Multiyear Financial Planning
Sensitive to Economic Change: Yes
Predictable: Depends on the type of aid
Large Source of Revenues: Yes for school districts, counties and cities. Less significant for other governments.
State and federal aid are generally unpredictable and beyond a locality's control. The timing and relative health of the State budget affect most of its aid categories.
It is generally accepted practice to hold State aid revenues constant, unless there is a reasonable possibility of a decrease or the solid expectation of a specific increase. There are some exceptions, however. For example, the mortgage tax is classified as State aid even though it is really non-property tax revenue that is primarily affected by local housing activity and interest rates. You may wish to break mortgage taxes out from the rest of State aid for this reason.
Similarly, certain State aid programs are reimbursed based upon local costs or participation (many school aid grants fall into this category). Localities may contact the State agency administering the program for assistance with these types of aid projections.
Federal grants are generally specific to certain programs, some of which can be start-up grants, meaning the local government must continue to fund the program after the federal aid ends. Generally, therefore, federal aid is a small but variable revenue source.