Rethinking the U. S. Intergovernmental Fiscal Relations - Is It Time for the Theory of Fiscal Federalism to Change ? -

The porpose of this paper is to examine the change of U. S. fiscal federalism. During 90-mids, there are signs that the features of American intergovernmental expenditure relations are changing slowly. The signs are the following three. Firstly, AFDC was abolished by welfare reform in 1994. Function of income redistribution partly shifted from central government to state government. Secondly, education financing system, primary local service, has been reformed by legal challenge since the Serrano v. Prest cases in 1976. In many states, the accountability of education financing has shifted from school districs to the state. Thirdly, many states recently have established rainy day (or budget stabilization) funds. While the rainy day funds could be used as a discretionary policy to stabilize the state economy, they are introduced to ease budgetary pressures. The states have become to strengthen a fiscal roll, income redistribution, local public good provision and stabilization, through the three changes. The meaning and causes of the changes can't be explained by the theory offiscal federalism