Cities Have Little To Show for Big Spending

America’s largest cities are increasing their spending at almost unprecedented rates.

A RealClearInvestigations analysis of cities with at least 500,000 residents found they cumulatively raised their per-person spending by 18% over the last 10 budget cycles, accounting for inflation. The only equivalents on record are the spending surges ignited by the Great Society programs of the 1960s and Franklin D. Roosevelt’s New Deal during the 1930s.

But unlike those past eras, today’s cities do not have the revenue to support their heavy spending. State and federal funding have dropped off from their record highs during the COVID-19 pandemic, and local tax hikes have not kept pace with spending. Large tax increases or reductions in city services will eventually be required to address burgeoning structural deficits, placing a burden on future generations.

The tradeoff would be easier to explain if cities were making strides to improve life for their residents. Census data, however, shows that key quality of life metrics in major cities have mostly been stagnant during the spending spree.

Each of the 38 cities in RCI’s analysis of data from the Census Bureau, FBI, Department of Housing and Urban Development, and enacted local budgets increased their spending faster than inflation over the last decade. Yet the cities that boosted their spending the most were, on average, no more or less likely to see measurable progress in reducing homelessness, lowering violent crime rates, tackling income inequality, improving rent affordability, and more. That was the case for the 33 cities led by Democrats and the five cities led by Republicans.

Economist Christopher Thornberg says cities typically don’t have the skills and resources to improve the economic status of their residents.

Beacon

San Jose, CA, saw its violent crime rate increase by  50% from 2017 to 2024, even after it doubled its police budget. The city is now proposing cuts to police spending and creating new taxes to fund its rapid budget growth in other areas. Seattle is considering shutting down its homelessness agency after huge investments failed to stop homeless rates from reaching the worst level in city history.

Christopher Thornberg, founder of the policy consulting firm Beacon Economics, isn’t surprised that big spending hasn’t produced big results. He said that cities typically don’t have the financing, policy sophistication, and regulatory oversight to meaningfully improve the economic status of their residents.

But that hasn’t stopped some cities from thinking “you can be successful just fire-hosing money across the economy,” said Thornberg, former director of the University of California, Riverside Center for Economic Forecasting and Development. “It seems sufficient to brag about the money they spent without referring to whether that spending accomplished anything.”

The Tax Gap

In 2016, large cities collected $6,727 of revenue per resident from local, state, and federal sources, adjusted for inflation. They spent 14% more than that: $7,685 per person.

Outlays Per Resident

RCI

By 2025, revenues had increased to $7,063 per person, but outlays had skyrocketed to $8,827. The difference of 25% is the largest gap on record since at least 1940.

The gap was not caused by low revenues. Cities earned record amounts of sales and property taxes last year. Instead, the deficits were driven by expanded bureaucracy, rising payrolls, overtime costs, and pension liabilities.

From 2017 to 2026, the public workforces of large cities grew faster than their populations. There were at least 12 cities that added new municipal jobs even though their populations dropped (A handful of cities do not disclose their staff headcounts). In an extreme example, Memphis added more than 1,000 public jobs even though the city lost more than 40,000 residents.

Many of those new hires work desk jobs. Census data shows large cities increased their administrative expenses – mayor’s offices, human resources departments, accountants, zoning departments, and more – by 55% from 2016 to 2023, accounting for inflation.

Despite rising budgets, staff headcounts at core city agencies like police and corrections departments are generally falling.

AP

But staff headcounts at core city agencies like  police  and  corrections  departments are generally decreasing, forcing cities to spend large amounts on overtime hours to keep their communities safe with the limited staff they have available.

Crucially, RCI found only a weak statistical link between increases in a city’s property tax collection and increases in its overall spending. Cities like Phoenix and Boston that boosted their per-resident spending by 88% and 75%, respectively, were not necessarily the ones with increased property tax revenue to support their outlays.

That suggests many cities have a “build it and we will fund it” mentality, enacting policies before figuring out how to pay for them.

Previous studies  have s…