Local Cost of Government Spending Index Released



January 13, 2009


Study Finds Disparity in Local Government Spending


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 and Decker Economics, developed a locality-specific local cost of government spending index (LGSI).  The report, which studied fiscal years 1990-2007, identified the County of Albemarle 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:


Albemarle County – adjusted for inflation, Albemarle County’s total spending increased by over 121% during the study period while population and school enrollment increased by 37.3% and 26.2% respectively.


City of CharlottesvilleDuring the study period (1990-2007), Charlottesville experienced an average annual rate of population increase of just 0.12%, the smallest of the municipalities being studied. In addition, Charlottesville experienced an average annual decline in School enrollment of 0.48%, the only municipality in the study group to experience a decline in school enrollment.


 In contrast, inflation-adjusted operating expenditures increased at an average annual rate of 2.66%.  The LGSI in Charlottesville was 148.81 in 2007, but had declined in each of the last two years.


It was also 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.  During the study period, Albemarle County had the greatest increase spending per capita at 60.98%, Charlottesville increased 53.24%, the balance of the localities increased less than 50%.  Fluvanna County (38.73%) had the lowest increase. 


It was also anticipated that school enrollment growth would track population growth. While it does, in every instance the percentage growth in school enrollment was smaller than the growth in population.  This may be reflective of larger demographic trends being seen on a national basis such as the general aging of the population. As demographic forces change the demands on local governments, additional study may be needed in this area.


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 http://www.freeenterpriseforum.org/research.php?articleID=121


One response

  1. […] spending rate for any locality.  We do track and report locality spending in our quantitative Local Government Spending Index (LGSI) but we make no qualitative assessment of local government […]

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