Posted on Fri, Dec. 17, 2004


A guided tour: sorting through all those state spending comparisons


Associate Editor

GOV. MARK Sanford’s crusade to shrink the already-shrunken state government draws heavily on his oft-repeated claim that South Carolinians pay 30 percent more than the national average to run government.

But the state’s chief economist, Bill Gillespie, recently concluded that number is “misleading for several reasons.”

His analysis focuses on why it makes more sense to use other approaches for comparing the cost of government in South Carolina to other states. But before we get to those other approaches, we need to look at the 30 percent claim, because understanding how it is derived shows that it doesn’t mean what the governor says it means. (I’m embarrassed to say that, like pretty much everybody else in the state, it had never occurred to me to ask the basis for Mr. Sanford’s number, which would have led to this conclusion earlier.)

Explaining this requires that I use a lot of numbers, so bear with me; I’ll be as gentle as possible:

Mr. Sanford’s figure comes from comparing the percentage of all S.C. goods and services that are produced by state and local government to the comparable number in all the states.

Here’s how that works: State and local government account for 11.3 percent of our gross state product. Manufacturing accounts for 20 percent, the service sector accounts for 31 percent, and so on. Nationally, just 8.7 percent of gross state product comes from government. So you divide 11.3 by 8.7, and you come up with 1.29 — or 29 percent above the national average. (The governor rounds that up to 30 percent.)

As Mr. Gillespie points out, using the same methodology and logic would lead you to conclude that South Carolinians pay 44 percent more than the national average on manufacturing and just 74 percent of the national average on services.

But neither statement is true in real life.

What’s true is that manufacturing makes up a larger portion of the economy here than in other states and the service group makes up less of our economy.

It’s also true that government makes up a larger portion of the economy in South Carolina than in other states.

But that doesn’t mean we pay more for government than others. It simply means that we have much less private-sector activity than other states.

If you want to talk about what we pay for government, turn with me to the U.S. Census Bureau.

The bureau shows how much money state and local governments receive and spend from taxes, fees and federal funds. So you can compare South Carolina to other states in terms of how much is spent by state government, local government or both. You can compare how much is collected by state government, local government or both from taxes, from taxes and fees or from taxes, fees and the federal taxes that mostly are collected in other states and sent to South Carolina because we’re so poor.

When you’re comparing how much South Carolinians spend on government, as Mr. Sanford does, I believe it makes the most sense to look at state and local government, for an apples-to-apples comparison, because South Carolina state government does an extraordinary number of things that are left to local government in other states. Doing that shows that South Carolinians pay an average of $3,964 in state and local taxes and fees; that’s 84 percent of the national average. Or, looked at another way, we pay 15.6 percent of our personal income on state and local government; that’s 102.6 percent of the national average.

You could even argue that these numbers are misleadingly high, because about half of the fees in South Carolina are college tuition and the money patients and insurance companies pay for care in public hospitals. Strip those fees from the state and national figures, and South Carolinians spend $3,113 per capita, or 74 percent of the national average.

The governor’s office defends its 30 percent claim by pointing to numbers that show South Carolina well above the national average in per capita spending and revenue. But that comparison, taken from Governing magazine, ignores local government and looks only at state spending. Compounding the problem, it includes federal funds; that’s fair if you’re talking about how much government spends in South Carolina, but not if you’re talking about how much South Carolinians spend on government, since much of the federal money we receive are collected in other states.

The one number the governor’s office can point to that clearly shows government is bigger in South Carolina is government employees. His numbers show we have 744 state and local government employees per 10,000 residents, or 13 percent above the national average. The numbers I get from the Census Bureau Web site show we have 587 per 10,000, or 8 percent above the national average.

There are lots of other ways to crunch state spending numbers, and I find all of these comparisons helpful — including the one from which the governor draws his 30 percent figure. Together, they give us a pretty good picture of how our state compares with other states. Looking at that picture, I cannot find a way to conclude that our state spends or taxes more than most states. Just the opposite.

Ms. Scoppe can be reached at cscoppe@thestate.com or at (803) 771-8571.





© 2004 The State and wire service sources. All Rights Reserved.
http://www.thestate.com