Jefe Hood touches on something we’ve noted with regard to Mecklenburg County’s budget — the dependence on federal (and state) dollars for ongoing operations, dollars which start life as federal borrowing:
Since 1967, the federal government has run budget deficits in all but five fiscal years. These deficits have ranged from small (less than 1.5 percent of GDP in nine separate years, most recently 2006) to large (between 4 percent and 5 percent of GDP in nine years) to scary (about 9 percent in 2009 and so far in 2010).
In all of those deficit-spending years, total federal grants to states and localities amounted to least 40 percent of the federal deficit. In most years, a majority of federal borrowing went straight to state and local budgets. More recently, the trend has been even more exaggerated – since the return of deficit spending in 2002, after the brief bipartisan budget-balancing of the late 1990s, virtually all of the federal deficit was consumed in revenue transfers to states and localities.
This is why the idea that federal money is “free money” is so poisonous — “free money” for a streetcar, “free money” for a $9.5b. transit plan, “free money” for low-income housing, and so on. And don’t forget the local tax dollars that we spend in order to lobby for the “free” money.
Update: Here’s a series of graphs on municipal finances, one of which notes that federal aid is one of the few positive impacts on the bottomline amid a sea of red ink.
