Fiscal pressures on California cities have been severe since the passage of Proposition 13. Federal and state aid policies have, in fact, exacerbated an already wrenching pattern of revenue losses since FY 77‐78. State aid, in particular, has perversely dropped the most for those cities hit hardest by reductions in other revenues outside their direct control. Despite this, California cities have kept total real per capita revenues and expenditures constant over this period by increasing revenues from a variety of local sources—and especially from current service charges for enterprise activities. Furthermore, cities hit hardest by exogenous revenue losses have increased locally raised revenues the most. In short, cities in California have responded to reductions in revenues outside their direct control by increasing revenues from sources within their direct control, rather than by reducing expenditures and their revenue‐increasing responses have tended to be in proportion to the losses they have faced in exogenous rev