A More Equitable Approach to Cutting Intergovernmental Aid

Bo Zhao and David Coyne

Public Finance Review, 2015, vol. 43, issue 1, 32-52

Abstract: In response to the recent fiscal crisis, state governments in the United States have deeply cut aid, often by the same percentage across communities. This across-the-board approach ignores local fiscal disparities and places a larger burden on communities in worse underlying fiscal health. This article introduces a more equitable approach to distributing aid cuts based on both underlying local fiscal health and the existing aid distribution. Policy simulations using Massachusetts data show that this approach could be politically feasible, as a majority of communities and state population would receive smaller aid cuts under this gap-based approach than under across-the-board cuts.

Keywords: intergovernmental aid; aid cuts; fiscal disparities; fiscal equalization; need–capacity gap (search for similar items in EconPapers)
Date: 2015
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Persistent link: https://EconPapers.repec.org/RePEc:sae:pubfin:v:43:y:2015:i:1:p:32-52

DOI: 10.1177/1091142113499963

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