Spending on Social Welfare Programs in Rich and Poor States. Final Report.. Fiscal Capacity and Need Measures

07/01/2004

Per capita personal income data suggest that the six states selected for analysis have less potential to raise revenue than most states. As noted in Exhibit Appendix B-1, Mississippi and West Virginia rank the lowest in ability to raise revenue in 1995 and 2001, 50 and 49 respectively, using per capita personal income as the measure of fiscal capacity. New Mexico, Louisiana, and South Carolina rank in the lowest quartile of states, and Arizona falls in one of the bottom two quartiles depending on the year analyzed.

Exhibit Appendix B-1:
State Fiscal Capacity - Per Capita Personal Income
  1995 2001
PCPI State Ranking PCPI State Ranking
Mississippi 16,984 50 21,750 50
West Virginia 17,882 49 22,881 49
New Mexico 18,435 47 23,155 47
Louisiana 19,314 40 24,535 44
South Carolina 19,221 41 24,886 41
Arizona 20,050 36 25,872 38
United States 23,255   30,472  
Source: Per capita personal income levels developed by Rockefeller Institute staff using U.S. Department of Commerce, Bureau of Economic Analysis and Census Bureau data. The levels are in current dollars and were developed by dividing total personal income by total mid-year population estimates.

The six states also rank low in fiscal capacity using other measures such as representative tax system and total taxable resources. Exceptions are Louisiana and New Mexico, which rank somewhat higher using total taxable resources. This can probably be explained, for the most part, by income from oil and natural gas production that may not be captured by other measures.

Exhibit Appendix B-2:
State Social Need - Poverty Rate
  1995 2001
Rate State Ranking Rate State Ranking
New Mexico 25.5% 1 17.4% 2
Louisiana 21.9% 2 16.7% 3
Mississippi 21.3% 3 16.6% 4
Arizona 18.2% 4 13.3% 12
West Virginia 17.6% 6 15.3% 5
South Carolina 15.6% 14 12.7% 14
United States 13.2%   11.1%  
Source: Poverty rates developed by Rockefeller Institute staff using U.S. Department of Commerce, Census Bureau data. The rates are three-year averages calculated using the number of poor people and total population: for example, the poverty rate for 2000 is equal to the average of the number of poor people in 1999, 2000, and 2001 divided by the total population in 2000.

Poverty and unemployment data suggest that the six study states have high social needs when compared to the rest of nation. As noted in Exhibit Appendix B-2, all of the selected states have poverty rates above the national rate. New Mexico, Louisiana, Mississippi, Arizona, and West Virginia had poverty rates in 1995 that were among the highest in the nation. Although poverty rates in general improved from 1995 to 2001, Arizona's improvement was somewhat greater than other states, moving from the fourth highest rate in the nation in 1995 to the twelfth highest in 2001. Four of the states selected for further analysis, Louisiana, Mississippi, New Mexico, and West Virginia, had unemployment rates higher than the national rate from 1995 to 2003 (see Exhibit Appendix B-3). Although unemployment declined in general from 1995 to about 2000, West Virginia's decline was greater than other study states, falling from 7.9 percent in 1995 to 4.8 percent in 2001. Arizona's unemployment rate remained close to the nation's average rate from 1995 to 2001. South Carolina's rate was also about average until about 2000 when it increased more rapidly.

Exhibit Appendix B-3:
State Social Need - Unemployment Rates

Exhibit Appendix B-3: State Social Need - Unemployment Rates

Source: Calendar year unemployment rates calculated by Rockefeller Institute staff using U.S. Department of Commerce, Bureau of Labor Statistics seasonally adjusted data.

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