Washington, states ignoring needs of local governments: while local governments have borne much of the burden for stepped-up homeland security since 9/11, the federal and state governments have been reluctant to provide financial assistance.

• Author: Gaffney, Susan
• Position: Federal Focus

The fiscal plight of local governments across the United States is a tough sell in Washington these days. In the face of shrinking revenues, rising homeland security costs, and increasing demand for public assistance, one would think the case for financial assistance to local governments would be an easy one to make. In fact, many editorials and news stories over the last six months have recognized the fiscal challenges of municipalities. Yet despite the dire messages from the media and elsewhere, direct aid to local governments is about as popular as sipping hot chocolate on a sultry D.C. afternoon.

Examples of fiscal stress at the local level are abundant. Consider just a few. After Nebraska lawmakers cut state aid to counties and cities by $12.4 million, local elected officials had to choose between cutting services and raising property taxes or some combination thereof. Fremont Mayor Donald Edwards had to tell his residents that they would be forced to pay more for ambulance trips and for basic telephone service. (1) In New York, 57 of the state's 62 counties have been forced to raise sales taxes, while the City University of New York recently approved the largest tuition hike in the school's history. (2)

The recent tax package passed by Congress and signed by President Bush on May 28 was characterized as a stimulus for consumer spending and for investing in the financial markets. Despite the pleas of local government officials, however, the bill did not include financial assistance for cities and counties. While the tax package provides $20 billion in fiscal aid to state governments ($10 billion in direct aid and $10 billion for Medicare), there is no provision for passing any of this money to the front lines-to local governments.

As Congress, the White House, state legislatures, and governors cope with the budget strains at the federal and state levels, local governments continue to bear the burden of the sluggish economy on their own. A recent study by the National League of Cities predicted that state aid to cities would fall by 2.1 percent in 2003. At the same time many states are cutting funding to municipalities, some are granting them new authority to raise taxes. While the extension of local tax authority is a promising development, raising taxes is a political hot potato that may or may not solve the immediate fiscal problems of local governments. (3)

One critical area in which local spending has increased dramatically in the...