CAN STATE AND LOCAL GOVERNMENTS ASSUME MORE OF THE COSTS OF WATER DEVELOPMENT?1

Abstract

ABSTRACT As availability of funds in the federal budget for water development has decreased recently, pressure has increased for state and local governments to pay a larger share of the costs. In this situation a difficult question immediately arises‐what is the capability of state and local governments to pay a larger share? Of course, there is no easy answer. Expenditures of public funds are policy outcomes of a government's political process in which political, economic, legal and other factors are involved in complex relationships. The traditional sources of capital funds for state and local governments include bond proceeds, tax revenues, and federal financial aid (state aid is also a major source of local government funds). The issuing of bonds is hampered by a variety of legal debt limitations, but there are means for circumventing the limitations. State and local governments vary widely in amounts of taxable resources available and in the extent to which these resources have been tapped. More effective use of revenue resources could be made in some cases. New sources of capital funds for water development ought to be considered‐a fee on the use of water per se, for example. Costs associated with water use currently are imposed to cover development costs, but a state might impose additional use fees earmarked for a state water development fund.