Bad Budget News in State Capitols Means More Bad News for Cities and Nonprofits

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October 2, 2011; Source: Stateline | If there are budget problems at the state level, you know they will reverberate down to city governments. For many nonprofits that get their financial support at City Hall, these cascading budget problems mean bad times ahead.

Rob Gurwitt, whose writing we have often seen in the pages of Governing, provides a travelogue of sorts of municipal government woes due to problems at the state capitol. Among the stops on Gurwitt’s journey:

  • Ohio is cutting the Local Government Fund—which sends a portion of state sales and income takes back to the communities that generate them—by one-fourth this year and one-half next year. Gurwitt writes that “Cleveland has already laid off 123 police officers—and 321 full-time employees overall—as a result of this year’s state budget.”
  • Nebraska eliminated its state aid to municipalities in order to close a $44 million state budget gap, causing less-than-nice things to happen to the budgets of Omaha and Lincoln.
  • The Michigan legislature is considering eliminating the personal property tax, which goes to local governments and school districts. The result of this tax repeal would be to remove $51 million from the Detroit city budget and cut the revenues of other cities as much as 57 percent.

Gurwitt quotes Lynn Rex, executive director of the League of Nebraska Municipalities, saying “Obviously, municipalities are on their own now. . . . There’s not going to be the kind of partnership that people thought was there.”

What do these cuts mean for nonprofits? Gurwitt tells of Troy, Michigan, an affluent suburb of Detroit, which has absorbed millions in state budget cuts. He reports,

After much public discussion, the town’s community center raised its fees to become self-supporting; other services were handed off to volunteer organizations; and its library just won a ballot measure to raise taxes to fund its activities. Robin Beltramini, Troy’s mayor, expects this sort of public debate over which services ought to remain part of the city’s portfolio, and which can be picked up by nonprofits, businesses, and others, to continue.

It seems to us that many people in the press and in the nonprofit sector don’t really appreciate how much nonprofit business occurs not in the state capitol, but at city hall. Gurwitt’s analysis is a tale of things to come that bode ill for nonprofits and the populations they serve.—Rick Cohen