Urban fiscal distress has resulted primarily from substantial increases in local government spending, local revenue's growth not keeping pace with costs or spending in many cities, and the nature of the intergovernmental system. Spending has risen as both the number of local public employees and their levels of compensation have increased. At the same time, revenue growth is limited by State laws, tax competition with other local governments, growth in the tax base, and the willingness of State and Federal governments to provide grants in aid. These factors are compounded by the mismatch that occurs when urban economies decentralize without corresponding adjustments of jurisdictional boundaries. Local governments face a limited number of alternatives in this complex situation. Most of the causes underlying their fiscal distress are beyond their control without State or Federal help. For many local governments, even the most obvious solutions of raising taxes or cutting services may be restricted by State tax - rate ceilings or service - level mandates. Perhaps the most compelling conclusion to emerge from the analysis is that the urban fiscal problem is fundamentally an intergovernmental problem, and the most appropriate policies for dealing with it will be those which coordinate the roles of the Federal, State, and local governments. Tabular data are provided.
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