News & Updates

St. Paul Spending Isn’t “Out of Control”

by | Nov 18, 2017 | Economy, Taxes

The City of Saint Paul is confronting a potential 24 percent increase in its levy in 2018, based on a preliminary budget proposal. The increase is largely the result of a Minnesota Supreme Court decision handed down last summer, which stripped the City of its ability to issue “right of way” maintenance assessments. This eliminated a significant source of funding for city services. In order to avoid deep budget cuts, city leaders proposed a levy increase to replace a portion of the lost assessment revenue. Quick to seize on the issue, the conservative Minnesota Jobs Coalition complained about “out of control spending.”

The assertion that spending in Saint Paul is “out of control” does not bear out based on an examination of real (i.e., inflation-adjusted) per capita spending trends since 2000. Spending information presented below is from annual city finance reports from the Office of the State Auditor (OSA), converted to constant 2015 dollars using the Implicit Price Deflator for State and Local Government Purchases, which is the appropriate index to use when adjusting total city expenditures for the effects of inflation. Spending totals will also be shown on a per capita (per person) basis to adjust for the increased spending pressures resulting from population growth. Finally, certain principal payments will be excluded from total spending to avoid double counting of these expenditures.

In 2000, total city spending in Saint Paul was $2,444 per capita. Over the next several years, per capita spending steadily declined, reaching $1,583 in 2007. Spending spiked in 2008; a closer examination of OSA data reveals that the 2008 jump was largely due to a one-time increase in public safety spending. After 2008, Saint Paul’s per capita spending gradually declined to approximately the 2007 level.

By 2015, Saint Paul spending was $1,668 per capita—15 percent below the temporary 2008 peak and 32 percent below the 2000 level. Since 2010, annual real per capita spending changes in Saint Paul have been marginal, with spending fluctuating between a low of $1,628 per capita and a high of $1,699 per capita.

Final OSA city spending information is not available for years after 2015. It is possible, however, to examine growth in real per capita city revenue base through 2017. “Revenue base” equals the sum of city levies plus state aid and is frequently used as a proxy to examine growth in city budgets. From 2015 to 2017, Saint Paul’s real per capita revenue base grew by approximately one percent; however, despite this slight growth, the City’s real per capita revenue base in 2017 is still approximately 25 percent less than it was in 2000.

Saint Paul’s revenue base will likely increase significantly from 2017 to 2018 as a result of (1) the likely increase in the City’s property tax levy and (2) the fact that the corresponding reduction in special assessments will have no impact on the revenue base, since these assessments are not part of the revenue base. Despite this large anticipated jump, Saint Paul’s 2018 real per capita revenue base will still be approximately fourteen percent less than it was in 2000, based on a preliminary projection which assumes adoption of the proposed 24 percent levy increase.

In light of the fact that total real per capita expenditures in Saint Paul are nearly one-third below the level they were in 2000, there is no conceivable way in which the trend in city spending could be deemed to be “out of control”—even if City leaders do opt to impose the proposed  levy increase in response to the need to replace the reduction in assessment revenue resulting from the Supreme Court decision. The only thing truly “out of control” is misinformed rhetoric which grossly distorts the City of Saint Paul’s financial track record.

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