Budget Shortfalls, Employee Compensation, and Collective Bargaining in Local Governments

Abstract

The purpose of this study was to examine how local governments are responding to budget shortfalls and to explore how compensation practices across the United States are correlated to changes in service delivery. One hundred thirty-four of the largest cities and counties responded to a mail survey, for a response rate of 45 percent. A large percentage (95 percent) of local governments reported experiencing budget shortfalls. In response, local governments are reducing their workforces, laying employees off and/or utilizing reserves rather than raising taxes and/or scaling back wages and benefits. Type of government (county or city) and collective bargaining were associated with budget shortfalls. Despite the fiscal distress of governments, average cost of living increases were between 2 and 3 percent for each of the two years surveyed and nearly half of respondents reported increases in employee benefits (fewer than 10 percent reported any decreases). Collective bargaining was significantly associated with higher increases in benefits, increased cost-of-living adjustments, and responses to budget shortfalls.