Dec 31, 1983
In each of the last several years, the City of Saint Paul, Minnesota, has faced a budget crisis. This Note answers the question: As inflation abates and the economy moves out of the recession, will the annual shortfalls disappear? Or are they indicative of a deeper problem unrelated to cyclical economic conditions? To answer this question, the authors estimate the revenue and expenditure levels the city can expect in each of the five years 1984-1988 if there are no basic changes in the structure of city costs or revenues. In seven of the nine scenarios examined, the city can expect to face growing annual budget deficits. In the most likely case, with moderate inflation and modest growth in intergovernmental aid, the annual deficit will reach $8 million in 1988. The projections reveal that the city's problems are structural — costs grow with inflation but revenues frequently do not. To avoid continuing fiscal problems, Saint Paul must restructure its finances.