Tough Fiscal Conditions for States and Cities Seen in July
July 1 marked the beginning of the fiscal year for most states and several local governments. Due to the current declining economic conditions, this will result in several cutbacks in state and local governments.
Currently, 29 states are facing a combined $48 billion shortfall in fiscal year 2009 and that three more states will face shortfalls in fiscal year 2010. This shortfall could lead to declining state sales tax revenues, increased pressures stemming from local property tax-housing revenue declines and the prospect of income tax revenue decreases if the economy continues to weaken.
Since states, like cities, can’t run annual budget deficits, the gaps will have to be closed by cutting spending, raising taxes, drawing down reserves, or some combination of the three. For cities, periods of state fiscal difficulty often result in cuts in state revenue or state takeaway of local revenues. This was the case in the years following the brief recession in 2001. At the time, the effects of these state actions were mitigated as many local governments experienced a boom in property tax revenues stemming from growth in housing values.
A new report, “Cities and State Fiscal Structure,” published by NLC suggests that a different set of state responses are in order this time around. The report, "Cities and State Fiscal Structure," outlines the different ways that state governments structure local revenue authority and capacity.
The report discusses the controversial idea of authorizing local taxing power and explains the possible drawbacks of property tax cuts. It also discusses the importance of a stronger federal response, such as a stimulus package, to ensure that critical services are provided and assist struggling residents during these challenging times.
For more information on green building legislation, contact Carlos Gutierrez at 800-368-5242 x8242.
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