44 · ALTERNATIVES FOR FINANCING THE PUBLIC LIBRARY

In this context, the Commission addressed itself to the ability of states to respond to court mandates (such as Serrano) to equalize interdistrict disparities in per-pupil expenditure. It estimated, for example, that it would cost the states $41/3 billion to raise per-pupil spending in all lower-spending districts to the 80th percentile. It found that only about one-third of the states would have some difficulty accomplishing this goal. These 16 states would have to use more than 20 percent of their untapped capacity (according to the intermediate capacity test) plus their general revenue sharing allotment. 26 Accordingly, the Commission concluded that "Federal intervention is not a prerequisite to State solution of the intrastate school disparities issue" and "that reduction of fiscal disparities among school districts within a State is a State responsibility."27

Impact of General Revenue Sharing on State Financing

As in the case of local governments, it is still too soon to assess the effect of revenue sharing on state financing. There are some harbingers of things to come. For one thing, many of the high property tax states are turning to their general revenue sharing funds as a means of relieving the property tax burden. Michigan, for example, has already taken steps to apply both its 1973 surplus and a large part of its revenue sharing allocation to a master property tax "circuit-breaker." Its massive program, aimed mainly at relieving the property tax burden of lower-income families, is estimated to cost about $250 million a year. Other states are increasing school aid, and at the same time placing lids on local property taxes for schools-another means of providing property tax relief. On the other hand, a recent attempt in California to reduce taxes and government spending (by applying some $850 million in surplus and revenue sharing funds to this purpose) was turned down by the electorate.

Federal Financing of Public Libraries

Federal government involvement in public library financing started in 1956 when the Congress enacted a small program to aid rural areas lacking adequate library services. Federal aid under this program was only about $8 million a year during the early 1960's.

The Act was amended in 1964 to broaden its scope by encompassing non-rural areas and also to provide library construction aid. Funds were allocated among the states under the 1964 amendments in proportion to total population (previously only rural population was taken

into account). Spending authorizations were increased to $25 million annually for library services, and were established at $20 million annually for construction.

The program was further expanded in 1966 to include interlibrary cooperation, and services to the institutionalized and the handicapped, and spending authorizations were increased considerably. Further expansion of the program was promised by Congressional action in 1970, which raised authorizations for library services by annual steps from $112 million for fiscal 1972 to $137 million for fiscal 1976, and for library construction, from $80 million for fiscal 1972 to $97 million for fiscal 1976. Authorizations for interlibrary cooperation were also raised.

Even in 1967 there was a gap between Congressional promise and performance. Thus, for that year, appropriations for library services were 75 percent of authorizations; and the situation has been deteriorating steadily.28 By fiscal 1973 the flow of Federal library aid had slowed to a dribble and the prospects for fiscal 1974 and subsequent years are dim indeed!

Although the effectiveness of the formula for allocating Federal library aid on the basis of population in meeting differing needs for library services can be questioned, none doubt that the program has at least stimulated state participation in the program. The aid is channeled through the states to the localities in accordance with required state plans. Some of it has been used to establish state library services where they did not exist previously and to improve such services where they were already in place before the 1956 enactment.

Along with numerous other categorical grants, library services and construction appear to have become victims of the "New Federalism" philosophy of the present Administration. Despite repeated denials before Congressional committees by representatives of the Executive Branch that general revenue sharing was not intended as a replacement for categorical grants, recent impoundments of appropriated funds and proposed cuts in the 1974 Budget are being defended in part on the grounds that revenue sharing funds can be used to supplant the reduced categorical aids. Grant consolidation efforts-in the name of special revenue sharing-will undoubtedly provide a rationale for further decimating categorical grant programs. Whether a true intergovernmental policy will be developed-one that considers the different functions of general revenue sharing, grant consolidation and categorical grants-remains to be seen. In the very first recommendation of its "fiscal balance" report, the Advisory Commission on Intergovernmental Relations called for such a policy (a “new Federal aid mix"):

The Commission concludes that to meet the needs of twentieth century America with its critical urban problems, the existing inter

66-133 0-76-10

46 ALTERNATIVES FOR FINANCING THE PUBLIC LIBRARY

governmental fiscal system needs to be significantly improved. Specifically, the Commission recommends that the Federal Government, recognizing the need for flexibility in the type of support it provides, authorize a combination of Federal categorical grants-inaid, general functional bloc grants and per capita general support payments. Each of these mechanisms is designed to, and should be used to meet specific needs: the categorical grant-in-aid to stimulate and support programs in specific areas of national interest and promote experimentation and demonstration in such areas; bloc grants, through the consolidation of existing specific grants-in-aid, to give States and localities greater flexibility in meeting needs in broad functional areas; and general support payments on a per capita basis, adjusted for variations in tax effort, to allow States and localities to devise their own programs and set their own priorities to help solve their unique and most crucial problems. . .29

Sorting Out the Federal, State and

Local Roles in Financing Library Services

What should be the respective roles of the three governmental levels in financing public libraries? A corollary question might be posed: If it is generally agreed that the present expenditure for public library services is too low-that it should be raised to, say, $2 billion—which level of government should pick up most of the tab?

There is no consensus regarding the "right" allocation of the cost of financing a particular function among governments. While it is generally recognized that some functions have more spillover effects than others, there has yet to be devised an accurate measure of such effects. Does 10 percent, 50 percent, or 90 percent of the benefits from educational expenditures accrue to the "National public," the "state public,' or the "local public?" How much of the police function is local? How much state? How much Federal? Are fire services and trash collection services strictly local? Are the spillover effects of library services about the same as they are for education?

"

Some of these questions are dealt with in the section of this report which analyzes the impact and relevance of the public goods benefit theory.

In the final analysis, however, the extent to which Federal or state— or even local-policymakers agree to participate in financing particular functions boils down to the interplay of political judgments. It was not until "law and order'' became an intense political issue at the National level that the Federal government began to provide substantial aid for

INTERGOVERNMENTAL FISCAL FACTORS 47

local police protection. When the Nation was plagued by a severe depression it became obvious to the Federal policy-makers that states and localities needed help in dealing with unemployment and the resultant social problems. The apparent need for an extensive highway network for national defense purposes and for meeting the requirements of a highly mobile society impelled the Congress to enact a gigantic highway program in the 1950's.

Interestingly, the need for library services was first perceived by the Federal policymakers as a rural problem. The solution, from that vantage point, did not require a massive infusion of Federal fundsmerely a small amount of seed money to encourage the states to do something about the lack of library services in their rural areas. As the program progressed and the library problem was brought up before Congressional committees periodically, some committee members developed interest and expertise, and, as states built up their own library staffs in response to the Federal program, the inevitable Federal-state "vertical functional bureaucracy" operated to expand the program. As the history of substantive legislation in regard to library services shows, each successive amendatory enactment has extended and expanded the program to encompass additional services and to broaden its scope. Legislative spending authority, thus, has increased tremendously over the years. But, as with many other categorical aid programs, particularly those supporting social programs, executive and legislative budget makers have seen fit to stem the spending tide.

It is conceivable that the substantive (program) committees of Congress will eventually prevail, and that Federal library aid will start to flow again. However, it is not likely that such aid will grow very much beyond recent LSCA levels of 7-8 percent unless there is a new realization of the importance of public libraries and the vital nature of the Federal role in their support. Should general revenue sharing prove successful and be expanded after 1976, that is, if states and localities convince the public (and consequently the Congress) that they can, indeed, manage and support adequately their own programs and services-categorical aids may well be curtailed. This could, then, lead to the development of the "new Federal aid mix" proposed by the Advisory Commission on Intergovernmental Relations. Thus, the library function in the U.S. Office of Education could range from mere technical-assistance, statistics-gathering and related duties to a broad fiscal support program with administrative responsibilities. Among the possible programs representing candidates for expansion might well be Title III of LSCA-interlibrary cooperation—to help the financially ailing urban centers make available to the general public the specialized library resources they have amassed over the years.

The Case For Increased State Financing

Any significant increase in library funding must come from the states. Thanks to the Federal library services and construction program, the states, without exception, now have the organizational structure and in many instances the leadership-to guide the development of library services. Moreover, as has been demonstrated, the great majority of them have developed, or are in the process of developing, highly productive revenue systems.

Just as there is geographic interstate diversity in the ability to finance public services, there are inter-regional diversities within states. As has been noted, this is as applicable to library services as it is to the financing of schools. These intrastate service inequalities can be handled much more readily when the funding is done on an areawide rather than on a local basis. When the state picks up a substantial portion-say 50 percent of the funding, it has an opportunity to equalize the resources among local library systems. This it can do by taking over some functions directly and offering equalizing grants for others. Thus, a state might use its own borrowing and taxing power to build libraries—the state itself would hire the architectural services and let the building contracts. Library buildings would be placed regionally in accordance with a statewide plan. At the same time the state would be in the position of offering library services wherever they are needed. The services would be provided locally, but state grants would take into account both needs and local fiscal ability.

Several states now provide library aid on an equalization basisamong them are Illinois, California and Maryland. The amounts involved, however, are generally too small to have much of an effect on the level of library services. Other states, like New York and Pennsylvania, use their aid funds to encourage regionalization of local library

services.

The Case For Local Areawide Financing

In all likelihood local government will continue for the foreseeable future to play a major role in the financing of library services. At the very least, the financing base should be broadened to encompass entire counties, rather than be left to the exigencies of a fractionated base inherent in municipal, school district and special district library systems. The disparities that exist, as among central cities, wealthy suburban enclaves and poor rural areas, can be smoothed out considerably by marshaling the taxable resources of a broad economic area to finance a diversified library system.

Where necessary, library financing should extend beyond county borders to encompass two or more counties. For example, a two or