Gateway Gazette

Many Municipal Governments on Fiscally Unsustainable Path

Report shows operating costs rose 2 ½ times faster than population growth 2000-12 

CALGARY, November 6, 2014 – The Canadian Federation of Independent Business (CFIB) released its annual Alberta Municipal Spending Watch report today that reveals operating expenditures by the vast majority of the province’s municipalities have risen at an unsustainable rate between 2000 and 2012, the last year for which data is available.

In order to determine the level of fiscal sustainability, the report looks at growth in real (i.e. inflation-adjusted) operational spending by each Alberta municipality between 2000 and 2012, and compares it to population growth over the same time frame.

Over the 12 year period, inflation-adjusted operating expenses by all 181 municipalities with a population of at least 1,000 people rose by 80 per cent, approximately two and a half times faster than Alberta total population growth of 29 per cent.  Only 12 of the 181 municipalities kept operating spending at or below population growth.

The silver lining is that the pace of growth appears to have slowed in 2012.  Operating spending increased only 1.3 per cent in 2012, while population grew by 3.4 per cent in the same period.

“Over the past twelve years, most of Alberta’s larger municipalities have been on a fiscally unsustainable path. As a result, it’s no surprise that some municipal leaders demand more revenue generating power.  Without greater ongoing fiscal discipline, the pressure to simply hike taxes, or ask for new taxes, will only grow”, says Amber Ruddy, Senior Policy Analyst for CFIB.

Based on information obtained from the Ministry of Municipal Affairs, the report shows operating spending by all municipalities across Alberta reached $7.8 billion in 2012.  Fifty six per cent was spent on salaries, wages, and benefits.  Over the 12 year timeframe, spending on this line item in operating budgets increased by 91 per cent, more than three times population growth.

“Since compensation costs represent the lion’s share of their operating budgets, it is critical for mayors and councils to exert better control over rising municipal government operating expenses.  Otherwise, the upward spiral of more spending and higher taxes will continue”, states Ruddy.

Although municipal governments claim there has been a large amount of downloading that results in higher operating costs, the CFIB report also reveals transfers from the federal and provincial governments have jumped 369 per cent between 2000 and 2012.

The CFIB report makes a series of recommendations to enable municipal governments to better control growth in operating costs, including:

  • limiting spending increases to the rate of population growth,
  • conducting formal spending reviews,
  • adopting sustainable wage and benefit policies,
  • denying new revenue-generating tools for cities, and
  • creating a municipal auditor general to scrutinize the spending practices of Alberta’s municipalities.

The Alberta Municipal Spending Watch report, with details for each municipality, is posted on the CFIB website at http://www.cfib.ca/ab.

CFIB Feature Image logoAs Canada’s largest association of small- and medium-sized businesses, CFIB is Powered by Entrepreneurs™. Established in 1971, CFIB takes direction from more than 109,000 members in every sector nationwide, giving independent business a strong and influential voice at all levels of government and helping to grow the economy.

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