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August
1960
-ONJ· LY REVIEW
KANS .
Recent District
Industrial Developments . . . .
page
3
State and Local Government ActivitiesDistrict and National Patterns . . . page
9
Current Charts and Statistics . . . . . page 16
FEDERAL RESERVE BANK
OF KANSAS CITY
Subscriptions t o tlie MoNTIILY REvrnw are available to the public without charge. Additional
copies of any issue may be obtained from the
Research Departrnent, Federal Reserve Bank of
Kansas City, Kansas City 6, Missouri. Permission
is granted to reproduce any material in this
publication.
Recent District Industrial Develo ments
I
NDUSTRIAL EXPANSION has continued to be
an important featnre of economic development in the Tenth Federal Reserve District,
according to preliminary results of the 1958
Census of Manufactures. 1 As has been true
throughout much of the postwar period, fluctuations in the amount and type of defenseallied production activity have continued to
influence materially the pattern of factory
output. \Vhilc the rate of expansion indicated
hy a comparison of the I ~J.17 and 195-1 ccns11s< 's was sonH'wliat laster than in the s11hscq11c11t 1 years, it slio,ild he rc('allcd Lhal manufacturing activity in the early HJ,50's was
swelled by defense production related to the
Korean War. Although some decline in defense output had already occurred by 1954,
it nevertheless remained a year of unusually
high military production in the District. Consequently, expansion in the subsequent years
probably could not have been expected to
continue at the rate recorded in the earlier
period. Contraction in defense-related phases
of activity in some areas has offset growth in
others. However, as in the earlier postwar
years, industrial growth in this region has
continued at a more rapid pace than nationally.
A primary objective of this article is to describe the important industrial developments
revealed by the 1958 census. By drawing on
1
1 The 1958 census is the third of the postwar period,
others having been made in 1947 and 19,54. It should
be noted that the 19,58 census figures in this article are
preliminary an<l subject lo some revision and reclassification. J t is not expected Lliat final figures will alter
conclusions stated in the text. H('aders inlcrcslcd in
addilional background or more detail on industrial devclopmcnl in the District during the earlier postwar
period may Rnd it 11sdul lo refer to a series of articles
on this topic previously p11hlishe<l in the Monthly
Review. Sec the December HJ52, July 19.57, November 19,57, April 1958, and August H),58 issues.
M onthly Review • Au gust 1960
the various measures of activity providedchiefly data on employment, value added, and
number of establishments- the geographic location of major changes in manufacturing activity is indicated, as are the mon' significant
developments among various kine.ls of manufacturing industries. Subsequc•ntly, the 195458 experience is reviewed in the light of
events in the earlier postwar y<'ars.
Finally, the pattern of industrial expansion
a11cl the composition or ma1111fadmi11g in this
r<'gion is ('0111pared with that i11 tlH· Nation.
Unfort1111al(·ly, tlic two rnosl ff<'<'lll C<'11s11scs
were taken during years of recession. While
this probably does not distort comparisous for
the District substantially - since in both cases
effects here were comparatively moderate it does bear significantly upon the meaningfulness of comparisons with the United States.
Durable goods production, which is comparatively more sensitive to recessions than nondurables output, constitutes a larger share of
total production in the Nation than in the
District. In addition, the relatiwly large influence of military production in the District
has helped lo moderate the impact of recession on durables output here. For these reasons, comparisons of national and District output or employment patterns during the recent census years must be interpreted judiciously.
easures of Manufacturin
Activity
The data gathered in the periodic censuses
of manufacturing provide several measures of
the extent and nature of industrial activity.
Each measure has its peculiar qualities and,
for a given purpose, one indicator may he
more useful than another. For this reason, a
better perspective is achieved by looking at
several aspects of activity. For example, value
3
Recent District
Measures of Change in Manufacturing Activity
Number of Employees
Colorado
Kansas
Nebraska
New Mexico
Oklahoma
Wyoming
Western Missouri
(Kansas City, Joplin,
St. Joseph)
Tenth District Total
United States
1954
64,446
131,432
59,381
15,061
89,257
6,261
99,614
465,452
16,126,000
Per Cent
Distribution
13.8
28.2
12.8
3.2
19.2
1.3
21.4
100.0
1958
78,157
119,063
58,653
20,278
92,933
6,496
98,194
473,774
- ~15,000
Value Added (Dollars in Thousands)
Per Cent
Distribution
16.5
25.1
12.4
4.3
19.6
1.4
20.7
100.0
Per Cent
Change
1954-58
+21.3
-9.4
-1.2
+34.6
+4.1
+3.8
-1.4
+1.8
- 0.7
$
1954
472,433
1,049,291
394,222
126,326
580,633
51,361
768,512
$ 3,442,778
_$116,913,000
Per Cent
Distribution
13.7
30.5
11.5
3.7
16.9
1.5
22.3
100.0
$
1958
761,954
1,163,955
507,689
206,153
716,115
65,822
886,586
$ 4,308,274
$140,113,000
SOURCE: U.S. Census of Manufactures: 1954 and 1958.
added hy manufacture - a statistic.: computed
hy subtracting cost of materials, supplies, fuel,
etc., from value of shipments - is considered
to he the best measure available for comparing the relative economic importance of manufacturing among industries and geographic
areas. This concept, however, when used to
compare performances over time, may not
directly indicate changes in physical output.
For example, the U.S. Department of Commerce suggests that higher prices may have
accounted for as much as 10 per cent of the
over-all clo11ar gains in valu(' added over the
4-ycar interval, 1954-58.
Consequently, in the following discussion
primary emphasis will be placed on the employment figures provided by the census.
Statistics on employment arc perhaps the most
widely used of all measures of regional activity and, since the census data can be augmented with estimates from other sources for
intervening years, they lend themselves most
readily to area analysis. Employment as an
indicator of changing activity has, however,
one distinct disadvantage compared with
value added-it does not reflect productivity
changes. ,vhen productivity rises, the amount
of value added increases relative to employment even though prices are unchanged. The
4
Per Cent
Dist ributi on
ad11al value of 011tput thus tends to rise more
than higher employment suggests. Ind ed, it
is quite possible for employment to fall somewhat while the real value of output increases.
In the following pages, however, when reference is made to striking gains in value added,
it must be recalled that they contain a fictitious element attributable to price change.
As is always true when statistics are improved through time, a degree of comparability with earlier periods is lost. For this
reason the 1958 census data are not strictly
comparable with the information reported
for 1947 and 1954. In general, each census
has represented successively broader coverage. For example, the 1958 figures include
<lata on ready-mixed concrete operations and
machine shops engaged mainly in repair
work, while earlier surveys did not. Similarly,
both the 1958 and 1954 censuses include data
on establishments engaged in the processing
and distribution of fluid milk and for logging
camps and contractors - industries excluded
from the 1947 survey. While these changes
arc of some importance in analyzing developments in the affected industries, the over-all
comparability of the censuses is not seriously
impaired except for data on number of establishments.
17 .7
27 .0
11 .8
4.8
16 .6
l .5
20 .6
100 .0
-
Industrial Developments
Per Cent
Change
1954-58
+61.3
+1 0.9
+28.8
+63.2
+23.3
+28.2
+15.4
-
+25.1
+ 19.8
Number of Establishments with 20 or More
Per Cent
Per Cent
Distr iDistri1954
bution
1958
but ion
490
18.2
540
18.2
21.2
572
645
21.8
378
14.0
411
13.9
101
3.7
152
5.1
524
19.4
574
19.4
49
1.8
57
1.9
585
21.7
586
19.8
2,699
90,473
100.0
2,965
95,461
100.0
Employees
Per Cent
Change
1954-58
+10.2
+12.8
+8.7
+50.5
+9.5
+16.3
+0.2
+9.9
1 5.5
Major Developmonts in the 1954-58 Period
One of the most striking points which can
b inferred from a comparison of the 1954
and 1958 census figures is that defense production programs have continued to play an
important part in determining the course of
factory activity in this region. In 1954, the
effects of the Korean War expansion were
still apparent, whereas by 1958 activity in
some of the industries, especially ordnance
and certain aircraft programs, had almost
completely subsided. Other phases of aircraft production, which had hccn sustained
by continued efforts to enhance our national
d~fense capabilities, also had slowed down
by 1958. In addition, the shift in emphasis
from manned aircraft to missiles resulted in
transfers in production from some areas to
others within the District. These notable developments were superimposed on a pattern
of steadily increasing importance of several
industries and continuing relative declines in
others.
Among the District states, New Mexico and
Colorado experienced the greatest absolute
and relative gains in manufacturing activity
between 1954 and 1958. In both cases, national defense programs were the major impetus for the advance. In New Mexico, facMonthly Review • August 1960
tory employment increased about one third
and value added rose by three fifths. The
sharpest increases appear to have occurred in
firms engaged in national defense projects,
such as ordnance, aircraft, and electronics. A
good indication of the extensive expansion of
manufacturing in a state where industry was
quite limited just a few years ago is the substantial increase in the number of larger establishments. While incr ased coverage was
responsible for some of the gain, in 1958
there were 152 establishments with over 20
employees compared with 101 in 1954 and
89 reported for 1947.
Tlw most significant single development
prompting Colorado's industrial gain hctwccn
195,1 and 19.58 was the cstahlishnwnt of a
major missik-produdng plant near Denver.
In addition, the same area experienced a considerable expansion - in part related to the
missile facility - in the electronics industry.
The impact of the new industries is reflected
in the fact that employment in transportation
equipment ( largely the new missile plant)
and electrical machinery increased from less
than .3 per cent of all manufacturing jobs in
19.54 to 12.5 per cent in 1958. As in New
frxico, most oth er manufacturing lines also
have xpandC'd. [n total, employment in Colorado rose 21 per cent and value added increased by 61 per cent relative to 1954.
In contrast to the rising importance of defense production in ew Mexico and Colorado between 1954 and 1958, most other areas
of the District experienced losses in that type
of activity. The largest decline due to reduced
defense business occurred in Kansas. Employment in that state's transportation equipment
industry fell nearly 10,000, reflecting for the
most part the demise of aircraft production
in Kansas City. The closing down of a chemical ordnance plant in the same area, as well
as an ordnance facility in Parsons, contributed
further declines. In total, manufacturing employment in 1958 was 9 per cent below the
5
Recent District
1954 level and, although an 11 per cent gain
in value added was reported, this was considerably below the District average. A substantial rise and subsequent decline in Wichita's aircraft industry is not reflected by a
comparison of the 1954 and 1958 census figures. Employment there was on the upswing
in 1954 and was declining in 1958, with annual averages for those years at about the
same level.
Another important center of military aircraft employment-Tulsa-also had experienced declining employment in that industry
hy 19,58. In addition to the 9 per cent drop in
Oklahoma's transportation cquipnwnt industr~·
which rcflcctccl that loss, <>rnploynw11t in
foods, petroleum and coal, primary metals,
and fabricated metals establishments also fell
below 1954 levels. On the other hand, significant gains occurred in apparel, electrical
machinery, and administrative and auxiliary
forces,2 with total employment showing a 4
per cent rise relative to 1954.
Nebraska employment figures also mirrored
the drop in jobs associated with the end of
the Korean War. The closing of ordnance
plants near Grand Island and Wahoo resulted in a substantial loss of jobs. This was
reinforced by sizable declines in instruments
-associated with the closing of a watch plant
at Lincoln in mid-1958 - and in the number
of administrative and auxiliary workers reported. However, gains in chemicals, machinery, and transportation equipment, as
well as in the metals group, contributed considerably toward offsetting the losses.
While defense production continued to influence manufacturing activity in the Western
Missouri portion of the District, the pattern
was in part one of offsetting changes. A drop
Central administrative offices or auxiliary units include such places as storage warehouses, power plants,
research laboratories, garages, and repair shops, which
serve more than one manufacturing establishment or
which are not located in the same general location as
the plant served.
in employment in Clay County due to the
phasing out of aircraft wing production and
declines in ordnance and aircraft engine
plants in Jackson County were in part offset
by a gain in jobs at an Atomic Energy Commission contract facility. In addition, the production of rocket engines near Neosho has
boosted employment in that area. On the
whole, however, factory employment in 1958
was about 1 per cent below the 1954 level.
In Wyoming, where the relative importance
of manufacturing has remained small, the
gradual rise, typical of the earlier postwar
period, continued. Factory jobs showed a 4
per cent gain and value adclcd was up 28
p('r c<·11t , despite a slight <·rnploy1nC'nl drop in
th<' stalc·'s ,najor man11factming industry
petroleum refining.
M an ufa ctu ring Employment
THOUSANDS OF PERSONS
SEMI-LOG SCALE
600
400
200
KANSAS
WESTERN MISSOURI
100
80
60
NEBRASKA
40
20
10
8
6
2
6
4
1
1947
_.I
1
1954
-1.__L__,__j_
1958
NOTE: On a semi-logarithmic scale, equal slopes indicate equal
rates of change .
SOURCE: U.S. Census of Manufactures: 1947, 1954, and 1958.
Industrial Developments
It is interesting to observe the 1954-58 developments in the light of earlier events. To
an important degree, of course, the magnitude
and direction of the 1954-58 changes in a
given state are dependent on its 1954 position. For example, in Kansas where employment in 1954 incorporated a sharp rise resulting from the Korean War effort, a decline from that level was experienced between
1954 and 1958. Employment fell 9 per cent
in that 4-year period compared with a 74
per cent gain in the previous 7 years. Taking
the postwar period as a who]e, however, Kansas ranked second only to New Mexico in
rf'lativc gains and contributed more' than any
othC'r state in terms of number of manufacturing jobs.
With the exception of Colorado, all District states experienced either a decline in
employment or a slower rate of expansion in
recent years than in the 1947-54 period. New
Mexico continued to show the sharpest gain
but the 35 per cent expansion in the 1954-58
period was considerably smaller than in the
earlier years. For the District as a whole,
employment rose about 2 per cent compared
with a 40 per cent gain in the previous 7
years. 3
Accompanying the lesser rate of expansion
in the 1954-58 period was a continued but
moderate shift in industrial composition in the
District. Investigation of the structure of
manufacturing employment in 1958 compared
with that of 4 years earlier reveals that about
half of the major industry groups experienced
gains in relative importance. Because of the
short period and rather gradual growth,
changes were small, with the largest being
Includes the six District slates as well as Kansas
City, Joplin, and St. Joseph, Mo., i.e. Jackson, Clay,
Buchanan, and Jasper counties. In the subsequent discussion dealing with industrial structure, the analysis
is limited to developments in the six states only, clue
to the absence of county industry detail in the preliminary releases.
:i
Monthly Review • August 1960
slightly more than 1 percentage point. Compared with 1954, shares of total employment
in the transportation equipment, ordnance,
and chemicals industries each declined about
1 percentage point, while electrical machinery
moved up in importance by about that
amount.
Despite the fact that some of the more nota blc industrial declines occurred in durable
goods industries, in the aggregate they continued to expand relative to nondurables. Between 1954 and 1958, employment rose about
3 per cent in hard goods industries compared
with less than a 1 per cent rise in nondurablcs. As a rcsu lt of the differential gains,
the relative importance of <lnrahlcs increased
slightly lo about 49 per -cnt of the total.
a1or Change
n
rial Composition
Six States*
Per Cent of Total Manufacturing Employment
1947
1954
1958
Transportation equipment 5
Food
35
Petroleum and coal
6
19
24
4
18
23
4
* Colorado, Kansas, Nebraska , New Mexico, Oklahoma, Wyoming.
With relatively minor changes in composition occurring between 1954 and 1958, the
major changes in industrial structure which
have characterized the postwar period are
still defined by earlier shifts among industries.
Changing shares of the food and transportation equipment industries are the outstanding
examples of this development, with a 12 percentage point decline from 1947 to 1958 in
the former and a 13 point gain in the latter.
The reduced share of food has been due to
the failure of employment to expand rather
than to any significant decline in the actual
number of jobs in that industry. Thus, despite
the food indush-y' s sharply reduced share of
total manufacturing employment in this region, it continues to make up an important
part of the District's industrial structure. The
importance of transportation equipment has
been enhanced primarily by the expansion in
aircraft production, although the auto in7
Recent District Industrial Developments
dustry in the Kansas City Metropolitan Area
also has grown considerably during the postwar period. The next largest change in share
of total factory employment was a 2 point
decline in petroleum refining. Additional
losses of about 1 point occurred in lumber
and wood, primary metals, and printing and
publishing, while 1 point gains occurred in
electrical machinery, and chemicals. Shares
of the other major industry groups have
changed little from the 1947 pattern.
Comparison with United States
The national, as well as the District, pattern of industrial activities has nnclc>rgonc
only moderate changes since J9S4. Thus in
J9,58, as in 1954, the major Llifiercnccs between the District and U. S. distributions of
employment were in the food and transporStructure of Manufacturing Employment, 1958
Per Cent of Total
Six
District
States
Total
Food
Transportation equipment
Nonelectrical machinery
Printing and publishing
Stone, clay, glass
Fabricated metals
Chemicals
Primary metals
Petroleum and coal
Rubber
Apparel
Electrical machinery
Lumber and wood
Miscellaneous, including ordnance
Furniture and fixtures
Pulp, paper
Leather
Instruments
Textiles
Tobacco
Administrative and auxiliary
* Less
than 0.5 per cent.
SOURCE: U.S. Census of Manufactures: 1958.
8
100
23
18
8
7
6
5
5
4
4
3
3
2
2
2
1
1
1
1
*
4
United
States
100
11
10
10
5
3
7
5
7
1
1
7
6
4
4
2
3
2
2
6
1
3
tation equipment industries. Only 11 per cent
of all manufacturing workers in the United
States are employed by food manufacturing
establishments compared with 23 per cent in
the 6-state area. Transportation equipment
firms in this region employ 18 per cent of the
factory workers compared with 10 per cent
nationally. The greater relative importance of
textiles, apparel, and electrical machinery nationa1ly constitute other areas of major difference.
Nevertheless, the continued rise in relative
importance of durable goods industries as a
group and the dging downward of nondurahles, cspPcially foods, has brought the District stn1clttr<' closer to that for the Nalion.
Whilc the 4-year period l)('tw en lhe 1ast two
censuses indicates only moderate further
movement in this dir ction, it appears to be
a continuation of the sizable steps made earlier in the postwar period. However, durables
continue to be relatively less important in this
region than nationally. For the United States
as a whole, jobs in durable goods industries
comprise about 55 per cent of total manufacturing employment while slightly less than
half are thus employed in the District. This
difference is probably understated, however,
by reason of the more severe impact nationally of the 1957-58 recession. Thus, the cyclical implications of an industrial structure
comparatively heavily oriented towards nondurables production continue to exist in this
region. In periods of general economic decline, this manifests itself in a better sustained
level of output. On the other hand, during
periods of rapidly rising output due to cyclical recovery, the District is not likely to experience gains of the same relative magnitude
as those noted in areas where durables make
up a larger share of total manufacturing activity.
State and Local
Government
Activities-
T
has seen an unusually
rapid climb in the expenditures of state
and ]oca] governments. Partly for this reason,
hoth the ]evcl and growth of state and ]ocal
activities have recently drawn much attention
from peopl e interes ted in diverse aspects of
the economy. The primary objective of the
present article and one to appear in a future
issue of the Monthly Review is to describe
and compare state and local government activities in states of the Tenth Federal Reserve
District. Insofar as possible, these activities
are also related to the national pattern and
to a variety of factors which appear to correspond to that pattern. A description of state
and local government activities in the District
states is of interest in its own right, but, in
addition, it is hoped that these articles will
help to shed some light upon the factors associated with differing levels of expenditures
among the District states and upon the forces
that tend to cause changes in such activities
over time.
Before attention is directed more specifically to the District states, some description
of the over-all national context in which they
operate is provided. This is done by viewing
the role of state and local expenditures in the
national economy as it might be seen by persons with differing perspectives. In addition,
several problems which are encountered in
making state-to-state comparisons of state and
local expenditures are discussed.
HE POSTWAR PERIOD
Monthly Review • August 1960
District and
National Patterns
Some Perspectives on the Nature and Role
of State and Local Expenditures
The individual who keeps his eye on fluctuations in ov<'r-all Jev Is of economic activity may have been greatly impressed by the
stab]e rate of increase exhibited by state and
local expenditures in the postwar period. The
growth in these outlays has been distinctly
more unvarying than expansion in the gross
national product. Indeed, there have been no
years and very few quarters in which seasonally adjusted state and local expenditures
failed to increase. This record contrasts especially strongly with such volatile components
of GNP as consumer durable goods outlays
and business plant and equipment investment,
both of which have in recent years been of
roughly the same order of magnitude as state
and local expenditures. Thus, activity in this
sector has had a notable stabilizing effect
upon over-all growth in the economy. In fact,
some short-run forecasting of over-all state
and local outlays recently has come close to
simply extending the virtually straight line
traced by these expenditures in the past several years.
However, the person who believes that the
expanding role of government constitutes a
threat to an economy which has generally depended upon the market system to appropriately allocate its resources may view the rapid
growth of state and local expenditures in a
different light. He may, for example, be con-
9
State and Local
cerned because the expenditures of these
governments for goods and services have expanded to the level of some major private
sectors of the economy. Perhaps he is especially impressed by the fact that in the past
few years these government units have spent
slightly more upon resource inputs than nonfarm private business has for new plant and
equipment. In addition, he may have observed that in the postwar period the outlays
of state and local governments for goods and
services have grown considerably faster than
the total gross national product and presently
constitute almost one tenth of the current
value of that broad measure of output. Also,
he may note that the rate of increase of stale
and local expenditures has not diminished in
recent years - indeed it may have advanced.
Conversely, the person who feels that the
Nation generally is not devoting an appropriately large amount of its total production
to the provision of public services may well
see state and local outlays in a still different
perspective. While recognizing the rapid
growth of the state and local sector relative
to the gross national product, measured in
current dollars, in the postwar period, he may
at the same time feel that the level which has
been achieved is not particularly high. For
example, he may note that state and local
governments have been the victims of extraordinarily rapid increases in costs. A large
portion of state and local outlays has gone
for construction in the postwar period and
construction costs have advanced at an unusually rapid pace. When state and local government expenditures for goods and services
are converted to constant prices and compared with gross product, also in constant
prices, the proportion which they represent
is near the levels prevailing on the eve of the
great depression and just prior to World War
II. This, in light of an upsurge in factors commonly thought to necessitate increased civilian expenditures by government - such as
10
greatly increased urbanization and the rapid
rise of the automobile-may not strike him as
a particularly impressive record.
Finally, the persons most intimately concerned with what has been happening to
state and local government expenditures may
he the officials and the citizens concerned with
financing them. Some states and numerous local jurisdictions are now involved in
fiscal problems which are widely considered
highly difficult, if not grave. Indeed, the
word "crisis" has been heard numerous times
in this connection. In addition, current population projections point to a high rate of gain
during th<' 1960's, with those segments of the
pop11lalion eliciti11g a high level of public
servic('s the urhan , aged, school age, and
co1lcgc age expected to increase at a faster
than average rate. Also, there does not seem
to be any evidence that other factors, such as
demands upon the educational system for
a wider range of services and pressures for
higher standards for public services generally,
are declining in significance-indeed they are
probably rising.
ensus of Governments - A Rich
Sour "' f Inf~ .. ,..... ,.., •• -....
For all those interested- for whatever reason-in state and local government activities,
the recent publication of the several volumes
of the U.S. Census of Governments: 1957 presents a great fund of information. Nothing
approaching the detailed data concerning the
activities of state and local governments obtainable from these volumes has been available since the 1942 Census of Governments.
Congress did not appropriate funds for the
decennial census which had been scheduled
for 1952, thus causing the longest lapse in the
census of governments since it was begun in
1850. This fact, combined with questions arising out of the strikingly stable and strong uptrend in state and local expenditures, has
caused unusual interest in the results of the
Government Activities
Indexes of Gross National Product and State
and local Government Purchases of
Goods and Services
Some Ground Rules for Making State-to-State
Comparisons
Why Treat State
and local Activity Together?
INDEX (19 29=100 )
The census of governments provides detailed information on expenditures and employment of a variety of subnational government units. Much of this information is of
interest but, in comparing activities from
state to state, the diversity of government
types presents a serious problem since the
states vary considerably in the allocation of
functions to different units of government. In
January 1957 there were 102,328 government
units in the continental United States. The
gr<'al<'st numhcr of these were school (lislricls
making up ,tlmos l one half of the total. The
remainder included the Federal Government,
the 48 state governments, and numerous townships, municipalities, special districts, and
counties. Nebraska has more government
units-6,658 compared with an average of
2,131-than any other state and Kansas ranks
fourth among the states. Comparisons of
government activities among the states are
complicated, not only by the different ways
in which functions are allocated among the
units of government, hut also because types
of government common in some states are not
even found in others. For example, the township and town type of government is not used
at all in the southern and in some western
states; in some states there are no special
school districts; in some others special districts for highways and sewers abound, while
in still others they are absent.
Even the broad division between state and
local government does not furnish a good
foundation for comparison. Functions performed by state government in one state may
he performed by a local unit - with or without a grant from the state - in another. In
fact, there seems to he some tendency for
states having relatively low state expenditures
per person to rank higher in local expendi-
700
600,
500
I
STATE AND LOCAL GOVT.
PURCHASES OF
GOODS AND SERVICES
I
I
I
I
I
I
I
400
GROSS NATIONAL
PRODUCT'-,..
200
-- ---Q
J
lt)2~
l
'I'\
I
'40
,,,
I
•4~
I
' 50
I
"'>5
' bO
SOlJRCf : U. S. nepa rtment of Commerce
1957 survey. The census makes possibl detailed cross sc>ction comparisons - i. e., comparisons of different government units at a
given time-as well as comparisons with previous census dates. Unfortunately, the latter
comparisons are somewhat limited by the
fact that recent census dates - 1932 and 1942
for example - have coincided with periods of
great stress in the economy.
The objectiv(' of the present investigation
is to utilize the results of the 1957 census and,
to a limited degree, those of earlier censuses
to describe state and local expenditures in
the District in a comparative fashion. It is
hoped that such comparisons will help reveal
some of the factors associated with differences
in expenditures between states, especially as
those differences manifest themselves in the
states of the Tenth District. Not only are
comparisons of individual states interesting
in their own right, but such collation may
help to illuminate influences tending toward
further changes. To the degree that existing
differences between states can he related to
objectively determinable factors, anticipation
of further changes in individual states, as well
as over-all changes may be aided.
Monthly Review • August 1960
11
State and Local
tures and vice versa. This sort of rough offsetting is apparent among the District states
when the direct general expenditures are compared at the local level on the one hand and
at the state level on the other.
New Mexico ranks highest and Nebraska
lowest among the District states in terms of
per capita expenditures at the state level. It
is interesting to note that these two states
also respectively rank highest and lowest in
the District in terms of the proportion of
total taxes collected at the state level. In
fact, they represent rather extreme cases
among all the states in the Nation. Only one
state ranks below New Mexico in the percentage of taxes collcclcd at the local level ,
and only one ranks above Nebraska. Since
states vary widely, not only in arrangements
whereby they share taxing power with their
local governments but also in terms of the
functional distribution of expenditures as between levels of government, state and local
expenditures are best combined for purposes
of interstate comparison. The combined total
constitutes expenditures on a group of functions which are fairly comparable from state
to state. This is especially true when "general" rather than "total" expenditures arc compared.
Table 1
Direct General Expenditures of State and Local
Governments
District States and the United States, 1957
State Governments
New Mexico
Wyoming
Oklahoma
Kansas
Colorado
United States
Nebraska
Missouri
Dollars
Per Capita
144
141
131
103
88
81
68
76
Local Governments
Colorado
Wyoming
Kansas
United States
Nebraska
New Mexico
Oklahoma
Missouri
-------..L-..
Dollars
Per Capita
193
187
167
156
134
130
117
115
----
NOTE : While a significant share of the population of the Tenth
Distri ct resides In Missouri, the largest influences upon state
and lo cal expenditures in that state are beyond the bounds of
ttie District. It is not possible to make meaningful comparisons
of state and local activities in the portion of Missouri in the
District with other District states.
12
Why Compare General Expenditures?
"General" expenditures are a better basis
for interstate comparison than "total" expenditures because the comparability of the latter
among states is seriously limited, primarily by
the inclusion of outlays on the operation of
such en terprises as utilities and liquor stores.
The incorporation of these types of outlays
makes it difficult to relate different levels of
expenditure to the factors which are ordinarily believed to bear upon them - population
growth, urbanization, etc. On the other hand,
their exclusion makes a substantial differencC' in some states. In the District, Nebraska
is an cxccllenl cxamplc. All elC'ctric utility
scrvi('C' is publicly provided in Nebraska. That
slate ('011lai11s two of lhc Nation's largest special districts the Loup Hivcr Public Power
District and th e Omaha Public Power District. Consequently, "general" expenditures of
Nebraska local governments are only about
two thirds as large as "total" expenditures.
Across the Nation, "general" expenditures of
state and local governments constitute about
85 per cent of the total. In all of the District
states other than Nebraska, general expenditures are a somewhat higher percentage of
the total than in the Nation.
Per Capita Expenditures to be Compared
Obviously, the largest factor accounting for
differences in state and local expenditures is
variation in population. Thus, the state of
New York, with a population of over 16 million , spent almost $5 billion in 1957, while
Nevada, with a population of less than 300
thousand, spent a little less than $100 million. When the influence of population is removed by dividing outlays in both states by
their respective populations, their relative expC'nditure positions are reversed, with Nevada
spending considerably more per person than
New York. In the present study, the influence of total population is eliminated by converting all activities to a per capita basis.
This does not mean, however, that popula-
Government Activities
tion characteristics are disregarded in explaining per capita expenditures. Factors such as
the proportion of aged, persons of school age,
and city dwellers in the population may bear
importantly upon differences in expenditures
per person.
Are Prices Responsible for Differing Per
Capita State and Local Expenditures?
Almost everyone has observed that price
levels differ considerably in various places in
the United States. Not only are prices higher
in the West than in the South but, for some
items at least, they are higher in large cities
than in smaller towns. The question may he
raised kgitimatcly, the.:rcforc, whether differences in stale and local expenditures arc accounted for largely, if not entirely, by either
genera1ly higher prices in some geographical
areas than in others or by the fact that some
states have big cities with high prices and
others have mostly smaller towns with generally lower prices. Unfortunately, information that would permit an exact answer to the
question does not exist. However, it is possible to shed some light upon it.
The first thing to notice is the very large
variation in per capita expenditures among
the states. Arkansas spent about $148 per
person in 1957; Nevada, on the other hand,
spent $367 per capita - or about two and one
half times as much. Even within the District
the range is from about $202 per capita in
Nebraska to around $328 in Wyoming. The
information available on regional and ruralurban price differences is for the most part
rather crude and, in the case of some of the
best studies, rather old, but it does not indicate differences in price levels of anything
like the magnitudes of the expenditure differentials.
In addition, one might suppose that prices
would be a less important distorting influence on comparisons made within the Tenth
District than if all the states in the Nation
Monthly Review • August 1960
were compared with one another. While price
differences are known to exist among the
District states, one would hardly expect them
to be of anything like the order of those encountered if Mississippi, for example, were to
be compared with California, or Alabama
with New York. The District states, while far
from being a homogeneous economic unit, do
after all have certain features in common
aside from their geographical contiguity durable goods manufacturing is relatively unimportant, they are comparatively heavily
dependent on agriculture, and they do not
differ drastically in the percentage of their
population that is urban. Fmthermore, price
levels in tlH' District arc neither among tl1e
highest nor the lowest i11 the Natio11. Since
they appear lo represent a somewhat intermediate position, comparisons with national
expenditure levels are probably not greatly
distorted by differences in over-all prices.
Another way to shed some light on the
problem of real differences in levels of activity
as opposed to those merely attributable to
price differentials is to peruse state and local
government employment rather than expenditures. The range again is quite large. In
19,57, West Virginia had ahout 227 full-time
equivalent employees per 10,000 population ,
while at the other extreme Wyoming had
around 368. Among the six District states the
equivalent figure varies from the high level
of Wyoming to a low of about 298 in New
Mexico. It might be noted here that each of
the six District states exceeded the national
average. The range of variation in employment is not so large as in the case of expenditures but it is still quite striking. The difference between the employment and expenditures measures cannot, of course, be taken
as a straightforward indication of the influence of prices since the composition of expenditure varies considerably and the average employee in one state is not necessarily
equivalent in terms of skill and productivity
13
State and Local
to an average employee in another. Still, the
marked variation does imply that there are
impressive differences in real per capita levels of activity. As will be elaborated at a
later point in this study, however, differences
in cost-especially in wages and salaries-may
be an important factor accounting for differences in expenditures particularly for certain
functions.
Over-All State and Local Expenditures in
District States
In 1957 over-all state and local government expenditures in the six District states
varied from about 1.5 per cent less in Nebraska - to almost 40 per cc•nt more
in
Wyoming - than the national average. 1t is
notable, however, that generally per capita
expenditures in the District ranged appreciably above th e national average and in Wyoming were next to the highest in the Nation.
However, expenditures in Nevada-which was
the top state in the Nation-were almost $40
per person higher than in Wyoming. 1
While the satisfactory identification of the
major tangible factors associated with differences in expenditures among the District
states and between the District stat<'s and
the Nation would require at least a hreakdown by major types of outlays, some general commentary about differences in over-all
levels may be of interest at this point. A
later article will give attention to the pattern
of District state expenditures, both in order
to identify in which functions the differences
occur and in order to throw further light upon
the factors accounting for comparative overall levels of expenditures.
1 Thc factors which helped lo account for \Vyoming's
high rank arc found in Nevada to an even more e:-tremc degree. Both stales have cornparnlivcly high
per capita incomes - with Nevada ranking near the
national maximum - and an extremely low density of
population.
14
Some studies of state and local expenditure
have concluded that the most important factor explaining differences in per capita outlays is per capita income. Perusal of the whole
array of state and local expenditures reported
in the 19,57 Census of Governments indicates
a rather close correspondence between income and expenditures which appears to persist-in a rough fashion- through the entire
range of income levels. This conclusion is
also indicated when the more formal statistical technique of multiple correlation is used.
Nevertheless, income differences cannot be
invoked to explain th<' generally higher level
or expcnclit11n's in th<' District than in the
Natio11, si11c-c- non<· of lh<' District state's ex
('('cckd the 11atio11al p<'r capita i11('0llH' level i11
1957. Consid<•riug direc.;t general cxp('ndilures
as a whole, a general reason that can be
given for the comparatively high level of expenditures in District states is their relatively
low population density. Experience across the
Nation suggests that, at a given level of per
capita income, states with lower population
densities tend to have higher per person state
and local expenditures. The six District states,
while accounting for about 18 per cent of the
area of the United States, account for only
,5 per cent of the population. Since some
functions arc more aIIected by population
density than others, it may be expected that
a comparison of specific functions would provide additional information on the importance
of the density factor.
On the other hand, among the District
states themselves there appears to be a discernible relationship between income and per
capita expenditures. The only real discrepancies arc New Mexico-which on the basis
of income should rank lower than it docsand Nebraska-which might be expected to
rank higher than it does. On a general level,
New ~lexico's high expenditures may be easier to account for than Nebraska's low level,
although the same factors may bear impor-
Government Activities
Table 2
Influence
Upon Over-All State and Local Government Expenditures
I
Capita
Per
General Expenditures
1957
Wyoming
Colorado
New Mexico
Kansas
Oklahoma
Nebraska
Missouri*
Mean- 48 States
Median- 48 States**
$328
281
279
271
248
202
191
237
238
r
Rank
In
Dist.
1
2
3
4
5
6
Per
Capita
Personal
Income
1957
$2,038
2,019
1,720
1,830
1,654
1,834
1,974
2,043
1,847
% Increase
Rank
In
Dist.
~
In Per
Capita Ex- Ran
penditures
In
1942-57
Dis
1
2
5
4
6
3
263
225
333
326
332
222
260
246
237
4
5
1
3
2
6
In Per
% Increase
Income
1942-57
in Population
1942-57
% Capita
'"""" Rank
116
127
174
116
165
126
144
125
122
In
Dist.
5-6
3
1
5-6
2
4
26
49
62
19
2
16
11
27
25
Rank
In
Dist.
3
2
1
4
6
5
Population Per
Square
Mile
1957
3
16
7
26
32
19
61
56
61
Rank
in
Dist.
6
4
5
2
1
3
*
See note to Table 1.
The median repre sen ts a figure which Is selected so that 50 per cent of the total number of cases, when arranged In order of size,
lie below it and 50 per cen t above it.
SOURCE: U. S. Department of Commerce.
**
tantly upon the situation in both states. In
recent years, the population of New Mexico
has been rising at an unusually rapid pace,
both in regard to the other District states and
relative to the Nation. This increase was more
than accounted for by the growth of a handful of urban areas. The rapidly advancing
requirement for urban services combined with
unusually swift income growth and sparse
population density would certainly suggest
comparatively large government expenditures
in the state. Nebraska, on the other hand, ex-
Monthly Review • August 1960
pcriencecl a considerably lesser growth in
both income and population . In Nebraska,
population actually declined from the late
twenties until the postwar period. This implies that requirements for social overhead
capital may have been comparatively small.
In addition, Nebraska is much less sparsely
populated than New Mexico. Again, however, specific factors associated with such differences may be more clearly delineated by
investigating expenditures for specific functions, as will be done in a future article.
15
CARRYOVER OF WHEAT BY CLASSES
PRICES RECEIVED AND PAID BY FARMERS
INDEX
INDEX
1910-14= 100
350 , - - - - - ~ -
OF BUSHELS
MILLIONS
MILL IONS OF BUSHELS
1200
350
1200
325
1000
1000
300
800
800
275
275
600
600
2 50
250
400
325
ON
CARRYOVER
JULY 1
PR ICES PAID,
INTEREST, ANO TAXES
\
300
400
HARO RED SPRING
WHITE
225
PRICES RECEIVED/
FOR COMMODITIES
200
_./
......--••
200
l
1947
200
i
J
'60
'55
'50
0
\
...,.......__\
~
~-,-9!'-~
1947
'50
__
200
SOFT RED
~----l... .._r--/
'-------~-/
1._
'
/
WINTER
0
1
'55
'60
NOTE: 1960 figures are estimated.
BANKING IN THE TENTH DISTRICT
Deposits
loans
Reserve
District
and
States
City
Member
Banks
PRICE INDEXES, UNITED STATES
Reserve
Country
Member
Banks
City
Member
Banks
Consumer Price Index
Country
Member
Banks
Wholesale Price Index
126.3
124.5
(1947-49 = 100)
119.5
119.7
119.7
242
298
(1910-14 = 100)
236
(1910-14= 100)
299
301
TENTH DISTRICT BUSINESS INDICATORS
District
and Principal
Metropolitan
Areas
+9
+1
-4
+1
+1
Colorado
+1
+6
+3
+11
t
-1
- 1
+1
-6
+4
+9
+4
-1
+2
+3
- 1
- 3
Denver
- 1
- 1
Kansas
-1
Missouri*
- 2
+3
+1
+0
+2
- 3
Nebraska
+ 1
- 2
+2
+10
- 2
- 5
**
**
+ 2
+3
**
**
*Tenth District portion only.
t Less than 0.5 per cent.
16
126.5
Prices Paid by Farmers
+2
Wyoming
(1947-49 = 100)
241
+2
Oklahoma *
June
1959
Prices Rec'd by Farmers
t
New Mexico*
May
1960
June 1960 Percentage Change From
May June May June May June May June
1960 1959 1960 1959 1960 1959 1960 1959
Tenth F. R. Dist.
June
1960
Index
**
**
t
Value of
Department
Store Sales
Value of
Check
Payments
Percentage cha nge-1960 from 1959
June
Year
to date
June
+5
+3
-1
-1
+9
+0
-1
+2
Wichita
- 6
- 4
-15
-13
Kansas City
+s
+3
+4
+2
Omaha
+0
+1
+2
+3
Tenth F. R. District
Year
to date
+3
+12
- 1
+0
t
- 8
+ 3
+ 3
Oklahoma City
+7
+2
+5
- 1
+9
**
**
- 1
+2
Tulsa
-1
0
- 6
-5
+ 2
+2
** No reserve cities in this state.
@FedFRASER