Our nation and state face serious challenges in the form of financing critical public services in the years ahead. Many local governments are cutting or eliminating services at the same time that states are reducing budgets. The problem is caused by two principal factors: 1) reduced tax revenue and 2) rapidly increasing personnel costs.
Oregon local governments have traditionally relied on property taxes to support services that do not generate sufficient revenue to cover their costs. Police, fire protection, libraries, planning, and parks are usually the services that require a tax subsidy, unlike water, sewer, building inspection, some courts, ambulance, and recreation programs that often pay for themselves. The rapid decline in property values over the past six years, coupled with Oregon’s unique property tax limitations, means that there is no longer sufficient revenue to support past levels of property tax dependent services. Communities have a number of options to increase local government income, but most are reluctant to try when unemployment is high and private sector wages are flat or declining.
The problem would be less acute if local governments had greater flexibility to reduce personnel costs without cutting the number of employees. Salary, health insurance, and pension costs have been rising at a much faster rate than revenue in recent years, forcing local governments to lay off, furlough, or otherwise reduce the number of hours worked by their employees. Cutting pay and benefits is usually not an option when employees are represented by bargaining units subject to binding arbitration, and most public employers seek to avoid the damage caused by strikes of other represented workers.
Some studies suggest that public employees are paid less than their counterparts in the private sector while others contend that when benefits are included, government workers fare better. Regardless of individual opinions on the matter, there are relatively fewer public employees now than there were in the past and there is no sign this trend will change in the next decade. According to the nonpartisan congressional research service,
“From 1955 to 2010, employment in the private sector increased by 64.1 million jobs (from 43.7 million to 107.8 million), while the number of jobs in the public sector (including federal, state, and local governments) grew by 15.5 million (from 7.0 million to 22.5 million). Since 1975, however, the percentage of all jobs that are in the public sector has fallen from 19.2% to 17.3%.”
Oregon counties and some cities have been greatly affected by layoffs in recent months, with significant staff reductions announced in Lane, Curry, Linn, and Josephine Counties to name a few; plus dramatic cuts in Oakridge, Molalla, Eugene, Salem, Corvallis, Portland, and many other cities around the state. Albany has reduced its budgeted workforce from more than 428 workers in 2009 to less than 383 in the coming fiscal year.
Policy makers and administrators are struggling to maintain some balance between the need to cut expenses while supporting important services. The dilemma is aggravated by laws and rules that restrict the use of certain revenues to specific purposes. Lodging taxes, for example, must be used largely for tourism promotion; and gas taxes can only be spent on streets and roads. Urban renewal or tax increment financing has become controversial in some areas because it is perceived by some to be taking revenue away from other services. Oregon’s public finance system (if it can even be called that) has become so encumbered by constitutional limitations and statutes grafted on to a 19th Century property tax plan that the vast majority of citizens no longer understand it.
Misunderstanding and confusion often lead to the kind of anger evident in so much of the discussion about what is happening in our cities, counties, states, and nation. Many people believe we can make things better by reducing the size of government while others focus on the need to improve the quality of our services. Regardless of how people might feel, local government is getting smaller every day and the challenges of maintaining, let alone improving, service quality are correspondingly greater.
Summary of Last Two Weeks’ Headlines Illustrating Local Government Budget Problems throughout the Nation:
Facing $18 Million Deficit, Sacramento Set To Slash City’s Public Safety Workforce
Twentynine Palms, California, In Jeopardy Of Losing Fire Department Due To Funding
Detroit Plans To Eliminate $250 Million From Budget, Cut 2,500 Jobs
Suffolk County, New York, To Lay Off 315 Employees
Florida’s Glynn County Contemplates 35 Percent Property Tax Hike To Cover Budget Shortfall
Declining Property Values In Metro Atlanta Continue To Burden Government Budgets
Budget cuts get personal at hearing
Fire Station 5 faces budget ax
City of Salem announces closure of two fire stations
Stayton police cut records position
2:27 PM, Apr. 24, 2012
As economic pressures continue to dog the city of Stayton’s budget, the squeeze is being felt at the Stayton Police Department.
Oregon’s small towns need to be proactive in addressing financial problems
Fire, rescue districts seek funds
LANE COUNTY – Death and taxes – Budget cuts may eliminate medical examiners and the morgue
Reduced Accounting Staff Led To Lack Of Fiscal Oversight In Florida’s Broward County
On Course For $30 Million Deficit, Birmingham, Alabama, Approves $3 Million In Spending
Unable To Raise Taxes, Jefferson County, Alabama, Plans Massive Cuts To Exit Bankruptcy