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Note: For our latest research on this topic, see "Fiscal Health of Large U.S. Cities Varied Long After Great Recession’s End."
This report examines how America's big cities navigated fiscal challenges during the Great Recession and in the years following that downturn. It evaluates the fiscal conditions of 30 large American cities, identifies the factors that drove cities' decline and rebound during the Great Recession, and the mechanisms cities employed to address the fiscal strain.
In the three years between 2009 and 2012, the U.S. economy began recovering from the Great Recession. Nationally, housing prices rose and the unemployment rate fell, but for many major U.S. cities, the fiscal crisis persisted, making the recovery a geographically uneven experience. In fact, in some major cities revenue declines continued into 2012—a full three years after the national recession ended.
The Pew Charitable Trusts reviewed the latest available data from 30 major U.S. cities and found that more than half—18—saw governmental revenue decline from 2011 to 2012 after adjusting for inflation.1 Of these, eight reported their lowest revenue since the downturn began in 2007.
In some major cities revenue declines continued into 2012—a full three years after the national recession ended.
An ongoing slump in property tax revenue is a significant contributing factor in the prolonged fiscal strain on some cities. City property assessments and tax collections typically lag behind the real estate market by 18 to 24 months. This time, however, the national housing crisis so dramatically undercut this important revenue source that Pew’s analysis found collections in many cities remained anemic a full three years after the national economy began to improve.2 In 2012, the majority of cities reported year-over-year losses in real property tax collections—the most to declare such losses in any year since 2007. Even today, “the recovery still feels like a recession,” said Federal Reserve Chair Janet Yellen.3
In addition to weak property tax revenue, city officials have faced the added challenge of cuts in state aid as state lawmakers strained to balance their own budgets. In 2011, federal aid began shrinking too, as cities’ share of federal stimulus money tapered off. City officials covered shortfalls by cutting spending, raising fees and taxes, and drawing down reserves.
City officials have faced the added challenge of cuts in state aid as state lawmakers strained to balance their own budgets.
Not all cities were worse off in 2012 than the year before, however. Boston, Cincinnati, Minneapolis, New York, and Seattle exceeded their prerecession revenue peaks in 2012—mostly due to gains in sales and income taxes and increased charges and fees.4 The boost in cash allowed Cincinnati to take a needed “breather,” as City Manager Milton Dohoney Jr. put it, from the deficit-driven budgets of the preceding three years.5
The findings of this analysis are explored in detail later in this report, but briefly:
The fiscal data reviewed in this report reflect conditions as of 2012, but analysts note that, even with improving property tax collections, the effects of the Great Recession are still being felt in some cities as of 2014. For example, Amy Laskey, managing director of U.S. public finance for Fitch Ratings, said in July 2014 that “both the degree of housing market improvement and the time lag vary by state and regions within states.”9
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