Pew Study Outlines Impact State, Federal Cuts Had on Cities

In some places, cuts in intergovernmental aid played a particularly significant role in causing budget strain.
by | November 11, 2013 AT 8:00 PM

By now, the fiscal stress facing cities has been well-documented. Though the recession began in late 2007, cities felt the impacts more slowly than the states and feds largely because they rely so heavily on property taxes.

Property taxes made them especially susceptible to the downturn in the real estate market, but it also impacted when the receission hit Americna cities. That's because there's a delay between when property values start to decline and when cities' assessments and ultimately taxes reflect those declines. It's also the reason why cities' recovery has happened more slowly.

A new study from the Pew Charitable Trusts reveals another way the recession uniquely impacted cities.

Researchers looked through the financial reports of the country's 30 largest cities and revealed how each of them was affected by and responded to the recession. One of the most fascinating findings was just how significant an impact the cuts to intergovernmental aid had on cities.

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In nine cities, cuts to intergovernmental aid -- money cities get from the state and federal governments -- drove their post-recession revenue declines, according to Pew. "Intergovernmental aid is an important revenue source for all 30 cities, but in nine—Baltimore, Boston, Cleveland, Houston, Las Vegas, Minneapolis, Philadelphia, Phoenix, and the District of Columbia—reductions in these receipts primarily drove falling revenue," according to the report.

Researchers found that more than half of Cleveland's post-recession revenue decline, for example, was due to intergovernmental aid cuts. While local officials have long bemoaned the impact of intergovernmental cuts, the study may play a significant role in helping to quantify their impact.

The retrospective look at cuts would also seemingly bolster the case for 2009's stimulus bill.  "For many of these cities... a key component of their recovery came from increases in intergovernmental aid," said Kil Huh, director of Pew's State and Local Fiscal Health project, on a conference call with reporters.