Thursday, October 14, 2010

Financial problems facing America's cities

This article from the National League of Cities caught my eye and I thought it was worth sharing.  The article reviews an annual report on the fiscal condition of America's cities.  The results are depressing:

  • 79% of the cities surveyed said they were being forced to lay off workers.
  • 69% said they had to delay or cancel capital improvement projects.
  • 25% had engaged in across the board service cuts.
  • 25% had engaged in public safety cuts.
The research brief itself painted an even more depressing picture: 9 out of every 10 cities said that 2010 was worse than 2009, with property and sales tax revenues declining.

Of course, all of us are probably thinking the same thing: how will this affect us in the Valley?  Lehigh County is proposing a tax increase this year, the first since 2005, and some tax hike seems likely.  Northampton County is currently facing a $14 million budget shortfall and serious questions remain about how that gap will be closed.  Easton will not raise their taxes this year, but will be offering early retirement incentives and furloughs.  Bethlehem and Allentown haven't released their budgets yet, though Allentown will in November.

This isn't a good time for governments, and pension burdens continue to present a serious threat to the long-term fiscal health of every governmental unit.  A recent report found that many cities, including Philadelphia, have an even greater pension liability than initially believed.  In Allentown, the minimum municipal obligation to the cities various pension funds has actually increased over 130% in the past five years.  That is an astounding number.

How are governments supposed to solve these problems?

1 comment:

Anonymous said...

With the pension deals, they need to go to defined contributions! Nowhere else in society can you get such a sweet deal like these municipal employees have.
Also, there needs to be a change in philosophy by mayors, councilpersons, etc. We need to elect more fiscally conservative people to these offices who will have the guts to make significnat changes. And elect councilpersons that challenge the executive branch rather than being a rubber stamp for the executive (Allentown's council is a prime BAD example).