Revenue sharing was a special form of United States government aid to state and local governments. The program began in 1973 and ended in 1986. Under revenue sharing, Congress authorized aid without specifying how the money should be spent, or with only broad restrictions on its use.
The federal government had always made grants to the states and to local communities. But these grants had to be spent for specific purposes, such as low-cost housing, medical programs, vocational training, and highways. States could use their revenue-sharing funds any way they wished. Local communities had to spend their funds for such general purposes as environmental protection, health, libraries, public safety, recreation, social services, and transportation.
Revenue sharing was controversial. Supporters of the program believed that state and local governments are more aware of the people’s needs than is the federal government, and can therefore spend public funds more wisely. Opponents claimed revenue sharing simply meant additional government spending.
President Richard M. Nixon first proposed a revenue-sharing program in 1969. In 1972, Congress passed the State and Local Fiscal Assistance Act, which authorized revenue sharing. The act created a trust fund for use by state and local governments. State governments received one-third of the funds, and local governments received two-thirds. Under legislation enacted in 1980, state revenue sharing was discontinued from Oct. 1, 1980, to Sept. 30, 1981. Then it was resumed for five years.
