Local Government Spending Index Finds Disparity

Charlottesville, VA – A fiscal study released today (8/30/23) shows that the rate of increases in local government spending vary dramatically. The fifth iteration of the “Choices and Decisions” report, which studied fiscal years 2002-2022, identified Nelson County with the highest LGSI at 122.20.  Albemarle County saw local spending increase cumulatively 56% and population increase by 33.21% during the study period resulting in an LGSI of 115.46. The City of Charlottesville, despite having the largest per capita spending at $5,385.30, had the lowest LGSI 99.10.  

Over a decade ago, the Free Enterprise Forum developed the Local Government Spending Index (LGSI) that uses locality provided data to benchmark each locality’s inflation adjusted spending growth in context of their population growth.  Adjusted for inflation, all of the governments are studied spending more in their operating budgets, but it is most interesting when the population growth is factored into the equation in the LGSI. The LGSI has its basis in per capita spending by each locality. It is important to recognize the relative differences that are embedded into the LGSI metric. To calculate the LSGI, we first must calculate the inflation adjusted per capita spending during each year of the study. This number is impacted by both spending and population growth.

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 and election season”.

The LGSI is based on self reported data required to be provided to the Commonwealth of Virginia’s Auditor of Public Accounts.  The numbers focus exclusively on the operating budget of each municipality and do  not include capital expenditures thus avoiding having single-year spikes in capital spending skew the results or interpretation of the data.

As K-12 education generally makes up over half of a locality budget, it was 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:

Nelson County had the highest LGSI in the 2022 study at 122.20. It is important to recognize that much of the limited population growth (.09%) in Nelson County has been in the Wintergreen Resort area. Resort homeowners tend to have lower incidence of school aged children, thus helping to explain why school enrollment growth does not mirror population growth.  Nelson witnessed a drop in K-12 students by nearly 40% during the twenty year study period.   The inflation adjusted 23.15% per capita increase in government spending absent the increase in students is an area for additional study.

Albemarle County – adjusted for inflation, Albemarle County’s total spending increased by over 56.81% during the study period.  Population increased by 33.21% and school enrollment increased by 11.98%

Fluvanna County – saw a negligible increase in school population of 0.88% compared to a robust 20-year population increase of 23.75%.  Operating spending increased by 50.80% when compared to 2002.

City of Charlottesville – During the study period (2002-2022), Charlottesville experienced the third highest population increase of  29.16%. Charlottesville experienced a cumulative decline in School enrollment (- 2.94%), second only to Nelson County (-24.24%) in terms of student enrollment decline.  Inflation-adjusted operating expenditures increased at 32.02% during the study period.  The LGSI in Charlottesville was the lowest studied at 99.10 in 2022.

LGSI Historical data (2002-2022) shows a variety of spending patterns in the region. Today, no locality is at their spending apex LGSI as compared with the 2002/2003 base metric. Nelson is 10 points below its 2016 peak of 133.60 LGSI points.

Many of the influences traditionally thought to impact local government spending are enumerated in the LGSI report including population growth, school enrollment growth and population density. The LGSI uses self-reported spending and verified population data to generate an inflation adjusted index comparing per capita expenditures.

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. In this iteration, Charlottesville, Albemarle, and Greene all had their highest LGSI in 2009 [all of which were budgets approved prior to the Great Recession].  Interestingly, Fluvanna, Louisa and Nelson all had their highest LGSI in 2021.

While the City of Charlottesville remains far and away the highest per capita spender in the study group, they always have been. Adjusted for inflation Charlottesville’s 2022 per capita spending is just $116.68 more than in 2002.

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 under Reports Tab at www.freeenterpriseforum.org.