Many of the nation's cities and towns, feeling effects of tax revision and last fall's cutoff of general revenue-sharing, are facing a financial crunch that is hampering their ability to balance budgets and provide services, the National League of Cities said yesterday.
Almost one-third of municipalities polled in an annual survey of city financial conditions said they expected a decrease in general fund revenues this year, according to the league's report, which summarized the survey's results. Some communities said that the anticipated decrease has forced them to reduce expenditures and to dip into financial reserves as they try to balance budgets.
Necessary services are being provided, the report found, but primarily through "cutbacks and postponements" that undermine communities' long-term ability to provide them.
Calling the results of the survey "ominous signals," league Executive Director Alan Beals said the report is "a warning that a rude awakening is in store for those who think our cities and towns are all prospering just because they are managing to keep their budgets balanced."
This year's survey polled 545 cities and towns, including the nation's largest 25 cities, most other major cities and a sampling of towns and rural villages.
More than 20 percent of the communities said they would cut expenditures this year, and 62 percent reported that they would begin spending money out of their general fund balances to meet current budgets, the report said. Of those dipping into fund balances, 19 percent said they would use more than half the money in those accounts.
Beals said Congress' decision last October to eliminate the federal general revenue-sharing program was "a major factor, without doubt" in financial problems cities and towns are facing.
General revenue-sharing accounted for about 25 percent of federal aid to municipal governments, Beals said. For most smaller communities, he said, revenue-sharing was the only federal support.
The federal tax law put into effect last October has also reduced the flow of money into municipal coffers by placing new constraints on use of tax-exempt municipal bonds, according to the report.
Beals said the full impact of these two changes will not be known until next year's survey. Because city fiscal years vary and rarely coincide with the federal fiscal year and because there is a built-in delay in distributing general revenue funds, more than two-thirds of the communities surveyed received some revenue-sharing funds in the period covered by the league survey.
"Next year, it will be cold-turkey all the way around, and that's a belt-tightening diet for cities," Beals said.
The survey also found:
Twenty-six percent of the communities in their most recent budget years reduced municipal jobs, and 26 percent said they were working under a hiring freeze.
Fifty-two percent have cut capital spending this year.
Fifty-five percent said the rate of growth in operating expenditures would be lower in 1987 than in 1986.
Twenty-two percent said losing the federal general revenue-sharing money will have an effect on public safety, 18 percent on public works and parks operation, 15 percent on service to the aged, 12 percent on service to the poor, 11 percent on services for youths and 11 percent on funding for recreation and libraries.