This analysis is the second of a series of seven reports on the ways that the urban fiscal crisis has affected children. During the 1970s, as a result of general public disenchantment with government, 39 states (78 percent of the 50 states) appear to have enacted tax limitations that affected children's services. Of these states, 37 imposed restrictions on local governments. Examination of census data indicates that after a period of expansion in the early 1970s, direct state-local expenditures dropped off more sharply than revenues, indicating that factors other than revenue availability were acting to curb expenditures. Tax limitations were installed in those states in which the growth of state-local revenues outstripped growth in personal income. Similarly, states with a high rate of in-migration were also likely to initiate tax limitations. There appears to be no relationship between changes in educational funding, the largest category of state-local spending, and changes in public school enrollments. Children's services may be particularly vulnerable during a period of public disenchantment because the wealthy "shop around" and pick a community to live in that gives them what they want. Statistical data are included on seven tables. An eight-item bibliography is appended. (FMW)