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NIPA state and local budgets

This page is a high level summary of state and local government budgets in the National Income and Product Accounts. The main question is the sustainability of current trends.

Summary

26 May 2014.

State and local governments face long-term difficulties from rising healthcare costs (both Medicaid and employee benefits) and over-committed retirement systems. While the big declines in spending are over, the underlying problems have not been solved, and budgets will remain under pressure.

Graphs

26 May 2014. Data through Q4 2013.

The first graph shows total current receipts as well as the two main components of current receipts, namely tax income and transfers from the federal government. Also shown is savings, that is, current receipts less current expenditures. The second graph shows the main categories of expenditures. (Click for larger image; all data from the National Income and Product Accounts, table 3.3, converted to 2009 dollars using table 1.1.9). All numbers are at seasonally adjusted annual rates (SAAR).

Highlights

Accounting conventions (27 Nov 2011) Note that although much of the NIPA data on state and local governments (maintained by the BEA) is derived from the Census of Governments (maintained by Census), NIPA has different accounting conventions, and much of the data is reclassified. Regarding transfers, note that state and local “Transfers to persons” include neither government retirement system payments nor unemployment insurance (accounted for in the federal sector).

In state and local retirement systems, the accounting treats government contributions as first passing from the state sector to the household sector as part of employee compensation and then, within the household sector, as being saved by the employee. Payouts are then treated as dis-saving.

Coarse overview of budget structure (10 Nov 2008) As of 2007: Local total receipts were $1109bn, of which state transfers were 40% and property taxes were 34%. State total receipts were $1270bn, of which federal transfers were 27%, sales tax 28%, and personal income tax 21%; expenditures were about 1/3 consumption, 1/3 transfers to individuals, and 1/3 transfers to local governments.


Scale (6 Aug 2008) State and local government expenditures in Q1 2008, less transfer payments (SAAR) $1,567bn; = 11% of GDP $14,151bn

Sources

The main source is NIPA Table 3.3, “State and Local Government Current Receipts and Expenditures”.

See also Tables 3.20 for state and 3.21 for local separately, but these are only annual, and far out of date.

To get inflation-adjusted figures, see Table 1.1.9. “Implicit Price Deflators for Gross Domestic Product”; line 25 is for state and local government.

See also

Clippings below were used in the construction of this page

Covered through 25 Dec 2008.

Accounting conventions

2005. BEA paper.

http://www.bea.gov/national/pdf/mp5.pdf

“GOVERNMENT TRANSACTIONS”

“Government social benefits to persons. Government social benefits to persons is the current transfers paid to persons to provide for the needs that arise from circumstances such as sickness, unemployment, retirement, and poverty. There are two kinds of social benefits to persons: benefits from social insurance funds and other social benefits. Social insurance funds include old-age, survivors, and disability insurance (social security); hospital insurance and supplementary medical insurance (Medicaid); unemployment insurance; and other Federal and state and local government programs. Other social benefits include the “refundable” portion of the earned income credit; workers' compensation; veterans benefits; food stamps; supplemental security income and other public assistance programs, and many other programs. Government payments to nonprofit institutions serving households, except payments for work under research and development contracts, are also included; these institutions are included in the NIPA personal sector. …

State and local governments. For state and local governments, BEA relies substantially on Census Bureau data to prepare national accounts statistics. The NIPA government sector includes Indian tribal governments, which are not included in the Census data. The Census state and local government data includes state and local government employee retirement systems, which are in the NIPA private sector, and state unemployment insurance (a joint Federal-state program), which is in the NIPA Federal Government sector.

Government employee retirement plans. The NIPAs treat the saving of government employee retirement plans as saving of the personal sector. Households are likely to base certain economic decisions, especially for the long term, on expected returns from these assets, so this treatment is more useful for certain types of analysis, and more consistent with factors influencing long–term personal economic decision–making. For government employee retirement plans, this treatment differs from that found in government financial statements; namely, Federal employee retirement plans are included in U.S. Budget aggregates that are prepared by the Office of Management and Budget (OMB), and state and local retirement plans are included in Government Finances aggregates that are prepared by the Census Bureau. Publicly administered government employee retirement plans are classified as employee pension and insurance funds, not as government social insurance programs. Transactions of government employee retirement plans are treated in the following manner: (1) Employer contributions are a component of “Employer contributions for employee pension and insurance funds” [which is part of employee compensation]; (2) personal contributions are treated as transactions within the personal sector; (3) interest received by the retirement plans is included in personal interest income; (4) dividends received by the retirement plans are included in personal dividend income; (5) benefits paid by the plans are treated as transactions within the personal sector; (6) benefits paid to those beneficiaries living outside the United States are transfer payments to the rest of the world from persons; and (7) administrative expenses associated with the plans are treated as personal consumption expenditures.”

NIPA local government breakdown

28 Aug 2008. NIPA table 3.21 (See Sources)

“Local Government Current Receipts and Expenditures”

All amounts in billions of nominal dollars.

2007: Total receipts 1109, of which transfers 529, of which state 444 (40% of total receipts). Tax receipts 543, of which property tax 381 (34% of total receipts). Total expenditures 1063, of which consumption 954.

NIPA state government breakdown

28 Aug 2008. NIPA table 3.20d (See Sources).

“Table 3.20. State Government Current Receipts and Expenditures”

All amounts in nominal billions of dollars.

2007: Total receipts 1270, of which federal transfers 347. Tax receipts 761, of which 273 personal income tax and 351 sales tax. Total expenditures 1305, of which consumption 402, transfers to individuals 398, and transfers to local governments 444.

Note on inflation adjustment

25 Dec 2008.

There are two inflation adjustment tables with very similar, but not quite the same, results:

Table 1.1.9. Implicit Price Deflators for Gross Domestic Product (A) (Q)
State and local	125.873	127.541	128.991	129.999	131.818	133.794	135.388	137.638	139.854	142.619	144.527
Table 1.1.4. Price Indexes for Gross Domestic Product (A) (Q)
State and local	125.880	127.548	128.999	130.008	131.828	133.806	135.400	137.649	139.866	142.632	144.540

According to a California document, “Implicit price deflators are derived from the national income and product accounts. It is derived as the ratio of current to chained-dollar GDP (multiplied by 100). It is also a weighted average of the detailed price indexes used in estimating constant-dollar GDP, but the indexes are combined using weights that reflect the composition of GDP in each period. Consequently, changes in the implicit price deflator reflect not only changes in prices, but also changes in the composition of GDP, and its use as a measure of price change should be avoided.”

So for the purposes of this page, 1.1.9 is probably more appropriate, but there is really no practical difference.