Spending Cuts Cascade Down to Local Level

Wednesday, August 3, 2011 at 9:50 PM by

Both the federal government and the state government are reducing spending, in large part by shifting costs to other levels of government. Faced with cascading cuts in spending, local governments have fewer options and are facing the possibility of having to make steep cuts in areas important to keeping our communities safe, well-functioning, and economically viable.

The debt ceiling deal means the federal government is going to be reining in spending, probably in part by sending less money to the states. Earlier this week, the Wisconsin Budget Project described the mechanism by which cuts in federal spending will take place. The cuts of more than $900 billion that the debt deal immediately locks into place come from discretionary spending – and fully one-third of this spending goes to state governments to support education, health care, human services, law enforcement, infrastructure, and other programs, according to the Center on Budget and Policy Priorities (CBPP).

Also, it’s very likely that the “supercommittee” charged with finding $1.5 trillion in cuts will find some of those savings in Medicaid, which would have an enormous effect on state budgets. (Medicaid, like other “non-discretionary” low-income programs, is spared from the initial cuts and the automatic across-the-board cuts that go into effect if the committee fails to produce a bill or the bill doesn’t pass.)

For states, the bottom line on the debt agreement is that they should expect less money from the federal government. CBPP put it this way:

“From a state’s perspective, the debt limit deal means that it will have to scale back or eliminate many education, health, public safety, and other services that the federal government has helped support unless the state comes up with replacement dollars — dollars that most states just don’t have.”

Meanwhile, in Wisconsin the state has reduced spending largely by sending a lot less money to local governments. In the 2011-13 biennial budget, the state slashed payments to local governments, sending less money to municipalities and counties to support functions like recycling, road maintenance, mass transit, and human services. If reductions in federal spending put the pinch on future state budgets, local governments could be looking at even more crippling cuts in state support.

With the federal government passing cuts down to states, and the state passing cuts down as well, where does that leave local governments? Holding the bag, according to a new report by the Public Policy Forum, which details Milwaukee County’s bleak fiscal position in the wake of large cuts in state assistance to the county.

Recent legislation restricting collective bargaining will do little to help Milwaukee County mitigate the impact of the cut in state aid. In 2012, Milwaukee County is looking at a $28.7 million cut in revenue from the state, and changes to employee compensation made possible by Act 10 will save $24.7 million that year. But – and this is a big but –Milwaukee County Executive Scott Walker already built $17.4 million of those savings into the county’s base budget, based on recent changes to Milwaukee County’s employee benefit structure. That leaves just $7.3 million in “new” savings as a result of Act 10 in 2012.The result: a $21.4 million hole.

Given the unpleasant fiscal realities facing Milwaukee County, many of the the possible courses of action are grim. The Public Policy Forum models various unpleasant alternatives for consideration, including closing several county parks, shuttering the zoo, and slashing the number of deputy sheriffs patrolling the roads. The report also includes an example of how to take a balanced approach to the budget hole, combining significant cuts with a 1.8% property tax increase and a $10 wheel tax, which together would bring in $10.1 million.

If that weren’t bad enough, the report looks to the future and predicts even leaner days ahead:

“Our examination of the county’s five-year outlook shows that the county’s sizeable annual budget gaps are likely to continue and even grow, which means that even the most severe options ultimately may need to be considered.”

At the federal and state levels, governments have the ability to push some of the pain of budget cuts down a level. Local governments don’t have that option. Instead they will have to make drastic cutbacks that will have detrimental effects on our safety, our local economies, and our quality of life.

Tamarine Cornelius

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