City budgets stuck between cutting or borrowing

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Bill Radke: American cities and states have money problems. Many of them started the fiscal year on July 1 facing budget holes so big, they basically had two choices: cut spending or borrow. Reporter April Dembosky tells us both choices are painful.

April Dembosky: The City of Oakland is ranked as one of the most dangerous city in the country. But on Tuesday night, its city council laid off 80 police officers. Council member Nancy Nadel said they had no choice.

Nancy NadeL We’ve cut everything else to the bone, so we just felt it was necessary for them to take a piece of the pain as well.

Other cities and states are making up for budget deficits by borrowing. Illinois could rack up $9.3 billion in bonds this year — then spend millions on top of that in interest payments.

BRIAN BATTLE: Illinois is unique, but not alone.

That’s Brian Battle of Performance Trust Capital Partners in Chicago. He says municipalities across the country face rising labor and pension costs. And short-term measures won’t be enough.

BATTLE: They’re gonna close the library three days a week. They’re only going to cut the grass at the park once a week instead of twice a week. But the recession is long enough and the overspending big enough that that won’t do it over the long term.

For cities that still can’t balance their budgets through cuts and loans, there’s always the unpopular prospect of raising taxes.

In Oakland, Calif., I’m April Dembosky for Marketplace.