The impact of changing intergovernmental relations on municipal capital outlays: A time series analysis

New patterns of fiscal relations between the federal, State and local governments continue to emerge. Reductions in restricted and unrestricted federal grants and a shift of fiscal responsibilities for many federal programs has impacted State and local governments in different ways. This essay explores the relationship between changing federal regulations and fiscal relations on municipal capital construction. Time series analysis indicate that the level of municipal capital construction outlays is relatively constant over the period 1964-1989, despite increases in federal assistance in the 1960s and 1970s followed by reductions in the 1980s. The analysis finds that changes in federal grant matching requirements, increased levels of local debt, and minor increases in state assistance offset the loss of federal grants.