Recession Puts Squeeze on Municipal Budgets Bridgeport's reasons for declaring bankruptcy are unique, but its problems are not.


When Bridgeport, Connecticut declared bankruptcy June 6, the gasps were heard around the world. It was the first time a major city -- Bridgeport is Connecticut's largest -- declared publicly that it could no longer pay its bills.

The immediate effects were dramatic: Wall Street's bond-rating agencies took the city's bonds down a peg or two. Bill collectors came beating at city doors. The state declared the city's action illegal and went to court to stop it.

The particulars of why Bridgeport chose bankruptcy as a solution to its fiscal crisis are peculiar to that city and its mayor. (It was, in part, a way to renegotiate labor contracts the city considered onerous.) But the declaration dramatized the budget dilemmas now facing local governments.

Cities and counties suffered in both the 1981-1982 and 1973-1974 recessions, but the misery is worse this time around: the budget cuts seem deeper, harsher and meaner. And they hit everywhere.

During the first year of a downturn, public safety tends to be sacrosanct. Police and fire services are perceived to be at the very heart of a city's or county's mission. But even that pattern is changing as localities face their second year of budget deficits. Long Beach, Calif., for example, cut everybody but police and fire in the 1990-1991 budget. This time it is everybody, including police and fire.

Repair and maintenance are nearly always the first casualties of recession. They are seen as expenses that can be put off for now and put right in better times. Even Honolulu, which is just beginning to feel a ripple from the mainland recession, is cutting back on road repairs. In Salt Lake County, Utah, where the recession is more entrenched, road maintenance will be done less often and vehicles will be replaced every six to seven years instead of every three to four.

Park and recreation budgets are vulnerable in the same way. Though there's usually a lot of constituent squawking when a recreation program is canceled or a park is closed, localities can often switch some of these services over to self-supporting means of funding, such as fees for service. This relieves pressure on the general fund but keeps alive the baseball league or maintains the tennis court.

In Milwaukee County, local officials have cut funding for the zoo, the museum and performing arts. These programs will have to survive on fees paid by those who use those facilities.

These are the traditional and relatively easy life-style cuts local officials make first in hard times. But as the recession goes on and revenues continue to plummet, cuts in core social programs are becoming widespread.

One service that has come in for surprisingly steep cuts is libraries. According to Linda F. Crismond, executive director of the American Library Association, the library cutbacks being made this year are the worst of the 20th century. Even in the Depression when everything was being closed, Ms. Crismond points out, libraries were kept open. Now, city and county libraries will be opening later, closing earlier, buying fewer books and laying off librarians.

Some may not open at all. Half of the counties in California are struggling to keep their libraries operating. Sacramento cannot open its new main library. In Montana, the Missoula Public Library was closed for three weeks this spring. In Detroit, the public library, having lost $900,000 in state funds, cut service at six branches to 20 hours a week. And the list goes on.

Perhaps more surprising, in the era of the "education president" and of high-profile education reform, is the extent to which school budgets are being slashed. Thomas A. Shannon, executive director of the National School Boards Association, calls the cuts taking place during this recession "the toughest situation for school districts since World War II."

State aid for schools is being reduced substantially by many states bogged down in their own deficits. In the Northeast, where the recession is most intense, property values are dropping, and school taxes, which depend on property values, are falling off as well.

The result is that throughout the country, teachers are being laid off and school supplies are dwindling. School districts are being encouraged to consolidate specific services or entire systems.

An increasing number of districts have had to turn to their states for emergency aid. This year in Ohio, 49 of the state's 612 school systems needed emergency aid from the state; that number is expected at least to double in the coming year. Where seven California school systems had severe budget problems in 1990, there have been more than three times that many in 1991. Fairfax County in Northern Virginia, the largest suburban school district in the country, dealt with a $30 million budget cut for fiscal '92 by freezing teacher salaries, increasing class sizes, imposing student parking fees and trimming spending on textbooks and athletic programs.

A statewide survey this year by the Massachusetts Teachers Association found communities cutting their supply budgets by 25 to 50 percent. Youngsters brought their own crayons to school to draw on used paper donated by businesses. Parents held fund drives to buy textbooks, while teachers paid for glue, pencils and rulers. This coming year's budgets hold out little hope for a better supply line.

Social services are also beginning to feel a substantial pinch. Services to the elderly are being cut, as are funds for drug treatment and child protective services. In Utah's Salt Lake County, there are fewer dollars available for meals on wheels. Elderly people who had been receiving the meals have to requalify to meet more stringent means tests. In Massachusetts, local out-patient drug treatment programs closed when state funds for those programs were cut 25 percent last year. In Milwaukee County, the number of foster care workers has been slashed, doubling some social workers' case loads to more than 100.

There has not, as yet, been an outcry over social service reductions, and, says Salt Lake County Commissioner Michael Stewart, president of the National Association of Counties, there may not be one. "If you close a ball field or shut off some lights, people speak up, but people who are not getting alcohol or drug treatment don't stand up and talk about their predicament publicly. Politically it becomes easier to cut those services."

While local budget troubles dominate the news and Bridgeport's bankruptcy raises fearsome specters, all is not doom and gloom. Recessions do have their therapeutic value.

Local governments, like businesses, run into trouble by developing sloppy spending habits and letting their rate of productivity slip during good times. Philip Dearborn, vice president of the Greater Washington Resource Center, who is analyzing those habits for a report to the Urban Institute, notes that the recession is causing local governments to impose budget constraints, and that's not necessarily bad.

Besides, he adds, history is on the side of a positive outcome: Governments generally survive downturns and come out of them healthier than before. "We are in midst of a severe recession, and that's painful and difficult. But the heavens aren't falling," he says. "The fiscal problems of most localities -- central cities excluded -- are transitory and cyclical."

One theory why this recession is hitting local governments so hard is that the high-spending era of the '80s raised service expectations and underwrote budget expansions. "A lot of places got caught up in the euphoria of growth in the '80s and overspent relative to growth in their economies," says Roy Bahl of the Policy Research Center at Georgia State University.

In the past, federal or state aid would have bailed out overenthusiastic localities, or support might have come from local taxpayers. But that isn't happening -- and won't -- this time ,, around.

Meanwhile, in parts of the country -- in cities in some Southwestern states, for instance -- the economy is rebounding from a long and deep regional recession that hit hard during the 1980s. These cities are enjoying modest growth. Houston, for one, gave municipal employees their first salary increase since 1981, and the city has begun hiring people for both the police and health departments. All of which is a reminder that there is life after a recession.

Penelope Lemov is a reporter for Governing magazine. Another version of this article will appear in the August issue of Governing.

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