Two models of local policy formation can be set forth. Although they are complementary rather than competing models, for heuristic purposes it is useful to present them as contrasting approaches. Since the first, the bargaining model, is well known, I shall concentrate in this paper on elaborating and applying a second, unitary model of policy making. The paper is divided into four main parts. After briefly identifying the limitations of the bargaining model, the first part develops the theoretical rationale for the unitary model. The second part uses the model to analyse empirically differences in the revenue sources for national, state and local governments. Part 3 does the same for expenditure policies, and, in the course of the analysis, distinguishes among three types of public policy – developmental, allocational and redistributive. In the final part, hypotheses deduced from the model are tested by means of a regression analysis of state and local expenditures.