Local Governments Lose Suit to Get Revenue-Sharing Funds

A federal appeals court ruled Friday that local governments may not collect $180 million in revenue-sharing funds canceled by Congress as part of its deficit-cutting program.

A three-judge panel of the U.S. Circuit Court of Appeals for the District of Columbia reversed a federal district court order requiring the secretary of the Treasury to turn over the money to counties, cities and towns.

The case was brought by the National Assn. of Counties and other local government groups, challenging the transfer of Revenue Sharing Trust Fund money to the general fund of the Treasury.

The groups argued that they were entitled to the money by law, even though Congress had withheld the funds under the 1985 Gramm-Rudman-Hollings deficit-reduction act.

“It is plain that the congressional intent in enacting Gramm-Rudman-Hollings was to reduce the deficit,” Judge John R. Gibson wrote for the panel. “Adoption of the local governments’ interpretation of this provision would not further congressional objectives.”

At issue was a provision in the budget law requiring that 4.3% of the revenue-sharing funds due to local governments in fiscal 1986 be withheld for use during subsequent budget years.

Although the Supreme Court struck down the provision in the law allowing the automatic sequestration of funds, Congress later passed a bill reauthorizing the withholding of the money.

In the meantime, the lawmakers terminated the revenue-sharing program. Because the program was ended, the court said, the money withheld no longer could be claimed by local governments.