Targeting State Highway Aid to Needy Cities

Abstract

Studies of state aid targeting to urban needs by Morgan and England (1984), Stein (1981), and Dye and Hurley (1978) have focused on aggregate stale aid to cities. This paper examines the relative responsiveness of a functional category of state aid, highway aid to cities. Analysis of state residual highway aid over a 21‐year period shows that (1) highway aid was generally not targeted to needs in a pre‐urban crisis period, (2) somewhat better targeting of highway aid followed the peak of the urban crisis, and (3) residual highway aid was more influenced by fiscal rather than socioeconomic or physical needs in cities in the latter period. This analysis of functional state aid supports earlier work on state aid targeting in urban areas. The analysis implies that state aid for cities has changed in a positive way that places the stales in a good position to assume more responsibility for local government problems under the evolving state‐centered federalism.