How Big Is Government in Your County?

I recently reported that GDP growth in Wyoming has come off another temporary spurt. It also looks like the upward trend in oil prices is coming to an end. Both these factors have obvious negative consequences for tax revenue, both at the state and local levels.

Rumor has it that the overall legislative strategy for the 2019 legislative session will be status quo: no tax hikes for the welfare statists; no spending cuts for the fiscal conservatives. It remains to be seen if this is where the power struggle balances out - my suspicion is that the fiscal conservatives will come up short - but regardless of how the game actually plays out, the reality of our state's economy remain what they are.

There are two components to that reality, the first of which is the weak economy and thereby the weak tax base. This can only be remedied with fiscal and regulatory policies aimed squarely at reducing the burden of government on the private sector: lower taxes - not more taxes - and a structured, economically intelligent rollback of regulations.

The other component is our big-spending government. There are overlaps between the tax-revenue problem and the big spending problem, the most obvious of which is that the more government spends, the more of our money it will lay claim to. However, there is a deeper, structural relationship that is rarely discussed in the public debate: the crowding-out effect that government has on the private sector.

Government pays better than the private sector. Employee compensation in state and local government is, on average, 21 percent higher than in the private sector; if we deduct minerals from the private side - a fair operation for analysis of local government but not at the state level - the difference increases to 33 percent. In some counties the difference is even higher (more on that later) compounding the problem of funding local governments.

Some people suggest economic development as the solution. The long-term effects of this practice of corporate welfare is disappointing: businesses stay where tax money flows until the faucet dries up. Therefore, a much better approach is to actually address the problem at its root: we have too many government employees that make too much money compared to what taxpayers can afford.

The latest county-level employee compensation data from the Bureau of Economic Analysis confirms this point: more money is earned from government jobs than from jobs in any other individual industry. As a direct result of the artificially high compensation in government jobs, and the abundance of such jobs, it is difficult for small businesses - especially upstarts - to recruit and retain staff.

Here are the three biggest sources of employee compensation (wages, salaries and benefits) by county:

Albany: 
1. State government; 
2. Local government; 
3. Health care and social assistance (largest private industry)

Big Horn: 
1. Local government; 
2. Mining. 
3; Construction.

Campbell: 
1. Mining; 
2. Local government; 
3. Construction.

Carbon: 
1. Local government; 
2. State government; 
3. Transportation and warehousing

Converse: 
1. Mining; 
2. Local government; 
3. Transportation and warehousing

Crook: 
1. State and local government (data does not separate the two); 
2. Mining; 
3. Manufacturing

Fremont: 
1. Local government; 
2. Retail trade; 
3. Mining

Goshen: 
1. Local government; 
2. State government; 
3. Manufacturing

Hot Springs: 
1. Local government; 
2. Health care and social assistance; 
3. State government

Johnson: 
1. Local government; 
2. Mining; 
3. Federal civilian government

Laramie: 
1. Local government; 
2. State government; 
3. Federal military government

Lincoln: 
1. Local government; 
2. Mining; 
3. Construction

Natrona: 
1. Health care and social assistance; 
2. Local government; 
3. Mining

Niobrara: 
1. State and local government (not separated); 
2. Transportation and warehousing; 
3. Mining

Park: 
1. Local government; 
2. Health care and social assistance; 
3. Federal civilian government

Platte: 
1. Local government; 
2. Construction; 
3. Transportation and warehousing

Sheridan: 
1. Local government; 
2. Federal civilian government; 
3. Health care and social assistance

Sublette: 
1. Mining; 
2. Local government; 
3. Construction

Sweetwater: 
1. Mining; 
2. Local government; 
3. Manufacturing

Teton: 
1. Accomodation and food service; 
2. Local government; 
3. Construction

Uinta: 
1. Local government; 
2. Construction; 
3. Health care and social assistance

Washakie: 
1. local government; 
2. Manufacturing; 
3. State government

Weston: 
1. Local government; 
2. Manufacturing; 
3. Transportation and warehousing

Long story short: we have made our state unsustainably dependent on taxpayers to stay alive and afloat.

To get an idea of just how dependent we are, Figure 1 explains the disparity in employee compensation between the largest government sector and the largest private industry. For example, the total employee compensation earned by local government employees in Lincoln County is 36 percent larger than the total employee compensation earned in the largest private industry in the county (which happens to be mining). For every dollar that mining workers earn in Lincoln County, local government workers earn $1.36:*

Figure 1
Source: Bureau of Economic Analysis

In only six counties, a private industry pays out more employee compensation than a government sector. 

Table 1 explains the same point from another angle, namely how large a share of total employee compensation in a county that is paid out by the largest government sector. Please keep in mind that "government sector" does not mean state and local government together - it means one of them; in almost every county that means local government:


Gov share
Albany 36.6%
Big Horn 30.1%
Fremont 29.2%
Johnson 28.6%
Hot Springs 27.5%
Weston 27.2%
Lincoln 26.6%
Converse 24.4%
Sheridan 22.9%
Goshen 22.6%
Park 22.3%
Uinta 18.9%
Sublette 18.4%
Campbell 18.0%
Carbon 16.7%
Laramie 16.1%
Washakie 16.0%
Sweetwater 15.9%
Platte 14.3%
Teton 13.4%
Natrona 12.4%

In other words, 30.1 percent of all employee compensation in Big Horn is paid out by local government (county, city, school districts). 

Last but not least, Table 2 reports the share of total employee compensation in every county that is paid out by state and local governments together. Notably, more than half of all salaries, wages and employee benefits earned by workers in Albany County are paid out by government:

Table 2

Millions of dollars, 2017
Total CoE SL Gov Share
Albany           952.6           488.8 51.3%
Fremont           892.1           318.3 35.7%
Weston           133.5              47.4 35.5%
Goshen           241.7              85.2 35.3%
Big Horn           251.6              87.8 34.9%
Johnson           176.0              58.7 33.4%
Hot Springs           101.6              33.4 32.9%
Lincoln           405.7           117.4 28.9%
Laramie       3,279.2           893.4 27.2%
Converse           412.6           111.7 27.1%
Uinta           471.2           125.4 26.6%
Sheridan           775.7           204.8 26.4%
Park           769.7           189.7 24.6%
Carbon           477.9           116.4 24.4%
Washakie           210.6              47.2 22.4%
Sublette           319.9              66.6 20.8%
Platte           246.5              48.0 19.5%
Campbell       1,868.1           351.2 18.8%
Sweetwater       1,757.7           299.8 17.1%
Natrona       2,473.7           368.3 14.9%
Teton       1,264.6           178.0 14.1%

Given the continued push for higher taxes in our state, it might be worth repeating a well-established fact: taxes do not pay taxes.
---
*) Crook and Niobrara are excluded, as data for these two counties do not separate state and local governments.

No comments:

Post a Comment

Weekly Economic Review

Our lawmakers here in Cheyenne are planning to raise taxes on the tourism industry - by a lot. In the meantime, the first issue of my new w...