The Farm Crisis and the Future of Rural Local Governments

Abstract

America's farmers are facing difficult financial times, and their problems are spilling over to rural local governments. Declining farm incomes and farm property values erode the local tax base. At the same time, demandfor publicly provided services may increase, creating asqueeze between falling revenues and higher costs. This article documents the impact the farm crisis has had on local government tax bases in eight multi-county regions in the Midwest. The impacts found, while severe, would generally be manageable in the absence of other shocks. However, when changes in the intergovernmental aid system-such as the elimination of General Revenue Sharing and other cuts infederal aid-arefactored in, local goverments in agriculturally dependent areas can encounter financial stress. Higher taxes and lower service levels may permanently change the quality of life in rural America.