Series Highlights Reductions and Cost Shifts to Local Governments

A recent three-part series by, “The Local Crunch: How States Are Passing Fiscal Pain to Cities and Counties,” describes the actions of states to realign and shrink the size of local governments.

Part 1 of the series, “As states cut aid, localities learn to do less with less,” discusses the budget actions of states across the county and the effect of these reductions.

It may not quite be every level of government for itself, but many states are showing far less willingness to share revenues, even revenues that local governments consider theirs. They are forcing localities to streamline by limiting their ability to raise money, as with legislatively mandated property-tax caps in New York, New Jersey and Indiana, or Nebraska’s moves to keep Omaha from taxing the vehicles of suburban commuters and restricting cities’ ability to tax telecommunications. States are setting out to reshuffle responsibilities up and down the governmental ladder — along with the funds that go with them — as California Governor Jerry Brown decided to do in this year’s budget. They are forcing local governments all over the country to reconsider long-established ways of doing business. And they are compelling local officials to rethink their relationship with state government.

Part 2, “Property tax caps and their impact,” describes how two Governors, Mitch Daniels of Indiana and Andrew Cuomo of New York, have instituted property tax caps in their states to shrink the size of local governments.

What makes the Indiana and New York tax caps interesting is that they have been embraced by two politicians who see them as more than a politically popular means of reining in local taxes. They are also a tool for achieving a larger end: holding in check, and maybe even reversing, what they consider to be the overly complex, unnecessary and expensive growth of local governments, their workforces, and their overlapping jurisdictions.

Part 3, “California reshapes local roles and revenue streams,” discusses how California’s Governor Jerry Brown proposed to “realign” many programs to the local level to find opposition in the state legislature.

In addition to cutting billions from state spending, he proposed two major steps: eliminating local redevelopment agencies and transferring most of their $5 billion annual property-tax haul to schools, counties and the state; and “realigning” state services by shifting responsibility for various criminal justice, social service and mental health programs to the counties, along with $6.3 billion in funding this year and ongoing funding in later years.In the face of intense lobbying from cities and redevelopment agencies, it split Brown’s redevelopment idea in two: In order to get around a set of voter-enacted propositions prohibiting the state from taking money from cities and from redevelopment agencies, one bill eliminated the agencies altogether while the second allowed cities to reestablish them if they paid a “voluntary” contribution to local schools, fire districts and transit agencies. The legislature also enacted Brown’s realignment proposal, but did not include his request for a constitutional amendment to make the funding allocations to counties permanent.

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