Cash-strapped cities look to cash-strapped states

October 7, 2010

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.”

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9 Responses to Cash-strapped cities look to cash-strapped states

  1. Chris says:

    Yes, but…… The USA is in a TEMPORARY situation that took years to create and will take a few years to fix; and our local governments are RAISING TAXES, and CUTTING SERVICES in their efforts to make up for the lack of tax income due to corporations laying off millions of people. BUT, what happens when the UE goes back to the normal of 5.5% ? Will we rehire and reinstate the Services, and will we REDUCE the taxes? The answer can be found in the Ronald Reagan years, NO…. Reagan caused a 3 to 5 times increase in state and local taxes, and these NEVER got reduced when the economy improved and returned to the pre-Reagan years…..

  2. Chris says:

    Yes, but…… The USA is in a TEMPORARY situation that took years to create and will take a few years to fix; and our local governments are RAISING TAXES, and CUTTING SERVICES in their efforts to make up for the lack of tax income due to corporations laying off millions of people. BUT, what happens when the UE goes back to the normal of 5.5% ? Will we rehire and reinstate the Services, and will we REDUCE the taxes? The answer can be found in the Ronald Reagan years, NO…. Reagan caused a 3 to 5 times increase in state and local taxes, and these NEVER got reduced when the economy improved and returned to the pre-Reagan years…..

  3. Chris says:

    Yes, but…… The USA is in a TEMPORARY situation that took years to create and will take a few years to fix; and our local governments are RAISING TAXES, and CUTTING SERVICES in their efforts to make up for the lack of tax income due to corporations laying off millions of people. BUT, what happens when the UE goes back to the normal of 5.5% ? Will we rehire and reinstate the Services, and will we REDUCE the taxes? The answer can be found in the Ronald Reagan years, NO…. Reagan caused a 3 to 5 times increase in state and local taxes, and these NEVER got reduced when the economy improved and returned to the pre-Reagan years…..

  4. Mike says:

    There is nothing temporary about 3 Trillion Dollars. In fact, it is fairly PERMANENT! And it didn’t take only a few years, it took 2 decades of unchecked deficit spending (Bush Jr AND Obama). Unfortunately, Obama doesn’t take responsibility for his share of deficit spending.

    And it will take more than a few years to fix. Raising taxes, and cutting services are only a small fraction compared to the enormous national debt. $3 Trillion. TRILLION. You do realize that is 12 zeros after the 3, right?

    If the the two presidents didn’t engage in such reckless deficit spending, we very well could have made a rebound by now. Instead, we are entrenched DEEPER in debt, a debt that is nearly equal to the amount of our Gross National Product. Stop the fiscally irresponsible spending!!

    Personally, I wouldn’t want to go back to the pre-Reagan era. Do some research and find out!

  5. Mike says:

    There is nothing temporary about 3 Trillion Dollars. In fact, it is fairly PERMANENT! And it didn’t take only a few years, it took 2 decades of unchecked deficit spending (Bush Jr AND Obama). Unfortunately, Obama doesn’t take responsibility for his share of deficit spending.

    And it will take more than a few years to fix. Raising taxes, and cutting services are only a small fraction compared to the enormous national debt. $3 Trillion. TRILLION. You do realize that is 12 zeros after the 3, right?

    If the the two presidents didn’t engage in such reckless deficit spending, we very well could have made a rebound by now. Instead, we are entrenched DEEPER in debt, a debt that is nearly equal to the amount of our Gross National Product. Stop the fiscally irresponsible spending!!

    Personally, I wouldn’t want to go back to the pre-Reagan era. Do some research and find out!

  6. Mike says:

    There is nothing temporary about 3 Trillion Dollars. In fact, it is fairly PERMANENT! And it didn’t take only a few years, it took 2 decades of unchecked deficit spending (Bush Jr AND Obama). Unfortunately, Obama doesn’t take responsibility for his share of deficit spending.

    And it will take more than a few years to fix. Raising taxes, and cutting services are only a small fraction compared to the enormous national debt. $3 Trillion. TRILLION. You do realize that is 12 zeros after the 3, right?

    If the the two presidents didn’t engage in such reckless deficit spending, we very well could have made a rebound by now. Instead, we are entrenched DEEPER in debt, a debt that is nearly equal to the amount of our Gross National Product. Stop the fiscally irresponsible spending!!

    Personally, I wouldn’t want to go back to the pre-Reagan era. Do some research and find out!

  7. Christopher Boyce says:

    Austerity or outright bankruptcy are the only options for many governments. At any rate, there should be no federal bailout without sacrifice on the part of public employees and constituents; otherwise, it’s just delaying the inevitable.

  8. Christopher Boyce says:

    Austerity or outright bankruptcy are the only options for many governments. At any rate, there should be no federal bailout without sacrifice on the part of public employees and constituents; otherwise, it’s just delaying the inevitable.

  9. Christopher Boyce says:

    Austerity or outright bankruptcy are the only options for many governments. At any rate, there should be no federal bailout without sacrifice on the part of public employees and constituents; otherwise, it’s just delaying the inevitable.

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