County governments feel economic strain

WASHINGTON (Reuters) - America's sour economy is forcing county governments to slash spending and scrape for revenue, according to a survey released on Monday by the National Association of Counties that showed most counties expect their budget gaps to persist through next year.

Four-fifths of counties included in the survey said they would have budget gaps next year and nearly half of the respondents said their shortfalls this year were worse than they originally expected.

The survey of 138 counties in 34 states found that counties of all sizes are experiencing their worst budget and revenue crises since the early 1990s, said the group's executive director, Larry Naake, in a statement.

More than a quarter of county governments have laid off staff, and at least one in 10 have required employees to take unpaid leave, according to the survey. Nearly half have instituted hiring freezes.

County workers run jails, airports, hospitals firefighting crews, sewer systems, social services and sheriff's offices.

"The great challenge for counties of all sizes in the months and years ahead is continuing to provide essential services to residents who are relying more on county services and programs," Naake added, echoing the concerns of states and city governments that they cannot afford to meet the needs of the growing ranks of jobless residents.

Like cities, counties have been hard hit by declining property tax revenues and fewer dollars coming from state and federal governments.

Still, only 2 percent are increasing the local sales tax rate, according to the survey.

About two-thirds of counties expect to receive some relief from the $787 billion federal stimulus package of spending measures and tax cuts passed in February. But so far, most said, they have been given less than half of the funds they expected.

"Our grave concern is what happens to state and county budgets when the federal economic stimulus dollars end next year?" Naake said.

(Reporting by Lisa Lambert; Editing by Dan Grebler)