Fiscal woes that have caused high-profile bankruptcies in California are surfacing across the country as municipalities struggle with uneven growth and escalating health and pension costs following the worst recession since the 1930s.
Budget crunches already have prompted Michigan lawmakers to authorize emergency fiscal managers, and led the mayor of Scranton, Pa., to temporarily cut the pay of all city workers to the minimum wage.
In a majority of the nation’s 19,000 municipalities—urban and rural, big and small—stagnant property tax revenues, less aid from states and rising costs are forcing less dramatic but still difficult steps.
Moody’s Investors Service recently said that while municipal bankruptcies are likely to remain rare, it warned of a “a small but growing trend in fiscally troubled cities unwilling to pay their debt obligations.”
“We need help right now,” said William Schirf, the mayor of Altoona, Pa. Crime in the city of 46,000 rose 11% last year, while the number of police officers fell 8% over three years because of budget constraints. The city has reduced the number of streets it is repaving and clearing of snow, and cut down on leaf pickups and removing dead animals, trash and bicycles from roadways.
Altoona officials projected a $3 million deficit for fiscal 2012. Under state law, the city can’t raise property taxes—its greatest source of revenue—any higher. In April, Altoona was declared fiscally distressed under a state law, enabling it to restructure its finances. “We just don’t have the income to match our expenses,” said Mr. Schirf.