Major US Cities Face Challenging Budget Shortfalls, Report Shows
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The Pew Charitable Trusts studied 13 major cities and found they face fiscal 2021 budget shortfalls of up to 17%, and they are using creative methods to try to balance their budgets.
Last spring, 13 U.S major cities forecasted general fund shortfalls up to 17% for fiscal 2021, and have since been implementing a number of initiatives to close the gaps, according to a study conducted by The Pew Charitable Trusts.
The study examines challenges to large city budgets after Covid-19 lockdowns and decreased economic activity. It highlights cities nationwide with similar budget calendars, mainly starting July 1, while only addressing general and operating funds.
Philadelphia is the main focus of the study and is projected to have a $749 million gap, or 14.7% of the prior year's general fund spending. Detroit fared the worst (17% gap) followed by Nashville (14.2%), San Francisco (12.3%) and Louisville, Kentucky (11.1%).
According to the research, the cities surveyed facing the smallest shortfalls are the ones that rely mainly on property taxes for their budgets. For example, Boston, which has the lowest projected shortfall (1.9%), depended on real estate taxes for more than 70% of its 2020 general fund revenue. Los Angeles (4.5%), Baltimore (5.4%) and Houston (6.8%) also ranked amongst the lowest on the list due to heavy reliance on property taxes.
On the other hand, the cities facing the biggest shortfalls rely more on sales taxes or taxes on wages.
To better address projected shortfalls, some cities are heavily relying on diversified and creative methods to raise funds, such as delaying new initiatives, eliminating vacant positions, implementing hiring freezes, furloughing workers, or using a combination of these strategies.
However, these practices may not be as easily available next year, according to Pew.
“Some of the cities where reserves may still exist have requirements and standards that could limit their use, including minimum amounts that must be kept on hand,” wrote Elinor Haider, director with The Pew Charitable Trusts’ Philadelphia research and policy initiative.
The other cities included in the study were: Atlanta; Detroit; Kansas City, Missouri; New York City; and Portland, Oregon. To get more information on the study and the cities involved click here.
Brent Woodie is an associate editor at Route Fifty.
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