From Layoffs to Delayed Repairs, Governments Tighten Belts : LUSENET : Grassroots Information Coordination Center (GICC) : One Thread

Apr 19, 2001

By Robert Tanner The Associated Press

Signs of the times: Saginaw, Mich., wants the YMCA to take over city recreation programs. Iowa lays off 600 state workers. Huntington, W. Va., thinks it can save money by living with flat tires.

As the U.S. economy falters, more states and cities are revisiting their budgets to cut spending, scale back plans, or just try to keep up with their own rapidly changing finances.

At least 15 states have cut their current budgets to make it to the end of the fiscal year in June. And eight states, acknowledging the bad economic weather, are dipping into "rainy day" funds to pay salaries and keep programs running.

"Those of us who've been around for a while learned when you see this coming, you better grab it by the neck and make your cuts," said Ohio Senate President Dick Finan, a 29-year veteran of the statehouse. "You can't wait until the economy turns around."

Ohio's weakening economy has spurred two rounds of budget cuts in the past four months. At the same time, lawmakers are struggling with an Ohio Supreme Court ruling from last year that ordered the state to increase public school spending.

Several cities - even those not yet suffering - are preparing for rougher times. New York City's Mayor Rudy Giuliani, though projecting more than $2 billion in surpluses, ordered agencies to prepare possible cuts of up to $500 million.

Others struggling include Hartford, Conn., which must cover a $30 million gap in next year's budget; Huntington, W.Va., with $2 million in unpaid bills; and Saginaw, Mich., with a $1.8 million deficit.

"We've gotten a lot smaller, a lot poorer," said Bill Bailey, a Saginaw spokesman who said the city could save $100,000 if the YMCA takes over recreation. "If we can find better, cheaper, faster ways to deliver services, we're doing it."

Jack Thornburgh, Huntington director of administration and finance, said the city may need to freeze all spending, even to the point of not buying new tires for city vehicles when old ones go flat.

Still, the budget blues haven't hit everyone. The National League of Cities found most officials were still optimistic about the economy when polled for a new survey finished last week.

Only about one-sixth of 348 cities reported they had cut spending by March; one-sixth also reported they reduced their revenue expectations. Three out of four, however, expected their economic outlook to stay the same or get better.

That same patchwork of good news and bad crosses the nation. Some states, especially in the South and Midwest, have been suffering for months. Others are still doing relatively well, like New York, California and much of New England.

But the rapidly changing financial landscape has government officials and observers alike scrambling to see where, and how quickly, the pain is spreading.

The National Conference of State Legislatures, which in late December had found a slowing but still strong situation nationally, saw the need to revisit state finances just two months later. Financial turmoil was the inspiration for the city league's special midyear survey, too.

"It looks like this is becoming more widespread than we originally believed," said Corina Eckl, who tracks state finances for NCSL.

The group's first survey in December found 44 states confident that their revenue projections were solid. Returning two months later, only 31 states remained confident.

And after months of weak sales tax performance, governments are now bracing to see what April's income taxes bring to city and state governments. Some hope for one more boost of good news from last year, while others wait to see if federal intervention - like this week's interest rate cut - helps.

"After April, things are going to get worse," said Elizabeth Davis, a senior analyst with the Nelson A. Rockefeller Institute of Government at the State University of New York in Albany.

"Next April is going to be nasty," she said. "All of a sudden it's going to be a lot less fun to be a state legislator or a governor."

The past few months have brought the weakest state tax revenues in seven years, with 4 percent growth, she said.

For many governments now putting together annual or biennial budgets, the uncertainty means "no-growth" plans with increases of 2 percent or less, Eckl said. With such tight budgets, inflation basically erases any gains.

"Everyone knew that the day would come," said Marcia Howard, who tracks state economies for Federal Funds Information for States. "People were caught a little off guard at the speed with which it happened. But that's how these things happen."

-- Martin Thompson (, April 19, 2001

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