Turmoil saps city budgets

Crain's:

Local governments are bracing for deeper budget shortfalls as the financial crisis hammers everything from sales tax revenue to pension funds.

The state's cash on hand in the first quarter of fiscal 2009, ended Sept. 30, plunged 75% to a record low $188 million amid slowing tax revenue, state Comptroller Dan Hynes says. Its unpaid bills ballooned 31% to $1.8 billion, also a record. That could further delay already tardy payments to vendors and crimp access to people who rely on state services such as Medicaid.

"We expect this to get worse," Mr. Hynes says. "We expect to unfortunately continue on the path of breaking these dubious records going forward."

Gov. Rod Blagojevich on Friday asked the federal government to provide financial assistance to Illinois and other states to defray budget deficits.

With the credit freeze and stock market swoon sapping consumer and business spending, cities and towns face growing pressures on just about every revenue source — from stagnant or declining sales tax receipts to transfer taxes on real estate transactions, which have plummeted more than 40% in some communities because of the ice-cold housing market.

Some cities that already were trimming staff and delaying projects have been forced to cut further as the revenue outlook darkens. Mayor Richard M. Daley this week is likely to mandate hundreds of layoffs and eliminate many hundreds of unfilled jobs to help fill a $400-million-plus budget hole in Chicago.