Figure 10. FINANCING OF STATE AND LOCAL HEALTH AND HOSPITAL EXPENDITURE, BY LEVEL OF GOVERNMENT, BY STATE, 1966 Federal Local State Conn. Ala. *Mideast Percent funds in 1966 exceeded 90 percent in Delaware and North Dakota while in Nebraska, Georgia and Nevada the State proportion was one-third or less, Highways.--With the initiation of a massive interstate highway system in 1956, Federal legislation established the National Government as a prime source of highway financing. By fiscal 1966, Federal aid provided one-third of the $12.8 billion spent by States and localities for road and street construction and maintenance (Fig. 11; Table A-14). Prior to establishment of the 90-10 interstate highway program, the 50-50 matching program for primary, secondary and urban-extension highways (still in operation) furnished only 11 to 13 percent of State and local highway expenditure. About 70 percent of the non-Federal highway financing is paid by State governments, a pattern which is fairly uniform among the States, and one which has changed little over the years (Table A-15). A significant portion of the State highway expenditure is in the form of shared highway-user revenue with local governments. These "dedicated" intergovernmental transfers comprise 35 to 40 percent of the funds available to local governments for streets and highways. There is, of course, interstate variation in the level of highway spending. With a national average of $65 per capita in 1966, the range was from less than $50 in New Jersey, Illinois and the Carolinas, to more than $140 in sparsely-settled Montana, Nevada and Wyoming. The proportion financed from Federal funds also varied, the higher proportions going generally to those States with the highest per capita costs. EXTENSIVE SEPARATION OF TAX SOURCES Although the "marble cake" analogy is useful in depicting the expenditure and functional side of our intergovernmental system, the revenue side of fiscal federalism resembles more closely the "layer cake," dominated by Federal income, State consumer and local property taxes (Table 13). Most striking is the polarity in income and property taxes--the former in the National Government domain and virtually the entire yield of the latter going to local governments (Fig. 12). In each instance, more than 90 percent of the total tax take from these two categories has traditionally gone either to the National Government or to the localities. The "separation" thesis is not as clear-cut in the case of consumer taxes. Actually, this group of taxes has been divided between the Federal Government and the States, the localities obtaining only a minor portion. Forty years ago, almost 70 percent of the consumer taxes (about half of them customs duties) went to the Federal Government and 29 percent to the States. Beginning in 1932, as the States moved rapidly into the general sales tax field, an area which the Federal Government has not entered, the distribution of consumer tax revenue shifted from the Federal to the State governments.12/ Also, the States have been increasing their general sales tax rates as well as their rates on selected excises such as those on tobacco products, alcoholic beverages and motor fuel. Further shifts can be expected as States continue to enact new and increased consumer taxes. |