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© Copyright 1998 by the Wyoming Department of Employment, Research & Planning
An article in the June 1997 issue of Wyoming Labor Force Trends described the role that federal expenditures play as a "driver" in Wyomings labor market. Each April, the Census Bureau publishes the " Federal Expenditures by State" report. This article takes the most recently released report and revisits the topic of federal expenditures in Wyoming. In contrast to last years article, which noted very slow growth in federal expenditures in Wyoming (0.4%), the most recent data show a healthy increase in expenditures during 1997 (5.1%). Employment in Wyoming also grew more in 1997 than in 1996 (1.2% versus 0.8%).
Relative Size of Federal Expenditures
In 1997, the federal government spent more than $2.6 billion in Wyoming (1). While $2.6 billion is a very small part of the federal budget, it represents a significant part of the Wyoming economy. This can be compared to $4.9 billion in Unemployment Insurance (UI; see Glossary) covered wages(2), total agricultural output of just under $1 billion(3) and a gross state product of $16 billion(4).
Comparison Across States
In 1996, Wyoming ranked 38th among the 50 states in growth of federal expenditures, but in 1997 the 5.1 percent increase placed us tenth in the nation. Table 1 shows the 50 states and the District of Columbia ranked by percent change in federal expenditures.
Figure 1 from the June 1997 issue of Trends is reproduced here showing federal spending as a percent of covered wages versus the percent change in federal spending. Wyoming is in the lower right shaded area showing it was "in the precarious position of being dependent on federal expenditures and having very low or negative growth in spending." However, when the same figure is produced using 1997 data, Wyoming moves out of the "precarious" area of Figure 2. During 1997, federal expenditures in Wyoming rose 5.1 percent, clearly above the 1997 inflation rate (as measured by the CPI-U) of 2.3 percent.
Comparing Figures 1 and 2 reveals that a few states changed position dramatically. In 1996, Nevada and Missouri both had growth in federal expenditures of around 12 percent. However, in 1997, both states had declines in federal expenditures. North Dakota also moved to the opposite end of the Figure. It moved from a 5.0 percent decline in 1996, to over 20 percent growth in 1997. Together, these changes suggest that states found in the extremes of either Figure 1 or Figure 2 are unlikely to stay there for long.
Despite some noticeable vertical movements from Figure 1 to Figure 2, none of the states made any dramatic changes in horizontal position. In other words, the rankings of states on their dependence on federal expenditures are stable from year to year. In Wyoming, this means that unless the state experiences unusually fast growth in the private sector, its economy will remain substantially dependent on federal spending.
Expenditures and Total Nonagricultural Employment
In the 1997 article, the relationship between federal expenditures and nonagricultural employment was explored. It concluded that there was a positive linear relationship between federal spending in Wyoming and total nonagricultural employment in the state. Figure 3 shows the growth in employment and federal expenditures. Interpretation of the Figure suggests that there might be a one-year lag in the effect of expenditures on employment. This is particularly obvious when the expenditures series bottoms out in 1986 and the employment series reaches bottom a year later in 1987.
This lag could have occurred because it takes time for federal money to translate into jobs in Wyoming. For example, at the beginning of the federal fiscal year (5) in the fall, the Department of Transportation (DOT) could get a grant to improve a road. This project is put out for bids and a contractor wins it. The following spring, the money is passed through the DOT to the contractor, and from there it goes to the contractors employees and suppliers in the summer. The employees and suppliers spend their earnings creating more jobs in consumer establishments and potentially in the transportation industry to bring in construction materials. Thus, the multiplier effect takes time to develop.
Breakdown by Component
Table 2 shows the breakdown of federal expenditures in Wyoming by component from 1996 to 1997. While some expenditure components decreased, the largest ones (Direct Payments for Individuals and Grants to State and Local Governments) increased.
The largest component is Direct Payments for Individuals. This includes Social Security, Medicare, Federal Retirement Programs, Food Stamps and Financial Aid for students. Direct Payments makes up 47 percent of all the federal money coming into Wyoming. From 1996 to 1997, this component grew 4.6 percent. Changes in population can affect the amount that Wyoming receives. For example, if a large number of retirees move to Wyoming and collect their Social Security benefits here, our Direct Payments for Individuals would increase. The Direct Payments for Individuals component has grown every year for the last ten years.
Grants to State and Local Governments is the second largest component of federal expenditures in Wyoming, making up 29 percent of the total. It includes grants from many federal agencies, including the Departments of Transportation ($145 million), Education ($54 million), Interior ($286 million) and Health and Human Services ($169 million). This component grew 7.6 percent from 1996 to 1997.
Salaries and Wages for federal employees accounted for $375 million or 14 percent of federal expenditures. This decreased 5.1 percent from $395 million in 1996. The Current Employment Statistics (CES) program showed a corresponding decrease in the number of federal employees from 7,300 in 1996 to 7,100 in 1997.
Procurement refers to federal spending to buy goods and services. In 1997, this amounted to $149 million, or 6.0 percent of the total. This was a 2.6 percent decrease from $153 million in 1996. Agencies that made up a significant part of this spending were the Department of Defense ($48 million), Department of the Interior ($16 million), the Postal Service ($17 million) and the Department of Transportation ($12 million). In the past ten years, the Procurement series has been more erratic than any other component, decreasing more years than it increased.
Expenditures in the Other Programs category increased 7.1 percent to $108 million in 1997. This represents 4.0 percent of federal spending in Wyoming. The majority of this spending is in grants to organizations other than state and local governments ($66 million). The remainder is spent on direct payments--other than for individuals ($42 million)--a category which includes payments by the Department of Agriculture to farmers. Like Procurement, Other Programs is a component without a steady pattern of increase of decrease.
Each year, the federal government spends an amount equal to 53 percent of total UI covered payroll in Wyoming. After slowing in 1996, federal expenditures in Wyoming showed healthy growth in fiscal year 1997. Grants to State and Local Governments grew in 1997 after declining in 1996, but Salaries and Wages to federal employees fell, reflecting cutbacks in federal employment. While the growth in expenditures is good news, the overall dependence of our state on this source of income is a potential cause for concern.
1 U.S. Bureau of the Census, Federal Expenditures by State for Fiscal Year 1997.
2 Research & Planning, Wyoming Department of Employment, Annual Covered Employment and Wages 1996.
3 Economic Research Service, United States Department of Agriculture, Wyoming Final Agricultural Sector Output 1996.
4 Economic Analysis Division, Department of Administration and Information, A Brief Profile for the State of Wyoming.
5 The Federal Fiscal Year runs from October 1 to September 30. Fiscal year 1997 ran from October 1, 1996 to September 30, 1997.
David Bullard is an Economist, specializing in Local Area Unemployment Statistics (LAUS) with Research & Planning. He is also an Associate Editor of Wyoming Labor Force Trends.
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