This audio is automatically generated. Please let us know if you have any comments.
Dive brief:
- US cities General fund spending up 7.5% in fiscal year 2024, according to a new survey by the National League of Cities. However, this growth has slowed to 0.7% in fiscal 2025 as new headwinds such as political uncertainty and economic changes have come into play.
- Revenue growth for cities in fiscal year 2025 is expected to decrease by 1.9%according to NLC, after a 3.9% increase in fiscal 2024.
- For fiscal year 2025, 52 percent of city finance officials said they were better able to meet their city’s financial needs, compared to 64 percent in 2024. That optimism was further reduced for fiscal year 2026, with only 45 percent expressing confidence.
Diving knowledge:
As federal funding for massive financial injections like the Jobs and Infrastructure Investments Act and the American Rescue Act begin to be reduced or reversed by the Trump administration’s efforts, cities are facing a new post-COVID reality.
The environment is more complex, exacerbated by federal policy uncertainty, inflationary pressures and a changing economic environment, according to the NLC report.
While property and income tax revenues grew strongly in 2024, sales tax revenues remained “mostly flat,” according to the report, indicating a “reversal of the tax revenue boom that cities experienced after reopening the economy after the COVID-19 pandemic, when strong consumer spending boosted sales tax collections.” It also points to a “normalization of the economy” after a post-COVID surge.
Cities also continue to monitor the impact of rates, with 43 percent of city finance officials reporting that rates have impacted their ability to purchase certain goods, according to the report.
Speaking on a panel during the NLC 2025 City Summit in Salt Lake City on Friday, Thousand Oaks, Calif. Councilwoman Connie Gutierrez said her city “is on trend” with its spending and “not very optimistic, unfortunately.”
The city lowered sales tax revenue estimates from $40.9 million to $36.7 million this year after bringing in $38 million last year.
“I think we’ve learned a lot from the realities of 2025 that we’ve faced.” Gutierrez he said
Evanston, Ill. Councilwoman Clare Kelly said Evanston is also reevaluating its budgets as COVID relief funding ends.
“We’re definitely at a point where we’re weighing our priorities in terms of spending,” Kelly said.
The report found that public safety continued to make up the largest share of city budgets at more than 50 percent, with 10 percent going to public recreation and culture and 7 percent to capital spending, in line with spending patterns from previous years. Debt service accounted for 3% of city spending and public health was 1%.
