St. Louis County Needs Federal Dollars to Stay Afloat
A recent article in the St. Louis Post-Dispatch reports that St. Louis County Executive Sam Page is asking the St. Louis County Council to use federal stimulus money to avoid budget cuts. Per the article, Page claims that $193 million from the American Rescue Plan Act will allow the county to avoid any cuts through 2024, but the county will have to find additional revenue sources to maintain current operations beyond that. My question is: Why can’t the county operate past 2024 without a $193 million boost from the federal government?
The county’s situation illustrates the point my colleague Elias Tsapelas and I made in our recent paper: Missouri local governments were not prepared for the economic downturn caused by the COVID-19 pandemic. Policy decisions can affect how damaging a downturn is and how difficult it is to recover. If county lawmakers had made different policy decisions, they may not have ended up needing federal dollars to stay afloat.
Relying less on sales taxes, which have a volatile revenue stream, would make the county’s total revenue stream more stable. (It should be noted that the county’s participation in the sales tax pool has already decreased some of the harmful effects of sales tax competition in the county). In addition, less misuse and abuse of tax subsidies would keep private developers from siphoning away taxpayer dollars. (More of this and less of this and this).
Of course, the COVID-19 pandemic did have undeniable effects on government finances. As predicted, revenues fell in 2020. St. Louis County’s sales tax revenue alone dropped by $27.2 million from fiscal year 2019 to fiscal year 2020. In addition, the county incurred new, pandemic-related costs. But county citizens are struggling too and “additional revenue sources” is code for tax increases. Page suggested that a property tax increase or implementing a use tax could be in the cards for St. Louis County. From a policy standpoint, a use tax is the preferred consideration, but it’s also worth keeping in mind that the county will receive more revenue from the gas tax increase. Why must a short-lived economic downturn force a tax increase on taxpayers?
I’m not here to judge how the county wants to use the stimulus money (but if I were, I would suggest the money be used in these ways). I’m here to point out that if the county had been more fiscally responsible prior to the economic downturn, we may have avoided this situation entirely. Policymakers should keep this in mind and prepare for inevitable downturns in the future.