The government financial support that has bolstered America's commercial news industry since its colonial days is now in sharp decline and is likely to fall further, according to a report released today by the University of Southern California's Center on Communication Leadership and Policy. Because these cutbacks are occurring at the height of the digital revolution, they will have an especially powerful impact on an already weakened news industry.

"It is a common myth that the commercial press in the United States is independent of governmental funding support," says Geoffrey Cowan who co-authored the report and is USC Annenberg School dean emeritus and director of the Center on Communication Leadership and Policy (CCLP). "There has never been a time in U.S. history when government dollars were not helping to undergird the news business to ensure that healthy journalism is sustained across the country."

The report analyzes some of the financial tools that government has used to support the press over the years -- from postal rate discounts and tax breaks to public notices and government advertising. The report documents cutbacks across a range of sectors and presents a framework for the consideration of policy options to place the industry on more secure financial footing.

"Certainly, the U.S. has never supported news-gathering the way some European and Asian countries have," said David Westphal, report co-author."The point here is that it's time all of us, outside and inside the industry, realize that tax dollars support the American news business, and those dollars, which throughout our history have been critical in keeping the news media alive, are now shrinking quickly."

The late 1960s marked a high-water mark of government support for the news business. The postal service was subsidizing about 75% of the mailing costs for newspapers and magazines, roughly $2 billion in today's dollars. Today, however, publishers' mailing discounts for their printed news products are down to 11% or $288 million.

Paid public notices, government-required announcements that give citizens information about important activities, have also been lucrative for newspaper publishers, providing hundreds of millions in revenue to publications ranging from local dailies and weeklies to national newspapers such as The Wall Street Journal.

For example, in a four-week study, researchers found that the government was responsible for the most purchases, by column inches, of ad space in the Journal. And the newspaper wants more: in 2009 they battled Virginia-area papers in a move to get their regional edition certified to print local legal notices.

This public notice income is especially important to weekly and other community newspapers, accounting, in 2000, for 5 to 10 percent of all revenue. But now, proposals are pending in 40 states to allow agencies to shift publication to the Web.

Tax breaks given to news publishers are likely to decline because many are tied to expenditures on paper and ink and cash-strapped states are seeking to find new sources of revenue. Federal and state tax laws forgive more than $900 million annually for newspapers and news magazines, with most of the money coming at the state level.

The report also found that:

•     In 2009, federal, state and local governments spent well over $1 billion to support commercial news publishers

•     The cumulative effect of reducing these government subsidies is not the primary problem afflicting the news business today. At most, government assistance has dropped by a few billion while newspapers alone have lost more than $20 billion in revenue in     the last three years. Yet, government support represents a critical element of economic survival.

•     Policymakers cannot afford to be mere spectators while these changes flash by. American government does not work very well if citizens do not have a reliable supply of news and information. What is playing out in the news business is a vital national     interest

The report provides a framework to pursue options currently under consideration, including 1) Allowing newspapers to become non-profits; 2) Tax credits for taxpayers who subscribe to newspapers; 3) Expanded federal investment in digital technology and infrastructure, including broadband access; 4) An antitrust law timeout to allow publishers to form a common strategy; and 5) Significant new government funding for public radio and public television.

As policymakers debate these and other proposals, Cowan and Westphal offer them a several suggestions:

•     First and foremost, do no harm. A cycle of powerful innovation is under way. To the extent possible, government should avoid     retarding the emergence of new models of newsgathering.

•     Second, the government should help promote innovation, as it did when the Department of Defense funded the research that created     the Internet or when NASA funded the creation of satellites that made cable TV and direct radio and TV possible.

•    Third, for commercial media, government-supported mechanisms that are content-neutral – such as copyright protections, postal     subsidies and taxes – are preferable to those that call upon the government to fund specific news outlets, publications or     programs.

"We live in an era of profound technological change that threatens many forms of news media. We do not favor government policies that keep dying media alive. But we do believe government can help to provide support during this period of transition," says Westphal.