Analysis: Behind The Budget Crisis: State Government Size Remains Steady Over Last 25 Years—It’s Rising Costs That Are The Problem
Here’s something you wouldn’t know from reading the Seattle Times yesterday: the number of government employees in Washington state, as a percentage of the population, has remained relatively constant for the last quarter century.
Yes, the size of government has grown. But the population also grew by 50 percent, from 4.4 million to 6.7 million residents. Government’s size, in relation to the state’s population, is remarkably steady. For every single year during the last 25 years, the average number of full-time state government employee positions per 1000 residents of Washington state has averaged between 16 and 17. (See page 45 of the state Office of Financial Management (OFM)’s 2009 data book).
And much of that growth in government size has been in schools to educate a growing population. More than 53 percent of all state government employees currently work in what the state calls “educational services,” as do 48 percent of all local government employees.
So why, as Andrew Garber reports, will total state government spending increase by $200 million over the 2009-11 biennium, even after the legislature cuts $4.5 billion? Why has the legislature transferred (i.e. raided) billions more from dedicated funds— especially on building maintenance and construction— to fill a budget hole of over $10 billion, when state spending is growing? Why, despite increasing revenue for K-12 education over the last 25 years, did the courts recently find that the state is failing to meet its constitutional obligation to provide “basic education” to all Washington state residents?
The answer is that the cost of government is growing faster than the size of government. It costs much more to employ someone today than it did 25 years ago. Yes, new government programs, especially in human services, have grown. But anecdotal reference to them distracts too many people from wrestling with complicated budget data and seeing the bigger picture.
The number of full-time state employee (FTE) positions grew by 62 percent in the last 25 years, from 70,000 in 1985 to 113,000 in 2009, more or less matching growth in the state’s population. But the state’s general fund spending grew by 300 percent during this same period, from $9.5 billion to $29 billion.
Why would government spending so far outpace the number of workers employed? Because it’s the cost of government, not the size of government, that is out of control. And it is out of control across the country, and not just in Washington state. The question is why.
The standard Republican explanation is that greedy public sector unions have artificially inflated the cost of government by driving up construction industry costs and state employee and retiree wages and benefits. And that Democrats, supposedly captive to unions, have aided and abetted this process in a way that has put the state’s entire financial system at risk.
The standard Democrat explanation is that spiraling costs of providing health benefits are driving state governments to the point of bankruptcy, and that national health care reform can help the states avoid slashing employee wages and benefits.
Over the next couple days, in the lead up to the beginning of the Legislature’s special session on Monday, I’ll be assessing both of these arguments to highlight the structural issues at stake in our state’s special session.
Stay tuned…
Comments
By Keith on March 13th, 2010 at 1:28 pm
I have looked at BLS data on compensation costs and number of employees in private versus state/local government in the USA. While government employees compensation is 20% higher than the average of private workers today, the compensation cost index for government workers is, since 1985, up only 10% more than private workers. I do not see this as a rapid increase in government compensation. The total government employment as you mention, is relatively stable, although as a percent of all employment it has increased during this recession (more private sector layoffs). Unless Washington is abnormal, compensation and employment appear to be mild drivers to the increasing costs. http://www.bls.gov/web/ecicois.pdf
I have also looked at all state spending as a percent of national GDP and those have doubled since 1950 but are relatively stable over the last 15 years.
I would guess that the budget deficits are likely due to the increasing costs mentioned here and the historic drop in economic growth. Since increasing budgets and entitlements are now part of our DNA, I fear we will not have the wisdom to cut spending and instead will wait for the economy to recover. If the economy does not recover soon, as I suspect it will not, then we will see ever increasing debt until we default.
I hope you have a more optimistic assessment.
By Trevor Griffey on March 13th, 2010 at 2:44 pm
Keith, thanks for your very thoughtful response. It’s hard to predict the future. Indeed, as an historian, I’m probably already out of my league talking about the present. But I think you’re right that the Democratic Party’s current response to the budget crisis is unsustainable, and postpones a day of reckoning which could become much worse if the economy doesn’t improve. And I haven’t seen much reason to believe that our recovery will be anything but “jobless” for years to come.
But we can’t presume that Democrats will continue to just push the state toward insolvency. Indeed, we can’t even presume they’ll stay in office long enough to do so. And the state isn’t taking on debt like the national government as much as it is raiding long-term funds for short term fixes. I think big business has a great deal of power in both parties, and that our State Treasurer is quite sharp, and both have sufficient power to prevent the state from becoming insolvent.
The real question is which alternative to insolvency the state government will end up pursuing. That’s what I’m hoping to write about the next few days. Right wing reform would, as far as I can tell, involve a massive privatization of state government functions (by outsourcing or increasing tuition and fees), and slashing the wages and benefits of state employees who remain. Left wing reform would involve creating a more progressive tax system and reforming the health care system before skyrocketing costs bankrupts both the private and public sector. Somewhere in between left and right, there may be a few non-partisan ways to improve government efficiency, but I suspect those will be marginal to providing any kind of real remedy for the structural crisis at hand.
The gulf between services the state is committed to providing and revenue it is committed to raising is too wide to be bridged without big changes to how our government operates. Those changes will take place whether we like it or not. But if the economy remains stable at this higher level of unemployment, they may be phased in slowly. If there’s another significant spike in unemployment, I’d expect the changes to be more rapid, and the resulting political polarization that much more intense.
By Joseph on March 13th, 2010 at 3:51 pm
Mr. Griffey,
I listened to your recent interview on KEXP and reviewed your web site today. Despite the claim of “Independent News” in your sites moniker, it is clear that the political philosophy of the progressive movement guides the “news” you report. For those citizens who do not support expansion of government and redistribution of wealth, there is scant evidence of an intellectually balanced approach. The constant advocacy for job killing and capital destroying government action can only come from those who have not successfully created jobs nor wealth.
You should stop using the term “news” and replace it with commentary or advocacy. If you claim independence, they why seek all your answers from more government?