Agenda - Council - 07/22/1980 - Laserfiche WebLink

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10 including issue areas defined by ACIR.* Another advocate of state financial oversight is Phil Dearborn, vice president of the Greater Washington (D.C.) Research Center. Dearborn told NCSL's Urban Development Committee that when local governments face fiscal problems, they may resort to "gimmicks," "The state impact on city finances and programs is pervasive, it includes control over boundaries and annexation; transporation systems; establishment of areawide service districts; criminal justice; delivery of social services; local government fiscal systems, and much more." otherwise known as "creative accounting," to balance their budgets, including deferred spending and short-term borrowing through tax revenue anticipation notes. The "single most important factor" triggering a local government fiscal crisis, said Dearborn, is a sharp jump in short-teim borrowing. When these loans can't be "rolled over," then fiscal collapse may follow, he said. In addition, states should establish a mechanism to deal with local government fiscal emergencies, rather than allow state aid to be "personalized" by local and state of- ficials after it happens, Dearborn said. Ohio, for example, has established the state Financial Planing ahci..Su.-p~r, vision C'o-mmission to o~,-~rsee the" fiscal recovery of 12i~3-3'l'h-n~IT-lvl~y6-f-G~7 Voinovich's recovery plan includes increased city income taxes, employee cutbacks, higher electric and water rates, and modest labor cost increases. Peterson is another who sees the states, over the next few years, responding mainly to "critical financial situations" where the state assumes program responsibilities from the locality. The MFOA's Petersen agrees saying the states will have to "throw a shoulder in and try and help some local government out of a ditch." Peterson sees a more desirable state role in the "reassignment of expenditure responsibilities" for local government programs, rather than increased direct aid. "I'd almost write off the possibility of large amounts of new state funding for the cities," he said. He pointed out that states, and some counties, are continuing to take over responsibility for costs which are geographically concen- trated because of the population distribution--through no fault of city management. One change in responsibility, particularly at the local level, may be the shift to "independent or quasi- independent authorities," said Peterson. This makes it easier for city administrators to rely on a revenue base generated by the pricing of specific government services, particularly where capital investment is involved, he said. This development was seconded by the MFOA's Petersen, who said that these enterprise functions are now "really the growth area" of city government. Another, more general aspect of state aid to localities which bothers Peterson of The Urban Institute is the "in- dexation" of program funding. He sees this as "one of the conflicts.., on the horizon," particularly for states under fiscal duress. The Future of State Aid The degree to which state aid can offset federal assistance cuts depends, of course, on the unique cir- cumstances of each state and its distressed communities. The general consensus, however, is that the states in the Midwest and the Northeast find it difficult to maintain, let alone expand, assistance efforts. The recent efforts by states to help localities, though, of-' fers some hope that the states will stand by the cities in this recession since federal aid prospects appear dim. "States are under the same fiscal scourge as cities," say Petersen of the MFOA. "My instinct is that although a lot of lip service was given three or four years ago to really bucking up and doing a lot for the cities.., that the states probably have less moral fervor to do that now--and fewer resources because they themselves are coming under all kinds of con- straints.'' The states, like the cities and the federal government, are under "pretty much the same political pressure, and there's just no political pluses in now raising taxes at all," Peterson said. An NCSL analysis of the Administration's revised 1981 budget found that 75 percent of the proposed total reduc- tions to state and local governments would be cuts in aid specifically to state governments. It seems likely that these John Peler~n Roberl Gordon