This study serves as a framework for analysis to assist the Revenue Resources and Economic Commission in making decisions that will affect virtually every citizen of the Commonwealth. Building this framework for analysis involves making projections, investigating alternatives, and evaluating the results. Final recommendations are not given in this study since they are the prerogatives of the members of the commission.

The authors are members of the Economic Research Section in the Division of State Planning and Community Affairs and of the Research Division in the Department of Taxation who have been on loan to the commission. The staff's opinions and conclusions are their own and do not necessarily represent the views of the Division of State Planning and Community Affairs, the Department of Taxation, or any other offices of state government.

In order to develop a clearer picture of the direction in which the state is moving in providing for the wants and needs of its citizens, the first chapter of this study presents an introductory overview of the roles of the state as well as the localities in providing for and financing public services, in particular education, health and welfare. Moreover, the first chapter serves as a focus for the entire study by summarizing the highlights of the study, including the state and local fiscal outlook, and by looking at alternative packages for financing present programs and new programs at the state level. To insure brevity and readability, several of the technical discussions involved with these topics are omitted in this summary chapter, and some of the topics may be discussed out of the sequence in which they appear in later chapters.

The summary chapter is followed by five major chapters and a statistical appendix. Chapter II provides background on state and local finance, including information on population, income, measures of fiscal effort and capacity, and major features of governmental finance in Virginia. Chapters III and IV furnish revenue and expenditure projections for the state's general fund and explore ways of increasing revenues. Chapter V provides revenue and expenditure projections for local governments, a discussion of central city, suburban, and rural finances, and an analysis of local revenue systems with special emphasis on the real property tax. Chapter VI analyzes new and alternative sources of local revenue, including state aid to localities.

Throughout the study the projection period extends to 1981 - 82, a seven year period from the current fiscal year or three biennia ahead if measured from the present biennium. At various points in the study, we present data for individual localities. Because of time and space limitations, we could not provide figures for each of the 133 cities and counties. Instead, we use a representative sample of seventeen cities and counties shown in Chart 1.1. The selection of sample areas was based on a desire to show effects due to size, geographic location, city or county status, and degree of urbanization.