DECLINE OF THE FROSTBELT
Ornstein, Allan C.
Over the last 30 years there has been a massive shift of people, jobs, and wealth from the Frostbelt of the Northeast and Midwest to the Sunbelt cities of the South and the West. An arch of...
...There are no reliable roadmaps to recovery for the Frostbelt cities and states to follow...
...Under present economic conditions, the Northeast and the Midwest cannot recapture these dollars through an increase of their own exports...
...Schools in San Diego, California, on the other hand—as in many other parts of the Sunbelt—are relatively new...
...Some pipes and valves in the old cities of the Northeast and Midwest are 100 years old or older...
...Rising energy costs have exacerbated the flow of dollars out of the Frostbelt economy...
...Bankrupting America: The Tax Burden and Expenditures of the Pentagon by Congressional Districts (Lansing: Employment Research Associates, 1982...
...In Philadelphia, the Broadstreet transit system alone needs $110 million to repair and replace its 1920 car motors and trains...
...1) There is less money available to buy goods and services...
...Most important, the proportion of operations and maintenance budgets spent on energy increased by 51 percent...
...The longer we wait to renew our public works, the greater the cost in future repairs and the more difficult it will be to sustain long-term economic growth...
...With rising prices for energy, these taxes and other revenues generate massive shifts of wealth to energy-producing states, profits to their local energy-related businesses, more jobs, and greater tax bases—in turn reducing local and state tax burdens for their residents...
...Nevertheless, energy costs escalated by 141 percent —from $95 million to $229 million...
...The Administration estimates that those programs will save the government about $30 billion per year...
...Nationwide costs for the maintenance of bridges are estimated to be $48 billion...
...Conclusion FOR THE LAST 80 YEARS, the Frostbelt has been the center of U.S...
...John L. Palmer and Isabel V. Sawhill, "Perspectives on the Reagan Experiment," Urban Institute Policy and Research Report, Fall 1982, pp...
...The electric companies of the Midwest need the coal for electric power...
...Moreover, urban Frostbelt schools will suffer the most, since the Administration expects to distribute funds to local schools on a per-child basis rather than on need...
...Despite the fact that 27 million new crossties and 881,000 tons of new rail were installed in the years 1976-80, about 30 percent of the total U.S...
...The frequent use of salt to combat ice and sleet underfoot causes major erosion of structural surfaces and transit systems, and the acid rain, produced by the concentrated pollution of heavy industry and automobile fumes, causes deterioration of the environment and of all stationary and moving systems...
...Thinned-out central cities tend to be ignored, yet their facilities must be maintained as though they were still used at capacity...
...In short, energy costs threaten to disrupt the instructional program and quality of schools in the Frostbelt regions...
...Only eight states have replaced some of the lost funds...
...The point is, energy-related fees and severancetax revenues help produce higher consumer costs and taxes in energy-poor states and enable energyrich states to reduce, or even eliminate, other taxes...
...The gush of federal money that hid the effects of this decline is now being shut off...
...Louis each need $2-5 billion...
...Frostbelt income is more evenly distributed than Sunbelt income...
...in 1970, it was one of two...
...certain contract provisions entered into in the past (under different market conditions...
...75 percent of its bridges are in need of major rehabilitation or complete replacement...
...Here are some of the problems...
...A recent federal highway study found that spending an extra $4.2 billion to fix dilapidated bridges and roads could prevent 480,000 injuries and save 17,200 lives over the next 15 years...
...Companies in Manhattan lose $166 million a year for each five-minute delay on subways and buses, and its numerous potholes cost the city $20.9 million in 1981 in property damage claims...
...A 5 percent balance is the accepted norm for efficient fiscal management...
...This trend has resulted in further erosion of the financial base of the Frostbelt cities...
...A Changing Federalism: The Condition of the States (Washington, D.C.: Education Commission of the States, April 1982...
...In 1981, it was $5 billion or about an 80 percent increase per year...
...The New Federalism—Present and Future (Chicago: Illinois State Chamber of Commerce, June 1982...
...In short, the dramatic shift in revenue sources reflects economic decline and high need in those cities, as well as increasing dependence on the federal and state government...
...Energy costs have far outstripped the overall school budget increases allowed by the voters and have forced school administrators to divert funds from instructional programs and maintenance budgets...
...For example, train delays cost up to $1 billion a year in lost revenues, and in 1981 alone, railroad accidents cost $922 million in loss, damage, and injuries...
...To be sure, we can expect little help from the present Administration, since the Sunbelt controls the electoral vote (the last four elected presidents came from the Sunbelt) and the core of Reagan's constituency comes from this region...
...For example, average Frostbeltstate residents spent about 6-7.5 percent of their personal income on energy in 1980 and will pay about 9-15 percent by 1990...
...And please also be sure to enclose a stamped, selfaddressed envelope...
...The population in these old urban regions is the country's most dense, resulting in concentrated use and greater demand on public facilities and public works...
...Half of the country is becoming poor, half of it rich...
...For 1980, the South had a net gain of $5.3 billion and the West of $7.1 billion...
...First, these revenues serve as powerful incentives for people and businesses to move from burdened regions—accelerating massive shifts of middle-class populations and jobs, away from the Frostbelt, to energy-rich Sunbelt states...
...In 1960, the number was one of three...
...By 1980, it was seven out of ten, and by 1990—unless these cities are integrated with their adjacent suburbs—the proportion of minority students will soar to nine out of 10...
...Between 1952 and 1978, 40 percent of all Sunbelt states had ratios of $1.25 or higher, and more than 60 percent of the Frostbelt states had ratios below $0.90...
...233-36...
...The burden of funding education and public spending in general will fall on local sources in the remaining 1980s—thus increasing disparities between poor and wealthy school districts and local governments...
...In Cleveland, 50 percent of the 150 schools are at least 50 years old, and cost for deferred maintenance is estimated at more than $50 million...
...In the last 30 years, there have been dramatic increases of blacks in the Frostbelt cities and minimal increases of blacks in Sunbelt cities...
...And the welfare state, as we know it, is at great risk...
...This is especially true in declining Frostbelt cities, as well as in a few high-need cities in the Sunbelt, such as Miami, Atlanta, or Oakland, where federal aid has increased by 400 percent or more...
...Third, there is the danger of retaliatory policies and divisive tax warfare, with each state taxing its exports or commodities just to preserve its economy...
...46870...
...This state, with 402,000 residents (about the population of Pittsburgh), has trouble spending its money...
...of Housing and Urban Development, December 1980...
...Thus the people who were to help bear the burden of school support have written off the cities' public schools, unwilling to maintain and participate in a system that, mostly, benefits others...
...As prices for materials and energy have increased dramatically, the gap between these two states' construction and operating costs has widened considerably...
...In 1950 all but one of the nation's 25 largest city public-school systems (Washington, D.C...
...Severance and royalty revenues for these energy-rich states are estimated to run $120-220 billion in the years 198190...
...Over the next 20 years it is estimated that the nation's major urban areas will have to spend $75100 billion just to maintain their water systems and meet pollution standards...
...For example, fiscal 1982 registered, approximately, a $23.5 billion loss for the five Great Lakes states and a $14.5 billion loss for the three mid-Atlantic states...
...Between 1982 and '85, federal aid to education is expected to drop another $34.2 billion, or 29.6 percent of the 1980 budget (when federal aid to education reached an all-time high...
...State and Local Government in Trouble," Business Week, October 26,1981, pp...
...For example, in fiscal 1980, Michigan was at the bottom of the list, receiving only 66e in federal funding for every dollar paid in federal taxes...
...For example, between the school years 1972-73 and 1978-79, the public schools in New York State reduced their energy consumption by 16.2 percent...
...Other factors in the Northeast's and Midwest's deficit are a shortfall of defense, aerospace, and shipyard spending within these areas...
...After 1979, concurrent with the growing recession, energy prices increased at a slower rate...
...For example, 294 out of 614 Chicago school buildings are more than 50 years old...
...372 • Energy and the Economy The energy bills Frostbelt residents and businesses have to pay are expected to remain a growing portion of their living and operating costs...
...In short, they are obsolete—or in need of very expensive reconstruction...
...Although schools are only marginally dependent on federal spending, which now accounts for about 8 percent of expenditures in education, Frostbelt school districts will feel the loss because state revenues cannot easily offset such losses...
...The benefits for Wyoming and Montana, each with fewer than 500,000 residents, are worth noting: no state income tax, no corporate income tax, a sales tax of 3 percent, property taxes at 3.5 percent of market value (that is, $350 for a home worth $100,000...
...Joel Havemann and Rochelle L. Stanfield, " 'Neutral' Federal Policies Are Reducing Frostbelt-Sunbelt Spending Imbalances, - National Journal, February 2, 1981, pp...
...The ports are in worse condition...
...It shows up as a major source of inequity and imbalance in the federal budget and the tax burden, and it contributes heftily to the economic decay of the Midwest and the Northeast...
...These deficits require a growing share of tax revenue for interest payments —and Northeast and Midwest residents pay $250 more per person than the rest of the country...
...Baltimore, Boston, Philadelphia, Cleveland, Detroit, and St...
...While the older and colder industrial states of the Frostbelt have had to absorb the higher cost of energy needs—having to import 75 percent either from other states or abroad—states with abundant energy supply (almost all in the Sunbelt) have benefited economically, receiving higher prices and revenues for their resources...
...Funding formulas have favored states and regions with increasing populations and low personal income levels...
...Thus, in some Frostbelt cities, up to 50 percent of the funds meant to provide for the future are being spent to pay for present expenses...
...tracks and railbeds still need repair or replacement...
...These cities have experienced declining middle-class populations and industry, and thus lower per capita property values and shrinking sales volume—resulting in more unemployment and higher taxes for remaining residents...
...The federal government syphons tax money from 302 of the 435 congressional districts and 29 of the 50 states into those that have large military bases and big military contracts...
...An arch of economic decay now encompasses the 21 states of the Frostbelt, comprising a total population of 108 million, and extending from New England and the midAtlantic to the Great Lakes and the Plains...
...economic base through military spending is spreading...
...Another 45 percent of the highway bridge approaches are deficient or obsolete...
...Pat Choate and Susan Walter, America in Ruins (Washington, D.C.: Council of State Planning Agencies, 1981...
...As to the whole national need, estimates, so far, are merely guesses, one (made in 1981 by Pat Choate and Susan Walter in America in Ruins) reaching an astronomical $3 trillion...
...State and City Streets These roads are in worse condition and in greater need of repair than the interstate system, especially in the cities, because they are older and take a greater pounding by trucks and traffic congestion...
...The old Frostbelt cities also have a reputation for dispensing public-works money for purposes of politics rather than need...
...Sometimes hundreds of ships are anchored offshore along the East Coast...
...Starting in 1973, energy price increases began to shock the nation's economy, paving the way for a decade of combined inflation and sluggish economic growth in the Frostbelt...
...Railroads and Ports Spending for train, track, and equipment maintenance has steadily increased each year—from $4.1 billion in 1971 to $12.3 billion in 1981...
...This assumes a 10-12 percent yearly increase in energy prices and a 6-7 percent yearly growth rate in personal income...
...cities—with 500,000 or more inhabitants in 1980-11 were located in the Frostbelt and 11 in the Sunbelt...
...Federal aid amounted to a 441 percent increase for the city...
...4) The lack of new investment funds slows economic growth still further...
...That year each Wisconsin resident paid a coal tax of $3.60 and each resident of Minnesota paid $5.40 to Montana...
...The Alaskans' estimates approach $200 billion in revenues over the 1981-2000 period, that is, $10 billion per year...
...State and local governments have been reluctant to take remedial measures, even when they had the resources, because pressure from municipal workers (including teachers) for higher salaries and from social pressure groups (welfare recipients, senior citizens, the handicapped, and so on) for more services tipped governmental priorities toward winning votes and meeting social demands...
...Although there is tremendous waste and mismanagement of tax money throughout the country, the old cities, particularly, have long experience with criminal abuse and fraudulent use of public funds...
...About 70 percent of all Americans suffer net drains on their community, which in turn leads to unemployment...
...federal aid to state and local governments then would be almost as low a proportion of the state government's budgets as it was in 1933...
...It has abolished its income tax, slashed property taxes, granted subsidized business loans, repaired most of its immediate infrastructure, and, in 1982, presented $1,000 to each of its residents...
...Only two of these cities—Memphis and New Orleans had substantial black populations linked to traditional and not to changing population patterns...
...The states could use the money for similar programs or simply eliminate them and use the funds for other purposes, including state tax reduction...
...had a white majority...
...Strong lobbies and congressional seniority (or clout) have prevailed too...
...In earlier years, the discrepancies were even worse...
...Where We're Going (Washington, D.C.: Reference Bureau, June 1982...
...These projected costs do not take into account needed capital markets for new industry or population growth, which is another problem among growing Sunbelt states...
...For the 11 Frostbelt cities, the median black population was 38.9 percent in 1980 compared to 15 percent in 1950...
...In 12 states, all but one in the South and the West, federal monies received in fiscal 1979 and fiscal 1980 amounted to over 30 percent of the residents' personal income each year, compared to about half of this percentage in the Midwest...
...City alone has about 775 bridges, about 25 percent of them in need of repair, and many are large and old (75 years and older...
...Interstate Highways The nation's 42,000-mile interstate system, just nearing completion, is wearing out at the rate of 2,000 miles a year, and there is another 25 percent or 10,000 miles that is worn out and needs resurfacing...
...In New York City, the transit-system renovation program will cost about $5.8 billion over the next five years, and passengers are expected to pay one-third of it in projected fare increases of 100-200 percent...
...Of the 11 states that suffered a net Pentagon tax loss of $1 billion or more for fiscal 1980, seven were located in the Midwest and three in the Northeast...
...terminals are so inadequate or badly in need of maintenance that the colliers and oil tankers must wait in line 30 to 60 days to pick up or discharge cargoes...
...q job produces additional jobs...
...Almost every old city loses 10-25 percent of its water through leaks, with New York City being in a class by itself—losing 100 million gallons of water per day...
...By comparison, state and federal revenues, which accounted for 19 percent of the city's revenues in 1970, provided 37 percent in 1980 (25 percent from federal contributions...
...industrial might...
...The cities' biggest worry is that the states will not pick up the programs of the federal government...
...In Chicago, for example, property taxes provided 31 percent of the city's revenues in 1970...
...In total, the South and West received over a half-trillion dollars more through federal programs than these regions paid in taxes...
...One highway industrial group estimates that the aggregate cost to the private sector for bad roads and bridges is $30 billion a year—for everything from 370 broken axles to lost business...
...By 1991, the federal government would cease dispensing federal programs...
...135-81...
...When energy payments increase faster than personal income, four problems arise...
...Although the interregional flow of federal funds is not part of any grand design, the Frostbelt region has suffered a low level of federal funding...
...it needs to repair only about 10 percent of its 490 bridges—at a cost of $124 million...
...It creates a drastic imbalance in the tax burden imposed on the Frostbelt states...
...We are talking about the nation's schools, libraries, prisons, hospitals, fire and police departments, and numerous other village, city, county, state, regional, and federal buildings...
...Severance Taxes Despite recent events, OPEC monopoly pricing and domestic decontrol combine to provide windfall revenues to all parties engaged in energy production...
...Over a six-year period, between fiscal 1975 and 1980, the cumulative deficit in the Frostbelt regions' balance of payments was $201 billion, while the Sunbelt states enjoyed a $134 billion surplus in their fiscal relationship with the federal government...
...Energy: Policies and Prospects BETWEEN 1960 AND 1980, the nation increased its energy consumption by 60 percent or about 2.5 percent a year on the average...
...In general, this new federal policy favors the Sunbelt states, to which the aging population is migrating, and it is relieving these states of future increasing costs in health care...
...Nevertheless, in 1979 energy bills jumped 37 percent, 18 percent in 1980, 12 percent in 1981, and 19 percent in 1982—compared with an average increase of 8.5 percent in consumer costs for those years...
...Over the past ten years, federal and state grants-inaid have taken the place of property and sales taxes as the cities' main revenue sources...
...Department of Energy, July, 1982...
...U.S...
...3 (Washington, D.C.: U.S...
...they represented 16 percent in 1980...
...Ironically, Chicago is one of the fiscally healthier cities within the Frostbelt...
...According to the Administration's plan, the federal government is to continue to operate those programs the states don't take on until 1987, when a phase-out period would begin that is to end in 1991...
...Of the 5,622 communities surveyed in 1978, the Commerce Department found 1,844 operating at the point of capacity, and new population loads would entail new construction...
...This prediction is based on the notion of investment leverage and the fact that almost every To Our Contributors • When sending manuscripts, please make sure that you do not send your only copy...
...Not only is this an obvious shortfall in needed revenues, it also makes the federal government responsible for repairs that now are handled by states and localities...
...even worse, most states have reduced public spending (programs and personnel) in fiscal 1982 and '83...
...In terms of tax dollars, then, the Pentagon draws from many and gives to a few...
...Compound the different tax rates with the fact that the Frostbelt's colder climates require more costly plant construction and higher operating costs (especially for energy) than the warmer climates of the Sunbelt...
...It didn't happen...
...369 • Public Buildings About 30-33 percent of our nation's public buildings are at least 50 years old and suffer rotted windows, outdated electric and plumbing systems, inefficient heating and cooling plants, and some kind of roofing, masonry, or structural problems...
...Now many states and cities are hard-pressed to 368 find money for sorely needed maintenance or new construction...
...1-17...
...Needless to say, these costs have jumped most dramatically in the Frostbelt, and will continue to do so because of shipping, pipeline, and infrastructure costs, as well as the colder climate...
...In San Francisco, the 120year-old cable-car system was shut down in 1982 for two years to facilitate an overhaul, at costs supposedly limited to $60 million...
...Chicago needs $5-8 billion for its infrastructure needs...
...Infrastructure: Delays and Decay THE UNITED STATES' physical plant is literally coming apart at the seams: our highways, railroads, bridges, ports, water and sewage systems, and municipal buildings are deteriorating faster than we are repairing or replacing them...
...As more of these states might lower or eliminate traditional taxes, they become even more attractive places for relocation...
...Population Shifts In the 1970s—after two decades of watching helplessly while their middleclass citizens pulled up stakes and headed for the suburbs—mayors and social scientists took heart over a projected "return to the cities...
...Richard Corrigan and Rochelle L. Stanfield, "Rising Energy Prices: What's Good for Some States Is Bad for Others," National Journal, March 22,1980, pp...
...The puffed-up realestate market—followed by a fixation for investment of big money into downtown areas at the expense of other neighborhoods—created a false impression of revitalization...
...At a time when federal and state governments are determined to slash urban aid, the cities' dependence on such aid happens to be at an all-time high...
...Both state treasuries had billion-dollar surpluses in fiscal 1981 and 1982—a year when 30 states had to cut programs to keep from going into deficit...
...In 1978, for example, capital plant construction was calculated to be 38 percent and energy cost 11.5 percent higher in Minnesota than in Louisiana...
...Frostbelt-City Problems THE OLDEST CITIES in the country, those in the Frostbelt, suffer the greatest infrastructural problems caused by decay—decay not merely brought on by age but also by weather conditions, congestion, pollution, and other causes...
...For fiscal 1980, for instance, the Pentagon tax burden borne by each state and the amount of money retained through military contracts and salaries varied dramatically, providing net gains for some, severe net losses for others...
...The greatest discrepancies exist among some of the individual states...
...Adjusted for inflation (at whatever the rate), the real dollar loss will clearly be greater...
...U.S...
...Alaska (considered part of the Far West) is the only state with rigorous projections on oil and gas severance tax and royalty revenues reaching into the future...
...In turn, this policy discriminates against the Frostbelt, where the welfare costs are projected to increase...
...At the other end, there were New Mexico ($1.91), Mississippi ($1.58), Alaska ($1.44), and Virginia ($1.41...
...All this means that the old cities have the most urgent needs...
...For the 11 Sunbelt cities, the median black population was 17 percent in 1980, compared to 10.7 percent in 1950...
...unless the flow of dollars is modified, the Frostbelt region will continue to experience loss of income and jobs...
...The New Federalism IN A MOVE that involves a $47-billion swap, the Reagan administration has introduced a package of block grants, or a handful of few-strings programs, in place of dozens of highly regulated ones...
...Costs for repairing or rebuilding this system have been estimated to run between $43 billion and $60 billion (using 1982 data), yet less than 5 percent of these costs have been allocated by the federal government...
...The Northeast also was hit hard, with a net loss of $8.3 billion...
...In the Northeast and Midwest, the annual weather range has a spread of 100-120 Fahrenheit degrees, causing considerable constriction and expansion of surfaces and structures, such as roads, sidewalks, bridges, tunnels, and buildings...
...only 2 percent are 50 years old or older, and costs for deferred maintenance run only $18 million...
...Collective action must be taken by the Frostbelt population to reverse this seemingly endless slide and decay...
...State and local standards for repair vary, thus estimates for repair and rebuilding in this decade also vary—from $200 billion to $700 billion...
...Although our once deplorably dilapidated railroads are improving, there were still 6,468 trains derailed in 1980...
...The increases expected for the rest of the 1980s—the era that is to see domestic decontrol—should dwarf anything we have seen so far...
...The Pentagon Budget Pentagon spending is a major item in the federal budget...
...Three major, related problems, among others, have resulted from rising energy prices, and severancetax and royalty revenues...
...The President's National Urban Policy Report, 1980 (Washington, D.C.: U.S...
...They believe the federal government started providing services in the first place because states did not accept those responsibilities...
...Boston is "unlucky...
...Meanwhile, the cost of rebuilding a road was 166 percent higher in 1980 than it had been in 1970...
...In return, the states will pay for the $16.5 billion Food Stamp and welfare programs...
...David A. Grossman, The Future of New York City's Capital Plant (Washington, D.C.: Urban Institute, 1979...
...Cleveland is "lucky...
...The schools too are affected by rising energy costs in this "no-win" proposition...
...Perhaps the best way to reduce the imbalances between federal expenditures and taxes (or of federal spending ratios) would be to eliminate the most widely used formula of tax capacity—that is, per capita income...
...of Energy and Natural Resources, Unpublished Draft, 1983...
...Consider the condition of the schools...
...Baltimore, Chicago, Cleveland, New York, Philadelphia, and Washington, D.C., have experienced more than 100 percent increases in black population during this 30-year period—Boston, Detroit, and Milwaukee saw increases of over 250 percent...
...PC-80-S1-5 (October 1981...
...The few cities that claim balanced budgets have either stripped their services (for instance, New York City) or have questionable accounting procedures —such as not considering inflation, using capital-expenditure money or pension money for annual operating costs, or deferring payment obligations to the next fiscal year...
...Wyoming now levies a 17.5 percent and Montana a 30.5 percent severance tax on coal...
...Steel estimates it is losing $1.2 million per year in employee time and wasted fuel for rerouting trucks around one bridge in Pittsburgh...
...the three mid-Atlantic states (New York, New Jersey, and Pennsylvania) lost $10.9 billion...
...For every dollar sent to the federal government in fiscal 1979, the southern states received $1.10 (Southwest) to $1.15 (Southeast), and western states received $1.00 (Far West) to $1.20 (Rockies), while northeastern states received $0.88 (Mideast) to $0.94 (New England), and midwestern states received $0.71 (Great Lakes) to $1.01 (Plains...
...But no more than 25 percent or, at most, 33 percent of the needed money is now available or being set aside...
...Dept...
...Furthermore, state governments as a group are now laboring under severe budget restraints—because of economic constriction, increased costs caused by unemployment ($20 billion in 1982 compared to $9 billion in 1979), the legacy of tax reductions enacted over recent years, voter-imposed tax limita367 tions, and federal aid reductions...
...These old cities have been financially strapped since the 1970s and have literally stopped much preventive maintenance and reduced repair crews...
...That fiscal year, the Midwest was the hardest hit with a loss of $19.8 billion in 1980...
...Because of its fiscal condition, it will invest $1.4 billion per year for these facilities...
...Thus 19 out of 21 Frostbelt states now have budget problems with deficits or balances of less than 1.5 percent, and so do about half the Sunbelt states...
...The continuous exodus of much of the white population from the major cities of the Frostbelt, accompanied by restrictive policies against blacks in the adjacent suburbs, has led to a decline in the tax base and has stimulated business flight, and job flight, from the cities to the suburbs and the Sunbelt...
...in the next 20 years, however, it will probably be halved, because consumers will opt for increased energy efficiency and reduced consumption...
...Despite a short-term glut of energy and a reduction in the producers' price of some energy sources (such as oil and gas), prices to the consumer will continue to increase (to the level permitted by law) because of monopolistic arrangements among wholesalers and distributors, and pipeline and utility companies...
...3) The pool of available investment funds is shrinking because only part of the energy payments are "neutral" or will benefit the home state in the Frostbelt...
...When energy was cheap, this growth rate was affordable...
...The states under fiscal pressure have not fully replaced federal funds for fiscal 1982 and 1983—even those with historically high commitments to social spending...
...Regional Impact of Rising Energy Prices (Minneapolis: Federal Reserve Bank of Minneapolis, June 1981...
...Consequently, in 1980, each Illinoisian paid a $3.18 tax on coal to the Wyoming and Montana treasuries...
...The cost for this work is difficult to estimate, but a good guess is that the railroads will need to set aside $100-250 billion to meet deferred and ongoing maintenance for the remaining 1980s...
...In many parts of the Midwest and Northeast, freight cars creep along at 10 m.p.h...
...The magnitude of this redistribution, measured as the difference between taxes paid and monies received, can be appreciated by noting that from the early 1950s through 1980 approximately $450 billion (in 1979 dollars) has been shifted from the 21 industrial states of the Northeast and Midwest to the 29 states of the South and West...
...and lack of current alternative energy sources...
...Usually, OPEC controls enough incremental oil-supply capacity to enforce its price decisions (barring overproduction) on the 371 entire world—to the extent that only limited supplydemand mechanisms operate in the marketplace...
...Under decontrol, these inflated prices provide monopoly-revenue returns for private industry and the opportunity for energy-rich states to impose severance taxes (on depleting resources) and obtain other revenues (such as payroll taxes, royalties, and return to their local stockholders...
...Had every state received a per capita share of federal expenditures, the total disparity among the states would be reduced, with the Great Lakes states enjoying the sharpest increase from $0.71 to $0.95, or 34 percent...
...it also requires special construction materials (resulting in additional costs) unnecessary in the Sunbelt...
...Bridges Of the nation's 557,500 bridges, more than 20 percent are so dangerously deficient that they are either restricted or closed...
...Sometime in 1983 or '84, the federal government is expected to take over state expenses for the rapidly rising Medicaid program, which, the Administration estimates, will cost $19.1 billion in 1983...
...This part of the deal is mandatory, and the particulars are being worked out in Congress...
...In 1982, it was $10 billion a 100 percent increase for one year...
...373 Reference Notes Annual Report to Congress, 1981, vol...
...Most important, the percentage increase in the central cities' black and other minority population has resulted in municipal overburden—since a large number of them are poor, undereducated, and unskilled, requiring many special services...
...Of the 18 states with a net Pentagon tax gain of $1 billion or more in 1980, 14 were located in the South and the West...
...The few Sunbelt cities with financial problems and municipal overburden all have large minority populations...
...The difference in taxes as well as in construction and operating costs cannot be ignored by companies or people seeking to invest money, to expand, or to relocate in a particular state or region...
...In that time span the states might take responsibility for any or all of some 40 federal programs that fund public (state and local) services and social programs...
...rotted, they are kept together with plugs and straps...
...6 (Chicago: Illinois Dept...
...The intense cold makes the water and sewer systems vulnerable to freezing, producing cracks and leaks...
...Delays Cost More Than Repairs The effect of ignoring our inadequate public facilities has enormous implications in dysfunctional costs and economic decline...
...Instead, this dollar drain is causing a drop in economic activity among Frostbelt states accelerating the loss of jobs and people, resulting in further decline of income for the businesses and residents who remain, and in lower tax revenues for the Frostbelt states...
...Of the 22 largest U.S...
...Though the rate of white flight slowed in the 1970s, the percentage of middle-class residents in cities, especially in the Frostbelt, continued to decline in comparison with that of minority and low-income populations...
...Using 1980 as a base year, energy costs are expected to increase 50-75 percent by 1985 and 100-150 percent by 1990...
...At present, nine southern and western states collect 90 percent of all severance-tax revenues and receive the greatest benefits from the nation's energy resources...
...as many as 85 were built before 1900 and the cost for deferred maintenance is estimated to run about $175-200 million...
...U.S...
...While a substantial portion of these federal funds was redistributed from taxes paid by Frostbelt residents, the majority was "created" by deficit spending, which has increased nearly 100 percent since the mid-1970s...
...This measure is not an adequate yardstick of state or local fiscal capacity, and surely there is the need for a broader measure of fiscal capacity, taking into account other revenue sources that are available to a state...
...The federal government has pushed pet projects of influential congressmen and lobby groups, mostly from Sunbelt states, at the expense of desperately needed public works...
...Close to this ratio were: Indiana (70c), New Jersey (710), Ohio (710), Illinois (73c), and Wisconsin (740...
...State Revenues from Non-Renewable Energy Resources (Washington, D.C.: Northeast-Midwest Institute, June 1982...
...Compounding these problems of concentrated decay is the fact that population and industry are fleeing these cities, which not only reduces the financial base but also shifts attention and capital investment to new facilities in growth areas...
...For example, federal aid to education dropped 4 percent in 1981—in sharp contrast to the average annual growth of 10.2 percent in the six years prior to 1981...
...The much-heralded "return" proved to be a short-lived real-estate boom, triggered by a small percentage of young couples and singles, and was confined to selected areas along the lakes, parks, and downtown university areas of Frostbelt cities...
...In order to appreciate the implications of these population shifts for the city schools, we must realize that those who left the cities were the white middle class with children...
...Mass Transit While the Sunbelt and western states have a minimal mass-transit system, partly because of the influence of big oil, the older cities of the Frostbelt need millions of dollars merely for maintenance, not to speak of improvement...
...The fact that hundreds of ships at times are simultaneously anchored offshore causes cargo spoilage and extra labor costs of $1-5 billion per year...
...While the older cities of the Frostbelt are confronted with the problems of aging plants, job and population losses, eroding tax bases, cuts in public services, and municipal overburden, the Sunbelt cities are moving into the postindustrial world of computers, lasers, and robots, experiencing moderate economic growth, energy surpluses, and expanding middle-class populations...
...Greater equalization of expenditures in relation to tax payments among the old industrial Frostbelt states would require either 366 a major decrease of federal military and aerospace spending or an increase in programs dealing with unemployment and urban decay...
...Local governments made it through the 1970s, despite declining tax bases, with the help of federal and state transfer aid—supplemented by some increases in local taxes and user charges that made largely unnecessary...
...The other half of the proposition is voluntary through fiscal year 1987...
...The total bill could run from $250 billion to $750 billion...
...Moreover, all of these trends have become more pronounced as Pentagon spending has increased some 30 percent from fiscal 1980 to fiscal 1982, indicating that the depletion of the U.S...
...These state reductions (accompanied by federal reductions) reverse a 12-year trend in education, whereby states helped provide greater equity and school finance reform—and a 15-year trend of strong social spending...
...In 1972, these nine states collected $710 million in severance taxes...
...Frostbelt states and especially cities will be hurt most, since their tax bases are quickly eroding...
...most other Frostbelt cities are far more dependent on federal monies...
...By 1978, it was $2 billion or about a 40 percent increase per year...
...The principal gainers were concentrated in the southern and western states...
...For example, between 1972 and 1979 the price of foreign crude oil increased by 470 percent and that of natural gas by more than 250 percent...
...By 1980, all but two (Columbus, Ohio, and San Diego, California) had mostly minority students—blacks, Hispanics, or Asian immigrants...
...2) Lower demand for local goods and services reduces gross state product and increases job loss...
...George Peterson, Fiscal Changes for the Next Decade (Washington, D.C.: Urban Institute, 1982...
...These estimates are based only on the known reserves at Prudhoe Bay and don't include untapped Alaskan reservoirs estimated to be worth $1.3 trillion for oil and $720 billion for natural gas (based on year-end 1981 prices...
...Today repair money for public works tends to come from capital originally budgeted for new construction...
...Water Systems Cracked pipes and water mains are common in our major cities causing millions of gallons of tap water to disappear daily...
...Of the 200 schools in Washington, D.C., approximately 30 percent are at least 50 years old, and deferred maintenance costs approach $50-75 million...
...Allan C. Ornstein, "The Urban Setting: Frostbelt/ Sunbelt Differences," Phi Delta Kappan, October 1982...
...Population: Where We Are...
...Worse, this regional transfer of capital, plant, and work force has a "multiplier" effect—draining the Frostbelt economy of future wealth and jobs in greater proportion (4:1 to 5:1) to the current outflow of dollars...
...Private companies would like to build new terminals or assist cities in developing their ports, but there are no eastern, Great Lakes, or Gulf Coast harbors deep enough to accommodate new giant vessels...
...Unless these formulas are changed, energy-rich states will receive inequitably large shares, disproportionate to their newfound wealth...
...Second, these energy revenues will distort and outdate current federal funding formulas...
...the five Great Lakes states (Ohio, Indiana, Illinois, Michigan, Wisconsin) lost $17.8 billion...
...Worse: by 1985, about 25 percent of the nation's 300 mass-transit systems may have to cease operations (for instance, San Francisco), owing to hazardous conditions...
...Badly needed construction has been delayed for the past 20 years at all levels of government...
...The federal government's new 5¢ tax on gasoline is expected to raise about $5.5 billion per year over the next five years, money to be used to rebuild highways, roads, and bridges...
...In 1950, only one of every ten students was classified as a minority member in these 25 city school systems...
...By 1990, Frostbelt cities will be spending approximately $1.50 to $2.00 for every $1.00 they collect in taxes and outside aid, unless cuts in spending or new revenue sources are found...
...Urban flight in the Frostbelt slowed, not because the cities have begun retaining or attracting financially stable families, but because most of those who were likely to leave had already gone—or were settling elsewhere to begin with...
...By 1985, energy costs for New York schools, and schools in other Frostbelt states, should be 75-100 percent higher than they were in the 1978-79 school year...
...This capital drain consumes the capital base of the nation—the foundation upon which ultimately rest both our taxes and our real income...
...Chicago: Neighborhood Needs Strategy Analysis (Chicago: Melanipy & Associates, 1981...
...Today it has become "aged America," plagued by disparities in federal funding and declining tax bases, worn out infrastructures, middle-class and white flight, high costs for energy, and massive shifts of industries and wealth to Sunbelt and energy-rich states...
...Bureau of Census, 1980 Census of Population, Standard Metropolitan Statistical Areas and Standard Consolidated Areas, No...
...Energy Efficiency in the Illinois Economy: 1980-2000, Vol...
...Now the cuts are coming...
...New York...
...In reverse, when the producers' price of energy is reduced, as it is in 1983, the energy-rich states and related industries in the Sunbelt also suffer—and there is a multiplier effect...
...New York City needs $40 billion to care for its streets, bridges, sewers, parks, hospitals, schools, libraries, fire and police stations...
...Federalism: Dollars and Disparities IN LESS THAN 25 YEARS, federal grants have expanded from funding 50 programs costing some $4 billion annually to 600 programs costing $95 billion...
Vol. 30 • July 1983 • No. 3
