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Show Limit Payments to Revenues? Use of Federal Payments The Commission believes it is impractical and improper to limit payments to the net revenues of resource programs. Because these programs involve both commodities for which market value is charged and those, such as outdoor recreation, for which user fees, if any, are unrelated to market value, overall net revenues from public land programs do not provide an adequate guide to the level of payments in lieu of taxes. For the same reasons that the Commission recommends abandoning revenue sharing, it rejects limiting payments in lieu of taxes to the receipts from the sale of goods and services from the public lands. The "Threshold" Limitation Approach Federal lands that provide general services, such as use for post offices, are located in all parts of the country. However, public lands are not so regularly distributed. Even in a state containing a relatively small percentage of federally owned land, a large percentage may be concentrated in a single county. The Commission cannot endorse the "threshold concept" under which payments in lieu of taxes would be made only to the extent that Federal lands represent more than some percentage of total land in a particular state or locality. First, it is virtually impossible to arrive at a logical basis for establishing either a percentage of land or of land values within a given area. Secondly, the pattern of concentration of public lands makes it impractical in our Federal system to apply such criteria to the states: in 19 states, for instance, federally owned lands comprise less than 2 percent of the state, while in 12 they constitute more than 26 percent. And this does not take cognizance of concentrations within individual counties. Uniform Treatment We believe that a uniform policy should be applied to both acquired and public domain lands in determining the level and distribution of payments in lieu of taxes. Although revenue sharing has been used, historically, as a device to compensate for Federal ownership of public domain land, while payments in lieu of taxes were applied to acquired lands, the Commission sees no reason to continue that distinction. Whatever the original rationale for the different approaches, it believes that there is no longer need or purpose to continue the dual treatment. The Commission is convinced that the Federal Government should not earmark payments in lieu o] taxes for particular functions. This is consistent with our concept of the Federal-state relationship. Historically, virtually all revenue-sharing payments are restricted to use for education and roads, while payments-in-lieu-of-taxes systems contain no restrictions. In view of the present-day, high level of financing for varied functions of state and local governments, earmarking for restricted uses is no longer valid. By paying the states directly without earmarking, the states can adjust the use of the funds to their individual fiscal requirements, and the local governments, which will be the ultimate recipients, can use the funds where they are needed. Relationship to Grant-in-Aid Programs Existing Federal grant-in-aid payments to state and local governments are not related to, and do not compensate for, the concentration of Federal lands, nor would proposed block-grants. Under a wide variety of Federal grant-in-aid programs, more than $20 billion is paid each year to state and local governments. These categorical grants {i.e., earmarked for specific purposes), often requiring matching commitments by state and local governments, help finance a wide range of public programs, such as education, welfare, and transportation, conducted by state and local governments. With one exception,12 these categorical grants-in-aid are not land related. Consequently, a community with a restricted taxable property base can receive payments no greater than those received by an otherwise comparable community with a fully taxable property base. Thus, even if categorical grants-in-aid, as now constituted, continue to increase at their current rate (from about $6.5 billion in fiscal year 1960 to an estimated level of more than $24 billion in fiscal year 1970), they will not satisfy the test of fairness which the Commission has suggested is required because of the concentration of Federal lands. In addition to the expanding system of categorical Federal grants, recent proposals have emerged for large-scale, block-grant, revenue-sharing programs to help finance all state and local government programs. One of the principal proposals-to divert a part of Federal personal income taxes to state and local governments-has drawn considerable attention to the potential of unrestricted block-grants. 12 Programs administered by the Federal Highway Administration do consider Federal lands in the matching funds payment formulae. It is the one major exception to the general rule that categorical grants do not relate to Federal lands. 239 |