Price of government soars due to inflation

Just about everything costs more these days with the rate of inflation running at close to nine percent. Unfortunately for state taxpayers, that includes the price of government at all levels, with the cost of fuel, supplies and other goods increasing at the fastest pace in 40 years.

It all adds up to one reality, the likelihood of higher taxes coming up the line from city hall to St. Paul. A Free Press survey of several government entities in the Mankato area provides a preview of the potential sticker shock coming taxpayers’ way next year.

Tom Sager, director of business services for Mankato Area Public Schools, found himself doing the math in his head when he was out for a walk. The school’s current budget assumed traditional cost increases of roughly 3.1%. Inflation over the past 12 months has actually been 9.1%.

“That’s a difference of 6 percentage points,” Sager said. “In the case of an $8 million supplies budget, that’s $480,000 more than we normally would spend.”

The district spends roughly $12 million for purchased services — things such as snow removal, legal advice, accounting services, minor building repairs. The difference between cost increases of 3.1% and 9.1% is more than $700,000.

Sky-high fuel prices account for much of the higher tab of doing government. The school district has spent $150,000 more than anticipated at the pump to date. It’s the same story over at city hall for all forms of energy.

At the city of Mankato, Administrative Services Director Parker Skophammer has literally never seen anything like this. Skophammer was born in 1987 and inflation hasn’t been this high since 1981.

“Our vehicle gas and oil is certainly the one that is up the most,” Skophammer said. “We’re up 47% from where we were last year.”

Utility expenditures including electricity and natural gas are 15-20% higher.

And much of the planned construction on streets and municipal buildings is costing more than planned.

“We’re seeing increases in costs for all of the projects we’re doing,” said City Manager Susan Arntz.

Construction costs over at the regional office of MnDOT have also gone through the roof. Prices have increased at multiples of the inflation assumptions built into current projects.

For the Minnesota Department of Transportation, the rising cost of construction is obviously a major issue, but so is the increasing expense of purchasing heavy equipment, of buying salt to spread on icy roads, of paying to fill the fuel tanks.

At MnDOT, the assumption for the current fiscal year was that fuel prices would rise 3.5%.

“In reality, it’s been closer to 20 percent,” said Greg Ous, who oversees operations for MnDOT’s Mankato-based District 7, which covers most of south-central and southwestern Minnesota. “We anticipate at least a 15 percent increase for salt compared to last fiscal year. Steel for culverts along with costs for carbide are up around 20 percent.”

The runaway costs come at a time when local governments are pouring over next year’s budget items and property tax rates. The next few weeks will be critical as officials weigh priorities against the reality that taxpayers also gouged by inflation can only take so much.

But elected officials and public sector administrators know that the people paying real estate taxes — the owners of businesses and homes — are grappling with the same inflationary pressures as local governments. A property tax increase on top of the rising costs for food, gas, vehicles, utilities and everything else would be a bitter holiday present.

“We understand it’s not just the city’s prices that are going up. It’s everywhere,” Skophammer said. “We’re certainly mindful everybody’s expenses are increasing whether its food or at the pump.”