Cash-strapped cities look to cash-strapped states
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Think budget decisions of cities and towns hundreds, or even thousands, of miles away don’t affect you? Think again.
Like their federal and state counterparts, many municipalities are facing large budget deficits. While some are making the tough choices necessary to get spending under control, The New York Times notes that “a growing number of towns, cities and other local governments” are simply going to their state governments for short-term bailouts. In Pennsylvania alone, 20 cities or small communities will ask the state government for additional funding. In Michigan there are 37 cities that will seek similar assistance; New Jersey has seven; and California, Illinois and Rhode Island each have one.
As reported by The Times, the states, which face cumulative deficits of $84 billion for fiscal year 2011, and another $72 billion in projected deficits in 2012, will eventually have to go to the federal government for help. Those pleas will be on top of the $26 billion in aid to states Congress passed in August.
Unlike most states and localities, the federal government doesn’t have to balance its budget. Thus, it simply adds its yearly deficit onto the nation debt. So while state governments are trying to keep their cities and towns out of bankruptcy court, in the end, the costs for the particular cities and states which rely on bailouts to maintain spending they can’t afford just gets passed on to the citizens of other cities and states – via federal taxes.
It’s a vicious cycle that won’t be undone until all levels of government make real decisions about how to deal with their overspending. As The Times explains, “If states let towns keep borrowing, without acknowledging the magnitude of the towns’ existing debts — like the pensions they owe retired public workers — they might never solve their problems and just keep drawing on the states.” Dan Miller, an accountant in Harrisburg, Penn., told The Times, “It’s like throwing you a life preserver but never pulling you into the boat.”