Financially-strapped cities cut jobs, services

City revenues are projected to decline and one of the many reasons for this is a drop in property tax collections. To make up for this decline, cities are cutting many jobs, cancelling projects, cutting services and modifying healthcare benefits for employees.

By Marina Landis
September 27, 2011: 1:45 PM ET
CNN Money

NEW YORK (CNNMoney) -- Belt-tightening continued in cities across the United States in 2011, as fiscal crunches forced local governments to cut back.

City revenues are projected to decline 2.3% by the end of 2011, according to a new report from the National League of Cities released Tuesday, marking the fifth straight year of declines.

One of the main factors contributing to the decline in revenue is a drop in property tax collections, which are projected to fall by 3.7% in 2011, the second straight year of declines. Last year's drop of 2.0% was the first year-over-year decline in city property tax revenues in 15 years.

To make up for the shortfalls, cities reported numerous job cuts, canceled infrastructure projects, cuts in services like libraries and parks and recreation programs, and modified health care benefits for employees.

Hiring freezes were the most common personnel-related cuts made in 2011. Half of cities reported salary reductions or freezes and nearly one in three cities reported laying off employees or reducing health care benefits. Other actions included early retirements and furloughs.

The staffing cutbacks are resulting in a significant reduction in the size of local government workforces. The August jobs report from the Labor Department revealed that local government employment in the U.S. had declined by 550,000 jobs from peak levels in 2008.

U.S. cities ended 2010 with the largest year-over-year reductions in general fund revenues and expenditures in the 26 year history of the survey, the NLC reports.

But while city finance officers still have negative perceptions of the economy, they are not necessarily getting worse. From 2009 to 2010, 87% said their cities couldn't meet fiscal needs, compared to 57% in 2011.

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