New Pew report shows local governments struggling

For the first time since 1980, both state aid and property tax revenues are declining at the same time in the U.S., delivering local governments a “one-two punch,” according a report out today from The Pew Charitable Trusts’ American Cities Project. “The blow comes as demand for government services rises, driven by stubborn unemployment rates, population growth, and other factors.”

To deal with reduced revenue, some local governments have raised taxes and fees, but most have cut spending, said the report, called “The Local Squeeze.” They’ve shortened school days, privatized or consolidated departments and reduced the frequency of services like trash collection. Ground Level reported on this same predicament playing out in Minnesota last year, in our project “Forced to Choose.”

The Pew report does take a state-by-state look at several factors, including reductions to state aid. This map shows the Minnesota is on the high end of the national spectrum.

pew state aid map.jpg

One way local governments reduced their budgets was to cut staff. “Through a combination of layoffs, attrition, hiring freezes, and furloughs, local governments shed half a million jobs, or 3.4 percent of their overall workforce, between September 2008 and December 2011, with half of this loss coming from the education sector,” said the report.

Minnesota fared better than most in this regard, shrinking its local government workforce by just under 4 percent per resident between late 2008 and 2011, while the national average was 5.6 percent.

The upshot is that while some governments are relieving financial pressures through greater efficiencies and use of technology, others have spent emergency funds or sold assets. Hard times have exacerbated debt problems and made it tougher to borrow.

“Their decisions may produce temporary fixes or permanent changes,” said the report. “Either way, the impact of the local squeeze will be felt for years to come.”

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