With ever more people out of work, consumer spending has dried up, depriving local government of sales tax revenue. The continued housing slump has wiped out real estate transfer taxes, while declining corporate profits have eroded business tax revenue.
From Maine to California, the slump has drained coffers at the very time that the cost of providing jobless benefits and healthcare has risen, straining public finances.
Over the coming week, Reuters.com will publish a series on the problems facing states and cities. From Aurora, Illinois, Karen Pierog reports on the hardship created by the closure of a shelter for battered women, a victim of the crisis in U.S. social services.
Nick Carey visited the town of Pontiac, Michigan, and reports on the desolation wrought by the bankruptcy of General Motors. From San Francisco, Jim Christie and Peter Henderson report on the ticking time bomb created by California’s fiscal crisis as the state Treasurer prepares IOUs for suppliers.