We considered several data sources on state spending for estimating the 50-state econometric model, including data from the U.S. Census Bureau (Census Bureau), the National Association of State Budget Officers (NASBO), the National Conference of State Legislatures (NCSL), and federal departments. No data source provides comprehensive, detailed measures of social services spending comparable across states and time. In addition, other sources are available for a limited number of states or covering limited periods of time. We relied primarily on the Census of Governments for data on spending by states and localities and estimated federal grants through intergovernmental revenues. Below, we summarize the primary data sources used in our analysis.
The Census Bureau collects finance data from state and local governments and aggregates these data for each state and year at the state level, providing information on revenue and expenditures of state government, revenue and expenditures for all local governments in aggregate within a state, and for state and local governments combined. The state and local expenditure data include state and local spending with federal grants. One of the largest and broadest expenditure categories, public welfare expenditure, amounted to $233 billion in state and local expenditures in fiscal year 2000.11
To measure social welfare spending, we aggregated several Census data categories. Exhibit II-1 breaks 2000 public welfare spending, in billions of dollars, into its detailed components, using the Census Bureau's codes and also shows how we aggregated the Census categories.
As shown in Exhibit II-1, there are six major categories of social welfare spending as defined in the Census as well as Own Hospitals, or state-run hospitals, which the Census does not count as part of social welfare spending. To estimate the model, we combined several categories of data. Federal Categorical Assistance and Other Cash Assistance were combined into a single Cash Assistance variable.12 Vendor Payments for Medical Care (chiefly Medicaid) served as its own category.13 The remaining three Census categories (Vendor Payments for Other Purposes, Welfare Institutions, and Other Public Welfare) were combined into a single Non-health Social Services category.14 Additionally, we created two more categories of spending from Census data, one for Public Hospitals shown in Exhibit II-1 as Own Hospitals and a residual category of all other spending that we called Non-social Welfare.
Per capita personal income was taken from BEA data and adjusted for inflation using the price deflator from the National Income Accounts. We measured the need variables by Bureau of Labor Statistics data (unemployment) and Bureau of Census data (poverty and population density).