Local Government Spending Index Released

FROM STAFF REPORTS

Charlottesville, VA – As local governments prepare to submit their budgets for review and approval, a new study shows that the rate of increases in local government spending vary dramatically. The biennial “Choices and Decisions” report, conducted by the Free Enterprise Forum, developed a locality-specific local cost of government spending index (LGSI). The report, which studied fiscal years 1990-2009, identified the City of Charlottesville as the locality with the greatest increase in LGSI.

Free Enterprise Forum President Neil Williamson said, “The goal of the LGSI is to inform and promote dialog. The comparison of local spending trends, combined with population data provides citizens an objective tool to evaluate spending decisions. Equipped with this data, citizens can ask better questions of elected officials during the budget season”.

 The LGSI focuses exclusively on the operating budget of each municipality. While this number will include the debt service on capital expenditures, it excludes the capital expenditures themselves, thus avoiding having single-year spikes in capital spending skew the results or interpretation of the data.

It has been theorized that inflation adjusted spending would largely track changes in population and school enrollment. While a correlation was found in some localities studied, this trend was not universal:

City of Charlottesville  – During the study period (1990-2009), Charlottesville’s population actually declined by 158, the only municipality that experienced a population decrease.

In addition, Charlottesville experienced a cumulative decline in school enrollment of -12.82%. In contrast to the population and school enrollment decrease, inflation-adjusted operating expenditures increased 80.85%. The 2009 LGSI in Charlottesville was 176.31 vs. 100 for the base year; this represents an annual per capita increase during the study period of 3.03% in excess of inflation.

 Albemarle County  – Adjusted for inflation, Albemarle County’s total spending increased by over 136% during the study period while population and school enrollment increased by 39.7% and 24.5% respectively. Inflation adjusted per capita spending increased 75.43% since 1990, which equates to an annual increase of per capita spending of 2.92% in excess of inflation.

The 2009 LGSI in Albemarle County was 172.71. Since 2005, Albemarle’s LGSI has increased 27.70 points the highest of any locality in the study.

Fluvanna County –  During the study period (1990-2009), Fluvanna more than doubled in population (114%). Correspondingly, school enrollment in Fluvanna County increased nearly 75%. The rate of increase in both population and school enrollment was the highest in the region.

With an increase of 23.96 points, Fluvanna is second only to Albemarle in LGSI growth since 2005. The rural nature of Fluvanna County (93 persons per square mile) is likely also a contributing factor to the low LGSI.

Greene County – Other than Charlottesville, Greene County is the smallest locality (geographically) included in this study. With 156.58 square miles of land area and 18,112 residents, Greene County has a population density of 116 persons per square mile. During the study period (1990-2009), Greene County experienced a population increase of 75.90% and a school enrollment increase of 57.73%, the 2^nd highest rates of increase (behind Fluvanna).

On a per capita basis the increase in inflation adjusted operating expenditures was 58.29%. Comparatively, Greene County’s LGSI of 156.17 in 2009 is below that of Albemarle and Charlottesville but above Louisa, Nelson, and Fluvanna. In the last four years, Greene’s LGSI has grown 18.5 points (only Nelson has grown less).

 

Louisa County – During the study period , Louisa County experienced population growth of 62% and average growth in school enrollment of 28.4%. 

Inflation adjusted operating expenditures in Louisa County increased 55.61% between 1990 and 2009. Per capita spending in Louisa County in 2009 is $2,407.33, compared to $1,547.02 (in 2007$) at the start of the study period. Louisa County’s 2009 LGSI is 153.87, placing it below all other jurisdictions in the study, except Nelson County.

Interestingly, in the last four years Louisa’s LGSI growth of 21.05 points places it third in the study group behind Albemarle and Fluvanna

Nelson County – With a 2009 population estimated at 15,519, Nelson County is the smallest locality in terms of population included in this study. It is also the least densely populated, with a population density of 33 persons per square mile. During the study period (1990-2009), population increased at a rate of 21% and school enrollment dropped dramatically in the later years of the study (-5.15% cumulatively).

Inflation adjusted per capita operating spending increased from $1,621.33 (in 2007$) in 1990 to $2,316.96 in 2009, an increase of 67.73%. This is the lowest rate of increase in the region. As a result, Nelson County had the lowest LGSI in the study in 2009 at 140.51.

Conclusions

It was theorized that growth in inflation-adjusted per capita spending among the localities would be similar because of the high percentage of programs mandated by the state and operated by the localities.

In contrast, the analysis clearly indicates wide variation in per-capita spending decisions made by the localities. Albemarle County and the City of Charlottesville have had the largest increases in per capita spending, at 75% and 81% respectively. Louisa, Greene, and Fluvanna counties were next, with increases of between 51% and 58%. Nelson County (43%) has had the lowest increase

An examination of the last four years of LGSI data resulted in a different hierarchy in terms of growth. While Albemarle is still number one with 27.7 points of LGSI growth (since ’05), Fluvanna and Louisa finished second and third with 23.96 points and 21.05 points respectfully. Charlottesville’s LGSI growth from 2005-09 was slightly above Greene County at 18.84 points. This may be indicative of the suburbanization of parts of the surrounding counties, and the resultant capital expenditures.

It is important to note, this study ends just as the economic downturn was impacting locality budgets. A comparison of FY2008 and FY 2009 per capita spending saw per increases of less than 4% (and a reduction of 2.79% in Nelson). It is anticipated FY2010 and FY2011 reporting may show further tightening of local government spending.

In conclusion, The Free Enterprise Forum Local Government Spending Index provides citizens an objective locality specific metric to be used to compare spending between municipalities. As mentioned in the preface, this analysis seeks to promote discussion and debate.

Armed with an objective metric such as the LGSI, additional study can be done to determine the relative value what citizens are getting for their money. In the end, it is up to the citizens to determine whether they are getting their money’s worth.

The Free Enterprise Forum is a privately funded public policy organization dedicated to individual economic freedom. The entire report, and supporting documentation, can be accessed at www.freeenterpriseforum.org.