PHILADELPHIA - Flanked by two silver balloons bearing the words "I love you‚" and a forlorn blue cuddly toy, the face of 12-year-old Frank Marasco smiles out from a collage of pictures assembled by shocked neighbours on the veranda of his burned-out home. http://www.philly.com/inquirer/local/20100813_Services_set_for_boy_whose... Watch sports videos you won't find anywhere else ">The young autistic boy died in a fire last week thought to have been sparked by a discarded cigarette.

President Barack Obama this week signed a $26bn federal aid package for cash-strapped states but public anger at cutbacks is still growing. (Photograph: Pablo Martinez Monsivais/AP) The inferno should have been a routine job for Philadelphia's 1,900-strong fire brigade, the fifth biggest force in the US which handles four major incidents daily. But the nearest fire station to Frank's house, just two blocks away, was unavailable after a so-called "brown out". Firemen at the station, barely 90 seconds' walk from the site of the fire, were on a maintenance run after a 12-hour shutdown, part of a rota of rolling daily closures imposed by city authorities grappling with a wrenching deficit of $2.4bn (£1.5bn) over five years.

"Everybody was running around trying to get the little boy out – he was stuck on the second floor," said a distraught neighbour, Virginia DeShields, whose house was damaged by smoke. She believes the boy might have been saved if the local firehouse had been open: "It's all right if you want to cut. But you shouldn't cut where lives are concerned. You can cut the prison system, cut the libraries, anywhere. But don't cut people who save lives."

Philadelphia's city authorities contend that first responders reached the scene within three minutes – a timeline disputed by Philadelphia's fire union, Local 22, which says it was closer to six minutes before an engine with hoses and water arrived. But irrespective of whether he could have been saved, Frank Marasco's fate is a rallying point in a titanic struggle over cuts engulfing cities and states across the US which are taking desperate budgetary measures, ranging from shutting schools to switching off streetlights and replacing tarmac roads with dirt tracks.

Local government in the US has traditionally been leaner than its British equivalent, with minimal public healthcare, patchy public transport and an ingrained culture of contracting out to private operators. The worst recession since the war has caused a triple-pronged slump: unemployment has eroded income tax takings, a dive in house prices has hurt property tax and weak consumer spending has reduced sales tax. Funding is stretched to breaking point.

The National League of Cities estimates that US municipalities, which had revenue of $398bn last year, face a fiscal hole of between $56bn and $83bn over the two years to 2012. States, which fund broader services such as schools, prisons and highway patrols, are in a worse jam — they grappled with a $192bn shortfall in 2010, equivalent to 29% of their budgets, according to the Washington-based Centre on Budget and Policy Priorities.

"We're seeing drop-offs in revenue that are breaking all records," said John Shure, deputy director of the CBPP's state fiscal project. "The irony is that people's needs are going up but the resources to meet them are going down."

Putting up taxes in a recession is politically unpopular and risks hampering a recovery. And borrowing money is not an option as most US local authorities are prohibited from going into debt. Shure says: "They're required by their own constitutions to have a balanced budget. There's no good answer."

The draconian nature of some cuts would cause even Britain's austere chancellor, George Osborne, to blanch. In Georgia, the county of Clayton, which encompasses down-at-heel suburbs south of Atlanta, axed its entire public bus service to save $8m, leaving 8,400 daily riders high and dry. Faced with a hole in its education budget, Hawaii's Republican governor simply shut down the state's schools on Fridays, moving teachers and pupils onto a four-day week.

Struggling to pay for upkeep of asphalt roads, counties in Michigan and South Dakota have been converting paved country roads to gravel, turning back the clock of modernisation. Then there are trivial, yet eye-catching examples — Miami has dispensed with the services of its chicken catcher. The California city of San Diego disbanded its 27-year-old mounted police force. The state of Washington scrapped its board on geographic names, deciding it could do without a body overseeing the historical and cultural consistency.

Colorado Springs, a city of 360,000 people on the edge of the Rocky Mountains asked voters to approve a tripling of property tax in November. They voted no. So the city switched off a third of its streetlights, removed litter bins from parks, put its police helicopters up for auction online and halted many bus services at 6.15pm. City employees have been asked to stump up more for their own healthcare, while community centres and pools are looking for private money to stay open.

Residents of Colorado Springs are being encouraged to bring their own lawn mowers to trim the grass in public spaces.

And anybody who strongly wants lighting can "adopt a streetlight‚" for $75 a year.

Barack Obama this week signed a federal aid package of $26bn for cash-strapped states, some of which will filter through to cities. But many argue this is not enough.

Christiana McFarland, an expert at the National League of Cities, says: "Local authorities are in a serious situation at this point. In years past, we've been down to the bare bones in terms of budget. They're now cutting critical services such as public safety."

Back in Philadelphia, deputy mayor Everett Gillison says it is a "lie" that fire station "brown outs" compromise safety, blaming unions for a cynical campaign to protect overtime. But in a nation where firefighters are held in the top echelon of public esteem, the spectre of darkened firehouses is prompting anger. "That's right – you take pictures of it!" yelled resident Darren Braxton, pulling up in his car as the Guardian visited a shuttered fire station.

Braxton, a maintenance contractor, had some advice for the city authorities: "If you're trying to save money, do something else. You don't mess with the trash men because we'll become Filthadelphia. You don't mess with the police because young people round here don't value life and they be shooting people left, right and centre. And you don't mess with the firefighters because they put out fires."