Fiscal cliff impact months away for cities

Fiscal cliff impact months away for cities

CHAMPAIGN — For local government, the fearsome federal fiscal cliff is more like an inconvenient fiscal slope. It would take months to get to the bottom.

Officials in Champaign and Urbana say it would certainly hurt city budgets if Congress could not reach a deal before New Year's Day to avoid automatic federal spending cuts and tax increases, but they are not sounding the alarm yet.

"Obviously, if we get into the middle of (December without a deal), I'll be spending a little more time on this," said Champaign Finance Director Richard Schnuer.

Low- and moderate-income housing programs would take the biggest hit locally, officials say, and funding for transportation projects might dwindle in the long term.

Between the two cities, direct federal grants account for a couple million dollars every year. More federal money filters down to the city government through the state of Illinois. Most of that trickle-down money is for transportation projects, but those numbers vary yearly.

Two major sources of city revenue would be affected if the federal government went over the "fiscal cliff," and both of those target low- and moderate-income housing programs.

The bulk of federal dollars comes annually in a chunk called the "community development block grant," or CDBG, which infused $702,739 into Champaign's budget this year, according to neighborhood programs manager Kerri Spear. Urbana received $362,644, said Comptroller Ron Eldridge.

The other is known as the Home Investment Partnerships, or HOME, program, for which Champaign received $303,558 and Urbana collected $769,083 this year.

The money from the two federal housing programs goes toward things like minor housing repairs for seniors, emergency repairs and repairs for accessibility. A Champaign neighborhood development program called CommUnity Matters benefits from the federal funds, and the final two homes in the Taylor Thomas subdivision will be constructed with federal money.

Other various neighborhood revitalization efforts are funded with CDBG money, too.

"Certainly there's always going to be some push for these programs," Eldridge said. "CDBG and HOME are really good programs that help the needy."

The HOME numbers fluctuate from year to year — Urbana received more than $1.5 million last year — but the CDBG funds have been trending downward. Urbana received 14 percent less between this year and last.

Even if Congress did not go over the fiscal cliff this year, Eldridge said, he suspects those federal funds "might slowly dwindle away" over the years anyway.

"This fiscal cliff thing is kind of a joke to me because the federal government is borrowing 40 cents on every dollar they spend," Eldridge said. "That cannot continue. Somewhere down the line they have to make some cuts."

So whether it is next year or a decade from now, Eldridge said that local taxes might need to pick up the slack for those programs if they were to continue. That will be a decision for voters and city council members.

"We were not in a position to subsidize those programs with general tax dollars," when CDBG funds were cut last year, he said. "Will they be in the future? I don't know. That's going to be extremely difficult to do."

The federal "fiscal cliff" is not so dramatic on the local level. The city of Champaign is spending federal money now that it received last year, and transportation funds always take months to filter down through the appropriate agencies.

So even if the city pulled money from other local expenditures to pay for the gaps in federal funding, residents would not see the effects until months from now.

"Because the effect would take a while, in terms of the city services for the next few months, it will not have a significant impact on the majority of our core services," Schnuer said. "We're simply not funding much of our fire and police and public works — except for some of those capital projects — out of federal money."

A very small percentage of the police department budget comes from a federal source called the Byrne Memorial Justice Assistance Grant. It numbers in the tens of thousands annually, and this year, the department used some of that money to buy a state-of-the-art training simulator.

Financial directors in both cities say that going over the "fiscal cliff" would be a strain on local resources and tax dollars. The effects would be months out, but they both said the federal government needs to come up with a better way to move forward.

"I recognize that the federal government needs to have a more sustainable revenue and expenditure structure," Schnuer said. "But I hope that our leaders can develop a plan that would have a more positive result than the automatic cuts and revenue increases that would happen under the current legislation."