WATERVILLE — While larger cities statewide shed dozens of government workers during the recession, many medium-sized communities avoided mass layoffs by taking drastic measures to cut government spending.

But after nearly four years of patching together budgets, putting off infrastructure repairs, asking employees to take on more work and struggling to maintain public services, some communities face a day of reckoning if the economy doesn’t rebound soon, according to city and town officials.

The city of Augusta, with a population of about 19,130, seems to be on the dividing line for communities small enough to stave off cutting government jobs and those that couldn’t avoid layoffs.

Despite having workers take unpaid furlough days, reducing employee benefits and merging some departments, the city was still forced to lay off 17 workers since the economy tanked in 2008, according to City Manager William Bridgeo. There are the equivalent of 221 full-time employees currently.

Although there have been recent signs that the city’s finances have turned a corner toward recovery, Bridgeo is worried about lingering fears tied to what economists call a double-dip recession, where the global economy slides back into recession after recent modest gains.

“At some point you’ve gone as far as you can in cost efficiencies to continue to provide the same level of service and eventually you get to the point where you have to decide to discontinue services,” he said.

So far the tough debate about which services to cut has been avoided, but any significant drop in government revenue would force the community to have that discussion, Bridgeo said.

The city of Waterville, with a population of about 15,760, has been facing the prospect of cutting services since reducing its work force long before the recession hit, according to City Manager Michael Roy.

From 2003 to 2005, the city government cut 15 positions to bring the number of employees down to 111. Gov. Paul LePage, then mayor of the city, pushed for the cuts and the city council approved it, Roy said.

“Since then, most people have agreed that any further reductions would impact and jeopardize services,” Roy said.

When the recession hit in 2008, the city had 109 full-time equivalent employees, which does not include seasonal and intermittent part-time employees. Currently the city has the same size work force.

With government revenue dropping, however, the city had to offset the gap by delaying $500,000 in infrastructure projects and drawing down emergency funds, according to Roy.

“The city has delayed capital improvement projects, but more importantly we’ve been able to draw on our reserves,” Roy said.

The reserves account, also known as the undesignated fund, is built up by the tax dollars left over at the end of a budget year. It’s an emergency fund that professional auditors recommend municipalities maintain at a certain level to sustain government operations during a crisis, according to Roy.

“The (undesignated) fund has drawn down almost $4 million in the last four years, that is the real reason that there hasn’t been any layoffs,” Roy said.

The city’s undesignated fund is currently at about $7 million, which is above the $6 million minimum amount recommended by auditors. But there may not be enough in the fund to cover projected budget gaps next year, without either cutting services, laying off workers or raising taxes, Roy said.

“The day is fast approaching when we’re not going to be able to afford to do that anymore,” he said of tapping reserves.

Feeling the ‘fiscal crunch’

In 2009, the city of Augusta had to reopen its budget because of a sudden drop in revenue. The emergency measure resulted in delaying capital projects, laying off 10 city employees and several other spending cuts, according to Bridgeo.

The dramatic cuts didn’t end there, though, and city employees had to take eight unpaid furlough days to help balance the budget. Another eight unpaid furlough days followed the next year along with reductions in certain employee benefits, he said.

Some departments also merged and employees took on added duties after the layoffs, he said.

These spending cuts seemed to help the city’s finances start to recover this year, however, when the number of furlough days was reduced to four. But the progress could be temporary if trends in Maine’s statewide financial health continue in the same direction, he said.

Bridgeo, like many other town and city officials, points to decreases in state money shared with municipalities as the biggest threat to local government services in the coming years.

A large portion of the city of Augusta’s revenue comes from state money, which has declined during the recession, Bridgeo said.

“So when the state is in a fiscal crunch we always feel it,” Bridgeo said.

In 2008, the city received $2.56 million from the state through the revenue sharing formula based on municipality size and assessed valuation, according to Bridgeo. It had dropped to $1.5 million by 2011.

Bridgeo said that slide was caused by declining revenues statewide, as well as the recent decision by the Maine Legislature and LePage to change the way state money is allocated.

“When you’re seeing the reduction in your revenues, you have to lay people off,” Bridgeo said.

The city of Waterville has been drawing down its undesignated fund to offset a $1.3 million drop in state revenue sharing money, according to Roy.

Roy said stagnant projections for next year’s state revenue sharing are worrisome, considering that the city has depleted its reserves in recent years.

The ability to offset budget gaps caused by declining state money is an uncertainty.

“Do we have one more year of that? I don’t know,” he said.

Nowhere to go

State revenue fell by 8.2 percent from 2009 to 2010 for the 492 municipalities in Maine, according to the most recent statewide data available, said Eric Conrad, spokesman for the Maine Municipal Association.

Some of the budgetary measures taken by Augusta and Waterville are the same ones most towns and cities across the state are taking, he said.

And despite taking similar steps, larger cities like Portland and Bangor faced government job layoffs during the recession because of the size of their operations, Conrad said.

Many municipalities with between 6,000 to 9,000 residents, as well as those with fewer, avoided layoffs because they have barebones operations, a situation that many larger cities now find themselves in after recent layoffs, Conrad said.

He said it’s hard to cut jobs and still maintain services. “There is basically nowhere to go,” he said.

In the town of Winslow, which has a population of about 7,500, officials have worked hard to keep municipal spending at a bare minimum and keep the tax rate stable. Meanwhile, they’re not laying off any employees; the town has 44 full-time employees — the same amount they had in 2008.

The town’s tax rate was $18.75 per $1,000 of property valuation in 2008. It was reduced in 2009 by budget cuts to $15.50 per $1,000 of property valuation, where it has remained for the last three years.

Town Manager Michael Heavener noted that municipal spending has been cut back by about 3 percent from 2008 to 2011.

“The decrease is in response to dwindling revenues,” Heavener said. “We reduced our budget to avoid a tax increase. All of the town’s employees agreed to no pay increases in this year to help us reach our budget reduction goal. We also reduced the amount of funding we set aside each year for future capital projects.”

In Skowhegan, with about 8,600 residents, there were 62 full-time employees working for the town in 2008 and one half-time employee. This year there are 59 full-time employees and three part-time workers.

Town Manager John Doucette Jr. said even the two positions cut through attrition required some reshuffling of duties.

“We’ve had to reorganize how the jobs are done — you have to,” he said. “With the part-time position we didn’t fill at the town office, we were able to do that because we started looking around and said ‘Hey, there’s things we can do smarter, not harder’ and save time that way.”

The town of Oakland, with about 6,240 residents, has 35 employees, one more than in 2008.

After two years of budget cuts, voters approved increasing town spending this year to $4.34 million, which is 4.97 percent higher than in 2008, according to Town Manager Peter Nielsen.

Town officials asked for the added tax dollars to pay to fix roads, something that has been a top priority despite a $200,000 decline in state funds, Nielsen wrote in an email, responding to questions about the recession’s affect on government spending and public services.

“I would say that while people are uneasy about the economy, job stability, and rising health and energy costs, that has not translated to a willingness to accept less in municipal services, say in snow plowing, public safety, and even cultural services like the library and recreation,” he wrote.

David Robinson — 861-9287

[email protected]

Reporters from the Kennebec Journal and Morning Sentinel contributed to this story.