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1 The Financial Challenge to the States: An Analysis of State Fiscal Developments, 1946-1957. Summary [i] (1958)

handle is hein.tera/fnngesde0001 and id is 1 raw text is: The Financial Challenge to the States An Analysis of State Fiscal Developments, 1946-1957 This is a summary of a 48-page study by the above title, prepared by Tax Foundation, Inc. Single copies of the study are available without charge from the Foundation's office at 30 Rockefeller Plaza, New York 20, N. Y. The Tax Foundation's study, The Financial Chal- lenge to the States, reviews the role of state govern- ments in our economy since World War II. The scope of the study covers postwar state finances, the expendi- ture, revenue and debt trends. These are related to Federal and local considerations. Major state tax changes are examined for the period 1946 through 1957. An analysis of projections of the level of gov- ernment expenditures in 1965 is also included. Finally, major problems of the states are discussed. The Principal Pressures On State Spending At the close of 1945 the states could look forward with confidence to the postwar years. Budgets were low, revenue was flowing at an unprecedented rate, reserves and surpluses of more than $3 billion had been accumulated, and debt had been reduced by about one-third from the prewar level. In contrast, today the financial situation of the states is precarious at best. Surpluses and reserves have disappeared. Total state spending in the 1958 fiscal year may reach $26 billion, more than four times the 1946 level. While the states have kept their revenues close to the rising expenditure level through new taxes and tax rate increases, there is no relief in sight. Unprece- dented prosperity and steadily rising revenues have been insufficient to meet expenditure demands. Con- sequently, long-term debt ib nearly $13 billion, be- tween five and six times the 1946 level. The study indicates these extraordinary developments in state finances have received much less pub!ic attention than they merited during the postwar period: first, because Federal finances continue to dominate the govern- ment fiscal picture and are the focus of public atten- tion; second, because the productivity of state taxes, under the stimulus of an expanding economy, has cushioned the impact; finally, the states do not ap- pear to have given as much critical attention in recent years to matters of efficiency and economy as their fiscal situations warranted. Pressures on the states that have resulted in an un- healthy fiscal situation are as follows: (1) Population growth and concentration occurred in urban and suburban areas, with the total population increasing about 30 million (from 140 to about 170 million) between 1946 and 1957. Over half of this growth was in the po- tential school (5 to 17) and retirement (65 and over) age groups. Additional schools and teachers have been required. The cost of pub- lic assistance and other social welfare pro- grams have also increased. Motor vehicles, growing in number from 34 million in 1946 to 64 million in 1956, have increased the de- mand for expanded road programs. (2) Rising price levels since World War II account for a substantial part of the upward trend in