1. Fiscal Federalism A.P. Government Lecture #5

2. Objective: Understand the concept of fiscal federalism and how federal funds are distributed to the states.

3. What is Fiscal Federalism? Fiscal Federalism is a system of transfer payments or grants by which a federal government shares its revenues with lower levels of government. The Federal government collect revenue in the form of taxes and then distributes a large portion to states

4. Involvement in Fiscal Federalism All levels of government are involved States with inadequate tax revenue will rely more heavily on federal monies National tax revenue comes from Income taxes State tax revenue comes from Property taxes Sales and transactions taxes

5. Federal Control The feds. often restrict how federal monies are spent by state and local government Expenditure arrangements are limitations on recipient government in order to receive funding States may spend federal funds only for the purposes specified by federal law

6. Federal programs Block Grants Grants-in-Aid (Categorical grants) Formula Grants Project Grants Refer to chart for further explanation

7. Mandates These are obligations without accompanying funds The federal government will require the states to enact programs but will fail to allocate resources