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The Next Economy | Big Questions

Washington's Dysfunction Makes Local Officials Feel Pretty Good About Themselves

"We don't have the luxury of shutting down...we're still going to pick up your trash."

(Jemal Countess/Getty Images)

photo of Nancy Cook
October 10, 2013

While congressional leaders in Washington bicker over the government shutdown and the mechanics of raising the debt ceiling for just a few weeks, the majority of city governments around the country are sitting pretty—or, at least, in much better financial situations than they have been over the past five years. 

It's a nice change from the lean years following the Great Recession, when many cities' finances were battered by faltering local housing markets, reduced tax bases, aging infrastructure, and growing healthcare and pension obligations. Today, 72 percent of city finance officers say that their cities will be better off money-wise in 2013 than in 2012, according to new research from the National League of Cities, an advocacy group that represents more than 1,700 cities across the country.

What's the cause for optimism? Well, it's primarily based on increased revenue in the form of city income and sales taxes. In 2012 alone, city sales taxes rose by 6.2 percent, the research shows, a level not seen since the start of the recession. City income taxes increased by 4.4 percent in 2012 and are projected to grow another 2.3 percent in 2013.

 

On top of that, city officials began to make tough choices in an effort to balance their budgets, according to the League of Cities' data. Thirty-nine percent of city financial officers raised user fees to pay for city services; roughly one-quarter of cities reduced their share of healthcare benefits or pension obligations for public employees. These are financial choices that the federal government is still struggling with as it wages yet another battle over the fate of long-term spending on Medicare and Social Security, as well as the across-the-board spending cuts known as sequestration.

All of this can make city officials from around the country look disparagingly on the federal government's ongoing gridlock. Just ask Ronald Green, the controller of Houston, a city that has gotten its fiscal house in order thanks to a diverse local economy that includes a lucrative port, local universities, and major healthcare facilities. "We don't have the luxury of shutting down," Green says. "Even with all of that going on, we're still going to pick up your trash. You have 911—someone is still going to respond. If you turn on that water, it's still going to come on."

Houston has not yet had to make any major changes due to the ongoing government shutdown, Green says—though in the coming weeks it may have to evaluate some grant-funded positions if the shutdown continues.

This isn't to say that cities are in the clear in the long-run. They still face major hurdles from big-ticket budget items like pension and healthcare costs for municipal workers (see: Detroit, Mich.), not to mention infrastructure that hasn't been updated in years. But if anyone is pointing fingers about who is being proactive in tackling financial quandaries and who's dithering, then the city officials win over the federal elected officials. After all, at least cities manage to pass their budgets year-after-year.

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