Nevertheless, there are liabilities and dangers of this type of state and local finance system that relies so heavily on intergovernmental transfers and hidden taxes that need to be held before the Legislature and the citizens of this state. This is perhaps the most serious liability. The citizen who tries to fix the responsibility for the growing cost of government is confronted with a bewildering array of complexities that hinder the investigation and discourage further involvement. Incentives to spend. Common sense dictates that the more heavily subsidized a local government unit is, the more that unit will likely spend.
Many aids come with matching revenue requirements, which also tends to stimulate spending.
What is true of governments is also true of individuals. The more the cost of government services is borne by others who are in the minority, the more likely the majority is to want additional services. Loss of local self-government. With an abundance of state and federal aid comes an abundance of rules and regulations on how that money is to be spent, with a consequent loss of discretion at the lowest levels of government. Provide intergovernmental transfers to cities, counties, and school districts based on a clear set of objectives.