In a historic first, Uncle Sam has supplanted sales, property and income taxes as the biggest source of revenue for state and local governments. …STEWARD’s economic study released last month noted a significant portion of the stimulus funds headed to New Hampshire will actually supplant state funds with federal dollars. Instead of encouraging states to reduce spending when budgets are tight, the stimulus monies allow them to prop up (and in some cases grow or even create new) programs that would otherwise have to be cut.
Federal stimulus money aimed at reviving the economy and a sharp drop in tax collections have altered, at least temporarily, the traditional balance of how states, cities, counties and schools pay for their operations. …
The dominance of federal money is set to expand dramatically this year because tax collections are sinking while the bulk of federal stimulus aid is just starting to arrive. "This money isn't manna from heaven. It comes with a price," says Indiana state Sen. Jim Buck, a Republican. He worries that the federal money will leave states under greater federal control and burden future generations with debt.
Problems arise two years from now, however, when these programs no longer have the funds to operate and the people that work for or rely on them are left out in the cold.
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