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John Petro

Cities Bearing the Brunt of State Budget Deficits

In a move that will surely delay the prospect of economic recovery, California is diverting $4 billion from local government coffers in order to help plug the state's $26.3 billion budget deficit. However, the drama playing out in California resembles the plight of cities across the country as they scramble to continue providing essential services in the face of rapidly declining revenue. Although California's budget provisions are the most blatant example of states passing the burden onto local governments in order to cover their own budget gaps, my colleague Harry points out that cities are also being shortchanged when it comes to stimulus spending.

Unfortunately, the sacrifices that statehouses are asking city and county governments to make will only prolong the country's economic slump and hinder long-term growth. California is planning on keeping $900 million in gas tax revenue from cities and counties, keeping construction crews out of work and prolonging critical repair work that will lead to deteriorating transportation infrastructure. The state is also looking to keep $1.3 in property taxes that was set to go towards local redevelopment agencies. While most private construction has hit a standstill, these public-private partnerships are still supporting construction projects. In Los Angeles, this would mean putting 2,300 construction jobs at risk.

Even more troubling is the elimination of health benefits for children, the elderly, and other vulnerable populations. As Jonathan Cohn notes at The New Republic

The consequences will be kids not getting glasses to see the blackboard, missing school for toothaches, and otherwise delaying care. One ailment or accident on the playground would put families at risk of financial ruin, and needed care will be delayed or avoided altogether. Children's and other community groups don't mince words when they say that cuts at this scale mean kids will die.

The short-sightedness of these policies is breathtaking. By not properly treating illness or other medical conditions, these children are more likely to have negative educational and employment outcomes later in life. Fortunately for those living in San Francisco, the city established a program that will provide health coverage to those who will no longer qualify for public health insurance. Hopefully the city's program will be able to handle the influx of those recently kicked out of the state insurance programs. Those living in other areas of the state will not be so lucky.

The experience of California cities, as well as cities across the country, makes a compelling case for a more direct role for the federal government in urban affairs. As Harry points out, there isn't much cities can do to stave off budget cuts during recessions, the exact time when we need a stronger social safety net. But the federal government can support local governments during these times. This type of support is necessary to ensure that cities and metropolitan regions, the nation's economic engines, do not sputter out.

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Posted at 5:22 PM, Jul 22, 2009 in Urban Affairs
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