St. Louis budget proposes $1.41 billion operating plan; officials flag tax refunds and slowing sales tax as risks

Budget Director Paul Payne told the St. Louis Board of Aldermen's Budget Committee the city's total FY2026 annual operating plan is $1,410,000,000 and that the largest single fund is the general fund at $607,400,000.

Payne said the apparent increase in the FY26 budget is driven in part by one-time and near-term factors: "this year, we took a big hit, as you are well aware of the earnings and payroll tax. There was significant refunds and activity that we had this year," he said, and added the refunds totaled about $47,200,000 to date.

Why it matters: committee members and the public were warned that those refunds made this year's budget look unusually low and that next year's numbers reflect the removal of the large, one-time refund activity. Payne said his FY26 revenue assumptions are modest: underlying growth estimates of roughly 1.5% for the earnings tax and 0.5% for sales tax, and he illustrated a 4.2% decline in sales tax through the first three fiscal quarters.

Key details reported by Payne: - Total FY26 operating plan: $1,410,000,000 (a 5.4% increase over prior year). - General fund: $607,400,000 (4.6% increase). Payne said the increase partly reflects the prior-year refunds not repeating and incorporation of pay adjustments and one-time interest from ARPA. - Special revenue funds: $247,900,000 (a 2.4% decline), driven in part by lower use tax and sales tax receipts. - Capital Improvement Fund: $61,400,000 (a 24.3% decrease), explained largely by a smaller carryover of the prior-year operating surplus than the previous year. - Enterprise funds (water and airport): $838,200,000 (9.6% increase).

Payne walked the committee through revenue drivers and risks: earnings/payroll tax refunds (about $47.2 million paid this year) inflated shortfalls in the current fiscal year and will not repeat at the same level; sales tax collections were down 4.2% year-to-date through three quarters; use tax was down 7.3% year-to-date. He also pointed out that some interest earnings and ARPA interest were being appropriated into the FY26 plan (about $5 million to general fund).

On expenditures, Payne highlighted several budget drivers: incorporation of $16.4 million in internal service cost allocations (to cover services previously budgeted in other departments but charged to the police department), pay and benefit increases (including FY25 pay increases and uniformed step increases), increases for police and fire pension contributions, and targeted increases in corrections and medical contracts.

Payne also summarized the city's reserve position: an unaudited unreserved general fund balance of about $153,600,000 (around 25.3% of the FY26 budget as presented), which he noted exceeds GFOA guidance of a two-month minimum reserve.

What's next: the budget director and chair described an ambitious committee schedule for department hearings and a plan to return any committee amendments to the ENA board for approval (the ENA is the executive/nominating/appropriation board that must accept changes and forward them to the full Board of Aldermen). Chair Alderman Devote said the committee will continue hearings in September on public safety departments and then other departments later in the month.

Ending: Payne emphasized that revenue risk from refunds and slowing sales tax growth remains and that his assumptions are conservative; the committee set further public hearings so members and residents can comment on priorities before any changes are finalized.