Census Bureau: State and Local Government Spending Grows Faster Than Revenue

Press release from the issuing company

Friday, December 19th, 2014

Between 2007 and 2012, total expenditures for state and local governments increased by 18.2 percent, from $2.7 trillion to $3.2 trillion, while total revenue declined 1.1 percent over the same five-year period, from $3.1 trillion to $3.0 trillion, according to new U.S. Census Bureau data from the 2012 Census of Governments released today.

Two major contributors to the decline in total revenues were employee retirement revenue, which includes earnings on investments and contributions, (dropping 67.7 percent, from $533.3 billion to $172.0 billion) and interest earnings (falling 44.6 percent, from $91.9 billion to $50.9 billion).

"State and local government revenues continue to be impacted by capital market fluctuations, especially employee retirement revenues," said Kevin Deardorff, chief of the Census Bureau's Economy-Wide Statistics Division.

The findings are from the 2012 Census of Governments: Finance — Surveys of State and Local Government Finances, which shows revenues, expenditures, debt, and cash and security holdings by level and type of government. Level of government includes state, local, and state and local combined. Type of government includes state, county, city, township, special district and school district.

Outstanding state and local government debt grew faster than both revenues and expenditures during this time frame, climbing 22.2 percent from $2.4 trillion in 2007 to $2.9 trillion in 2012. Cash and security holdings declined 1.7 percent, from $5.4 trillion in 2007 to $5.3 trillion in 2012.

State and Local Government Revenues  

Tax revenue rose 8.2 percent, from $1.3 trillion collected in 2007 to $1.4 trillion in 2012. Taxes accounted for 53.4 percent of total state and local government general revenues in 2012.

Other highlights of revenue comparisons from 2007 to 2012:

  • General sales rose 4.7 percent, from $300.6 billion to $314.8 billion, and individual income tax revenues rose 5.9 percent, from $290.3 billion to $307.3 billion. 
  • Corporate income tax revenue fell 19.6 percent, from $61.0 billion to $49.0 billion. 
  • Federal government grants increased 25.7 percent, from $464.9 billion to $584.5 billion. 
  • Hospital revenues grew 34.3 percent, from $91.9 billion to $123.5 billion.

Between 2007 and 2012, North Dakota's state and local government general revenue from their own sources more than doubled, from $4.0 billion to $8.4 billion, by far the largest rate of increase of any state. (North Dakota has also experienced rapid population growth in recent years: its total population rose by 7.4 percent, among the five fastest-growing states between 2007 and 2012.) Alaska followed with a 34.3 percent increase, from $10.4 billion to $14.0 billion. North Dakota also had the largest rate of increase in total tax revenue (up 155.6 percent, from $2.6 billion to $6.6 billion), with Alaska next (a 75.3 percent rise, from $4.9 billion to $8.7 billion). 

State and Local Government Expenditures

Overall, education spending by state and local governments climbed from $774.2 billion in 2007 to $869.2 billion in 2012, or 12.3 percent. However, capital spending for education declined 7.9 percent, from $91.7 billion to $84.5 billion; this can be attributed to a 22.1 percent drop in elementary and secondary education capital spending, from $65.5 billion to $51.1 billion. Education represented 27.6 percent of state and local government expenses in 2012. 

Other highlights of expenditures comparisons from 2007 to 2012:

  • Public welfare spending rose from $384.6 billion in 2007 to $485.6 billion in 2012, or 26.2 percent. In 2012, this represented 15.4 percent of direct expenditures. 
  • Insurance trust spending jumped 62.0 percent, from $213.9 billion to $346.5 billion. 
  • Unemployment compensation expenses more than tripled, from $28.9 billion to $95.6 billion. 
  • Spending on hospitals increased 30.2 percent, from $119.6 billion to $155.8 billion, with health spending rising 13.6 percent, from $74.3 billion to $84.4 billion.

State and local government spending on public welfare increased at a higher rate in Oregon from 2007 to 2012 (52.2 percent, from $3.8 billion to $5.8 billion) than in any other state, although Texas closely followed (51.3 percent, from $20.4 billion to $30.8 billion).

There were four states in which state and local government spending on unemployment compensation more than quintupled: Colorado(430.6 percent, from $290.6 million to $1.5 billion), Texas (430.3 percent, from $1.0 billion to $5.4 billion), Utah (412.1 percent, from $85.7 million to $439.0 million) and Arizona (402.4 percent, from $209.0 million to $1.1 billion).

Among states and equivalents, the District of Columbia had the highest rate of increase in education spending from 2007 to 2012 (53.4 percent, from $1.5 billion to $2.4 billion), followed by North Dakota (35.0 percent, from $1.7 billion to $2.4 billion).

Other Findings

Texas led all states in the rate of increase in state and local government outstanding debt, as it climbed 45.0 percent, from $186.7 billion to $270.7 billion. Debt rose in the District of Columbia and every state except for Alaska and Montana, where it fell by 4.5 percent, from $9.9 billion to $9.5 billion, and 7.6 percent, from $6.2 billion to $5.8 billion, respectively.

State and local government cash and security holdings increased 59.9 percent in North Dakota, from $13.1 billion to $20.9 billion, nearly double the state with the next highest rate of increase (Wyoming, at 31.1 percent, from $21.4 billion to $28.1 billion).

For detailed analysis surrounding these statistics, see the State & Local Government Finance Summary Report.