One dimension of development planning for Appalachia which has been given little attention is the potential role of state and local governments. That is, what taxation and expenditure policies are most harmonious with the goals of economic development? The dual objectives of this paper are to examine the trend and pattern of finances shaped by the state and local government sector in an underdeveloped Appalachian state, and to explore the implications of alternative public (state- local) policies for economic growth.