COMMENTARY
A better look at the 'big' picture
| • | Table: Government 'size' — Is Hawai'i too big? |
By John M. Knox
Waimanalo-based consultant and writer
Conventional wisdom (and magazines like Forbes) usually would say Hawai'i has a much "bigger" government than other places.
Is that correct?
Trouble is, there's no single way to answer that question. "Big" can mean different things. If your child says a "bigger kid" was picking on him, did he mean a taller kid, a heavier kid, an older kid or a more aggressive one? Kids can be "bigger" in different ways.
Same goes for governments. We did a study of U.S. Census data to look at different ways Hawai'i's government is or isn't "bigger" than others. The findings:
• Employees.
No, we really don't have a "bloated bureaucracy," at least not as of 2000. Given our population, the number of state and local government employees in Hawai'i was pretty much in line with the national average, especially for states with similar populations. (More populous states enjoy economies of scale, meaning fewer employees per resident.)
But payroll accounts for only about a third of typical state/local government expenditures — and in Hawai'i, even less (just 29 percent as of 2000). So we should look at other measures of government "size."
• Expenditures/debt.
Our combined state and county governments clearly do spend more per resident, on average, than those in most other places — we were 10th highest of the 50 states for fiscal year 1999.
Since we weren't spending that much on payroll, on what did we spend more money? The study suggests we spent disproportionately more on general government functions and on paying off debt. In fiscal 1999, our governments spent nearly twice as much per resident for interest on debt as did governments in most states.
To be fair, other places that year weren't yet worrying as much as Hawai'i was about stimulating their economies through debt-financed construction. The May 2002 issue of Governing magazine says most state governments are now slashing overall budgets, but also switching public construction finances from a pay-as-you-go basis (affordable in the 1990s) to debt financing — more like us!
• Overall revenue and taxes.
Interestingly, our total revenues weren't that much higher than in most other places as of fiscal year 1999. But what was high in Hawai'i was total tax revenue (at $3,303 per resident, we were seventh-highest in the nation, about 16 percent above the 50-state average).
Some of this, obviously, is because of a large de facto population of tourists who pay both hotel and excise taxes, major components of our overall tax base.
Other states got higher percentages of their money from nontax sources such as user fees, public hospital charges and public university income. We rely more on the sort of taxes that can be passed on to visitors but affect residents as well — such as excise taxes or taxes on alcohol and tobacco.
All of these conclusions are based on the U.S. Census 2000 Annual Survey of Government Employment, and/or the U.S. Census Survey of State and Local Government (fiscal 1999).
Our study was narrowly focused on the "size" questions that could be answered by that data. It couldn't address other questions about "size," such as whether we have more government regulation here.
In doing this study, we found reasons to be leery about national "ratings" studies that use this sort of data to paint what may be an exaggerated picture of the size of Hawai'i government:
• Dangers in using only state-level data.
Hawai'i state government is by definition "bigger" (and local government "smaller") than other places because our state government takes on functions, especially education, reserved for local government elsewhere. No comparisons should ever be made unless they are for combined state and local government figures.
• Tourists don't get counted.
Comparisons are made on a "per capita" basis, but that really means "per resident." In truth, 10 percent to 12 percent of the people in Hawai'i on any day are tourists, a far higher figure than in most states. Visitors require some government services, and they generate a lot of government revenue. Excluding them makes our per capita numbers seem "bigger" than they are.
• All states differ greatly in the details.
Census data show all 50 states have fairly similar combined total government revenue per resident. But when you break that total revenue into specific sources, such as a particular type of tax, there's a much greater spread. More states are far above or below the average.
So the more a national ratings study looks at the details rather than the "big-picture" figures, the more likely Hawai'i will score very high or very low.
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