Majority of US Cities Raise Taxes Due to Major Fiscal Crises
Officials also closing down libraries and hospitals, scaling back police, fire, garbage, and other services
OVER half of United States cities and towns are projecting budget shortfalls by the end of fiscal year 1992, according to the National League of Cities (NLC) in Washington.Skip to next paragraph
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The NLC study, conducted in April, is the organization's latest report of fiscal conditions in cities across the United States.
In the study, 54 percent of the cities and towns projected annual expenditures exceeding revenues for 1992. For 1991, 52 percent of cities reported shortfalls, marking it the first year a majority of cities reported shortfalls in the NLC's annual survey since 1984.
The survey sample of 620 cities and towns was chosen to be representative for all cities in the United States.
Since most cities are constitutionally required to maintain balanced budgets, many have been forced to dig deeper into their reserves, says NLC spokesman Randy Arndt.
"They have had to manage these problems," Mr. Arndt says.
"Cities cannot go bankrupt, shut down, or disappear the way private businesses can when times turn tough."
As a result, cities have enacted a variety of cutbacks and revenue-raising initiatives. According to the study, 3 out of every 4 cities increased taxes or user fees.
Some cutbacks include shutting down city hall satellite offices, closing a hospital, or scaling back fire, library, and garbage services, according to the survey.
Some cities have been forced to take more drastic measures. Cities cut services
Last week, Detroit announced a 10 percent across-the-board salary cut for nonunion city employees. And a year ago, Bridgeport, Conn., filed a bankruptcy action.
Other cities, like Boston, are managing with fewer services. The city's municipal employees have had no pay raises in two to three years, says City Councilor Tom Menino.
In addition, the city's police force will lose 120 officers next year while summer youth programs also have been cut, he says.
Mr. Menino says Washington policymakers ignore cities. "It's become a suburban vote this year. Cities don't have voter power," he asserts.
Respondents to the NLC survey listed four factors that negatively affect city finances: federal and state mandates, city infrastructure needs, escalating city employee health-care costs, and the local economy.
Municipal leaders fault the federal government. Not only are cities burdened by decreasing federal aid, but they also face new federally mandated program costs as well.
Such federal mandates include affordable housing and environmental programs, as well as community development programs.
The federal government mandates these programs and then, in effect, says: "Well if you're not paying for it, see you in court, Charlie," the NLC's Arndt says. Pass mail-order tax
Washington policymakers could help cities through legislation, Arndt adds.
He suggests Congress could, under a Supreme Court ruling earlier this year, pass legislation allowing cities to collect sales taxes on mail-order purchases.
"This would be something that would generate sorely needed revenues," he says.
Besides making cutbacks, cities are also working to improve efficiency.
Over half of the largest cities surveyed cited improvements in productivity, while more than 1 in 4 of the smaller cities and towns surveyed cited productivity gains. Efficiency measures needed
Efficiency measures include reallocating resources, contracting out services, improving record-keeping, and combining departments.
The city of Coon Rapids, Minn., for example, saved $14,000 by reorganizing personnel, while the city of Ogden, Utah, saved $35,000 by improving budget and finance reporting.
Survey results were received from 35 of the 55 largest US cities and half of the 451 cities with populations between 50,000 and 300,000.
The survey also included responses from a random sample of cities with populations of 10,000 to 50,000.