Will debt ceiling deal, Fed spending cuts trickle down to Elk Grove?

More potholes, fewer cops; state to raid local funds?

During the July 13 Elk Grove City Council meeting, City Manager noted that less than one month into the city’s fiscal year 2012 budget, there was already a shortfall. (See video of Gill’s comment here.)

Gill noted that while the city lost over $500,000 in funding from the June 30 expiration of the vehicle licensing fees, that loss was offset by a law enforcement grant of $225,899 and higher than expected cable franchise fee revenue was $420,000 more than budgeted.

In her comments Gill noted that she and her staff will continually monitor the state’s financial situation and update the council as needed. If she didn’t mention it, Gill and her staff may want to add the Federal financial situation to her list of things to monitor.

While the true effects of the recently deal struck on extending the Federal debt ceiling won’t be known for some time, there is no shortage of predictions on what will happen to state and municipal budgets.

According to the Center on Budget and Policy Priorities (CBPP), which tracks state spending, the government’s non-security, domestic, discretionary spending will shrink by about $500 billion over the next 10 years. Nearly one third of these funds typically flow to state to support programs ranging from Head Start to road maintenance.

Raiding city funds?

National Priorities Project executive director Jo Comerford says taxpayers can expect more potholes and few cops on the streets.

“We’re way past cutting the fat or program efficiencies,” Comerford said. “Now we’re into cuts that are really affecting quality of life and forcing really hard choices.”

Furthermore, the CBPP notes that state and local government nationwide have been cutting 10,000 to 20,000 positions per month since the onset of the credit collapse in August, 2008. On top of that, more than two thirds of Federal funds that flow to states are earmarked for specific expenditures such as Medicaid and general assistance leaving very like wriggle room for states to juggle their finances and obligations.

Elk Grove Budget Director Katy Baumbach said that the affects of the debt ceiling deal “are difficult to gauge at this point” and added the city staff “will be monitoring the discussion as Congress determines how exactly to cut discretionary spending prior to the October 1 start of the federal fiscal year.”

Baumbach did add a cautionary note that while Elk Grove receives some direct funding from the Federal government, she noted cuts to health, welfare, unemployment, and education that would greatly affect the state’s budget and that could affect the city.

“Given that the state routinely raids local government funds to help resolve budget crises, we will be keeping a close eye on the process at both the state and federal levels,” she noted.

All of these trends can be troubling if they come to fruition, especially for a city like Elk Grove that is home to many government workers. While the exact effect this debt ceiling deal is not yet clear, it is unlikely the debt ceiling deal and spending cuts will help Elk Grove or any other city for that matter.

Hold on, things could get real bad in the coming years.