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As Economy Slides, Local Governments Feel the Squeeze

AMERICA'S local governments enter the new year in increasing financial peril. They are sandwiched between decreasing revenues and today's increasing need to provide the poor with free social services - especially health care, food, and shelter. The implications for the poor are ominous. The growing peril stems from two causes. The first is the continuation of decades of shift of American wealth out of central cities and the countryside and into the suburbs. As a result cities and small towns can raise less money through taxes: ``That impacts the social services'' they can provide the poor, says Michael Stewart, a county commissioner of Salt Lake County, Utah, and president of the National Association of Counties.

The second cause is America's current economic slide. ``What you're seeing all across the board is the economic slowdown starting to bite into any surplus, and deepen any deficit'' of American cities, says Lance Simmens, assistant executive director of the United States Conference of Mayors. This slowdown is like a giant wave approaching the coastline: Its full effects are yet to come, urban officials say.

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In recent years many cities and counties have been laying off workers to try to make do. This has helped produce ``cutbacks in public housing, libraries, and food services,'' says Mr. Simmens. In the coming months the prospect is for deeper staff cuts, with a consequent crimping of services to the poor, as the recession presses harder on municipal governments.

Cities cannot expect help from above. The federal government, preoccupied with the addition of the enormous costs of the Gulf buildup on its own budget problems, does not have the money to increase its payments. And states - half of which are running in the red - are talking about reducing, not increasing, the funds they provide.

Complicating the problem, some levels of government have mandated that community governments increase social services - but have failed to provide the money to do the job, urban officials say. They point to last year's congressional decision to mandate some expansion of Medicaid as an example.

In addition, some cities are hemming in counties by trying to shift to them services and their costs, Mr. Stewart charges. Examples: medical care for the indigent, youth services, and care for parks and recreation facilities. ``We're between the hammer and the anvil on this,'' Stewart says: There is no money for the additional services, but they need to be performed.

The deeper the bite the recession takes of municipal finances, the more pressure cities and counties face to balance budgets by reducing social services at the very time when growing numbers of their residents are becoming poor and are seeking subsidized services. Local governments - cities, towns, counties - are the governments of last resort in dispensing social assistance, albeit usually with some federal and state financing help. Traditionally the need rises when the economy falls.

No nationwide statistical picture of the current situation yet exists. ``Everybody's got ideas, but nobody's got the numbers,'' Simmens says.

That soon will change, however. Within two weeks two nationwide urban organizations expect to release surveys to show the dimensions of the coast-to-coast problem.

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As early as next week the National League of Cities expects to release an opinion survey of urban budget officials. Although the full picture is not complete, the survey shows ``a significant increase in the concern about economic conditions and the fiscal capacity of cites,'' says a spokesman for the league: ``The ability to deal with these stresses is Topic A right now'' among city officials.

At about the same time the Conference of Mayors expects to release its survey of the difficulties that confront 50 cities. The conference wants to know whether they have raised taxes, cut services, received more or less money from states, - and how they are coping with today's problems.

If the precise nationwide picture cannot yet be seen, in individual counties and cities the general outline already is discernible. One example is Montgomery County, Md., which abuts Washington, D.C., to the north and west. Often described as one of America's wealthiest counties, it is facing growing demographic change: More county residents are poor or undereducated. The need for social services is rising, with no end in sight.

The budget squeeze affecting less affluent counties and cities also confronts Montgomery County; new county executive Neal Potter warns that to balance this year's budget county departments may face a 5 percent cut.

The state of Maryland won't be closing that gap: It faces its own budget shortfall of $400 million this year, and already is warning counties to expect less aid than a year ago.

For most counties and cities in Montgomery's condition raising taxes, like trimming services, is perilous: November's election showed ``the tax limitation movement'' is strong in much of America, Stewart notes.

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