Cadillac or yugo?

• Author: Gold, Steven D.
• Position: Evaluating the quality of state services - Includes related article

Trying to compare the quality of services from one state to another is slippery business, but it isn't impossible.

Foes of government spending from California to New York suggest that "citizens have Chevrolet incomes, but the state gives them Cadillac services." Is it true? Or are state services better likened to Yugos--those cheap little cars of such poor quality that after they were launched with much fanfare, vanished from the market within a few years?

These are not simple questions. Comparing tax burdens among states is not easy, but it is a piece of cake compared to measuring differences in service levels. There are several important problems in comparing services:

* Services are multi-dimensional. One has to consider not only quantity but also quality, and quality has many different aspects.

* Information about services is fragmentary and incomplete. In fact, there is much more that we don't know about services than we do know.

* Many services are provided by local rather than state governments. Within a state, there are often wide variations in the level of local services. Thus, it is not just a matter of comparing services among 50 states.

* When people think about services, they often have in mind program characteristics that reflect environmental conditions as much as what governments are doing about them. Two examples: School results depend heavily on the socio-economic background of the pupils, not simply on teachers, school facilities and so forth. Crime rates tend to be high in poor areas even though cities often devote many more police resources to them. The amount that states spend on such programs is also influenced by demographic and economic conditions, like the number of school-age children and the poverty rate.

Considering these problems, one could easily conclude that comparing service levels is an impossible dream. But that view is too pessimistic. Trying to discuss service levels intelligently is not merely tilting at windmills. Data and analysis help in understanding the service issue, but it is still true that measuring services is a slippery business.

The Anatomy of Spending

A good place to start is by considering which programs receive the lion's share of state and local budgets. One cannot simply add together state and local spending because the state expenditures include aid provided to local governments. If we exclude all aid payments, total spending by state and local governments in 1990 (of course excluding capital expenditures) was $3,352 per capita, of which local governments account for 60 percent. In other words, local governments spent three of every five dollars that go to provide direct services.

By contrast, states account for three of every five tax dollars collected. So localities get to spend 60 percent of the money even though they collect only 40 percent of the taxes. In 1990, local governments received $182.7 billion in aid from state and federal governments.

This is probably one reason why surveys invariably find that people say they get more for their tax dollar from local than from federal or state governments. It appears to citizens that local governments are using their tax money more carefully (which may be true), but localities are also heavily subsidized by state and federal governments.

Although the composition of services varies from state to state, eight services are common to all states and are probably the most important ones provided. According to the U.S. Census Bureau, per capita state expenditures in 1990 were:

* Elementary-secondary education, $423

* Higher education, $270

* Medicaid (not including payments to hospitals), $231

* Highways, $179

* Other health and hospitals, $172

* Income maintenance, $104

* Social services, $89

* Corrections, $70

Before discussing these services in detail, it is important to observe that two categories cover most of them--(a) education and (b) social and health services. Only corrections and highways fall outside these two groups.

This is important because it implies that states are mainly...