Our observation

It has been years since constructing a budget has been painless for local govenments.

Each year the cuts get deeper and deeper, whether it be the hundreds of jobs cut within a municipality or the reining in of amenities such as landscaping at city parks.

To balance its 2010 budget, Winter Park made cuts such as trimming $260,000 from 401(a) and longevity bonus contributions from its employee benefits package.

But is cutting always the answer? Reducing government spending has its advantages and this recession definitely cut a lot of fat from budgets that swelled during the economic boom, which lasted from 2004 through 2006. But after a few rounds of heavy trimming, the fat is just about gone, and it seems hacking away at the muscle and bone of local government is all that's left to do at this point.

Many local politicians are vehemently opposed to raising taxes and rightfully so — it's a very unpopular thing to do. After all, with an unemployment rate hanging around 11 percent and officials predicting little relief for years, how could local government ask taxpayers to fill its coffers with their hard-earned money?

But some say a period of fiscal crisis is precisely the right time for a tax hike. According to The Center on Budget and Policy Priorities' article "Budget Cuts or Tax Increases at the State Level: Which Is Preferable When the Economy Is Weak?" budget gaps nationwide are estimated to reach $260 billion despite aid from federal government.

"Some state-level policymakers contend that the weakness of the economy means that a state should rely solely on cutting spending, rather than raising taxes," the article states. "But this one-dimensional approach is not based on sound economics."

The article quotes two economists — Nobel Prize winner Joseph Stiglitz of Columbia University and Peter Orszag, director of the federal Office of Management and Budget — as saying "spending cuts could actually be more harmful for a state's economy during a recession than tax increases." Their reasoning: "some of the tax increase would result in reduced saving rather than reduced consumption."

And they are not alone. Earlier this year, House Majority Leader Steny Hoyer, D-Md., said tax increases may be the only way to handle the $12 trillion federal deficit.

He told The Hill that, "No one likes raising revenue, and understandably so, but if you're going to buy, you need to pay. If need be, I am hopeful that both parties will agree to look at revenues as part of the solution — not as a gateway to higher spending, but as part of a compromise that cuts spending and balances the budget."

Last month The Observer reported that taxable values in the county had dropped 10 percent in Winter Park and Maitland, meaning residents could expect to pay on average 12 percent less in property taxes. This sounds like a steal, but it also means that each municipality will get that much less revenue than the year before.

Still, both cities' mayors maintained that there will be no new taxes, explaining that running each city more efficiently will make up for the loss without significant cuts in service.

This sounds like a lovely solution but with all the program cuts, layoffs and reductions in service it seems like reducing spending alone won't cut it for long.