Uses a simulation model to analyze state government decisions affecting public expenditures on public assistance and other goods and services, specifically Aid to Families with Dependent Children. The model assumes that state and local political leaders make decisions as if they were maximizing their preferences subject to a state-local government budget constraint. The arguments of this function are (1) the income eligibility level for welfare, (2) the maximum allowable payment to a welfare recipient family, (3) per capita expenditures on welfare administration and social services, (4) other state-local expenditures per capita population, and (5) "own" state-local revenue per capita population. The report evaluates the model's predictive power by varying the budget constraint using four revenue sharing plans: a change in the welfare reimbursement formula, a flat grant proposed to states and localities, and plans proposed in the late 1960s by the Nixon Administration and by Senator Jacob Javits. (See also R-894.) 87 pp. Bibliog.