Economy Affecting Local Governments and Working Families

Local governments and working families are feeling the crunch of the economic crisis and could be in for some long term pain according to two recent reports. The National League of Cities (NLC) recently released it annual survey of city finance officers which concluded that municipalities’ fiscal condition has decreased dramatically in 2008.

Working in partnership with the 49 state municipal leagues, NLC serves as a resource to and an advocate for the more than 19,000 cities, villages, and towns it represents. More than 1,600 municipalities of all sizes pay dues to NLC and actively participate as leaders and voting members in the organization. The City Fiscal Condition Survey is a national mail survey of finance officers in U.S. cities conducted in the spring of each year. This is the 23rd edition of the survey.

The findings included the following:

Two in three city finance officers report their cities are less able to meet the fiscal needs in 2008 than in the previous year;

Final tallies for 2007 reveal city revenues, when accounting for inflationary factors, remained flat while spending increased by three percent;

As finance officers look to the close of 2008, they predict revenues and spending will decline in inflation-adjusted terms, with revenues decreasing 4.3 percent and spending decreasing by 1.5 percent;

Property tax revenue increased by 6.3 percent in 2007, but is predicted to decline by 3.6 percent by the close of 2008;

Spending pressures stem from rising costs, such as energy and fuel prices, public safety and infrastructure needs, and employee-related costs for health care, pensions and wages;

To balance annual budgets and meet ongoing spending needs, many cities are increasing fees and charges for services; and,

Ending balances, or “reserves,” remain at high levels and will provide a buffer against the current downturn.

Since an overwhelming number of local governments depend on property taxes to raise revenue the current housing crisis has affected local revenue. At the time of the survey, most respondents stated they did not have information documenting the impact of foreclosures in their communities; however, 40 did respond and stated the rate of foreclosure increase by 60 percent from 2006 to 2008. In addition to property taxes, some local governments rely on sales taxes or local income taxes. Most respondents expect revenues to decline from these sources as well. Many of the respondents stated the impact of the national economic conditions will still be felt by local governments in 2009 and 2010.

The current economic climate is also adversely hurting working families. The Working Poor Families Project, Working Hard, Still Falling Short, which states far too many families are working hard but still did not earn enough income to achieve economic security.

The project reviewed U.S. Census data which revealed:

1. More than one in four working families with children, a total of 9.6 million, is low-income;

2. More than 21 million children live in low-income families;

3. The number of low-income working families increased by 350,000 from 2002 to 2006;

4. Income inequality among working families increased by almost 10 percent from 2002 to 2006;

5. These families lack the earnings to meet their basic needs; and,

6. The report states public policies which promote education and skills development, quality jobs, health care and family leave are effective ways to foster family economic security.

The report also seeks to refute myths about low-income families:

1. Seventy-two percent of low-income families work;

2. The average annual work effort for low-income working families is 2,552 hours, roughly one and one-quarter full-time jobs;

3. Fifty-two percent of low-income working families are headed by married couples;

4. Sixty-nine percent of low-income working families have only American-born parents;

5. Eighty-nine percent of low-income working families have a parent between the ages of 25 and 54;

6. Forty-three percent of low-income working families have white, non-Hispanic parents; and,

7. Twenty-five percent of low-income working families receive food stamp assistance.

The report states the federal government should make a commitment to pursue four goals:

1. To increase the number of working adults enrolled in and completing education and skills development programs;

2. Increase the number of good jobs and increase wages and benefits for low-income workers;

3. Increase economic opportunities for low-income families; and,

4. Regularly assess the challenges facing this group and how the government is responding to their needs.

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