Chattanooga clearly was not alone in the recent struggle to make a budget that would keep it out of the red again, and allow some improvements in vital services. Nearly every city in the country is still engulfed in the deep wake of the Great Recession – and the concomitant fall in housing and property values that underpin their tax structures.
A new report by the National League of Cities, in fact, found that while many cities are already in their fourth consecutive year of declining revenue, many are now facing even more dire financial straits from declining property values that are just now being posted following periodic reappraisal programs.
The league’s survey of 338 cities found that the burst of the housing bubble, now made concrete in new property appraisals, will cost them an additional 1.8 percent in lower property tax revenue.
Two-thirds are already doing what Chattanooga and some other local governments have done. They’ve cut spending by deferring maintenance and infrastructure work and capital improvements. A third of the city finance officers contacted by the league said they also laid off workers; a fourth said personnel cuts included public safety programs like fire and police departments.
Christopher Hoene, one of the authors of the league’s report, told The New York Times that the harsh economic trough of the recession had substantially more impact than most downturns on municipal budgets. Typically, he said, cities’ sales tax revenue begins to recover by the time property tax collections dip, but in this case that hasn’t happened.
“This time around, the recession has been deep enough that we have the two major sources of revenue down at the same time,” he said.
Given current financial conditions in most cities, the report said, the effects of the recession – low consumer confidence, high unemployment and a subpar real estate market – are likely to continue through 2011 and beyond.
The report bears out what nearly all economic studies suggest: that the depth and economic wreckage of the recession, in closed businesses and permanently lost jobs, will not be overcome without more vigorous efforts at stimulus and temporary job creation. Both are necessary to build consumer momentum and spur the creation of new and permanent manufacturing jobs.
Cutting federal spending and unemployment aid, and doing nothing to prompt job creation, will only perpetuate the cycle of deflation and greater long-term joblessness. Voters who fail to recognize the unique straits in which the Great Recession has put the country, and who thus vote mindlessly in November against “government” and for Republicans who have no plan, will do themselves a lasting disservice.