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■ NEWS RELEASE • • • • • • • • • • • • • • • • • • • ■ ■ • • • • • • • • ■ • • • • • • • • • • • • • • The Federal Reserve Bank of St. Louis St. Louis Little Rock Louisville Memphis AS fflE FEDERAL GOVERNMENT TIGHTENS ITS BELT, CAN STATE GOVERNMENTS FIND SOME SLACK? FOR MORE INFORMATION, CONTACT: Charles B. Henderson, (314) 444-8311 95-120 FOR RELEASE DECEMBER 21, 1995 ST. LOUIS - As Congress appears poised to hand off responsibility for many federal welfare programs to state and local governments, the question arises: Are state and local governments ready? Kevin L. Kliesen, an economist at the Federal Reserve Bank of St. Louis, considers that readiness in "A Fiscal Devolution: Can State and Local Governments Measure Up?" the lead·article in the October issue of The Regional Economist, the St. Louis Fed's q~erly review of business and economic issues in the Eighth F¢eral Reserve District. "The recent battle between Congress and the Clinton administration over the budget indicates there are still major disagreements about priorities," says Kliesen, 11but the reordering of federal budgetary expenditures will be an important element that states will have to factor into their fiscal planning." https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis (more) STATE BUDGETS/2 Kliesen notes that although both states and municipalities have done well recently in curbing their spending rates, since 1987 states have relied less on their own general fund revenues and more on revenues from the federal government - a potential long-term problem. A notable example is state spending on Medicaid, which, he emphasizes, •has mushroomed at the expense of other spending," such as education. Now, with a tentative agreement by the Clinton administration and Congress to balance the federal budget within seven years, Kliesen says there is even greater urgency for state governments to plan for less help from Washington. Other articles in this issue of The Regional Economist are: • "How Statistics Can Mislead," by Adam M. Zaretsky, who uses the "family cap" in New Jersey's welfare program to illustrate how omitting or glossing over crucial information can blur statistical findings, which can lead to misinterpretation; and • "Will the Mutual Fund Boom Be a Bust for Banks?" by Michelle Clark Neely, who examines the growing popularity of mutual funds sales through District banks. The Federal Reserve Bank of St. Louis has branches in Little Rock, Louisville and Memphis. It serves the Eighth Federal Reserve District, which includes all of Arkansas, eastern Missouri, southern Indiana, southern lliinois, western Kentucky, western Tennessee and northern Mississippi. In addition to serving as a bank for depository https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis (more) STATE BUDGETS/3 institutions and the U.S. government, each Reserve Bank supervises state-chartered member banks and bank holding companies, monitors economic conditions in the District and participates in formulating monetary policy. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis *** Where State Governments' Revenues Come From (1993) $804.5 billion t Charges & misc. general revenue (13.8%) Insurance trust revenue (18.0%) Liquor & utility taxes (0.46%) Intergovernmental Revenue (includes money from the federal government to the states) (23.4%) Taxes (43.9%) In the last several years, states have relied less on general fund revenues and more on revenues from the federal government. For example, intergovernmental revenue in 1985 made up about 20 percent of the states' revenues. In 1993 the number was 23. 4 percent, and now it's approaching 25 percent. NOTE: Totals may not add because of rounding. SOURCE: U.S. Department of Commerce, Bureau of the Census. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis
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