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ADVISORY COMHISSION ON INTERGOVERNMENTAL RELATIONS
Washington, D. C. 20575
January 15, 1968
To : Members of the Advisory Commission
on Intergovernmental Relations
From : Executive Director
Subject: Selection of New Topics for the Commission's
Work Program at the February Meeting
The status of our work program now allows one new project to
be taken on in each of our two areas of work-~Taxation and Public Finance
and Governmental Structure and Functions.
As has been the previous practice the Commission may wish to
make its selection from the list of items set forth in this memorandum
or, other items may be advanced by individual members and be found to
have majority support.
At one of its early meetings the Commission adopted the
following criteria to guide in the selection of problems and issues for
investigation:
(a) Relative importance and urgency of the problem;
(b) Manageability from a staff standpoint; and
(c) Degree to which the Commission can make a unigue
contribution toward the solution or amelioration
of the problem
On occasion when the Commission has been choosing between two
or more closely competing items for study, the question has been raised--
"Why not select both, one to be studied immediately subsequent to the
other?" The difficulty with this approach is that by the time No. l is
b. A study of realigning functional responsibilities
would undoubtedly throw additional light .- the
various factors that appear to be related to the
centralization of financial responsibility. that
has taken place in this country and elsewhere over
the course of time. As such, this study would add
additional evidence to what is presently a rather
sketchy portrait J! the "centralisation tendency"
in the United States.
c. An important argument against this topic at this
tiua is the broad National study of the welfare
problem by a special couldsaion just established
by President Johnson.
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NATIONAL CONFERENCE OF STATE LEGISLATIVE LEADERS
December 26. 1967
Mr. Hilliam G. Colman. Director
Advisory Commission On Intergovernmental Relations
New Executive Office Building
126 Jackson Place, N. 0., Suite 5208
Uhshington, D. C.
Dear Mr. Colman:
The Executive Committee of the NCSLL at a meeting on December 2
voiced a serious concern which all state legislative leaders feel
concerning the impact of the federal program known as Medicaid.
It appears that the Congressional authorization for this program
has put the states in the position of being committed to some
extremely large expenditures withOut any state control. Some of
the members present expressed their feeling that the program as
presently constituted may seriously jeopardize their financial
picture.
In order to provide the NCSLL with the background information it
needs in order to formulate a specific program on Hedicaid. I
should like to enter a formal request for a study of this subject
by the Advisory Commission. we would suggest that this study cover
the legislative background as well as the program and its implica-
tions for the states. It would serve to formulate our thinking
and provide us with the basis for whatever joint action the state
legislative leaders feel is necessary.
1 understand the Commission meets again on February 2 or 3 and I
would appreciate your bringing this request before them. Nb would
hope that the study could be commenced immediately so that our
members will have this information at the earliest possible date.
Sincerely.
John L. O'Brien
President
JLO:lc
. cc: Ron. C. George DeStefano
non. Jesse M. Unruh
hon. Ben Barnes
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Gggernmentsl Structure and Functions
A. Large-Scale Projects
1. The Intergovernmental Impact 9! Political Parties in the
States and Metropolitan Area!
The American political party system with its national, State
and local components has been a major preserver of the Federal prin-
ciple. As a loose-knit, decentralized, fairly pragmatic system, it
has facilitated the processes of nominations. elections, and represen-
tation--while. at the same time. providing a vital arena for developing
consensus and achieving compromise-~vital functions in a democratic.
representative. federal system. with the bulk of the elective offices
at the State and local levels, major authority over nominations, elections,
and other political functions are assigned to these levels and their
party systems have served thus as a buttress of political decentralization.
Yet. significant changes have occurred in the State and local
parties: interparty competition has increased at the State level, new
approaches to drafting party platforms have emerged, new relationships
have developed between the executive and legislative wings of parties.
the older bases of local political organizations have eroded in many
municipalities with new ones taking their place, and arawide problems
and efforts have appeared in many urban and rural places but without
much political party involvement per so. These and other changes have
put the State and local parties at the crossroads.
The Commission in various reports has explored ways of strength-
ening the formal and functional features of State and local governments.
especially as they relate to urban problems. The party systems that
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underpin these governments require comparable attention. Assessment
of their roleo-as they interrelate to the challenges of bigger State
and local governments and bureaucracies; of more intricate and intense
State-local relationships; of transcendent regional problems in urban
and rural areas; and of a continuing and growing Federal involvement
in all of these problemso-vould provide the bases for identifying ways
and means of relating the political party framework to the processes
of State-local and interlocal relations.
Estimated completion time for this project would be 9-12
months.
Arguments for undertaking this project would include:
a. The Commission has never undertaken a study of the
informal, political dimensions of intergovernmental
relations.
h. The growing agreement on the need for State and local
institutional change and functional revitalization
make it critically important that the political party
dimension of these efforts be properly highlighted.
2. The Intergovernmental Dimensions of State Public Utility
Regulatory Activitie!
The growing complexity of the industries regulated and the
increasingly nationwide aspects of their activities have directed
attention to State public utility programs (including electricity.
gas, telephone, water and transportation utilities such as railroads,
motor buses. and cmumntand contract carrier trucks).
Certain coemrn areas of present interest and concern can be
identified. A recurring theme is the need for more adequate represen-
tation of the broad general public interest. This was early reflected
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in the establishment of a consumers council in the Coal board. one of
the depression regulatory agencies. More recently it has been high-
lighted by the broader discussion of an "ombudsman" to represent the
public interest generally in government. Another common area of concern
is the need for regulatory agencies to be provided with resources and
capability adequate to deal with the frequently highly sophisticated
and heavily staffed corporations which are being regulated. The appro-
priate and proper distribution of authority between the Federal Government
end the States has received continuing attention. Finally, efforts to
discover ways in which States can cooperate with one another and with
Federal agencies in dealing with such regulatory problems having an
impact beyond their own borders are of growing importance.
The division of jurisdiction between Federal and State regulatory
agencies responsible for public utility regulation is based on the
distinction between interstate and intrastate commerce. This frequently
raises exceedingly complex problems in separating utility properties
and expenditures between interstate and intrastate portions of their
business. A related problem is the extent to which varying State reg-
ulations and requirements should apply to interstate operations within
their borders. Although there are a number of problems in reconciling
Federal and State regulation which are common to all of the utilities
there are others that are unique to particular utilities.
For example. one of the major problems in interstate commercial
motor vehicle operations are the varying and sometimes mutually exclusive
State requirements covering safety lighting and other special fittings
and equipment. Licensing and certification standards for common carrier
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and contract truck operators in interstate commerce also very consid-
eregl;. Meeting all of the varying requirements frequently imposes
heavy burdens. Although less frequent and vexing, similar problems
arise in connection with the regulation of railroads. such as the
"full crew" requirements in some States. Technical advances in the
generation. transmission, and distribution of electricity permitting
massive interconnected power pools is necessitating increased cooperation
between Federal and State commissions. since neither has complete regu-
latory responsibility.
A somewhat different intergovernmental relations problem arises
because of the increasing participation of local governments and other
public agencies in the provision of electricity and water and the oper-
ation of rapid transit lines. The jurisdiction of State regulatory
agencies ever rates. service standards, extension of service. safety
standards. and other policies of publicly owned utilities varies con-
siderably from State to State with a resulting disparity in responsibility.
Hide variation also exists in the extent to which the State agency has
jurisdiction over rates. service standards. and extension of service pursuant
to interlocsl contracts and agreements among local governments. As a
result smaller governments may find themselves at the mercy of the larger
jurisdiction providing the utility service.
The estimated research time necessary to complete this study
would be approximately 9 to 12 months.
As the above suggests, arguments for placing the topic on the
Advisory Commission's study agenda include:
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a. No recent studies have been made of the intergov-
. ernuental dimensions of public utility regulation.
b. The growing interdependence of public utility
activities underscore the need for a current exam-
ination of regulatory authority.
c. The emergence of a grouing number of local government-
owned public utilities presents new queations--heretofore
unasked--regarding the jurisdiction of State regulatory
bodies.
3. The Intergovernmental Aspects of Igaggagce Eggplatigg
During the early growth of the insurance industry in the united
States the doctrine of Paul va Virginia, declaring that insurance was
not interstate connnrce. set the stage of the establishment of State
regulatory programs. In 1964. the South-Eastern underwriters Case
reversed the earlier decision. declared insurance to be interstate
connerCe, and applied Federal anti-trust laws to it. The following
year. however. the McCarran-Ferguson Act (PL 15), while reaffirming
the courts application of the anti-trust laws to the business of
insurance, asserted as national policy that the States were to continue
to regulate and tax insurance business.
The activities of the insurance rate-making bureaus, which call
for concerted action on the part of insurance companies. have been-a
matter of continuing Federal concern within the framework of anti-trust
jurisdiction. The extension of Federal jurisdiction in motor vehicle
safety matters has again focused interest on the exceedingly complex
area of motor vehicle liability insurance. Growing consideration of
consumer protection by both the States and the Federal Government has
drawn attention to possible abuses and activities in restraint of trade
in connection with the selling of credit insurance to borrowers. These
a
and additional problems have raised a number of issues left unresolved
by the South-Eastern Underwriters Case and the McCarran-Perguson Act.
The estimated research time for this study would be 6 to 9
months.
As the foregoing demonstrates. the basic arguments for including
it on the study agenda include:
a. The anti-trust implications of insurance rate-making
bureau activities are a source of increasing concern.
b. The motor vehicle liability insurance is now an inter-
governmental isaue--given recent Federal highway safety
legislation.
c. The need for greater consumer protection is becoming
increasingly apparent in this field.
a. [he Role and Escord gt Interstate Compacts and
1 signal (2&1 mg
nterstate Re set
The Constitution of the united States provides for interstate
compacts and the States have relied on them throughout our history.
Thirty-six such compacts were entered into between 1783 and 1920 and
another 65 between l920 and 1955. Since then. more than 20 others
have been established. Prior to 1920. most compacts were bi-state and
involved boundary settlements. Subsequently. many were drafted for
regional or even nationwide adoption with on-going authority for planning,
operating, and even regulating in varioos governmental areas. It appears
clear now that the compact device potentially may extend to the nhola
range of permissible legislative authority. and some have forecast that
compact agencies will become a much more widely accepted and familiar
governmental form in this country.
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A survey of this device would assess its record to date. includ-
ing its use. sponsors, legal questions, and accomplishments; it would
also consider the problems and prospects of compacts as a mechanism
for Federal-State, as well as interstate collaboration.
Uith the 1961 enactment by Congress of a statute granting its
consent and providing adherence of the national government to the
Delaware River Basin Compact. s ndv dimension to interstate coopera-
tion was added. with the subsequent enactment of the Appalachia
legislation and the Public Barks and Economic Development Act of 1965.
the Federal-multi-State form of cooperation was expanded and afforded
additional potentialities. Hhile the record of these recently estab-
lished regional development and water basin counuasions is brief. it
already has raised questions of intergovernmental significance
(e.g., to what extent should the Federal co-chairman implement national
policies in the exercise of his authority? what is the appropriate
role of the chairman vis~a~vis separate Federal departmental interests?
what is the appropriate pattern of representation and voting strength
on these commissions?, etc.).
The estimated research time for this study would be 9 to 12
months .
The arguments for its adoption include:
a. The interstate (compact) and Federal-interstate options
provide alternatives to direct Federal action fci meeting
the regional needs of our citizens.
b. The Federal-interstate device includes two markedly
different legal approaches; the compact or enabling
Federal legislation; these are a source of consider-
elle controversy in the States. Congress, and the
Department of Justice.
c. No definitive study has been made of the relative
merits of these two approaches or of the Federal-
interstate device itself.
5. State-Local Relatigns in Lag Enforcement
As the Nation faces continued crime and increasing crimes of
violence. as demonstrations and riots grow in intensity and frequency.
as the illegal use of drugs grows, attention is sharply focused on
law enforcement at the local level where primary responsibility
resides. Yet the role of the States in providing leadership, assist-
ance. and enabling legislation. dso becomes particularly important.
Recent studies have provided valuable knowledge of many of the problems,
deficiencies, and failures in the present system and have proposed
significant approaches to solutions. Nevertheless, the relationship
of States to local governments and their respective roles in law
enforcement merit intensive study.
Under our division of powers it/thm local governments. and
particularly cities, which bear the major burden of lav enforcement
and the nature of involvement is conditioned primarily by State
constitutions, laws, and institutions. Yet, State responsibility has
not been clearly institutionalised. In some States the office of
Attorney General shares responsibility with a State police force or
Department of Public Safety. Departments of Local Affairs have some
involvement in a number of States. In most States, however. there is
no clear focal point. Furthermore. State support in the form of finan-
cial and technical assistance is frequently extremely limited. The
role of the States in training and recruitment, employee relations.
criminal investigations. communication. and laboratories is diffused
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finished. circumstances may have changed to remove No. 2 as a timely
and urgent topic. Consequently selections within each of the two
functional areas into which the Commission's staff is divided have
been made on a single basis, with the staff work on the selected pro-
ject beginning immediately.
Because of the fairly limited size of the Comission's pro-
fessional staff. we would recommend one additional ground rule for your
consideration in selecting a new project for each of the two areas of
work. we have just completed two rather "massive" studies--studies that
have preoccupied the entire staff for the past year or more. This has
caused us to slight the promotional and implementation phases of our
responsibilities. So to provide a better work distribution in the
future. we w0u1d prefer 525 to be conducting two long-range and large-
scale studies at the same tine. If a large scale project is chosen
in one area we would hope that a short range, smaller project would be
chosen in the other area. Of course. a smaller scale project could be
selected for each area.
In the hope that the above suggestion might find favor with
members of the Commission. the lists of projects which follow have
been subdivided into "large-scale" and "smaller-scale" categories. A
brief description and urgurrntation is provided for each possible project.
he Ga calmn
and vague. The law enforcement roles of the State police and National
Guard units take on increased significance with growing unrest and
violence. The relation of State offices of Attorney General to local
law enforcement and particularly local prosecutors, uith their dual
role of enforcing State and local laws. needs clarification. These
issues are sharpened by current proposals fo. national grant programs
for law enforcement. The need to clarify the respective roles of
State support for law enforcement is a top priority question in con-
temporary intertovernnentsl relations.
The estimated research time for this study topic would be
approximately 6 to 9 months.
Arguments for its adoption include:
a. Existing reports and studies on this subject have not
explored it full.
b. Effective law enforcement-~regardlsss of Federal action--
will inevitably depend on meaningful action in the State-
local area.
The major argument against adoption would be that the subject
was covered, albeit generally, in the recent Report of the President's
Commission on Law Enforcement and Administration of Justice.
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B. Smaller-Scale
l. Inter overnme a1 Re sibilities for Man r Train n ,
DevelopmentI end Utilisation
In a time of steady economic expansion. the Nation continues
to confront the problem of pooviding jobs for all who want them. At
the same time, many jobs 30 unfilled for a lack of qualified workers.
The major causes of this paradoxical mismatch of jobs and people are
technological advanceso-automation--ehifting labor demands from semi-
and unskilled workers to skilled and professional workers; and the
long-standing inadequacies of our system in educating and training the
underprivileged. most specifically. those in urban ghettos and rural
pockets of poverty. The lack of employment opportunities for the Negro
poor is often diagnosed as the main source of frustration and hopeless-
ness that pervades urban ghettos.
In recent years, studies by various ational groups have focused
on different facets of the overall problem of reducing unemployment,
including the National Cemmission on Technology, Automation and Economic
Progress; the President's Committee on Manpower; and the Presidential
Task Force on Rural Poverty. Numerous new national programs have been
enacted bearing on the pioblem, including the Manpower Development and
Training Act of 1962, the Economic Opportunity Act, and the Elementary
and Secondary Education Act. These and previously existing programs
involve intergovernmental approaches. as in the State-Federal employ-
ment service. vocational education, and community action programs.
The Commission has looked at parts of the problem of under-
snd unemployment in previous btudies. In its 1965 report on Hetgogglitag
ggial end Economic giggagigies, it recommended steps for better
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administration of employment services across State lines in intersta:e
metropolitan areas. In its 1966 report on Inggtgovernmcntal Rolatigns
in [kg Povertx grog. the Comission proposed coordinated 'State-
Pederal planning of the anti-poverty impact of job creation 1nd job
training programs. In the current study of urbanization and nev
cmity development, measures are popcsed for overcoming locational
obstacles to matching jobs and manpower.
A new Commission study would identify lac full intergovernmental
dimensions of the problem of matching jobs and 1eople, including its
relationship to both the problem of pover:y and technological automa-
tion: describe present intergovernmental assignment of responsibilities
for education. training, retraining, and t~ployment services; evaluate
the barriers to their most effective functiorin'; and suggest inter-
governmental actions for improvement.
The estimath research time for this study would be b to 6
months.
Arguments for its adoption include:
a. The topic deals with a major domestic problem and one
that can only be attacked on an intergovernmental
front.
b. Studies and reports to date have largely handled it
in a vertical. in-depth, fashion with no across-
the-board review of intergovernmentrl relations in
this field.
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2. Stage-Local Respggsibilities for Laggg-Hanegement
Relations in Public Emplgzggnt
Government. which has mandated collective bargaining work for
the private sector, now is having trouble in its own house. Picket
lines are being set up and manned by teachers, public transit workers.
and even by firemen. A technique increasingly resorted to by public
employees to circumvent no-strike laws is attendance at "professional
meetings."
The significant question seems to be not only whether there
ought to be collective bargaining for public employees, but how it
might be provided to the satisfaction of the public and public servants.
Some experts feel that the traditional methods used in the private
employment field haVe been so well established, that a different
approach for public employment is out of the question. Others feel
that new and better methods must be found.
The Commission study would review the background of the new
militancy among public imployees' organizations, the special problems
of employee-management relations in the public sector, State laws on
the organizing of public employees and prohibitions against strikes.
The study would attempt to evaluate the continuing debate on public
employee strikes as well as current collective negotiation efforts
in State and local government. Finally. the Commission study would
explore the advantages and disadvantages of various possible courses
of action to deal with the problem of public employee collective
bargaining.
The estimated research time for this study would be roughly
6 to 6 months.
Arguments for including it on the Commission's study agenda
include:
a. This is one of the most timely intergovernmental
topics before us.
b. The Commission has neglected the field of public personnel
administration having issued only one report in this area--
Transferabglity of Public Employee Retirsggnt Credit!
£2293 Units of Government, in 1962.
3. Relationships Between School Boards and nit! 0:
General L228; Government
The relationship and division of authority and responsibility
between units of general local government-ocities. counties, town,
or townships--and the public school body has always been a difficult
problem of local government in this country. The rising revenue
requirements for public education have made these questions more acute
in recent years, as increased expenditures have required sharply
increased taxes. Schools now account for almost half of total local
government expenditures.
The basic question of intergovernmental relations in this area
is the degree to which the education function should be governed and
financed in a manner different from other functions of local government--
hospitals, welfare. libraries, etc. Specifically, should a general
governing body have authority to change the budget adopted by an
elected shcool board, or should a school board have authority to set
a tax rate by its own decision without reference to a general governing
body such as a city council or a county board of supervisors. Associated
questions include those of where respon.ibi1 ty should rest for build-
ing construction, purchasing. and school site location. Nev signifi-
cance has been given the issue. by the rising national stress on
education as a basic means of overcoming :cverty. and the growth of
Federal programs that involve coordinated use of a wide range of
local resources, such as the anti-poverty and model cities programs.
A Commission study would identify the key questions of inter-
governmental relations, analyze the advantages and disadvantages of
various types of existing school-local government relationships over
the country; and set forth pro and con arguments for alternative
policy positions which the Commission might wish to consider.
The estimated research time for this study would be roughly
6 months.
Arguments for its adoption include:
a. This is one of the longest-.immering intergovern-
mental issues at the local level. involving such
matters as basic relationships between general pur-
pose and the major special-lurpose local government;
the merits of singling out one function over others
for special organizational :nd financial treatment;
and the basic conflict between two professions
(general government and education) as to priorities
to he followed in fashioning local government.
b. The Commission has given limited attention
to the education function except for its financing.
5. R0 e of the State Univer ter rnme tal Affairs
The exigencies of our times have thrust State universities
into the mainstream of intergovernmental relations. Federal, State and
local governments already have made major demands on the institutions
of higher education and this trend has not run its course. Traditionally.
the university has assumed the "trinity of teaching, research. and
service." as President Edgar F. Shannon. Jr., of the University of
Virginia, has phrased it. But today, the challenges of the latter
two functions have over-spilled their traditional bounds.
Universities are being and will continue to be called upon to
help prepare personnel to staff the public and private sectors; conduct
research that is relevant to social and technical problem-solving;
conduct adult education prograns for elzgtod and appointed public
officials; study patterns of institutional reform for local. natropol-
itan. State. and Federal governments; and encourage basic research in
functional areas of State. regional, and national development-~aa in
transportation, manpower, environmental science, capital structure.
public health, and human resources. Moreover. the unique intellectual
and institutional qualities of the university explain why governments
turn to then for these services.
Yet in meeting these intergovernmental obligations, the university
may lose sight of its primary purpose of achieving excellence in teaching
end scholarship. without a proper balancing of service, scholarships,
and teaching. the university's function, administration. and societal
position becomes fragmented. confused. and weakened.
The estimated research tine for this ttudy would be 4 to 6
months.
a. Expansion of the role and responsibility of State
universities in Vaderal-State-IOcal relations
has been largely an unheraldud. unrecognized,
and partly unconscious development; hence, it
requires focused attention and study.
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As a new partner in the intergovernmental fraternity.
the State univeraity merits examination in terms of
public demands made of it; their costa; the new
relationships created by these dtnanda; and the
paramount question of whether this new university
role will undermine academic freadim and involve
it too heavily in political and day-to-day affairs.
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Taxation and Finance
(One project to be selected)
A. Large-Scale
1. State Aid to Local Governments
This study would examine the various fiscal arrangements now
employed by States in extending financial aid to local governments.
More specifically. it would examine the assignment of governmental
responsibilities for such major programs as welfare. health. and
highways. Considerable attention would he focused on specific
techniques such as grants and shared taxes for bringing local needs
and fiscal resources into better alignment, particularly among juris-
dictions vithin metropolitan areas. The study would also examine the
cases for State general support programs and test out for States
the relative equalization merits of sharing State revenue with local
governments on the basis of population. non-educational expenditure,
welfare case loads. and local tax resources.
The estimated research time for this study would be 6 to 9 months.
The following arguments could be advanced for placing this sub-
ject on the Advisory Commission's study agenda.
a. This study of State aid to local governments stands
out as a "necessary corollary" to the Commission's
recent comprehensive study of the ?ederal aid system.
b. A study of this subject would be timely from a fiscal
policy standpoint because there is growing agreement
on the proposition that States will have to extend
aid to local governments on a more generous and
"equalizing" basis. The rise of the "lopsided" subur-
ban jurisdictions (rich, poor. middle income, and
industrial enclaves) and the growing fiscal tensions
-3-
experienced by many of our central cities justify
a searching re-examination of the role which States
should play in coming to the financial aid of local
governments. particularly in metropolitan areas.
c. Because this subject has not been researched on a
comprehensive basis in recent years, it would also
make a first-rate contribution to the literature
in this field, particularly timely because the
Commission will have detailed State and local fiscal
data just generated by the 1967 Census of Governments.
2. Effect; of Property Taxation 0292 Land 0:5
This study would examine the effects of the present system of
property taxation on land use. As such. it would include: (a) an
investigation of the growing belief that the existing property tax
structure discourages rehabilitation of property in the central city
and encourages premature and haphazard development of land along the
suburban fringe (b) a tabular presentation--to the extent possible--
designed to show the heterogeneity of property tax receipts among
local (and State) governmental units and the impact of
such levies on land use. (c) an appraisal of alternative property
tax systems, or possible reforms. including--but not necessarily
limited to--Creat Britain and Australia, (d) an assessment of the
locational effects of varying property tax levels and structures by
industry.
The estimated research time necessary to complete this study
would be approximately 6 to 9 months. The following arguments could
be advanced for placing this subject on the Advisory Commission's
study agenda:
a. In view of the growing Federal and State concern
for orderly development of metropolitan areas in
general and rehabilitation of central cities in
particular, the study has obvious intergovernmental
implications.
b. By focusing on the economic effect of the property
tax, this study would "round out" the Commission's
treatment of the property tax. It would balance
off our earlier concern for strengthening adminis-
trative procedures and would be particularly timely
in view of the newly developed effective property
tax rate data to be published in the 1967 Census of
Governments.
c. The study could be broadened to include not only
the effect of local property taxas on land use. but
also the effects of Federal and State policies.
3. User Taxes and Hiscellaneggg Fees
This study would investigate a revenue raising device that,
according to some, has a presently untapped potential for further
growth. As such, the study would include the following specific
issues: (I) a descriptive discussion of the various user charges
presently imposed--including college tuition fees, (2) a tabular
presentation of the varying degrees to which State (and local) gov-
ernments rely upon these charges, (3) the estimated revenue potential
of this tax source. (4) the change in receipts from Federal (and State
government) grants-in-aid that would result if user charges were
incorporated in programs currently using measures of fiscal capacity
as a basis for allocation, (5) the changes that would result in the pre-
vious ACIR "tax utilization indexthat would emerge if such revenues
were included, and (6) exploration of additional State and local
activities where the "user charge" concept may be applicable and an
estimate of this revenue potential.
-5-
The estimated research time for this study unuld be
approxi-
mately 6 to 9 months.
The following arguments could be advanced for placing this
subject on the Advisory Commission's agenda:
a. This study would he topical since an increased re-
Co
liance on these devices would (a) permit a reduction
or slower acceleration of the more traditional tales,
and (b) facilitate tax reform, particularly the
property tax on business. and thereby promote greater
equity in the fiscal structureo-areas of considerable
interest to citizens as well as government officials.
Since these fiscal instruments are applicable to
local (as well as State and Federal government),
this study would complement previous Commission
Reports dealing with financial resources of metro-
politan areas. it would therefore add a dimension
to the question of what the local metropolitan
governments are doing to meet their problems from
their own resources which some have vieved as a
"precondition," and which most would agree, is a
necessary adjunct to increased State and Federal
assistance.
This subject would be a valuable addition to the
literature which has largely ignored this topic
(presumably for the reason given below).
Counterbalencing these merits, at least in part.
is the fact barring a major overhaul of the property
tax that user charges and miscellaneous fees are--
and are destined to be--a minor component of general
revenues for any governmental sector. Such a study.
therefore, might lack potence in the degree of change
it would help influence.
6. Realignment of Financial and Adgigigtratige Responsibilities
[or Public Education
This study would examine the present system of divided re-
sponsibilities for public education.
it would investigate (a) the
intergovernmental arrangements. financial and administrative, to
determine strengths and weaknesses of the present and alternative
.6-
approaches, (b) the inter- and intrs-state disparities resulting
from the existing system, and (c) the fiscal capacity of alternative
levels of local government to support public education.
The research time to complete this study would be approxi-
mately 6 to 9 months. The following arguments can be advanced for
placing this subject on the Advisory Commission's study agenda.
a. Such a study would be timely in view of the hard
pressed fiscal situation for many local governments
and some States. Since there are large-scale revenue
implications-oinvolving freed resources for certain
governmental levels and new obligations for others--
the study would complement the recent Fiscal Federalism
Report.
b. A study of realigning functional responsibilities
would undoubtedly throw additional light on the
various factors that appear to be related to the
centralization of financial responsibility, that has
taken place in this country and elsewhere over the
course of time. Moreover. since public education
is a field with considerable local identification.
this study would also indicate points of conflict
with increased centralization. As such. this study
would add additional evidence to what is presently a
rather sketchy portrait of the "centralisation
tendency" in the United States.
3. Smaller-Scale
l. ntral Cit Ta at of Commuter
This study would examine earnings taxes designed to get com-
muters to share part of the burden of providing city services. It
would investigate: (1) whether commuters take more from the city in
services than they contribute directly and indirectly to revenues.
(2) whether such taxes discourage individuals and businesses from
locating in the city, and (3) the equity issues involved in connoter
oriented taxes.
The estimated research time would be approximately 4 to 6
months. The following arguments can be advanced for placing this
subject on the Advisory Commdssions agenda.
s. Such a study would be timely in view of the hard-
pressed fiscal situation of many central cities.
b. The study has obvious intergovernmental implica-
tions, particularly in the context of the Commission's
previous studies of income tax coordination and
fiscal balance.
c. It would give the Commission the opportunity to
comment on efforts to reconcile tax loyalties to
the place of residence and the place of work.
d. The major counter-argument for undertaking this study
is that commuter taxation is thus far limited prin-
cipally to unique situations in a few, albeit populous.
places in Kentucky, New York. Ohio. Pennsylvania.
Hichigan, and Missouri.
2. Intergovernmental Regpggsibilities for Medicaid
This study would examine present State experience with financ-
ing hospital and physician care of the "near needy." Two critical
issues would be analyzed: (a) the substantive question of defining
"near needy" and (b) the intergovernmental issue--uhether the financ-
ing of this joint Federal-State program should be "nationalized"
completely.
The estimated time for conducting research is 3 to 6 months.
The arguments in favor of placing this project on the Advisory
Comissinn's study agenda are as follows:
a. Medicaid is an extremely timely issue. Few programs
are causing as much financial stir as this program.
b. The nationalization issue would give this subject
sufficient "intergovernmental character" to justify
placing it on the Consisaion's agenda. It must be
admitted. however, that the substantive issue-~that
of defining the "near needy"--is the more important
matter for research and policy decision.
c. This study fairly bristles with "Private Federalism"
issues--reletionships between government and the
medical profession. hospitals, drug industry. and
medical insurance underwriters.
d. An ACIR study of the subject has been urged by the
National Conference of State Legislative Leaders
(correspondence attached).
3. Rs-a nt of Fine i e d nistra ive
Resgggaibilities fgr Public welfare
This study would examine the present system of divided respons-
ibilities for public welfare. It would investigate (a) the intergovern-
mental arrangements, financial and administrative, to determine strengths
and weaknesses of the present and alternative approaches; (b) the inter-
and intra-state disparities resulting from the existing system; and
(c) the economic consequences of these disparities--in terms of central
city, suburban financial strains. the locational pull of migrants and
business. etc.
Despite the breadth of the subject the estimated research time
would be approximately 3 to 6 months because of the considerable work
already done on this subject within the Commission and by several other
groups over the past several years.
The following arguments can be advanced for placing this subject
on the Advisory Commission's study agenda.
a. Such a study would be timely in view of the hard
pressed fiscal situation for many local governments
and some States. Since there are large-scale revenue
implications--involving freed resources for certain
governmental levels and new obligations for others--
the study would complement the recent Fiscal Federalism
Report a
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