Craig Mauger, The Courier Times News Editor

From schools laying off teachers to the city charging new fees to the library limiting its bookmobile, big cuts are hitting the government services offered in Henry County, and the cuts could be here to stay.

Just tonight, the New Castle Community School Board is expected to decide whether to close Greenstreet Elementary School. And while that is meeting going on, the New Castle City Council will continue considering dozens of new users fees.

The cause for the cuts has been called a perfect storm. There's the struggling economy, property tax caps adopted by the state and the fact that many people simply aren't paying their taxes.

One expert said last week that this could be the beginning of a new era for local government in Indiana, and cities like New Castle and Muncie, facing deep cuts, could be "canaries in a coal mine."

"We're in a real transition phase," said John Ketzenberger, director of the Indiana Fiscal Policy Institute. "And I don't think any of us understand exactly how this will play out."

Ketzenberger said New Castle and Muncie are both cities that have lost major factories. When the factories left, so did the property tax revenue they created, he said

On top of that loss comes the economy's troubles. Some people can't pay their taxes, and some face foreclosure. At the same time, property tax caps are taking effect.

New Castle's city budget has dropped from $15.6 million in 2008 to $14.3 million in 2009 to possibly in the $12-million range for 2010.

To deal with the decrease, the city has laid off employees and has left positions vacant. The city is also considering charging for trash pickup and adopting other user fees.

"I think it's really a harbinger of things to come," Ketzenberger said of New Castle's situation.

Earlier this year, Mayor Jim Small said the city was facing a possible $2.7 million budget shortfall for 2010. Of that $2.7 million, $1.7 million was because of the tax caps while $1 million was because of other factors, Small said. And last week, he said the cuts next year "will be as severe."

"We either get the money in property taxes or we reduce our services," Small said. "You can't have both."

County Auditor Linda Ratcliff said a variety of factors are creating the budget problems facing government entities. For one, she said it costs more money for entities to operate because gas prices and utilities costs are going up.

Ratcliff said there's no one in city or county government who has any money to waste.

Henry County Commissioner Kim Cronk said the county may have to cut $3 million in 2011. Already in 2009 and 2010, the county has cut between $3 million and $4 million, he said.

"Everybody's down to the bare bones," Cronk said.

Last week, the county took a cost-saving step by privatizing the Henry County Youth Center.

In 2008, when the General Assembly adopted the tax caps, state Rep. Tom Saunders, R-Lewisville, was the only Republican to vote again them.

Last week, Saunders said the way the caps have played out was his fear two years ago.

He added that officials, like Small, have been forced to make unfavorable decisions, because of the budget shortfalls they're facing.

"He's going to have to make these cuts," Saunders said.

State Sen. Beverly Gard, R-Greenfield, voted for the tax caps. On Sunday, she said state and local government wouldn't be in the financial situation they're in if it weren't for the national recession.

Gard said the public is in favor of the tax caps. She added that there wasn't one state legislator who pushed for a tax increase during the 2010 session to help fund government.

She said the state's seeing a new economic situation where government is being forced to tighten its belt.

"This is going to be the new reality," Gard said.