As States Cut Aid, Localities Learn to Do Less With Less

By Rob Gurwitt, Special to *Stateline, The Pew Center on the States

You can get accustomed to hard times, and over the last few years Ohio’s towns and cities learned to scrape by. Faced with the long-term decay of Rust Belt manufacturing and the financial travails of homeowners, banks and businesses of all sorts, they watched their tax revenues shrink and did their best to adjust. They deferred road maintenance. They laid off employees and delayed new hires. They reorganized departments, merged positions, and generally looked for any means of saving a few dollars.

Then, this past summer, the state decided to step in. Only not with a helping hand.

“Local governments need to change the way they do business,” Republican Governor John Kasich announced. And in the budget that took effect July 1, he and the GOP-controlled legislature made sure that if towns, cities and counties hadn’t already changed their ways during the Great Recession, they would have no choice from here on out.

The state’s leaders cut what is known as the Local Government Fund — a Depression-era vehicle through which the state sends a portion of sales and income taxes back to the communities that provide them — along with two other funds local governments relied on heavily. In the case of the Local Government Fund, a quarter of the $665 million handed out last fiscal year will remain in Columbus this fiscal year; next year it will be half. That move is expected to save the fiscally strapped state some $400 to $500 million over the biennium.

The state’s gain, though, is local governments’ loss. In the words of Tim Riordan, the city manager of Dayton, “We took it on the chin.”

At least local government aid in Ohio merely got lopped in half. In Nebraska, Republican Governor Dave Heineman and the legislature erased state aid to cities and counties entirely. That move, which helped the state close its budget gap to the tune of $44 million over two years, blew a $3.3 million hole in Omaha’s municipal budget this year and cost Lincoln $1.8 million — not devastating for Lincoln, which has a $140 million general fund, but part of an overall revenue decline that has forced it to raise taxes and fees.

Of course, even cities and towns in Nebraska might look with compassion on their counterparts in Michigan. Since 2000, that state has cut almost $5 billion in spending that used to go to local units of government. There, too, cities have cut back on services, laid off workers, put off hiring, merged departments and positions, and renegotiated labor contracts. But now, in a state where local governments have long had only limited means of raising revenue, the GOP-led legislature is considering repealing the personal property tax, about 80 percent of which goes to local governments and the rest to school districts. This move could cost Detroit some $51 million, and other cities and towns anywhere from 17 to 57 percent of their revenues. “I don’t think there’s a good sense in Lansing for the impact of what they’re doing to local government,” says Gretchen Driskell, the mayor of Saline, a town of about 9,000, south of Ann Arbor. “We’re getting by, but I just don’t know how much longer we can go on.”

Plenty of other states this year, including Delaware, Maryland, New Hampshire, New Jersey, New York, Virginia, Wisconsin and Wyoming, cut direct state aid, revenue sharing, or funds for specific local services. That’s on top of big local-aid cuts in other states over the past few years. “Over the last three or four decades, every time there’s been a recession and states have made cuts, those aid programs have taken the hit,” says Chris Hoene, director of the Center on Research and Innovation at the National League of Cities. “Often they were replaced or backfilled, but then, over time and with the next recession, that reimbursement piece has gotten yanked.”

Pages: 1 · 2

News and Issues, Moving and Retirement, Issues, Politics, Government, Senior Women Web, Sightings

As States Cut Aid, Localities Learn to Do Less With Less

More Articles