What is Intergovernmental Revenue?

Intergovernmental revenue refers to financial resources that one level of government provides to another, typically in the form of grants, shared taxes, or reimbursements for specific programs or expenses. These funds are commonly transferred from the federal government to state or local governments to support public services such as education, healthcare, transportation, and public safety. For example, a state government may receive federal funding for highway construction, which helps cover the costs of infrastructure projects. Similarly, local governments may receive state grants to support school districts or public health initiatives. These revenues help ensure that lower levels of government can fund essential services without overburdening their local tax base. Since intergovernmental revenue often comes with specific spending guidelines, receiving governments must comply with reporting and accountability requirements to ensure funds are used appropriately.

The recipients of these funds record them as revenue.

Examples of Intergovernmental Revenue

Here are several examples of intergovernmental revenue arrangements:

Child care funding. The federal government issues funding to state governments to pay for a portion of the child care costs of lower-income taxpayers.
Education funding. The federal government issues education-related funding to state governments for further distribution at the local level.
Highway tax receipts. A state government shares a portion of its highway tax receipts with the county and municipal governments within its boundaries.