U.S. Cities Are Mired in Fiscal Woes; Study Finds a Dim Outlook, As Costs Outstrip Revenue While State Aid Dries Up
While economists have said the U.S. recession ended in late 2001, a fiscal recession continues in America's cities, according to the latest annual survey by the National League of Cities.</br></br>The survey of finance directors from 288 cities found that 63% said their cities were less able to meet financial needs during their fiscal 2004 than in the previous year. Looking ahead, 61% said their cities will be less able to meet financial needs in 2005 than in 2004. (Fiscal years start in January, July, or October depending on the city.) The survey is expected to be released today.</br></br>The financial officers blamed rising costs for employee health benefits, wages, public safety, increased infrastructure needs and employee pensions. The cities' revenues aren't keeping pace with their increased expenses. Cities' 2004 budgets predicted general-fund revenue increasing 2.6% from 2003, with general-fund expenditures expected to rise 3.6%.</br></br>"As elected officials, we can only stretch our resources so far, tighten our belts so much," says James C. Hunt, vice president of the Washington, D.C., league, which represents U.S. cities. Mr. Hunt also is a council member in Clarksburg, W.Va. "We have huge responsibilities we must address and not enough resources to support them."</br></br>Cities also cited the weak economy and insufficient state aid, reflecting the financial havoc wreaked upon states, and in turn cities, during the economic downturn. "There was a huge [income-tax] revenue burst for cities and states in the late 1990s and it disappeared with the bursting of the stock-market bubble and business capital-investment bubble," says James W. Hughes, dean of the Edward J. Bloustein School of Planning and Public Policy at Rutgers University, of New Brunswick, N.J. As a result, "most states have been in a fiscal crisis, so they have cut back or not been able to increase state aid to cities."