White House budgets are more messaging tools than spending plans. And President Donald Trump’s message last week was loud and clear: States, counties, cities and towns will have to do more with less.
Those were tough words to hear in Union County, Tenn., where a fifth of the population lives in poverty. And in Allentown, Pa., where property taxes would need to double or triple to make up for the loss of federal spending. Gary, Ind., by law, can’t raise property taxes even if it wants to.
The administration’s proposed federal budget cuts are, in effect, local budget cuts that ignore the economic realities of the communities that voted for Trump. The president’s plan proposes deep reductions to agriculture subsidies and eliminates billions of dollars for housing, transportation, environmental cleanup and job training. It calls for “a greater role for state and local governments and the private sector to address community and economic development needs.”
When Micheal Williams, a Republican and a self-described fiscal conservative, saw the plan, he was stunned.
“I thought, ‘Oh my God,’” Williams said. “I don’t know if they really thought this through.”
Williams is mayor of Union County, which never fully recovered from the loss of its textile industry when it shifted to Mexico after NAFTA. When Trump promised to bring back manufacturing jobs, voters there lined up behind him.
But last week when Trump released his budget, the message they got from the president was that they were on their own.
The bulk of Union County’s $42.8 million budget is funded by property taxes. With a population of less than 20,000 and a median income of $37,000, there’s no way to raise money for big projects. Some residents still rely on dial-up internet, and a rural elementary school needs a $500,000 upgrade to its water and septic system.
“Sometimes the public paints it with a broad brush, ‘Oh they’re wasting money,’” Williams said. “Well, even if we cleaned up everything, we still couldn’t afford the infrastructure for broadband.”
Williams has applied to the Appalachian Regional Commission for a grant to help the school. The commission and a handful of others like it combine federal dollars with state, local and private money to boost economic development and job growth in the poorest regions of the country. All these commissions would be eliminated under the Trump plan.
Of $3.5 trillion in federal outlays in 2014, nearly $589 billion was in the form of grants directly to states, localities, individuals and nonprofits, according to research from Pew Charitable Trusts. In Tennessee, that added up to almost $2,000 per person.
“The federal budget is not just a national story, it really is a state-by-state story,” said Anne Stauffer, director of Pew’s Fiscal Federalism program. “When people think about the federal budget they don’t connect it to their lives or the services they get from their state or their city.”
Local and state politicians are already ramping up lobbying efforts to preserve popular programs, including $3 billion in community development block grants, and Congress is sure to protect many of them.
If federal dollars are lost, it’s not apparent that states and municipalities could pick up the slack. Only 28 states are on track this year to meet revenue forecasts, according to the National Conference of State Legislatures. Sluggish commodity prices are hurting budgets in the Midwest, sales tax revenue has disappointed, and levies paid by fossil-fuel companies are falling as energy prices drop.
Rural America in particular — where Trump got more than 60 percent of the vote — is struggling with high unemployment, slow economic growth and tepid home price appreciation. Three in four rural counties still haven’t fully recovered from the recession, according to the National Association of Counties.
Some had manufacturing or mining economies upended by economic shifts. Their tax base has been eroded and their workers don’t have the skills that modern employers want.
“People bought into Trump, particularly in these hardest-hit areas, on the idea that he’s going to create jobs,” said Chris Estes, president of the National Housing Conference. “This is not a budget for them.”
Federal grants have been a lifesaver for Gary, especially after Indiana state legislators rolled back local property taxes and cut the city’s budget in half. This year, Mayor Karen Freeman-Wilson is scrambling to close a $9 million deficit.
Three years ago, Freeman-Wilson, a Democrat, used a community development block grant to demolish a 14-story hotel that had been abandoned since the 1980s. This year, another block grant will help pay for a new Indiana University campus downtown. Losing the grants would leave her with few options.
“Forty percent of our citizens are in poverty. The last thing they need is a tax increase,” Freeman-Wilson said. “Not only do we not have the authority to raise it, I don’t know that that’s the best answer for this problem.”
Cutting off lifelines for economic development and job training could send struggling economies into stagnation just as some of them are starting to regain their footing.
“You get this cascading effect when you start cutting funding to states,” said Michael Brown, an economist at Wells Fargo. “Think of Canton, Ohio, or Hickory N.C., manufacturing towns. They’re sort of stuck. I don’t know that there’s a recovery there without a public or private investment in education.”
Catherine Boudreau contributed to this report.