IssuesPA

August 1 2006

Comparing Pennsylvania’s spending habits to other states’ provides a different perspective and could impact how state leaders make future spending decisions. However, these comparisons must be tempered by Pennsylvania’s unique population and culture.


(August 2006) Harrisburg insiders and the media pay considerable attention to state spending, comparing spending categories from one year to the next. But there’s usually little focus on how those Pennsylvania numbers compare to other states’ spending patterns.

IssuesPA sought some national perspective with the help of the U.S. Bureau of the Census, which recently published data on spending by state and local governments nationwide.

How does Pennsylvania compare?

The table below shows how much Pennsylvania’s state and local governments spend per $1,000 of personal income compared to the total for all 50 states and the District of Columbia. The comparison includes the combined spending by state government, counties, municipalities, and school districts. State and local governments are grouped together to account for the differing responsibilities of state and local government from state to state. Some states perform certain functions at the state government level, while local governments perform those same duties in other states.

State and Local Spending Per $1,000 of Personal Income
by Major Function for Pennsylvania vs. the U.S. in 2004

 Function

PA  ($) 

 Rank

 US ($)

Percent Difference 

 Direct General Expenditures

 203.51

 32

 207.96

 -2.1

 Elementary and Secondary Education

 50.19

 20

 49.40

 1.6

 Higher Education

 16.06

 41

 18.91

 -15.1

 Public Welfare

 44.71

 15

 36.63

 22.1

 Health and Hospitals

 13.34

 36

 17.45

 -23.6

 Highways

 12.30

 36

 12.91

 -4.7

 Police

 5.91

 39

 7.62

 -22.4

 Fire

 1.33

 50

 3.10

 -57.1

 Corrections

 6.58

 18

 6.18

 6.5

 Interest on debt

 11.56

 6

 8.93

 29.5


Pennsylvania’s total direct expenditure per capita is nearly the same as the national average although the rank is lower (1 = the highest spending level) than the median of 25. There are differences when comparing spending on certain functions. The table shows Pennsylvania state and local governments spend significantly more for public welfare (including medical assistance) and interest on debt than the U.S. average. Pennsylvania compensates by spending significantly less than average on higher education, health and hospitals, police, and fire.

Why is Pennsylvania different? Here are three reasons.

First, Pennsylvania, like every other state, has made a series of policy choices about what the priorities should be. For example, higher than average spending on corrections is due, at least in part, to past decisions on sentencing guidelines for criminals.

Similarly, Pennsylvania has made decisions to use high debt service, particularly at the local level, rather than fund capital projects with current revenues. Also, Pennsylvania created and maintains a smaller publicly-funded health system.

Second, the nature of the state’s population dictates certain spending levels. A large part of the public welfare budget goes for medical expenses for elderly people, and Pennsylvania has more than its share of them. Also, a larger rural and older population usually requires fewer police.

Third, culture enters into the picture. Pennsylvania’s reliance on volunteer firefighters certainly limits spending on fire protection, and our state’s tradition of relying on private higher education rather than state-owned institutions reduces total spending on higher education.

At times these forces counteract each other. For example, moderate spending on basic education is a result of policy decisions to spend more on each student, offset by a relatively fewer number of students compared to the size of the population.

What’s the bottom line?

Spending priorities vary from one state to the next. The driving force behind most of the spending decisions is state government. Not only does state government spend about 58% of total state and local dollars, it sets the framework for local spending either directly or indirectly, often mandating how – and often how much – local governments should spend.

Comparing Pennsylvania’s spending habits to other states’ provides a different perspective and could shed a different light on future spending decisions. Remember – these comparisons must be tempered by Pennsylvania’s individual, unique population and culture.