Of the 250 cities, more than half still have reserves below their 2007 levels. They also have taken on more debt: 114 cities saw overall debt loads increase from 2007 to 2012. The real-estate markets in 100 cities are still worse than they were in 2007, an acute problem for governments that rely on property taxes as a top source of revenue.In Allentown, Pa., weak property values are starving the city of a primary source of cash. Springfield, Ill., has seen pension costs nearly triple in the past decade. Providence, R.I., raised taxes and fees and cut benefits to offset losses in state aid. Fresno, Calif., has so little available cash that officials worry one unforeseen event could reverse nascent improvements. […]The risks have increased for investors. “More local governments today are facing heightened long-term fundamental credit challenges than at any time in the recent past,” Moody’s said in a September research report.
One thing is clear: City officials around the country will have to dig deep for years to come. Some will have to ask residents for tax increases even as they cut services. All will have to figure out how to inch toward fiscal solvency without overburdening low- and middle-income families with taxes or scrapping the services that the poor rely on.The WSJ is doing a real service by diverting some of its reporting resources away from the soap opera on Capitol Hill. Elite discourse is usually too focused on what Washington should or should not be doing to fix our economy. (Conservative pundits are as guilty of this as liberals.) But partly because of how our federal government is set up, partly because of how our economy functions, and partly because of the incompetence of the current crop of national political leadership, our nation’s future will be determined at the local level much more than it will be determined in Washington.