Pew Report Examines How Cities Are Balancing Budgets

Many Face Significant Budget Gaps and are Cutting Services and Personnel

PHILADELPHIA, May 18 /PRNewswire-USNewswire/ -- A new study from The Pew
Charitable Trusts' Philadelphia Research Initiative looks at how 13 major
cities are coping with the recession and finds that most are facing
significant budget gaps and are cutting services and personnel in response.

The report, Tough Decisions and Limited Options: How Philadelphia and Other
Cities are Balancing Budgets in a Time of Recession, examines the budget
decisions that have been proposed or enacted in Atlanta, Baltimore, Boston,
Chicago, Columbus (OH), Detroit, Kansas City (MO), Los Angeles, New York,
Philadelphia, Phoenix, Pittsburgh and Seattle.

Four of the cities studied are planning major tax hikes, with New York looking
at two tax increases, in property and sales. Philadelphia is planning a
five-year, one percentage point increase in the sales tax; Atlanta has a
property tax increase on the table; and Columbus is considering a higher
income tax.

In some cities, including Boston and Los Angeles, major tax hikes are all but
impossible to enact -- the result of state laws, ballot initiatives and
constitutional restrictions.

"We found that almost every city we studied has a significant budget problem
on its hands, largely due to falling tax revenues, decreased state aid and
weakened pension funds," says Larry Eichel, project director of Pew's
Philadelphia Research Initiative. "But the size of the problem varies
dramatically from place to place, as do the strategies for dealing with it."

Taking into account the wide variation in the size of city budgets, the study
compares the one-year budget gaps in the cities in percentage terms, with
Seattle and Baltimore appearing to be in the best fiscal situation. Alone
among the cities studied, Pittsburgh has a modest surplus (1 percent) for the
current budget year. Among the others, Philadelphia, with a one-year budget
gap of about 11 percent, is roughly in the middle, with some cities, including
Detroit, facing gaps of about 20 percent.

The study examines the causes of city-budget gaps and the various ways
communities are reducing expenditures and generating revenue. Among the
findings:

-- Declines in consumer spending, job losses and a flagging real estate
market have caused dwindling city tax revenues. On top of this, losses
in the stock market have weakened city pension funds, forcing cities
to
increase contributions to those funds.

-- Rather than raise broad-based taxes, most of the cities studied are
emphasizing service cuts and coupling those cuts with furloughs and
freezes on salaries. Every city with a budget gap is seeking to reduce
the size of its workforce and/or its personnel costs one way or
another
-- through attrition, early retirements or layoffs.

-- For example, to make ends meet during the current fiscal year, Atlanta
cut the hours and pay of most employees by 10 percent, including
police
officers and firefighters; the proposed increase in the property tax
would end those furloughs. Detroit's budget for the year ahead
would lay off 334 people from a workforce that has shrunk by more than
a
third during this decade.

-- Proposed service cuts are mostly targeting libraries, recreation
facilities and aspects of trash collection. (While no city is
currently
pursuing library branch closures, many cities are cutting funding and
hours.) In a number of cities, fire departments are shrinking. Police
departments, typically the largest city agencies, remain relatively
unaffected, at least for now.

-- In the search for additional revenue, many cities are focusing on fees
rather than taxes -- Los Angeles, for example, has increased its
residential trash fee, while Phoenix is raising fees for after-school
programs. Other cities, like Detroit and Chicago, want to lease city
assets.

-- In some cities -- including Boston, Los Angeles and Chicago -- mayors
are demanding substantial wage and benefit concessions from municipal
unions, warning of big layoffs if such concessions are not
forthcoming.

-- An unusual situation has developed in Phoenix: At budget hearings,
citizens offered to pay more for the services they value, inquired
about
volunteer opportunities and even asked how to contribute funds to the
city coffers. As a result, the city developed a special Web page where
citizens can sign up for these opportunities.

-- Philadelphia's situation stands out in ways that help explain why
it is relying more than others on a tax increase -- which is slated to
be temporary -- to help solve its fiscal problems, city officials say.
Only Philadelphia must present a credibly-balanced, five-year plan for
approval to a state- appointed agency, the Pennsylvania
Intergovernmental Cooperation Authority (PICA), although New York is
required to take a four-year look at its revenue and spending plans.

About the Report
The cities covered in this study were selected in order to provide a broad
demographic and geographic mix. There also was an emphasis on cities that are
on the same budget cycle as Philadelphia -- with fiscal years beginning July
1. Since most of the cities studied are in the process of approving budgets
for the coming fiscal year, the final budgets may look different than the
mayoral proposals now under consideration.

To prepare this report, researchers at the Philadelphia Research Initiative
spent two months studying city budget documents from the selected cities,
reading mayoral speeches, interviewing budget officials, and talking to
journalists and independent analysts. It was written by Claire Shubik, senior
associate at the Initiative, with research associate Laura Horwitz and project
manager Thomas Ginsberg.

About the Philadelphia Research Initiative
The Philadelphia Research Initiative (www.pewtrusts.org/philaresearch) was
created by Pew in fall 2008 to study critical issues facing Philadelphia and
provide impartial research and analysis for the benefit of decision makers,
the news media and the public. The initiative conducts public opinion polling,
produces in-depth reports, and publishes briefs that illuminate
front-and-center issues.

About Pew
The Pew Charitable Trusts (www.pewtrusts.org) is driven by the power of
knowledge to solve today's most challenging problems. Pew applies a rigorous,
analytical approach to improve public policy, inform the public and stimulate
civic life. We partner with a diverse range of donors, public and private
organizations and concerned citizens who share our commitment to fact-based
solutions and goal-driven investments to improve society.

SOURCE Pew Charitable Trusts

Cindy Jobbins, +1-215-575-4812, cjobbins@pewtrusts.org, or Emily Cheramie
Walz, +1-215-575-4809, echeramie@pewtrusts.org, both of Pew Charitable Trusts