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How Federal Money Flows From Washington to States to Cities

February 3, 1991

WASHINGTON (AP) _ To help American cities combat drugs in their streets, Congress established a program in 1986 to funnel hundreds of millions of federal dollars through states to city police forces.

Five years later, Birmingham, Ala., still hasn’t seen one penny.

That’s because once the money got to Montgomery, state officials decided that state and county police agencies needed it more than Alabama’s largest city.

″It’s such a bureaucratic boondoggle,″ laments Scotty Colson, administrative assistant to Birmingham Mayor Richard Arrington.

The drug-enforcement program is emblematic of the way federal money trickles from Washington to state capitals and from those capitals to city halls.

It’s also indicative of how, sometimes, the money doesn’t trickle down.

Many other cities report they’ve yet to receive any federal drug- enforcement help, or have waited three years or more before seeing even a small portion of the money.

Washington sends the money to the states, which then decide how to divide it among law enforcement agencies. States have three years to spend the money and, in some cases, they’ve waited until the end of that time to hand it out.

According to one informal survey by the Conference of Mayors, of the program money distributed in the first nine months of 1988, only 6 percent got to city governments.

Half hadn’t been awarded yet, 21 percent went to state agencies, states kept another 5 percent for administrative costs and the rest went to counties, to agencies comprised of several local governments, to courts and other groups.

Last year’s allocation - $386 million - is a small drop in the federal budget bucket and would hardly solve all the local problems.

But for cities - the end of the federal funding line - the issue is not how much, but who controls the money.

″We don’t claim there are not indirect benefits from state (drug) programs,″ said Mike Brown, spokesman for the Conference of Mayors. ″But the mayors or other city officials simply don’t get to direct these funds to the problems they see.″

Federal officials defend the system, saying that states know the local needs better than Washington.

To be sure, federal money is just a small part of those state and local budgets. But cities have seen their share of federal assistance drop dramatically in the past decade and the money from the states has risen imperceptibly.

At the same time, cities and states have faced increased demands for spending - both from their citizens and from increasing federal standards for everything from the quality of their waste water to the breadth of their welfare programs.

As a result, cities and states have raised taxes repeatedly. Still, it hasn’t been enough. Many states and cities face massive deficits despite a decade of tax increases - including nearly $10 billion worth in 1990, a startlingly large amount for an election year.

″States face trouble throughout the 1990s,″ said Steven Gold, director of the Center for the Study of the States in Albany, N.Y.

He’s author of a book describing the difficult decade ahead for state governments. He points to an 18 percent growth last year in spending for Medicaid, the health program for the poor, and 17 percent growth in spending on prison construction, demanded by a crime-conscious public.

″It puts the states in a terrible bind when they have that kind of upward pressure on spending, and then you add a recession on top of that,″ Gold said.

To cite but a few examples: California is looking at a $10 billion deficit in the next fiscal year. In New York, Gov. Mario Cuomo is proposing sharp spending cutbacks and layoffs as answer to a $6 billion deficit. Even tightfisted North Carolina expects a $1 billion shortfall.

City leaders argue the problems are even tougher at their level. Few cities have an income tax to fall back on. They must raise money largely through property taxes - which fall unevenly on the middle class and poor.

To make their case, the Conference of Mayors recently examined how the cutbacks have been dealt with in 50 cities - not a scientific sample but a fair representation, from Los Angeles among the biggest to Williamsport, Pa., among the small.

Between 1980 and 1990, in those 50 cities:

-Federal money as a percentage of city budgets fell dramatically, from 18 percent to 6 percent.

-State contributions to city budgets rose from 11 percent to 12 percent.

-City taxes filled in the gap, rising from 65 percent to 75 percent of city spending.

-Three-quarters of those cities raised taxes, and 42 percent cut services as well. Half raised taxes within the past year.

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