DONNA E. SHALALA
Characterized in the past as the invisible branch of government—the fallen arch of the federal system—state government has finally arrived. Like a private foundation, the state has enormous funds to give away. New York State allocates over half its money to local governments, resulting in complex fiscal relationships with them. Opinions differ on whether states were pulled or pushed into taking more responsibility for their citizens, but clearly there is much greater involvement today than there was twenty years ago.
Indeed, before New York State became predominantly metropolitan, the level of interdependence was low; citizens demanded few services from their local governments and even fewer from the state. The one exception was New York City, whose vast population concentration made it a special case "which demanded special treatment." 1
Both urbanization (the movement of people from rural areas to the cities) and metropolitanization (the redistribution of population and economic activities between city and suburb) led to increased interdependence between localities and state governments. The growth of the state's aid to localities program is but one reflection of this.
Direct payments to local governments in New York are made through the state's Local Assistance Fund. New York also assists its residents through the State Purposes Fund, which finances services performed by the state, such as the operating expenses of state-maintained institutions. This analysis, however, will focus on the seven____________________