Deficit, Federal Aid Cuts Worry Cities’ Leaders

City leaders are more pessimistic about economic growth than they were a year ago, with the budget deficit and prospects for less federal aid topping their list of worries, the head of the National League of Cities said Wednesday.

In a survey of elected officials in 371 cities, mayors and council members overwhelmingly said that eliminating the federal deficit is their top concern, but they want it done through increased tax revenues and not by further slashes in domestic spending, Alan Beals, director of the league, said.

Deficit ‘a Dark Cloud’

“The deficit has hung a dark cloud over the economic horizon of the nation’s cities,” Beals said in releasing the league’s annual economic survey.

Although desiring a reduction in the federal deficit, city officials listed the likely loss of federal aid programs as the greatest demand on their city budgets during 1986. Thirty-nine percent listed the likely loss of federal aid as their top worry, and 38% said they would be unable to maintain services without a local tax increase.

On the other hand, 49% said they thought they could maintain services, and 13% believed they could expand.

Beals said the survey showed that city leaders want any federal tax reform to raise enough money to cover the deficit by eliminating tax breaks.

Tax Breaks Cited

“There is no correlation between federal domestic spending and the deficit,” he said. “The deficit has doubled during a period in which assistance to cities has been cut in half. Also . . . there has been a doubling of tax expenditures--credits, preferences and various other tax breaks and loopholes--costing the Treasury over $400 billion in 1986.”

The survey showed that city leaders expect economic growth to be less robust and uniform than they did in a similar survey a year ago. Only 25% of the officials said they expected strong economic growth locally in the new year; last year, 45% said they looked for a strong economy.

City officials listed unemployment as their next worry behind the deficit.

Sixty-three percent said there had been no improvement in unemployment in their city in the last year--a major shift from a year ago, when 76% said there had been improvement.

No Lessening of Poverty

Eighty-five percent said the problem of homelessness had not improve locally, and 83% said poverty had not lessened. Improvement was seen in only two areas, mortgage conditions and interest rates for city borrowing.

Northeastern cities were most likely to say that they would need a tax increase to maintain services, while cities of the West were more optimistic, with 19% saying they could expand services without raising taxes.