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Fiscal tensions tighten around city budgets for third year running; NLC leaders urge national focus on local economic health.

The financial health of a majority of U.S. cities and towns remained under stress for the third consecutive year, the National League of Cities reported last week. This despite an army of productivity improvements, budget adjustments, new revenue measures and other actions taken to ameliorate local conditions.

More than half of the 688 cities responding to NLC's annual survey of city fiscal conditions said their current general fund expenditures would exceed revenues this year. The previous two years recorded a similar indicator of budget stress.

Measured in per capita amounts, the survey found municipal revenues growing by less than one percent and expenditures growing by more than two percent. Both figures fall below the national inflation rate of 3.3 percent, an indicator that many local governments are reducing services or putting off investments to repair, replace or maintain their equipment or facilities.

In cities between 100,000 and 300,000 population, revenue and expenditures were both expected to shrink this year by more than one percent from 1992 levels Speaking at a news conference in Washington, NLC's top leaders described the survey findings as evidence that a broad-scale economic recovery is not occurring in the United States and that a sound, longterm plan for national economic recovery is needed.

"Local economies are still straggling, and the sputtering weakness of our national economic indicators is the sum-total of those local conditions," said NLC President Donald M. Fraser, mayor of Minneapolis. "A national economic recovery depend upon actions that will serve to strengthen our local economies. They are the building blocks." "Congress returns next week at a key crossroads in deciding a strategy for deficit reduction and long-term investment in America's future. It is not an 'either-or' choice, and it is essential that our congressional leaders keep that in mind," Mayor Fraser said.

"In February, President Clinton properly recognized that we face fiscal, physical and human deficits. The most recent national economic indicators make clear the importance of taking steps not just to reduce the deficit and interest on borrowing rates, but also to provide meaningful jobs and opportunities in our communities.

"The National League of Cities has consistently urged an approach that combines rigorous and sustained deficit reduction with sorely needed investments to support economic recovery and the transition to a competitive global peacetime economy. Neglecting either of these priorities will leave our nation and its cities less able to make real and lasting progress.

"These are not fend for yourself issues. They are among the most difficult challenges that we, as a nation, must face together--to rebuild our nation's economic strength and reshape our national priorities," Mayor Fraser said.

Budget officials in two-thirds of the cities and towns responding to the survey said their communities were less able to meet their fiscal needs in 1993 than they were a year ago. Looking ahead, nearly 72 percent said they anticipated the same to be true in 1994.

As a result of the recurring revenue shortfall, the financial reserves maintained by cities to deal with contingencies and cash flow were expected to shrink by nearly 10 percent. Nearly 10 percent of the cities said their ending balances would be less than one percent of the general fund budget, leaving many communities with little or nothing to carry over.

"Along with continuing fiscal stress, the survey also found that local governments cannot, by themselves, deal with some of the major causes of their problems," said NLC First Vice President Sharpe James, mayor of Newark, N.J.

"In trying to do their jobs and make ends meet, city officials said that unfunded federal and state mandates, as well as cutbacks in support for programs carried out by local governments, were among the most significant adverse factors affecting their budgets."

The survey found that intergovernmental aid to cities declined by nearly 20 percent in constant dollars since 1980. While federal cuts were greatest during the 1980s, changes in state aid were reported as having a more adverse effect in the past year.

"This tells us that a lot of people know how to pass the buck, but not nearly as many feel obligated to provide some bucks to do the job. They may think the tooth fairy is going to appear, but in the meantime, the rest of us have a budget to balance," said Mayor James.

"Budget responsibility and accountability should apply at all levels of government and not be demanded of some and be done simply at the whim or convenience of others," Mayor James said. "It's not just something for the people at City Hall on Main Street; it's something for the folks on Capitol Hill and in our state capitals, too. And I'm talking about responsible fiscal policy--not just shifting the burden down the intergovernmental pipeline."

"Cities and towns are balancing their budgets because they have to, but the job is getting harder and harder," said NLC Executive Donald J. Borut. "They are finding ways to increase productivity, combine operations and raise new revenues, but even so, many are drawing more heavily from reserves, and others are continuing to cut back service levels."

Current expenditures were expected to exceed revenues this year in 53 percent of all cities responding to the survey. Western (62 percent) and midWestern (58 percent) cities were both more likely to face this problem. Nearly 20 percent of the communities said the gap between revenues and expenditures this year would be greater than 5 percent.

The survey found that 72 percent of the communities reduced the growth rate of their budgets in 1993, 55percent reduced capital spending, and 52 percent increased user lets and other charges. Actions taken by nearly 40 percent of the communities included reductions in the number of city employees, contracting out services, improvements in productivity and hiring freezes.

Neatly 30 percent increased property tax rates, and 25 percent enacted new fees or charges. Cost-sharing agreements were developed by 23 percent of the communities, and 17 percent said they reduced city service levels.

Among the productivity improvements noted by survey respondents were actions such as improvements in solid waste collection saving $8 million in Jacksonville, Fla., and the consolidation of motor vehicle pools to save $2.8 million in Corpus Christi, Tex., to purchases of resale power that saved $100,000 in Altus, Okla., and developing advanced planning and construction schedules that saved $250,000 in Southfield, Mich.

Shared service initiatives included a joint water system that saved $5.75 million for Cary, N.C., and a program to share community and school athletic fields that saved $2.3 million Irvine, Calif.

Specific reductions in city services described by survey respondents included street and building maintenance and repair, library and recreation center cutbacks and closings, reductions and changes in solid waste collection, layoffs and hiring freezes, public transit reductions, furloughs and office hour cutbacks, reductions in courts and elimination of child care services.

"These budgetary actions and. procedural changes demonstrate what the real world of difficult choices is all about," said Borut.

"It isn't easy. It isn't gimmicky. It isn't painless. But it's honest, it's responsible, and it gets the job done. It's a lesson for Congress to follow, and we are now at a crucial time for that lesson to be applied," Borut said.

"The 1992 elections were a referendum for change, and it is time for those changes to be brought forward, constructively debated and acted upon without the obstructionism and partisanship that crippled the president's economic stimulus plan," Mayor Fraser said.

"To borrow from a line used by Lee Iacocca, it's time in Washington for people to lead, to follow, or to get out of the way. We and our citizens are tired and fed up with gridlock."

Years of prudent financial management have provided most communities with a relatively sound footing to deal with periods of fiscal stress.

The NLC survey was conducted by Dr. Michael A. Pagano, professor of political science at Miami University, Ohio, who also wrote the report. The university's Center for Public Management and Regional Affairs carried out the data management tasks.

Survey responses were received from 42 of the 51 largest U.S. cities with populations above 300,000 and from nearly haft of the cities with populations between 50,000 and 300,000. From a random sample of cities with populations between 10,000 and 50,000 to which the survey was sent, the response rate was 39 percent.
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Title Annotation:National League of Cities
Author:Arndt, Randy
Publication:Nation's Cities Weekly
Date:Jul 12, 1993
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