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Government Has Two Options

The crunch is getting tighter. We’ve heard about state governments giving IOU’s on their debts or just failing to write state employees checks, and it doesn’t look like America’s cities are faring much better during the continued economic downturn:

Overall city revenues declined by 0.4%, even as expenses rose 2.5%, and city officials expect steep drops in tax collections in the next two years, making for the worst outlook in the 24 years the group has been surveying its members. Western cities were particularly downbeat.

The gloomy mood “is indicative of the depths of the downturn, that they have the worst ahead of them, and the fact that the recession is universally hitting their revenue sources,” said Chris Hoene, research director for the league.

Because employee wages, health care and pensions are a major component of municipal budgets, two-thirds of the cities reported hiring freezes or layoffs. Almost as many cities said they were postponing big construction projects.

While a quarter of the cities said they raised property tax rates, far more — 45% — raised fees on everything from garbage collection to overdue library books.

Just a reminder folks, raising fees is the same as raising taxes. Actually, it may be worse because on occasion we hear about tax cuts, but I don’t think I’ve ever heard of a fee cut. Once it goes up, it stays up.

So, here’s a thought for dealing with budget crunch:

Guest-blogging on the liberal Democracy for New Mexico Web site, state Sen. Linda Lopez wrote that her solution to the state’s budget problems is to “return to pre-2004 tax rates to fix the budget shortfall.”

A much better solution is available. Rather than raise taxes back up to pre-2004 levels, the Legislature should lower spending back to pre-2004 levels.

I’m just saying it sounds like a good idea to me. We’ve been on a binge for the last several years. Sometimes, you just need to cut the fat.