Municipal fiscal woes can lag behind national economic downturns by as much as several years, as periodic property value assessments reduce property values and drag down property tax revenues. So for municipalities across the United States, recession-mindedness is still standard operating procedure. Some U.S. cities have already finalized their fiscal year 2012 budgets, and many others are still moving through that process. But nearly all municipalities have found that the fiscal woes continue, and are forced to make hard choices.
A vast majority of U.S. cities have dealt with or are dealing with sharply reduced resources in their 2011-12 budgets, according to Chris Hoene, director of research at the National League of Cities, an organization that advocates for cities and towns in Washington. "The depth of the recession has affected nearly every city. It's all just a matter of scale," says Hoene. "The main sources of local revenue are property and sales taxes, and the housing market crash is having a dramatic impact on local property tax revenues. And retail activity around the country, people consuming, is still fairly stagnant, so we're not seeing much growth in sales tax revenues," he adds.
Unlike the federal government, which is allowed to run deficits year after year, most U.S. cities are required to balance their budgets. This is determined by state law, and the only state that doesn't require a balanced budget is Vermont, according to the National Conference of State Legislatures (though other sources count Wyoming, North Dakota, and Alaska in this group as well).
Here is a look at 10 U.S. cities facing fiscal challenges, as well as the myriad ways they are keeping afloat despite sizable budget gaps.
With his recently passed fiscal year 2012 budget, Albuquerque Mayor Richard Berry closed a projected $40 million shortfall. The most recent budget did not increase taxes; rather, the budget cut costs in numerous other ways, including the permanent elimination of 149 vacant positions. Also, by renegotiating health care services and awarding those services to a single provider, the city saved over $4 million for fiscal year 2011-12.
On his first day on the job in May, Mayor Rahm Emanuel authorized $75 million in spending cuts. Currently, the Windy City faces a $31 million deficit. Just this week, Emanuel sent a letter to city employees explaining that his office had identified $20 million in savings, and that the remaining gap could be addressed with workplace reforms, like increasing the work week from 35 to 40 hours and reducing overtime pay from double to time-and-a-half. However, the mayor and labor unions have not been able to agree on those reforms, and the letter placed the blame squarely on unions: "By adopting these workplace reforms we can save jobs but reforms have not been agreed upon. Thus, I must begin the process of laying off up to 625 city workers."
When Detroit Mayor TK Bing presented his budget proposal in April, the city faced an accumulated budget gap of $208 million. The $3.1 billion budget that passed, including $1.2 billion in general fund spending, went into effect on July 1 and cut the city's accumulated deficit by $50 million, using equal parts revenue increases and spending cuts. One way the city aims to increase revenue is to work with the state to identify businesses that had not been paying the city income tax, an initiative with the potential to generate $49.5 million over the next five years.
Houston's fiscal year 2012 budget went into effect on July 1 and included layoffs of more than 700 of the city's 21,000 workers as part of closing a budget deficit that had been projected at $130 million. Budget cuts also slashed the police department's fuel budget by 75 percent, meaning police helicopter operations have been reduced from 20 or more hours daily to three.