August 3, 2009

Stimulus funds prop up local governments

The Bureau of Economic Analysis said U.S. federal contributions had surpassed local taxes as the No. 1 funding source for state and local governments.

The influx of federal funds helped offset an 8 percent drop in sales and property tax revenues in the second quarter, pushing total revues for states and local governments up 7.5 percent and prompting a 0.1 percent increase in civil service hiring on the local level, USA Today reported Monday.

In the second quarter, state and local government spending increased 4.8 percent, including the addition of 12,000 workers to local government payrolls.

The influx of funds reversed a six-month decline in local government spending and means the stimulus is working as intended, said Chad Stone, chief economist at the Center on Budget and Policy Priorities, a Washington, D.C. think-tank.

Pay also increased in the second quarter for local government workers, rising 4 percent on an annualized basis, the Bureau said.

For private workers, pay rates rose 0.8 percent on an annual basis in the second quarter, the lowest rate in more than 25 years.