American cities to face challenges to economic recovery in future

Pew Charitable TrustsA recent report from Pew Charitable Trusts found that 30 American cities may face challenges in the financial recovery—the result of state and federal fiscal constraints.

“American cities are still suffering from the effects of the worst economic decline since the Great Depression,” Kil Huh, the director of state and local fiscal health at Pew, said. “As policymakers continue to confront difficult fiscal conditions, Pew’s analysis suggests that revenue challenges will continue in the coming years. This is important given the outsized impact cities have on the economies and long-term prosperity of their states and the nation as a whole.”

The report found that by 2011, more than 20 of the cities had not returned to previous revenue peaks, and for cities that had rebounded, improvements were offset by federal and state-driven aid packages that were not derived from internal sources of growth.

Though each of the 30 cities saw a unique recovery, most budgets felt the impact of the 2008 financial crisis later than federal and state governments. Relatively effective property tax collection helped reduce the impact of the financial crisis, but the revenues began to decline in 2010, suggesting a difficult economic future.

In developing the report, Pew standardized data from annual financial reports for each of the 30 cities to examine fiscal conditions, including reserves, revenues, expenditures and long-term obligations, and adjusted them for inflation.

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