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“Some are innovating and finding creative solutions but, regrettably, without the necessary resources, cities will continue to have a difficult time assisting their residents through these trying economic times.”

With property taxes serving as a significant revenue source for local governments, the still slumping housing market has strained city and county coffers. And since it takes time for housing assessments to catch up to current values, local governments are expected to feel the full effect of the downturn in 2011 and beyond.

Generous salaries and compensation packages, particularly for union members, also accelerated local government budget woes, says Tad DeHaven, a budget analyst with the Cato Institute, a free-market Washington think thank.

“That is the 800-pound gorilla,” he said.

Mr. DeHaven added that local officials should use this time as an opportunity to re-evaluate their financial structures and salary packages to institute reforms to make governments as efficient and nimble as the private sector.

“In the public sector, you don’t have that flexibility,” he said. “You have a privileged [employee] class of people that have been promised things, and they expect those promises — even if those promises come at the expense of everybody else’s job.”

The National Association of Counties (NACo) recently launched its “Restore the Partnership” campaign to lobby Congress to maintain federal financial assistance to at least 2010 levels for many county programs, such as the popular Community Development Block Grant Program, grants to public safety agencies, aid for rural counties and assistance for Medicaid and social services programs “that are essential in creating and maintaining jobs while providing assistance for our citizens.”

NACo also is pressing Washington lawmakers to repeal a tax law that beginning in 2012 will require many counties to withhold 3 percent in federal taxes on payment to government contractors for goods and services.

This article is based in part on wire service reports.