Urban Change and Poverty (1988) / Chapter Skim
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Fiscal Conditions in Large American Cities, 1971-1984
Fiscal Conditions in Large American Cities, 1971-1984
Pages 255-283
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From page 255... ...
Are fiscal conditions in major cities better or worse than they were a decade ago? Have changes in federal policy in the 1980s affected urban fiscal conditions?
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From page 256... ...
of Selected Major Cities 1970-1984 Population Difference, Percentage Citya 1984 1970 1970-1984 Change St. Louis 429.3 622.2 -192.9 -31.0 Detroit 1,089.0 1,511.3 -422.3 -27.9 Cleveland 546.5 751.0 -204.5 -27.2 Buffalo 339.0 462.8 -123.8 -26.8 Pittsburgh 402.6 520.2 -117.6 -22.6 Cincinnati 370.5 452.6 -82.1 -18.1 Minneapolis 358.3 434.4 -76.1 -17.5 Baltimore 763.6 905.8 -142.2 -15.7 Philadelphia 1,646.7 1,948.6 -301.9 -15.5 Atlanta 426.1 497.0 -70.9 -14.3 Milwaukee 620.8 717.1 -96.3 -13.4 Kansas City 443.1 507.2 -64.1 -12.6 Chicago 2,992.5 3,362.8 -370.3 -11.0 Boston 570.7 641.1 -70.4 -11.0 New York 7,164.7 7,894.9 -730.2 -9.2 Seattle 488.5 530.9 -42.4 -8.0 New Orleans 559.1 593.5 -34.4 -5.8 Indianapolis 710.3 744.6 -34.3 -4.6 Denver 504.6 514.7 -10.1 -2.0 San Francisco 712.8 715.7 -2.9 -0.4 Nashville 462.5 448.0 14.5 3.2 Memphis 648.4 623.8 24.6 3.9 Columbus 566.1 539.4 26.7 4.9 Jacksonville 578.0 528.9 49.1 9.3 Los Angeles 3,096.7 2,816.1 280.6 10.0 D alias 974.2 844.2 130.0 15.4 San Antonio 842.8 654.3 188.5 28.8 San Diego 960.5 696.6 263.9 37.9 Houston 1,705.7 1,232.4 473.3 38.4 Phoenix 853.3 581.6 271.7 46.7 Total 31,826.9 33,293.7 -1,466.8 -4.4 -These were the 30 largest cities in 1970, excluding Honolulu, the District of Columbia, and San Jose.
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From page 257... ...
an inability to understand how urban finances are affected by local and national actions. Before discussing what we do know about urban fiscal conditions from 1971 to 1984, let us review these problems of measurement so that the reasons for the paucity of information and the difficulties involved in getting a clear picture of urban finances can be understood.
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From page 258... ...
Fund balances give both a cumulative view of past budgetary performance and a measure of the reserves available to meet unexpected financial demands on the government. A fund deficit is a clear sign that the government has had serious problems balancing its budget and is in weakened financial condition to cope with future problems.
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From page 259... ...
Cities routinely budget to reduce fund balances, as shown in the 1986 projections, but actual results often reverse the plans and add to balances. The National View At the national level, much of the work on urban fiscal conditions has been comparative.
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From page 260... ...
Developing Alternative Measures of Fiscal Condition The wide variety of approaches to measuring urban fiscal conditions has enriched our perspective, but they are often controversial and inconclusive. There remains a major unmet need: an evaluation of urban fiscal conditions on a national basis in the context used by local officials.
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From page 261... ...
Census information recasts each local government's ciata into a single national format that ignores the fund structures of local governments, treats capital spending and debt service in a manner different from that required by local accounting practices, and makes it generally impossible to determine whether operating revenues and expenditures are in balance. There is, of course, no information about how results compared to what was budgeted, so that, for example, there is no way to tell the difference between a decline in revenues caused by a planned tax cut and a decline caused by worsening economic conditions.
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From page 262... ...
The financial reports of the governments provide a wealth of financial information, but these, too, have problems in providing comparable time-series information. After New York's financial crisis, analysts, accountants, and city oh ficials recognized the need for better accounting and reporting by local governments.
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From page 263... ...
Governmental operating funds. These funds receive revenue from most taxes, federal and state operating grants, and other general revenue sources, and are used to pay for salaries, supplies, debt service, and other operating costs associated with providing basic government services.
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From page 264... ...
New Approaches to Measuring Fiscal Condition This paper, in addition to reviewing and analyzing the historical and current general fund financial results of 30 major cities, will consider more comprehensive measures of financial activity encompassing all governmental funds, both operating and capital. Proprietary funds, because they are self-supporting, will not be included.
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From page 265... ...
The general fund operating results and balance-sheet condition of the 30 large cities will be presented first in the same general framework that has been used in previous reports dating from 1971. New data series on other funds special revenue, capital improvement, and debt service in the period 19811984 will then be reviewed.
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From page 266... ...
It seems likely, therefore, that the experience of the major cities in balancing revenues and expenditures is cyclical and that it relates to national recession. Because of the nation's strong economic recovery following the 1981-1982 recession, major cities in 1984 had the largest dollar excess in revenues of any year examined and the highest excess as a percentage of expenditures since 1977.
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From page 267... ...
SOURCE: Data were derived from the published annual financial reports of the cities. 267 rates of expenditures and revenues, when taken together, could account for the consistent cyclical pattern of revenue-expenditure der.
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From page 268... ...
Data were derived from the published annual financial reports of the cities. In contrast, 1983 and 1984 were strong recovery years.
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From page 269... ...
In TABLE 3 Comparison of Budgeting Experience for 21 Major Cities Experience 1982 1983 1984 Cities budgeting a deficiency Cities budgeting an excess Total Amount of aggregate deficiency budgeted (in millions) 20 20 18 1 1 3 21 21 21 $321.4 $312.3 $216.0 SOURCE: Data were derived from the published annual financial reports of the cities.
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From page 270... ...
Compared with City Budgets for 21 Major Cities: 1982, 1983, and 1984 Year and Actual Difference Fiscal Category Budget (Unfavorable) (Favorable)
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From page 271... ...
. SOURCE: Data were derived from the published annual financial reports of the cities.
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From page 272... ...
of Selected Major Cities: 1982,1983, and 1984 Year As a Percentage Surplus of Revenues 1982 1983 l9g4 336.1 247.1 0.9 364.7 1.1 1.2 NOTE: These figures include New York but exclude Los Angeles. SOURCE: Data were derived from the published annual financial reports of the cities.
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From page 273... ...
For 1981 and 1982 balances, the undesignated fund balance was generally used, but in some cities it was referred to as unrestricted. SOURCE: Data were derived from the published annual financial reports of the cities.
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From page 274... ...
For each of the 4 years, the aggregate operating revenues of the major cities exceeded their operating expenditures. The excess revenues expressed as a percentage of expenditures was as follows: 1981 1982 1983 1984 1.9 1.1 0.2 2.2 Thus, although there was not a deficiency in 1983, as occurred when only the general funds were used as a gauge, the considerably poorer operating results of the cities in 1983, compared with 1982 or 1984, were repeated by this broader measure.
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From page 275... ...
Effects of Changes in Federal Aid Federal grants, except for capital grants, are usually received by a city as a revenue that goes into special-revenue funds, but generally they are lumped together with state aid for reporting purposes and shown only as intergovernmental aid. Thus, it Is impossible to
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From page 276... ...
Special-revenue fund revenues were slightly higher in 1984 at 27.1 percent of total operating revenues, compared with 26.4 percent in 1981. If there were any effects from federal aid reduction, therefore, they must have been offset by faster growth in state aid or other restricted revenues.
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From page 277... ...
SOURCE: Data were derived from the published annual financial reports of the cities. Revenue Sharing Information was obtained from the U.S.
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From page 278... ...
SOURCE: Data were derived from the published annual financial reports of the cities. Revenue Sharing Information was obtained from the U.S.
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From page 279... ...
Capital spending could be going down because needs are decreasing, because federal grants are less, because interest rates were high for most of these years, or for other reasons. The exact causes cannot be determined with precision, but circumstantial evidence suggests that federal aid reductions and reduced bond sales (because of higher interest rates)
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From page 280... ...
Although it is possible that the decline resulted from other revenue losses, such a cause is unlikely because state grants and interest earnings are not generally major revenue sources for capital spending. High interest rates in the early 1980s may have caused an increase in debt service costs as a percentage of total operating expenditures, as shown below: 1981 1982 1983 1984 7.8 7.7 8.0 8.8 As was discussed earlier, local officials prefer to keep debt service costs stable as a percentage of overall operating expenditures.
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From page 281... ...
Such confidence may be justified, but it is also the case that for most years of the 1980s, except 1983, all of the major cities have shown good results and improving financial conditions. Thus, until the next period in which major cities generally experience financial troubles, it ~ hard to judge whether these cities have permanently recovered.
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From page 282... ...
condition of urban governments in a way that is meaningful from both local and national perspectives remains a difficult challenge, but improvements in accounting practices have made some advances possible. There ace still many unanswered questions, but we are now able to observe at least a few key indicators of financial condition on an annual basis and to make judgments about the general financial performance of major cities, as well as about the condition of individual cities.
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From page 283... ...
Petersen 1983 Ire rids in the Fiscal Condition of Cities: 1981-1985. A study prepared for the use of the Subcommittee on Economic Goals and Intergovernmen tal Policy, Joint Economic Committee, Congress of the United States.
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