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Fiscal Conditions Improving
for U.S. Cities
For the first time since 2001, city fiscal
conditions are showing improvement, according to the City Fiscal Conditions
in 2005 released recently by the National League of Cities. However, ongoing
revenue constraints and concerns about potential declines in property tax
revenues leave city officials cautious about 2006. Half of the nation’s
cities have been forced to raise new revenues in order to balance budgets in
2005. Only 26 percent said they relied on increases in property taxes.
Other findings from the survey:
- More than three in five city officials say
their cities were better able to meet financial needs in 2005 than in
previous years.
- Nine in 10 city finance officers cited
employee health benefits and employee wages as the top factors affecting
city budgets in 2005.
- Increases in employee health care and wages, public safety
needs, and pension costs
were cited as having the most negative impact on the ability of cities
to meet their fiscal demands in 2005. Reductions in state aid were also
cited as having a negative effect.
- Three in four officials reported they
increased public safety spending in 2005, while half (53 percent) reported
increases in spending on infrastructure needs. Forty (40) percent of
officials increased spending on human services.
- Finance officers in cities that rely on sales
taxes or income taxes were more likely to report improved conditions for
2005 than those cities that rely exclusively on property taxes.
- Looking ahead to 2006, finance officers in
cities that rely more on sales taxes were most likely to predict
improving conditions for 2006, compared to those that rely on property
taxes and income taxes.
- Finance officers in the
largest cities were less optimistic for 2006 than those in other sized
cities; with finance
officers in the South more hopeful than those in the Northeast, West,
and Midwest.
The complete City Fiscal Conditions in
2005 is available online.
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