Is the Worst of the Recession Ahead for City/Municipal Budgets?
By: Steve Grumm
City/municipal funding is often an important piece in the public interest funding pie. In Philadelphia and Seattle, for instance, the municipal governments fund public defense programs. Legal services organizations rely on city grants and other collaborative funding efforts to serve clients. So it’s worth noting that, even as the recession has officially ended, the worst may lie ahead for city budgets. The Washington Post explores looming budgetary woes for city governments:
The nation’s housing crisis is five years old, but for local governments across the country, the worst of the reckoning might only now be at hand.Because of the time it often takes for property assessments to reflect falling home values, the bust that began in 2007 has just begun to ravage tax revenues in communities from coast to coast. The problem is unlikely to subside soon. …
State governments, which rely heavily on sales and income taxes, saw massive hits to their bottom lines early in the crisis as unemployment skyrocketed. But those revenues have begun, ever so slowly, to recover.
Meanwhile, many local governments weathered the early years of the financial crisis in part because the property tax revenues they rely upon so heavily held steady or actually increased as a result of assessments that still reflected inflated prices. Many municipalities are now being forced to recognize the collapse in home prices and the shrinking tax base that comes with it. At the same time, they are seeing state and federal aid dry up.