Reductions in State Aid

State budgets have also been confronted with several years of shortfalls and constraints. In many cases, states have been reducing aid and transfers to city governments.

NLC’s 2012 survey asked city finance officers about the types of state actions they’ve encountered since 2010, including:

  • Cuts in state-shared and/or state-collected revenues (45%),
  • Cuts in general aid (42%),
  • Revocation or reduction of reimbursement programs or other transfers (30%),
  • Cuts in funding for services that cities and other local governments deliver on behalf of state governments (22%),
  • Transfer of state program responsibility (19%), and
  • Actions that reduce or limit local authority (24%).

This mix of state actions to balance state budgets adds to the cyclical economic pressures that cities and other local governments are confronting. Looking across state and local actions in response to fiscal stress reveals the pro-cyclical nature of state-local fiscal actions – that during economic downturns the decisions that state and local leaders make to balance budgets often exacerbate the effects of the downturn for other levels of government, for employment, and for the quality of life and well-being of individuals and communities.

View Larger Image