City Spending has been Growing at Twice the Rate of Inflation

Mac has made the Financial Advisory Committee’s recommendations available at his site. Spoiler alert! This post contains the money quote (heh), from FAC member Tom Teresinski.

Tom Teresinski
Overview – A Perspective

I. Spending – Per City Report: (000)

General Fund – Spending (1998): $14,535.8;
(2009) $28,167.0
% Growth: 93.8
Avg % Increase 0ver 11 yrs: 8.5%
Avg % CPI – estimated: 3.0%
Avg Rate of Increase Above CPI: 5.5%

II. Comments:

Given that the City has historically spent more than 2 times the rate of inflation over the last 11 yrs indicates that we have a spending problem. Since these costs are 85% personnel this will be a major component of the review required.

Even if this has made you speechless, surely you’ll be recovered by next week. See you in Council Chambers Monday at 7 p.m. for the public hearing on the FY2009 budget.

16 thoughts on “City Spending has been Growing at Twice the Rate of Inflation”

  1. Sorry for being a bit academic but we must be accurate in our figures. What Tom demonstrates is the cumulative increase is a shocking 93% over 11 years. Now remember increases compound that it is 10 percent increase per year in two years is not 20% but rather 21%.

    Anyway, assuming my hand dandy calculator is correct. A 93% increase over 11 years comes about by an increase of 5.9% a year, not 8.5% a year, when compounding is added in as it should be. That 5.9% is still way higher than the average inflation, but the comparison should be 5.9% compounded versus the 3.%.

    Herb

  2. Herb, no matter what numbers you use. We have surely identified several huge problem areas within the City of DeKalb’s money management center.

    THEY HAVE A BAD HABIT, THEY HAVE AN OVERSPENDING PROBLEM!

    The council can only do one thing, actually several things. The first is to take the recommendations from the FAC and implement these cuts along with all of the cuts recommended by council and do so immediately.

    The second would be to publicly announce the huge effort that this citizen’s group has done for this community. I do support their recommendations to the fullest.

    As many dollars that come and go through city hall in comparisons to many other communities is embarassing especially when you look to see how those dollars were spent (wasted).

  3. Ivan,
    I’m just pointing out the need especially as critics to be very careful to double check numbers and to be certain that all are correct. I study advocacy groups that criticize banks and bank regulators and use hard data to do so. But before they release such data they double check first among friends and then among opponents to make sure they have it right.

    Some of the comments made about the budget are self-evident. For those who don’t want to spend money this year on PR, eliminating the $100,000 line for a consultant makes sense (I want it eliminated.) But other comparisons depend upon analyses that most of us have not duplicated. I’m simply arguing that to make sure these other analyses are credible that the ones easier to check must be carefully vetted for accuracy. For example, using comparison cities is always tricky and needs to be very carefully examined and re-examined (A typical academic article in my field that was published was vetted by at least 5 independent and anonymous critics)

    Let me also talk politically. Our (and I’m included) examination of the expenditures came up with many items that we thought should be eliminated. I concurred with most. In this list were three types of expenditures (my classification). Those that just were a waste or at least unnecessary for now. Those in which we were mistaken because we did not understand something (no fault of ours, but we were mistaken because the budget is not all that detailed). And, those that reflect policies on which people do disagree.

    What happens: Those who don’t want to change the budget focus on our mistakes to defend themselves and they do so successfully in areas in which we are not right but then extend that logic to other areas in which i believe we are correct.

    I’m not at all disagreeing with the need to push for most of the cuts and I will testify to that end tomorrow (unless i finally do burn out, I’m close). I’m just repeating stuff I’ve written for social protests groups on the need to be very careful especially in data based arguments.

    Herb
    who caught the 5.9 versus 6.2 error by doing everything again (turns out I copied a wrong figure on my scrap paper; so much for the high tech world).
    I also was double checking figures. Long before you started attending school functions i did and in watching meetings noticed that numeric skills were not all that strong among those on the board so started double checking. Ditto for the council.

    Few on boards or council intentionally distort numbers. (I don’t think, but i see people in a positive way). it was just that some calculations didn’t add up and people did not catch it. (That’s why we need better schools)

  4. I feel like an idiot, no comment please. I was so concentrating on the arithmetic that I forgot the substance.

    See if my budget had gone up twice as fast as inflation in 11 years, I’d be in bad trouble. 11 years ago we needed the same housing, cars, food etc. as we do now.

    But the city government serves a growing population, not a stagnant one. If the population served were the same and the budget went up dramatically more than inflation that would be real yucky. But the population has increased, the service area expanded etc. so one would expect that city costs would also go up.

    What Tom has missed (i think) is in asking the germane question: how much has city costs gone up (above or below inflation) correcting for population increase or increase in services provided?

    Maybe someone with the figures at hand will do the more germane calculation; take the GF divide it by population in the beginning year; do the same for last year and then compare the increase versus inflation.

    My guestimates is that costs have gone up faster than inflation but no where near as dramatically as this first pass indicates.

    The census has the 2000 population at 39000; I think we are about 48000 now (these are late night guesses) that’s about 25% increase, explaining a substantial but not all of the increase in GF.

    In any case, the first pass analysis comparing the increase in the GF versus the CPI, without accounting for population increase and service increase is very problematic.

    Herb
    who does feel foolish for not seeing that immediately but the compounding interest problem distracted him

  5. I think it’s interesting that the budget has doubled in a dozen years. There’s growth in there and there’s inflation in there and a recession in there. I’m not the one to tease out all the factors; it’s just clear everybody has gotten what they’ve wanted for a long time.

    What I can say for sure is that with so much bad news, there should absolutely be a smaller budget in FY09 than in FY08. Continuing to keep the city in the manner it is accustomed is simply not possible.

  6. From the web, we were at 43-44000 at the special census in 2004, Star reports that the 2007 special census added another 3100 folk. Plus i used the 2000 population rather than the 1998.

    Don’t disagree that we need to hold down expenditures. I’ve certainly testified to that effect as you have.

    just want analyses to be correct. Initial analysis compared 8.5% versus 3%; when factoring in the compounding effect the comparison should be 6.1% versus 3%, now when factoring in population increase it probably is something like 5.2% versus 3%.

    If we are criticizing city figures our figures also must be reasonably correct.

    herb

  7. When it comes to DeKalb’s population I think even the Census Bureau guesses. Suitcase college towns need an asterisk next to their population figures.

    We’re out of whack…

    Our k-12 enrollment is lower than most if not any town of 40-somethousand.

    Our downtown district is smaller (geographically) than many towns with 25,000 population.

    Our EAV is lower than similars.

    Our retail sales and sales tax is lower.

    The explanation for 93% growth in expenditures over 11 years can be compounded but the total remains the sum. And as the deficit indicates it was more than what was brought in. That indicates a problem in money management because this was done during a historically rare time of a hot economy and growth in new construction EAV, jobs and sales tax revenue. Little excuse for the erosion of the reserve fund can be given.

    I think the nexus of the problem, and the solution, can be found in this: Lazy public sector budgeting policies that encourage departments to spend every dime of their budget elst their budget may be reduced the next go ’round. This laziness is now widely accepted and ENCOURAGED policy.

    How about encouraging and even rewarding contributions to the reserve fund?

  8. Herb, you be the math guy and I’ll be the big picture guy. The big picture is this: The city is overspending and it’s our money they’re overspending and what are we gonna do about it.

  9. Hey Guys,
    Remember I was the one who first dared to testify about the 800 lb gorilla.

    I’m for trimming and restoring fiscal balance.

    Just trying to prevent us through calculation errors going over board in the wrong direction. If we should be spending $1000 and we are spending $1100 let’s get back to the $1000 but not by some technical mistake get back to $950 when we really need a $1000.

    See everyone tonight.

    There has to be a better way of spending an evening, no insult meant but I do like being with Irene more than being at city hall.

    Herb

  10. I am in Cincinnati working the next few days. Looking forward to your guys reports on what happens. By the way beer is $6.00 per bottle at the hotel. Glad you guys are not apporving my expense account. HA HA d

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