Trends and prospects in state and local finance

This article reviews trends in the national total of the expenditures of state and local governments for the period of 1929–1982. The principle conclusions are that growth of federal grants has played a significant role in the growth of these expenditures, and that even after allowing for the effects of relative price, income, and federal grants, a relatively large unexplained positive residual remains. Part of this upward drift in expenditures, especially for the period of 1950–1970, can be accounted for by the growth in school-age population. The article ends with a brief discussion of future prospects for subnational governments.