The Reagan administration's "New Federalism" and tax reform proposals were expected to have chilling effects on growth of state and local government revenues and expenditures. This paper examines the hypothesis that there was a structural break in state and local government fiscal behavior in the 1980s. Although the evidence is far from conclusive, it does suggest some different fiscal patterns in this decade. However, the real structural break ap­pears to have occurred in the late 1970s and these trends have continued during the Reagan years.