When States and Towns Go Broke

Localities are forced to deal with irresponsible spending at all levels.

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"You can roll over budgets into another year. You can shift things around to make the budget work. You can defer decisions into the following year," Gordon says. "Local governments don't have the flexibility that the state has, and they don't have the sources of revenue."

Phil Oliff, a policy analyst at the Center on Budget and Policy Priorities, says this kind of accounting is symptomatic of a broader failure of states to budget properly that puts unneeded pressure on localities. "States could have lessened the need for deep cuts by taking a more balanced approach using additional revenue and tapping rainy-day funds," Oliff says.