Belt-Tightening by States Squeezes Cities and Towns

Publication: Wall Street Journal

Author: Leslie Eaton


06/20/2009 - HAVERHILL, Mass. -- At first glance, this old mill town near the New Hampshire border seems to be weathering the recession well.

Hard hats swarm empty brick factory buildings, turning them into upscale apartment complexes. New restaurants are opening, a suit manufacturer relocated here this spring, and the city recently got its first two national chain stores. Property-tax receipts are rising.

But in the former high-school building that now serves as city hall, times are tense. Eleven city workers face layoffs and five police jobs are in jeopardy. Parents are protesting the city-run schools' plan to cut back on gym, art and music classes. Mayor James Fiorentini has been threatening to close a firehouse if he can't get concessions from the firefighters' union.

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States are running record budget gaps as their tax revenue plunges while expenses increase. Federal stimulus money is helping to plug those holes, but most states are still struggling and have few options. Taxes are hard to raise, especially in a recession; costs for things like prisons and pensions are tough to trim.

For states, local aid "is one of the things they cut, because they can," said Susan K. Urahn, managing director of the Pew Center on the States, a research group in Philadelphia.

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