Exclusive: Doing less with less - U.S. counties cut spending

WASHINGTON Tue Oct 18, 2011 12:58pm EDT

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WASHINGTON (Reuters) - Counties across the United States are slashing spending and making long-term changes to their budgets as federal and state governments pull back on aid, according to a survey to be released on Wednesday.

"Although most financial analysts believe that the recession ended more than a year ago, local economies affecting county governments continue to struggle toward recovery," the National Association of Counties found in its survey of 233 counties in 38 states.

In the current fiscal year, only 35 percent adopted budgets that anticipated no shortfalls. Of those, seven counties said they would have gaps of $25 million or more and nearly a quarter said the gap grew since the year began, according to the survey, which was conducted in October.

For more than half the counties, the main culprit is a decline in U.S. state or federal funding. Low property tax revenues follow.

When counties do not have enough revenues to cover costs, they must hike taxes or cut spending. After the housing bust, financial crisis and economic recession, they whacked away spending for many services, including firefighting, libraries, law enforcement and infrastructure.

The U.S. government helped with the $830 billion economic stimulus plan, although much of the money went to states to trickle down to local governments. Now states, suffering their own budget problems with the end of the stimulus plan, are cutting aid they send to cities and counties.

A recent report from the National League of Cities found cities have arrived at a "new normal" where they will simply do less for years to come. Counties, too, are settling into a permanent state of lower revenues, staffing and services.

Only 19 percent of counties with budget gaps have raised property taxes, and only 1 percent raised sales taxes, according to the survey.

Half used their reserves to make up for gaps.

For the current fiscal year, which for most counties began this summer, many continued to look to shrinking employee costs to balance their budgets.

More than half of the counties froze pay. Slightly more than a quarter laid off employees, 40 percent froze hiring, 10 percent put employees on furloughs and 3 percent went to four-day work weeks. Only 5 percent increased borrowing.

Some counties -- less than 40 percent -- are consolidating services with neighboring cities. They are working with the cities in areas such as law enforcement, fire protection, emergency services, street maintenance and facilities.

As cities feel their own fiscal pain, some are contracting with counties to provide police, firefighters, paramedics and tax billing services. Nearly a quarter of the counties in the survey said they had contracts with their neighboring cities for law enforcement.

(Editing by James Dalgleish)

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