There are three areas in which federal grant outlays to California could be affected by reduced local spending brought about by the pasage of Proposition 13. The biggest impact on federal outlays probably will result from matching and maintenance of effort requirements in federal assistance programs. Both base federal aid on the amount of the local grantee's financial support. The second area of impact is in federal compensation programs that reimburse state and local governments for revenues lost because federal landholdings are exempt from state and local taxation. The third area is federal formula grant programs that use grantee expenditures or taxing effort as a factor in allocating federal funds. The precise effect that Proposition 13 will have on California's federal funds cannot yet be determined. The effect depends on future (1) local budgetary decisions, (2) uses made of the state surplus, and (3) waiving of certain federal grant requirements. An increment to federal revenues may also result from the passage of Proposition 13. The principal reason for this effect is the decrease in federal tax deductions for property taxes paid. The increment to federal revenues will probably not exceed about $1.5 billion in the first year following passage of the amendment. (Author/JM)