As they start 2012, city and county officials are hoping the U.S. economy will turn the corner toward a solid recovery. In the meantime, they are exploring new revenue sources, expanding partnerships with the private sector, trimming budgets, and taking other steps to keep expenses in line with fiscal realities.

According to the latest “City Fiscal Conditions Survey” from the Washington-based National League of Cities (NLC), released in October, city finance officers expect general city revenues will continue to fall. This is the fifth straight year of declines in revenue for cities, according to the survey.

City officials are responding by cutting personnel (72 percent), delaying infrastructure projects (60 percent) and increasing service fees (41 percent). One in three (36 percent) cities report modifying employee health care benefits.

To keep its budget under control, Sandy Springs, Ga., uses public-private partnerships for many city functions, says Mayor Eva Galambos. “We have been able to maintain our high level of public services because of the public-private partnership model under which we operate,” Galambos says. “Except for fire and police, our departments are run by private firms that compete for the contracts. This has saved us considerable amounts.” The city rebid its contracts this past June, with the savings amounting to $7 million over the next five years.

The 3,143 counties in the U.S. also are scaling back or deferring spending to balance their budgets, according to the National Association of Counties (NACo) report, “Coping with the New Normal: An Economic Status Survey of Counties,” released in October. A total of 233 counties, representing 38 states, responded to the survey, and 51 percent reported that declining revenues from the state and federal government was the No. 1 contributor to their county’s budget shortfalls.

Counties are using rainy day funds, imposing hiring freezes and freezing pay, and adjusting personnel to address their shortfalls. They also are delaying purchases, repairs and capital investments, as well. Meanwhile, about half (49 percent) of responding counties report that cities have contracted with them to perform some services, such as law enforcement and tax billing.

“The cuts in personnel and the delaying of infrastructure projects are prudent and responsible actions by local officials,” says Donald Borut, NLC executive director. “City officials are making difficult decisions and are working hard to find innovative solutions to reenergize their communities. But without more resources and more cooperation, the outlook will continue to be challenging.”

Michael Keating is senior editor for Govpro.com and Government Product News and contributing editor for American City & County. He can be reached at michael.keating@penton.com.