REVISED PRICE INCREASES FOR 1989

By NORMAN WALZER and CAROL RACHUS*

The annual Illinois Municipal Price Index was published in the April issue of the Illinois Municipal Review but at that time it was noted that the figures were based on incomplete information on wages and preliminary data for several of the national price indices. As a result, a revision of the index is necessary.

Complete information has now been received and a revised index is presented in this article. This index still covers period ending December 1989 and no attempt has been made to include the effects of price increases in 1990. Most of the major changes result from addition of cities in the wage and salary portion of the price index.

Between 1970 and 1989, prices of goods and services purchased by Illinois municipalities increased by 96 percent. Without significant changes in productivity, those cities in which revenues did not increase proportionally have fewer resources with which to work. The municipal index is mainly wages and salaries and, for that reason, lies between the commodities and services portions of the Consumer Price Index. The municipal increase for 1988 to 1989 was slightly less than that for services in the private sector and noticeably above the increase for private goods. The effects of inflation, however, have been greater than those reflected in the Producer Price Index.

By department, the indexes differ widely. Library services experienced the largest impact and prices are estimated to have increased 118.5 percent. One explanation for the differences in the effect of inflation by department is the base period. Wages in libraries were relatively low compared with police officers and fire-fighters, for example. Thus, the same increase counts as a larger percentage for libraries than for police or fire.

Equally important, however, is the relative size of the departmental budgets in the overall city expenditures. Libraries are relatively small compared with police, fire, and streets. For this reason, even though the library experience with inflation was greater than the others, the overall impact on city budgets may not have been as great.

The price index can be a helpful planning tool in city administration and finance. Estimating the effects of inflation on past spending is virtually the only way that local managers can determine how resources for local public services have been maintained in recent years. Local officials should not "budget for inflation" but should use the price index in their deliberations about changes in the allocation of tax dollars to maintain or increase services. For this purpose, it is a useful tool. •

Table 1 PRICE INDICES (1977=100.0)
Index	1977	1980	1985	1986	1987	1988	1989
Consumer Price Index	100.0	135.9	177.5	180.9	187.5	194.7	204.6
All Commodities	100.0	133.9	164.1	163.1	167.7	173.4	181.8
All Services	100.0	139.1	196.3	206.1	214.7	223.9	235.5
Producer Price Index	100.0	135.9	161.6	159.4	162.7	166.6	175.4
Illinois Municipal Index	100.0	128.3	167.5	171.5	178.5	186.3	196.0

Table 2 DEPARTMENT PRICE INDICES
Department	1977	1980	1985	1986	1987	1988	1989
Miscellaneous	100.0	127.2	165.9	171.1	177.6	185.7	203.0
General Control	100.0	122.6	160.3	166.7	174.4	181.2	200.9
Other Sanitation	100.0	129.4	166.2	169.7	174.6	179.7	188.8
Civil Defense	100.0	129.0	171.2	174.0	179.3	183.8	193.1
Health	100.0	122.3	160.6	165.7	171.3	175.5	185.5
Water/Sewer	100.0	129.8	174.8	179.5	185.6	193.1	198.8
Parks/Recreation	100.0	131.2	176.5	181.4	189.0	194.6	199.8
Police Protection	100.0	127.3	163.6	169.9	176.8	185.1	193.8
Fire Protection	100.0	111.4	159.4	165.9	172.0	180.5	193.3
Streets	100.0	139.1	175.2	173.0	180.0	184.6	190.9
Library	100.0	128.1	174.4	183.3	191.1	199.1	218.5

September 1990 / Illinois Municipal Review / Page 13