Local Governments Struggle Even As Private Sector Recovers

Though private sector employment shows signs of recovery, the National League of American Cities predicts 500,000 municipal workers will lose their jobs over the current and coming fiscal years. The Economist considers solutions.
November 23, 2010, 10am PST | Lynn Vande Stouwe
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According to The Economist, decreased revenues from property and sales taxes and increased costs from boom time pension promises based on "wildly unrealistic investment assumptions" have left many cities running budget deficits. The Economist says most municipalities eventually turn to staff cuts to bridge the gap.

A recent forum by the Miliken Institute suggested other measures local governments might take, says the Economist:

"Municipalities should adopt better accounting standards, dole out saner pensions and start rainy-day funds-all of which might help in recessions yet to come. They might put fewer people in county jails or broaden their revenue base by extending sales taxes to services (which many currently exempt). They might even merge with other municipalities to eliminate duplication of services...The other option is to ask the federal government for help, though given the mood of the electorate regarding stimulus and bail-outs, that would be controversial."

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Published on Thursday, November 18, 2010 in The Economist
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