Cities Respond to Sluggish Economy. (City Fiscal Conditions)

By Davis, Lance | Nation's Cities Weekly, June 9, 2003 | Go to article overview

Cities Respond to Sluggish Economy. (City Fiscal Conditions)


Davis, Lance, Nation's Cities Weekly


As the national economy continues its downward spiral, local leaders are taking drastic measures to ward off deficits and shortfalls that could force increases in taxes and service fees.

"Definitely the last two years have been the tightest. We've had to be more creative than at any time in the 12 years I've served on the city council," said Margaret Peterson, a West Valley City, Utah, councilmember.

Though signs that the economy was cooling were evident in 2000, it did not go into a full-scale recession until the terrorist attacks of Sept. 11, 2001. Since then 45 states have accumulated a combined budget deficit of $89 billion dollars. And while no official numbers exist for the local budget crisis, city officials have had to layoff personnel, cut spending, increase taxes and fees or a combination of the three to make sure their governments are not operating in the red.

"We've had to cut 10 percent of our workforce. That equates to about $13 million from our operating budget and 150 full-time positions," said Tempe, Ariz., Mayor Neil Giuliano.

Tempe's staff cuts came from a combination of vacant positions, early retirements and early resignations. Giuliano said the city has made a concerted effort to not cut from its public safety positions. But that has also meant delaying capital projects such as a voter-approved police and courts building.

"A bond program was approved for the construction, but we can't be sure that we'd have the money to operate the facilities," said Giuliano.

A panel of experts convened by NLC last month concluded that several factors are contributing to the continued financial stress being felt by local and state governments--unfunded mandates, increased homeland security spending, rising healthcare costs and cuts to key federal programs.

City officials are also frustrated by the federal government's decision not to include direct economic relief to cities when Congress passed the "Jobs and Growth Tax Relief Reconciliation Act of 2003."

The Tax Relief Act included $20 billion for the states, $10 billion to be divided among the states and $10 billion for Medicaid. An earlier version of the act included $4 billion in direct aid to cities.

And while the states are slated to divide $10 billion between them, many experts say it is not enough to quench the $89 billion combined state budget deficit.

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