Special Report

Eight States Slashing Local Funding

Funding from local governments’ two biggest sources — state aid and property taxes — fell for the first time since 1980, according to a report released last week by the Pew American Cities Project. The decrease in funding from these two sources has forced many local areas to cut expenses significantly. Relying on the Pew report, 24/7 Wall St. identified eight states slashing local funding to cities, towns, counties and school districts.

24/7 Wall St.’s independent analysis of data from the Center on Budget and Policy Priorities and the U.S. Census Bureau indicates states that cut funding the most had budgets that were particularly hard hit during this period. Some suffered budget shortfalls that forced them to cut spending. Others experienced drops in tax revenue that prompted the same response.

Of the eight states with the highest cuts in local funding, four experienced among the steepest declines in tax revenue. Wyoming, which had the worst decline in tax revenue, fell a whopping 21.9% during the period.

Budget shortfalls were among the worst in many of these states. Arizona, California and Nevada, among the eight states cutting local budgets, had the first, second and third highest budget shortfalls as a percentage of their general fund. Arizona faced a 65% shortfall in 2010.

These budget shortfalls, according to Robert Zahradnik, research director for the Pew American Cities Project, forced states to make deep budget cuts, hitting local governments — and their employees — particularly hard. According to the report, the number of employees on local government payrolls fell in 45 states between 2008 and 2011.

In several of the states with the largest cuts to local governments, these declines were the most pronounced. California, Arizona and Nevada were among the 10 states with the largest drops in government employees per person. In Nevada, the number of government employees fell by 15.4%, the most in the country.

While police and fire departments and other areas of local budgets were hit hard as well, no area suffered more than school districts. Zahradnik explained, “about half of the reduction of the local government jobs were in the education sector, and that’s not entirely surprising because that’s where the staff and the money are for the local government.” This is a notable departure from standard practice during a downturn in the economy. Usually, Zahradnik noted, local governments will leave education off the table because it is something the public wants to protect. In the great recession, however, there simply were no other options.

24/7 Wall St. identified the eight states with a 5% or greater decrease in state aid to cities, towns, counties, and school districts between 2009 and 2010 based on state funding to regional governments and government employee data from the Pew American Cities Project report, “The Local Squeeze: Falling Revenues and Growing Demand for Services Challenge Cities, Counties, and School Districts.” The report relies on the latest available Census Bureau information on state budgets. It also calculated the change in government workers between December 2008 and December 2011 using Bureau of Labor Statistics data on government employee figures, as well as population estimates, also from the Census Bureau. Separately, 24/7 Wall St. obtained state budget shortfall data from the Center for Budget Policies and Priorities, as well as changes in tax revenue between 2009 and 2010 from the Census Bureau.

These are the eight states slashing local funding the most.

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