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On each paycheck, Americans all across the country are used to seeing two differing numbers-their salary, and their salary after taxes. But what if a city needed more money than what its citizens were already contributing? Would residents volunteer to donate money to pay for the services the city provides?
For some citizens in Phoenix, apparently the answer to this question is yes. According to a recent report from the Pew Charitable Trusts, Tough Decisions and Limited Options: How Philadelphia and Other Cities Are Balancing Budgets in a Time of Recession, at budget hearings some residents of Phoenix volunteered to donate money to the city's general fund.
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But Phoenix isn't the only city who may need a financial boost. According to the Pew report, twelve of the thirteen cities examined will experience a budgetary crunch in the coming fiscal year. Of the twelve, Seattle appears to be in the best situation with a budget gap of five percent, while Detroit ranks last with a twenty percent shortfall. Pittsburgh is the only city in the report to record a budget surplus.
"We found that almost every city we studied has a significant budget problem on its hands, largely due to falling tax revenues, decreased state aid and weakened pension funds," Larry Eichel, project director of Pew's Philadelphia Research Initiative, said in a press release announcing the report. "But the size of the problem varies dramatically from place to place, as do the strategies for dealing with it."
Each city employs a variety of ways to generate revenue. What is common across all cities, though, is the impact the economy has on its citizens: unemployment cuts into potential income and sales tax revenue, and falling housing prices sap a state's ability to raise property-tax revenue. Plus, the historic stock market decrease has eaten into public pensions, thus obligating cities to contribute more funds to them.
To combat dwindling resources, some cities have proposed raising taxes, while many others are proposing slashing services, firing or furloughing civilian employees, freezing wages and raising fees. Each city has its own unique way of combining these strategies to navigate the economic downturn.
Some are looking to increase a major tax. New York City has ended a property tax rebate and is asking the state to increase the sales tax rate a half-point to 8.875 percent. Similarly, Philadelphia and Columbus, Ohio are looking to raise sales and income taxes, respectively.
Luckily for New Yorkers, they won't have to pay extra at the grocery store. A proposal by Mayor Michael Bloomberg to levy a five-cent tax on plastic bags was scrapped from the city's budget.
Other cities, for constitutional or other reasons, are unable or unwilling to increase taxes. As a result, they must find creative, alternative ways to support a crumbling budget.
Many cities are turning to recreational facilities as a good place to cut costs. For one, Kansas City, Missouri is looking to move away from pools and open so-called "spraying grounds."
Los Angeles has hiked its trash collection fee by ten dollars a month, while Baltimore has redesigned its sanitation routes in order to save on overtime pay. Philadelphia has made cuts to its sanitation budget as well--it has eliminated leaf, bulk and tire collection.
Besides spending cuts and cost-savings measures, cities have resorted to other fiscal maneuvers to cover the budget gap. Chicago has leased its Skyway toll road, parking garages and parking meters to private companies for billions of dollars. Other cities may follow suit, such as L.A. leasing some city-owned parking garages and Detroit leasing parking meters and a toll road.
Whether the economy will recover this year or early next year is anyone's guess. If it does, cities will likely be able to restore services and reduce taxes in the coming years. If not, the report concludes, cities "will have to get accustomed to making more tough choices in the years ahead."
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