Cities Slash Essential Services To Stay Afloat

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As Congress debates tax cuts and deficit reduction, states and cities are struggling with massive budget shortfalls. According to the Center on Budget and Policy Priorities, 46 out of 50 states faced budget deficits in the current fiscal year. Budgetary constraints have led to a decision by the New Jersey city of Camden to lay off half its police force. Host Michel Martin speaks with Scott Pattison, Executive Director of the National Association of State Budget Officers and New Jersey Star-Ledger reporter Chris Megerian about the impact of the budget crises.


I'm Michel Martin, and this is TELL ME MORE, from NPR News.

We're going to talk more about that deal on tax rates and unemployment benefits that President Obama made with congressional Republicans. You know, the one that has Republicans cheering and Democrats jeering. We'll talk about that in just a few minutes.

But first, we wanted to talk more about the finances of state and local governments. As Washington debates that tax agreement, and ways, of course, to reduce that huge and growing national deficit, states and cities, who, as our leaders continually remind us, generally cannot run a deficit, are struggling with ways to fill massive budget holes.

According to the Center on Budget and Policy Priorities, 46 states - yes, that's 46 out of the 50 states - faced shortfalls when adopting budgets for the current fiscal year. That means state and local governments will struggle even more to provide constituents with public services like fire and safety, school funding and social service needs.

We wanted to talk more about this, so we've called on Scott Pattison. He is the executive director of the National Association of State Budget Officers. And Chris Megerian, a New Jersey statehouse reporter for the Star Ledger of Newark. Thank you both so much for joining us.

Mr. SCOTT PATTISON (National Association of State Budget Officers): Thank you, Michel.

Mr. CHRIS MEGERIAN (Star Ledger): Hi, how you doing?

MARTIN: Chris Megerian, I'm sorry, I didn't mean to butcher your name. Now, we've called you 'cause you recently reported on Camden, New Jersey, which is about 90 miles south of Newark, and you're saying that the city leaders there are saying they may have to lay off half of the police force.

Mr. MEGERIAN: Right. Camden is historically one of the country's most dangerous and poorest cities. And because of budget cuts, they're talking about laying off about half of their 373 officers. And union negotiations are ongoing. But if they don't reach an agreement, they'll start laying off people on January 18th. Best case scenario, according to the union, is that they may save about one-third of the jobs slated for layoffs. So, no matter what happens, it seems like there's going to be some pretty steep cuts there.

MARTIN: What are some of the steps that they've taken leading up to this point? 'Cause I think it's a fair bet to say that this is one of those things people don't do first. It's a last resort, not a first resort.

Mr. MEGERIAN: No. They're planning to cut all around the city - civilian and uniformed workers. But the police department in most municipalities is historically the most expensive part of the city's services. So when they're really looking to save money, that's where they have to go to cut.

MARTIN: Scott, I'm going to ask you to jump in here. I understand that Camden is a city and not a state, but I'd like to talk about the, first of all, how common is this scenario around the country? You're in touch with, you know, state budget officers all around the country. How common is this scenario and how do the state budget difficulties factor into what's going on in the cities and other municipalities?

Mr. PATTISON: Well, fortunately the Camden incident appears to be one of the more extreme examples, which is certainly good. But it doesn't take away from the fact that state budgets are lower than they were pre-recession. And we've had two years of very significant declines. And as a result, you are seeing some painful decisions across the country. One that's received a lot of attention lately - you've probably seen - is that Arizona has said their Medicaid system won't necessarily pay for all transplants. And that obviously personally affects people.

But the bottom line is there's only so much money, and because of the declines, states and localities are making some really tough decisions.

MARTIN: Why are state finances so weak? And the state obviously affects the ability to give aid to municipalities, because some states obviously support, you know, local functions, which is part of this knock-on(ph) effect. But why are state budgets in such a weak financial position?

Mr. PATTISON: It's really result of the Great Recession that we've all had to suffer through. And you have unemployed folks and therefore they're not paying income taxes, they're not buying and they're not paying sales taxes, so you have a tax revenue decline. And then, in addition to that, you have higher expenditures, 'cause some of those people are going to go on social services.

MARTIN: Now, some states don't have a state income tax. You say obviously where people are unemployed they're not paying state income tax. Well, what about states that don't have an income tax?

Mr. PATTISON: They're still suffering too because they've seen a large decline in their sales tax, and other sources of revenue go down too.

MARTIN: And, Chris, are other cities in New Jersey facing similar tough decisions? Jersey City, Newark, Atlantic City?

Mr. MEGERIAN: Yeah. Actually, Newark has already laid off about 13 percent of its officers. And that's a loss unseen since 1978, another budget crisis there in the city. Jersey City is planning to lay off 82 of its 829 officers. So a lot of urban areas that have struggled with poverty in New Jersey are looking at some significant cuts in public safety.

MARTIN: What is some of the reaction that you're seeing about these cuts? What's the public response? Now, we've seen that in Europe, where there have been, you know, demonstrations around cutting things like tuition, for example.

Mr. MEGERIAN: Right.

MARTIN: For state universities and trying to, you know, change the retirement age and things like that. There have been street demonstrations. But what about cities that you cover? What have been the public reaction here?

Mr. MEGERIAN: Well, there have been some street demonstrations against cuts to benefits for public workers. There was a big rally in Trenton a little while back. A lot of the reaction, though, from people in the street is pretty grim. Camden, for example, people are used to grim news, so they're - you know, they think a horrible situation's only going to get worse for them.

MARTIN: So when you say that there are - what are they saying? Are they scared? Are they...

Mr. MEGERIAN: Some people will say literally just that they're actually scared. They say they hear gunshots out late at night from their home. They're afraid that there's just going to be more of that. More criminals on the streets and they're going to be less safe because of the budget cuts.

MARTIN: Are there any other alternatives, though, that are being considered? What are they? I mean what are public officials saying about that?

Mr. MEGERIAN: Well, the governor has said that no more help is coming from the state. Camden receives more state help than any other city in New Jersey, about $69 million, and other services as well. So what people are talking about is getting other nearby agencies and other federal agencies to help. Camden has a strong presence from other law enforcement agencies and they're talking about beefing that up maybe. And also just trying to reach an agreement with the unions to mitigate the losses.

MARTIN: If you're just joining us, this is TELL ME MORE from NPR News. We're talking about how states and cities are handling their budget crises. There's been so much conversation around the federal deficit and what steps officials should take to address that growing problem. We thought it was a good time to look at state and local governments and see some of the hard choices that they are facing.

We are speaking with Chris Megerian. You just heard him. He's the New Jersey statehouse reporter for the Star Ledger - that's based in Newark. And Scott Pattison of the National Association of State Budget Officers. He's here with me in our Washington, D.C. studios.

So, Scott, you know, we talk a lot about - analysts are concerned about the financial picture that many of the states are facing. But I'd like to ask you, and I don't mean to be sort of fear mongering here, but what is the worst case scenario? Has there ever been a state that's defaulted?

Mr. PATTISON: Well, not in the recent era. The last default was some Arkansas transportation bonds back in the '30s during the Great Depression. So I think what is important to look at when we're looking at the state fiscal situation is not to be worried that they'll be a default on debt - I can't imagine that happening; I don't think leaders in a state would want that to be a legacy -but the pain that's going to occur by having to cut other things, or raise taxes, to ensure that they can continue to pay the interest on debt.

MARTIN: Well, give us an example. I mean, are there states that are taking extreme measures now, things that you just could not envision, say, five years ago?

Mr. PATTISON: Well, I think a good example is the one I talked about in Arizona not long ago, by not covering transplants.

MARTIN: Organ transplants.

Mr. PATTISON: Yes, exactly. And it's really fascinating because you're just seeing it across the country. They've pretty much done everything they can do. Rainy day funds are pretty much drained in many places. Parks departments and things like that have been seeing extreme cuts. You're seeing cuts to social services, Medicaid and health care. Places that always were very generous to K through 12 education - like, Louisiana has frozen K through 12 funding for two years, and things like that.

So, you really see across the country, it's not unique to any state, just very, very significant cuts, and in some cases tax increases. But things I wouldn't have envisioned before.

MARTIN: Now, if you would just sort of clarify this for me - you know, we often hear from state and local leaders: Well, I can't print money, I can't run a deficit. Is that literally true? Obviously we know they can't print money. But is it literally true - can states literally not run a deficit? Are they constitutionally or legally barred from running a deficit? What would happen if they did run a deficit?

Mr. PATTISON: Well, in most cases they are totally barred from doing so. For the most, part states do have to basically balance the budget. The amount coming in has to equal the amount coming out. It's that simple. Now, there are nuances to that and various technicalities to get around it.

MARTIN: Well, for example, they take on bonds to pay for things.

Mr. PATTISON: Exactly.

MARTIN: Like, for example, skating rinks or schools, to build things. Often people say, well, they can issue bonds, which is a form of debt. But it's expected to be paid back. But from an operating standpoint, just in terms of the way we run our households, generally, what goes out has to come in.

Mr. PATTISON: Exactly. There are some exceptions, but for the most part, states use debt for things like capital expenditures. Like you said, buildings and things like that. And they don't run operating deficits.

MARTIN: And why don't they? Because some of them are legally barred from doing it. But what about the ones that aren't?

Mr. PATTISON: Well, there are several reasons. One is that they want to keep their bond ratings fairly good and for most states they are. And if they were to run operating deficits, that would be a problem. So the markets prevent that. But as you say, they don't have the tools of the federal government. They can't print money, so to speak. They can't control interest rates and so forth. So they really are, either because of the law or because of market constraints, unable to run those operating deficits.

MARTIN: So, Chris, give us a sense of what's being talked about now. You've talked about the fact that, you know, barring some big change, it looks as though, a significant number of officers from Camden are going to be laid off at the beginning of the year. What are officials there talking about doing? What is possible?

Mr. MEGERIAN: Well, they say they have some contingency plans, but they're not publicly revealing what those are. I think they're trying to hold the cards close to chest as they go through negotiations with the union. And while Camden is an extreme example, I think a lot of towns around New Jersey are facing similar strings right now because of the loss of state aid and the economic recession, a lot of them are caught between a rock and a hard place.

MARTIN: And, finally, Scott, we're going to talk about this in our next segment. We're going to talk about that sort of tax and unemployment benefit deal announced between the White House and congressional leaders. It reportedly will add some $900 billion to the national debt over the next two years. I know this is all very new, but I'm just interested to hear, what are the state leaders saying about the national debt and whether it affects what's going on with them?

Mr. PATTISON: Well, there are varying degrees of views, of course, on what's going on right now in Washington. But that being said, state officials for the most part are very concerned of the long term impact of the federal debt for both on the economic side, but also they're very concerned about, frankly, money that now goes to the states for various programs like law enforcement will probably go down - from the federal government.

MARTIN: Because?

Mr. PATTISON: Simply because they've got to deal with the deficit and start cutting spending.

MARTIN: Okay. Scott Pattison is the executive director of the National Association of State Budget Officers. He joined us here in our Washington, D.C. studios. Chris Megerian joined us from the Star Ledger's New Jersey statehouse newsroom. Thank you both so much for joining us.

Mr. PATTISON: Thank you.

Mr. MEGERIAN: Thank you.

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