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National League of Cities reports worsening finances for local budgets

September 27, 2011 |  2:00 pm

Budget 
The nation’s cities are facing what one expert says are the most difficult budget-balancing decisions in decades. 

The annual survey by the National League of Cities projects a fifth straight year of decreasing municipal revenue, driven by declining property tax revenue from the struggling housing market, slow consumer spending and high employment.

"Dire" was how one expert described the plight of municipalities. 

Noting that cities have laid off workers, cut services and delayed or canceled projects, the survey says that cities will be confronted with declines or slow growth in future property tax collections, not just in 2011 but most likely through 2012 and 2013, forcing further reductions.

"Cities have known that they are going to need to deal with these issues for the last several years.... What we don't know is what the end is going to be,'' said Michael A. Pagano, dean of the College of Urban Planning and Public Affairs at the University of Illinois at Chicago.

City finance officers has hoped that the worst was over. But "given where economic conditions lie, that seems to be very unclear," said Christopher Hoene, director of the league's Center for Research and Innovation.

The survey’s release comes as the league has called for passage of President Obama’s jobs bill.

The $447-billion measure would increase spending on roads and other infrastructure and help keep teachers, police and firefighters on the job, among other things, but faces strong resistance in the Republican-controlled House.

Cities ended fiscal year 2012 with the largest year-to-year reductions in general fund revenue and expenditures in the 26-year history of the survey, according to the report. (www.nlc.org/cityfiscalconditions2011)

"Revenue and spending shifts in 2010 and 2011 portray a worsening fiscal picture for America’s cities," the report says. "With a national economic recovery that has been weak or stalled, and taking into account a lag between economic shifts and the effects for city budgets, it seems very likely that cities will confront further revenue declines and cuts in city spending in 2012."

About 57% of city finance officers reported that their cities are less able to meet fiscal needs than last year, but that figure is down from 87% last year.

"The biggest question for cities lies in the uncertainty about the health of the national economy,’’ Hoene said in a statement. "If regional housing markets, unemployment and consumer confidence struggle, city revenues will continue to lag, city leaders will face more cuts, and those decisions will act as a drag on the national economy."

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-- Richard Simon, reporting from Washington

Photo: Miguel A. Santana, city administrative officer, listens as the Los Angeles City Council works on changes to Mayor Antonio Villaraigosa's proposed budget in the council chambers on May 18, 2011. Changes were made to both the Fire and Police departments. Credit: Anne Cusack / Los Angeles Times
 

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