State and Local Government in a Tax-Cutting Era: The Case of Massachusetts

Published date01 April 1985
Date01 April 1985
DOI10.1111/j.1467-9256.1985.tb00103.x
AuthorPhilip John Davies
Subject MatterArticle
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PHILIP
JOtCJ
DAVIES
The fiscal distress of certain municipal governments, especially
in
the
northeastern United States, has been the subject of discussion
in
the past,
but
in
recent years this concern has been widened
to
include the
plight
of
some
state governments.
A
nationwide recession reduced revenues
and
increased
service demand;
an
economy-minded electorate has shown its willingness
to
use
the ballot to
limit
taxation; a national administration
has
achieved real
reductions
in
expenditure on domestic programmes, including federal
aid
to
state and local governments.
This essay will consider these phenomena as they have affected the New
England state
of
Massachusetts. While
not
immune to the effects of recession,
Massachusetts has advantages over most
of
its
northern 'Frostbelt' neighbours.
The largest concentration of higher education institutions
in
the world
attracts knowledge-hungry industries
and
has helped make
it
a
major
centre
in
the 'hi-tech' boom. The state has a
high
concentration of defence-related
industries which have benefited
from
the spending priorities
of
the Reagan
administration. These growth sectors do not always help individuals made idle
by
the decline of traditional heavy industries,
but
contribute to the state's
overall economic health. Unemployment
is
among the lowest
in
the United
States. This relative economic health has not saved the state from the other
two pressures
-
federal cuts
and
taxpayer revolts.
The
FederaZ
Environment
In
each
of
its
first three budgets the Reagan administration demanded cuts
in
intergovernmental aid.
In
February
1981
the proposed 'Program for Economic
Recovery' (covering Federal Fiscal Year 1982) combined tax cuts, spending
cuts
and
the consolidation
of
categorical
grants
into block
grants
in
a
general
effort to reduce federal involvement
in
domestic policy-making
and
programme
delivery. The
Omnibus
Budget Reconciliation Act
of
July
1981
gave the
administration almost everything requested, cutting the budget
by
$35.2
billion,
mainly from domestic programmes.
proposals (for
FFY
1983)
contained President Reagan's 'New Federal ism'
plans,
which were intended to change the nature
of
intergovernmental relations, with
the
ultimate
aim
of
reducing federal
aid
to negligible proportions. State
and
A
year later the administration's budget

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