Figure 7.

STATE AND LOCAL GENERAL EXPENDITURE FOR SELECTED FUNCTIONS, 1948 TO 1966

Year to year changes in per capita educational outlays can be substantial--the national average jumped from $147 in 1965 to $170 in 1966. The volatility in per capita educational expenditures often results in one State leap-frogging past several others when it supports education more generously.

Per capita expenditure comparisons understate the effort on behalf of public education in these States with relatively large numbers of students in private and parochial schools. A comparison on the basis of per pupil public school expenditure strips out this private school factor. Even by this measure, the Southeastern States are lowest, averaging $390 per pupil in average daily attendance in 1966, compared with a national average of $532. The States ranged from $317 in Mississippi to $876 in New York.

Significantly, the trend is toward increasing State responsibility for financing elementary and secondard education, a development that helps explain the increased number of States that impose both broad-based personal income and sales taxes. In 1942, 35 percent of all State and local expenditure for education other than for colleges and universities was financed from State funds. In 1957, this proportion had moved to 38 percent, and by 1966 to more than 40 per cent. As a group, the Southeastern State governments financed the largest proportion in 1966--59 percent--and the New England States the smallest--22 percent.

The division of responsibility between States and localities for financing primary and secondard education is developing more similarity across the country. In New England--the region that has traditionally emphasized local responsibility for education--the trend is toward greater State financing involve

ment.

New Jersey and New York present an interesting neighbor-State contrast in school financing trends. New Jersey paid only 16 percent of the local school bill in 1966, down from 23 percent in 1942. New Jersey's revenue system was characterized by the absence of broad-based taxes until a State sales tax came on the scene in 1966. New York financed half of the local school bill in 1966, up from 30 percent in 1942 and 38 percent in 1957--a reflection of a responsive State revenue system further diversified in 1965 by the enactment of a State sales tax.

Public welfare.--Unlike education, the State and local public welfare function has been heavily supported from Federal funds since the Depression of the 1930's. In 1966, fully half of all State and local expenditure for public welfare was from Federal aid for categorical public assistance programs (Table A-10). In some of the Southern States, the National Government financed more than 70 percent (Fig. 9).

Federal financing of State and local public welfare programs has grown since 1942. Although the national old age and survivors insurance system was expected to reduce drastically the need for State and local welfare programs, this has not occurred. The number of old age assistance recipients has indeed declined, but the number of beneficiaries of the program for aid to families with dependent children has been rising steadily, as have the benefit payments. This, together with increases in Federal matching has resulted in an increase in the Federal share from 30 percent of the cost in 1942 to 45 percent in 1957 and 53 percent in 1966.

The Federally-aided public assistance programs, initiated in the mid 1930's, were the first major effort at Federal-State cooperation in a functional

area that up to that time had been left almost entirely to local governments. The substantial Federal financial involvement and the insistence that the States set up programs to handle the Federal funds led to substantial financial involvement on the part of the State governments as well. Thus, over 75 percent of the non-Federal funds going into public welfare came from State government sources in 1966. In 1942, the State portion had been 61 percent, and in 1957 it was about 72 percent. The preponderance of State financing is almost universal; only a handful of States finance less than half of the non-Federal costs (Fig. 9; table A-10). All of the non-Federal share is financed at the State level in Alaska, Hawaii and Washington (Table A-11).

A recent study of public welfare points to the group of categorical assistance programs as illustrative of "cooperative federalism:"

Of all the important programs involving money payments

to individuals, public assistance is most dependent on inter-
action between governmental levels. If the goal of public
relief in America were to show how federalism operates, the
goal would be achieved.11/

Yet, as the author points out, the appalling range of benefit payments under the various programs provides a revealing commentary on its actual operation.

Per capita welfare expenditures varied in fiscal 1966 from a low of $14 in Virginia to a high of $70 in Oklahoma, with a national average of $35. This substantial variation cannot be justified on the basis of measurable differences in need alone. Benefit payments for AFDC ranged in July 1966 from $7.90 in Mississippi to $50.83 in New York; and for OAA from $39.68 in Mississippi to $120.58 in New Hampshire; differences which far exceed the variations in the cost of living and relative need. More important are sharp differences in local attitudes toward the merit of various "relief" programs. There is no nationally established subsistence level below which assistance payments may not fall. The lower limit (a very low one) is established by the amount of monthly payment State and local government is willing and able to make to take advantage of the most favorable matching provisions of the Federal public assistance programs.

Health and hospitals. --To a significant extent, responsibility for providing different aspects of the "health and hospitals" function is divided among the three governmental levels. The construction and operation of Public Health Service hospitals and quarantine stations and hospitals and clinics of the Veterans Administration and the Bureau of Indian Affairs, and also the financing of a great deal of medical research are in the National Government's domain. Mental institutions, tuberculosis hospitals and specialized rehabilitation centers are operated at the State level. Many local governments construct and operate general hospitals and also underwrite the provision of general public health services with the States. State and local functional responsibilities are federally aided (Fig. 10; Table A-12).

The $6 billion spent on health and hospital services and facilities by State and local governments was shared almost equally between the two levels in fiscal 1966 as it has been with little change over past years. Yet, the interstate variation in the level of expenditure for health and hospital services, as indicated by the per capita data in Table A-12, is large, ranging from $11 in South Dakota to $80 in New York.

There are also great differences from State to State in the way the financing responsibility is divided between State and local governments (Table A-13). For example, the percent of the non-Federal financing from State