St. Louis City budget proposal totals $1.41 billion; officials cite tax refunds, ARPA interest and internal service shifts

Budget Director Paul Payne presented St. Louis City’s proposed fiscal 2026 budget to the Budget and Public Employees Committee on May 31, 2025, saying the total plan is $1.41 billion and the general fund would be $607.4 million.

Payne said the FY26 proposal is an increase of about 5.4% overall and a 4.6% increase for the general fund, but he warned several one-time and timing issues affect comparability with the prior year. “Refund totals at the end of the third quarter [were] as high as $47,200,000,” Payne said, attributing a large portion of the year’s revenue shortfall to refunds on earnings and payroll taxes paid to commuters and telecommuters.

Why this matters: the refunds depressed current-year revenues and complicate baseline assumptions for FY26. Payne said underlying receipts showed modest growth in some categories but that sales and use taxes were weaker year to date — sales tax receipts were down about 4.2% and local use tax receipts were down about 7.3% through the third quarter.

Payne walked the committee through fund-level detail: the proposed total of $1,410,000,000 includes a $607,400,000 general fund; special revenue funds of about $247.9 million; grant funds of roughly $88 million (which he said reflects $22.1 million in ARPA interest earnings being incorporated into the budget); debt service of about $13 million; a $61.4 million capital improvement program; enterprise funds (water and airport) totaling about $338.2 million; and internal service funds rising to $52.9 million.

Payne explained the internal service fund increase stems in part from the return of state control over the police department and the reclassification of units that historically provided support services into internal service accounts. “That’s about $16,400,000,” he said, referring to costs shifted into an internal-service charge to the police department.

On personnel and operations, Payne said the general fund payroll total would reflect both the movement of some positions into internal service funds and recent pay increases: the city-wide allocation includes $10 million set aside for salary increases yet to be negotiated, and the police department budget shows a net reduction of 91 sworn positions in the general fund but the overall public safety side remains the largest single share (about 51.5% of general fund spending in Payne’s presentation).

Revenue assumptions for FY26 include restrained growth projections (generally under 1%), an anticipated reduction in the extraordinary refunds that depressed FY25 receipts, and a plan to use $5 million of ARPA interest earnings as a one-time revenue supplement for the general fund. Payne summarized the discipline behind reserves, noting the unreserved general fund balance was reported at about $153.6 million (roughly 25% on a cash basis in his chart), while warning that end-of-year activity and storm-related expenses will affect final results.

Payne concluded by summarizing the major drivers: refunds on earnings and payroll tax are the dominant current-year risks; ARPA interest is being used as a contingency; police-related internal service reallocations are the major structural change; and the capital program is smaller than the prior year mainly because last year included an unusually large prior-year operating surplus that fed capital.

The committee chair said the committee will reconvene Monday to hear the sheriff and to take final public testimony before making amendment recommendations that may go to the ENA (president/comptroller/mayor review) as part of the chartered budget timeline.

Ending: The committee’s next scheduled meeting is Monday, June 2, at 9 a.m. in the Kennedy Room for further hearings and possible amendment work ahead of ENA review.