County governments cope with financial woes

While Philadelphia reels from economic catastrophe and a series of severe public-service cuts, suburban governments find themselves contemplating still more hard choices.

The Pennsylvania counties ringing Philadelphia uniformly loathe raising the property taxes central to their budgets - all of which run into the hundreds of millions of dollars.

Yet tax revenue is not keeping pace with rising government costs fueled by municipal-bond volatility and pension-fund shortages, leaving money scarce when budget time comes around. Where, then, can government find money in hard times?

"They're not in a position to raise taxes readily, obviously," said Temple University sociology professor David Elesh, who has written about local-government economics, "so they're going to have a situation there."

In Montgomery County, where the budget has been delayed until December to deal with the money shortage, Board of Commissioners Chairman James R. Matthews glumly compared a projected $42 million gap to Philadelphia's money troubles.

"I don't envy their problems," he said. "They are different than ours, but both require the same thing, which is heavier use of the red ink in reviewing budgets."

Suburban county governments don't foot the entire bill for the range of municipal-level operations, such as neighborhood libraries and fire stations, as Philadelphia does, so the sting of cutbacks can be less obvious. Matthews said fee increases and hiring freezes were likely in Montgomery County, along with "cutting some county services," though he would not be specific.

"We're looking into the details and haven't done the necessary human-resources" preparation, Matthews said.

Some governments have a relatively painless option: tapping cash reserves to get through a lean cycle, like a household using savings for groceries.

Bucks County, coming off two straight years without tax increases, is considering taking money from its general fund this year to avoid a tax hike, finance director Brian Hessenthaler said.

"We are doing everything possible not to have one," he said.

The preliminary Bucks budget is due today, and department heads have scraped to keep from having to dip too deeply into the rainy-day fund. At $70 million, it is in far better shape than it was in 2004, when it stood at $4 million.

Montgomery County officials know well the danger of tapping the surplus too often: budgets in the late 1990s left cash reserves of about $13 million, endangering the county's bond rating.

Montco built up that fund to nearly $100 million but then spent about $33 million from it to help cover this year's $483.8 million in spending. After two consecutive years of cutting taxes, a tax hike has not been discussed as feasible.

Accordingly, every department was asked to cut its budget by 5 percent, which Matthews called "a little bit of a haircut, but nothing draconian."

Chester County has also looked for ways to trim budgets, but a request this month to freeze county employee salaries found little popular traction. Officials are sorting out how to cover an increase of nearly $6 million in its required contribution to a pension fund that cost the county only $7.5 million in this year's budget. Raising taxes to support the proposed $556.9 million budget remains on the table, though the amount is in question.

Delaware County, which raised taxes after the 2007 elections, has no plans to do so again, according to the $303.3 million preliminary budget released Nov. 3. Despite increased costs in the justice system and other areas, Delco officials projected a balanced budget through some debt restructuring and providing employee retirement incentives.

Bucks County, which had a $466.5 million budget last year, has found one undimmed spot in dark budgeting times: slot-machine revenues at Philadelphia Park are still strong.

"I really thought we would see a decrease in that activity, and we thought Philadelphia would be online with its slots by now," Hessenthaler said. "But they're not, and we're reaping the benefits.

"I look at these numbers each week and shake my head at the number of people who continue to play, even in these bad times."