built across Alaska to allow the development of that state's huge petroleum resources under the excuse that it will upset the ecology of snow bunnies and polar bears, while at the same time we prepare to import natural gas from the Soviet Union? Does it not seem odd that the Rockefellers' Chase Manhattan Bank is opening a branch in beautiful downtown Moscow, even as the Soviets are preparing to sell bonds in America?
The Metro conspiracy made great advances with the aid of Presidents Eisenhower, Kennedy, and Johnson, but its triumph awaited the Administration of Richard Nixon. Mr. Nixon was the first to "bite the bullet" and create the 10 federal regions as part of his "New Federalism" ... a takeover which he describes as part of a "New American Revolution." It might more accurately be described as a "counter revolution" to that of 1776 which freed us from the arbitrary rule of "swarms of officers."
As I write, President Nixon is in the process of creating a Cabinet post of Community Development, the boss of which will act as a commissar ruling over his 10 regional soviets and using the $30 billion in "revenue sharing" funds as both a carrot and a stick to implement Metro rule. And Richard Nixon means business. Washington columnist Richard Wilson informs us that the "new federalism ... is an obsession with him." Ironically, Mr. Nixon's collectivist obsession is being sold to the public as decentralization. The President has proclaimed:
I realize that what I am asking is that not only the executive branch in Washington, but even this Congress will have to change by giving up some of its power.Nixon is taking power from the Executive Department in Washington by creating 10 branches of the Executive Department throughout the country. Sacrebleu!
Under the title "Domestic Kissingers To Have Vast Powers," columnists Evans and Novak reveal what Mr. Nixon is really up to:
Many details await final Presidential determination, but the intent of the drastic reorganization has now become inescapably clear: to devise lines of power and authority which will centralize all decision-making in the White House to about the same extent that Henry Kissinger now controls every aspect of foreign policy.In blueprint form is a proposal to create four or five new Kissinger-type master bureaucrats, working directly under the President. They would exercise fully as much control over their old-line departments as Kissinger now exercises over the State Department through the National Security Council (NSCJ).
What this means is that Mr. Nixon intends to take direct control of the sprawling and often immovable bureaucracy into his own hands, operating through his new master bureaucrats.
Our country is being changed into a Big Brother dictatorship with Newspeak as the official language. The first thing you know, the "domestic Kissingers" will be trying to put a federal television set in every home to spy on us. And if you don't believe it, read Alan Stang's article called Big Brother in America.
May 4, 2009
In a historic first, Uncle Sam has supplanted sales, property and income taxes as the biggest source of revenue for state and local governments.
The shift shows how deeply the recession is cutting. Federal stimulus money aimed at reviving the economy and a sharp drop in tax collections have altered, at least temporarily, the traditional balance of how states, cities, counties and schools pay for their operations.
The sales tax had been the No. 1 source of state and local revenue since the mid-1970s, according to the Bureau of Economic Analysis. Before that, property taxes were the primary source. That changed in the first three months of 2009.
Federal grants — early stimulus money plus conventional federal aid — soared 15% in the first quarter to a seasonally adjusted annual rate of $437 billion, eclipsing sales taxes, which fell 2%.
The dominance of federal money is set to expand dramatically this year because tax collections are sinking while the bulk of federal stimulus aid is just starting to arrive.
"This money isn't manna from heaven. It comes with a price," says Indiana state Sen. Jim Buck, a Republican.He worries that the federal money will leave states under greater federal control and burden future generations with debt.
Nick Johnson, a state finance expert at the liberal Center on Budget and Policy Priorities, says the federal aid is well-timed.
"This has more to say about the severity of the recession than anything else," he says. "Congress stepped in on a temporary basis to help states."The federal government plans to provide about $300 billion in extra aid to state and local governments over the next two years, mostly for health care, education and transportation projects. State and local governments spend about $2 trillion a year, and the federal government is now paying about 23% of those costs.
States are counting on tax collections rebounding by 2012, when stimulus money starts to run out.
The early flow of stimulus money helped lift total state and local revenue by 1.6% in the first quarter compared with a year earlier despite a 2.9% drop in total tax collections. Spending rose 1.5%.
Things are getting worse for states that rely on the income tax. Reason: Unexpectedly large refund checks in March and April are going to workers who lost jobs or had wage cuts last year.
Michigan's income tax collections are down $200 million and refunds are up about $200 million — a $400 million swing. Connecticut has paid nearly $1 billion in tax refunds this year, about 20% more than expected. "These are big numbers. It's put us in a very bad situation," says Connecticut Comptroller Nancy Wyman.
Key state and local taxes:
- Sales tax. Collections started falling at the end of 2008 for the first time since the Bureau of Economic Analysis first reported data in 1958. The drop in sales of automobiles and construction materials has taken a big bite out of sales tax revenue.
- Property tax. The most stable tax is generating increasing revenue, mostly for schools, despite plunging property values. One reason: Forty-six states limit how fast property taxes rise or fall.
- Income tax. The most volatile tax produces big increases during boom times and giant declines during hard times. California, New York, Oregon, Connecticut and other states that depend heavily on taxing year-end bonuses and capital gains on investments have been hardest hit by the worst income tax drops since 2002.
Mired in Crisis, States Kick Off Legislative Year
State Tax Revenue in U.S. Drops Most Since 1963, Study Says
Obama Extends Diplomatic Immunity to Interpol by Executive Order
Obama grants Interpol immunity as foreign ‘assets’ assigned to U.S. homeland
Obama Expands Federal Power Over the States with Executive Order
American Republic Replaced by "Council of Governors"?
Vast Majority of Federal Transportation Dollars Get Divided Among States
Hundreds of public and private groups spent more than $19 million on lobbying teams focused solely on surface transportation, but that drastically understates the total amounts being spent by local governments, businesses, and other interest groups around the nation... Transportation policy and transportation bills provide depressingly stark proof that all politics is local. Each city, state, and more specifically, congressional district, has its own battles to fight... The vast majority of federal transportation dollars get divided among states and localities to spend as they see fit. Congress has created dozens of programs through which those dollars flow from Washington. But there’s no overarching national strategy. And few goals. Beyond that, though, a portion of the pot is doled out project-by-project in Washington. So lots of groups end up hiring lobbyists to bypass local and state decision-makers and get projects funded federally... House leaders proposed some nontraditional ways to collect more money, such as a tax on oil speculators, a national sales tax, or the use of more tolling and private partnerships. A "miles traveled" tax, which levies specific charges on drivers based in part on the number of miles they drive, has gained the support of Congress’ two national policy commissions, but that option would require years to implement and would likely be a tough sell to the public.
PDD 51 & New Executive Order Give Obama Dictator Power
President Obama Signed a New Executive Order that Forms a Council of Governors
Obama Establishes a Council of Governors
'This is a military plan that's designed to bypass the Posse Comitatus Act that traditionally prohibited the US military from operating within the borders of the United States. Not only will American soldiers be deployed at the discretion of whomever is sitting in the Oval Office, but foreign soldiers will also be deployed in American cities,' warns Lt. Steven Rodgers, commander of the Nutley, NJ Police Department's detective bureau.
State Unemployment Funds Going ‘Absolutely Broke’
Small-business bankruptcies rise 81% in California
Schwarzenegger submits "draconian" California budget
Government aid is a hard habit to break
Why 650 Local Governments Use Lobbyists to Get Cash for Buses, Trains, and Roads
States to Government: Hands Off Education
Obama to Propose $3.8 Trillion Budget Boosting Education, Energy, NYT Says
Budget-strapped states avoid the word ‘taxes’
Pennsylvania State Capital Mulls Bankruptcy as a Budget Option
Phoenix gives OK to 2% tax on food
MIAC Report Supporter and Missouri Gov. Nixon to Sit On Obama’s Council of Governors
De Facto Military Occupation of Pennsylvania
Massive Layoffs Coming in NYC, Nevada, California, Colorado, Arizona, Everywhere
Cities, states, and municipalities are sinking by the minute. And unless unions agree to concessions (which they won't) massive layoffs are coming everywhere you look. New York City is a prime example.
New Jersey Governor Declares Fiscal Emergency
Cash-strapped states face multimillion-dollar storm cleanup
Council of Governors Takes Shape
Kansas Senate passes state sovereignty measure
The Kansas Senate sent a non-binding resolution to the House which would urge the federal government to respect state sovereignty. The resolution calls for the state to send a letter to federal officials, including the president, urging the president to respect the 10th Amendment, said Sen. Mary Pilcher Cook, R-Shawnee, who sponsored Senate Concurrent Resolution 1615.
“It does not stop the erosion of state sovereignty, but it does serve a purpose,” she said.
Pennsylvania Counties Seek Long-Term Solution to Declining Tax Revenue
Tennessee Hospitals to State: Tax Us, Please!
States Freeze Tax Refunds
States from New York to Hawaii that have been hard-hit by the economic downturn say they have either delayed refunds or are considering doing so because of budget shortfalls.
Regionalism: Destroying the American System of Government
States Sue Over Overhaul That Will Bust State Budgets
Florida, Texas and Pennsylvania are among 14 states that filed suit after the president signed the health care bill over the constitutionality of the burden imposed by the legislation. The health-care overhaul will make as many as 15 million more Americans eligible for Medicaid nationwide starting in 2014 and will cost the states billions to administer.
Florida budget action sets up fight over health care, schools, roads
The Florida House on Thursday approved a $67.2 billion state budget on a party-line 74-44 vote, setting the stage for a month of hard bargaining with the Senate over funding for health care, schools, road building and state workers. Both chambers attempt to balance the budget — and a $3.2 billion shortfall — in different ways. The Senate’s bigger $69.9 billion plan is buoyed by more than $1.3 billion in federal cash and Seminole Tribe of Florida gaming money, though neither is guaranteed.
Updated 4/2/10 (Newest Additions at End of List)