Federal transfer payments boost area economy

A new study from EWU’s Institute for Public Policy and Economic Analysis affirms something area economists have noted before: Inland Northwest residents get more money back from the federal government in pensions, payouts and support than we send to Washington, D.C., in taxes and Social Security.

The Spokane economy relies on government “transfer” payments for about 21 percent of all personal income. In Kootenai County the figure is 18 percent, the study said.

EWU Assistant Professor of Economics Lori Geddes compiled data over a 31-year history on payments made in the form of retirement payments (Social Security), disability and survivor benefits, Medicare-Medicaid payments, welfare, unemployment benefits, veteran’s benefits, federal education and training programs, and the broad area of farmer price supports and aid programs. Also included were a small percent of transfers to Spokane and Kootenai counties that were not from the federal government. Those payments from businesses, mostly as corporate gifts to nonprofit groups, came to roughly 3 percent of the total payments in both counties, the study said.

Geddes’s survey of transfer payments here from 1971 and through 2001 had these conclusions:

• Federal transfer payments to Spokane residents went from $154 million in 1971 to $1.9 billion in 2001. For Kootenai County, payments went from $17.6 million to $414 million. Spokane’s per capita amount in 2001 was $4,178; in Kootenai County, it was $3,708.

• Farm payments in Spokane County in 1971 were 2 percent of all transfers, but fell to 1 percent in 2001. For Kootenai County, the drop was from 3 percent to 2 percent.

• Farm payments for both counties grew from 1976 to 1986, then started declining over the past five years. Veterans’ benefits showed a similar u-shaped pattern.

• In both counties, the three major source of transfers were: retirement-disability benefits, medical payments, and welfare. In both counties, retirement and disability payments in 2001 came to 94 percent of all transfers to area residents.

“This is a good study and by far the best thing they (at EWU’s institute) have done yet,” said Phil Kuharski, a retired Spokane banker and a frequent economic analyst for area businesses.

The EWU study quantifies the net inflow of federal dollars to this area, although it cautions that there are some data shortcomings in that conclusion.

The study says that for every dollar going out in the form of taxes and required contributions to Social Security, about $1.31 comes back to Spokane. For Kootenai County, the ratio is $1.30, according to Geddes. However, Geddes was only able to gather area income-tax payment data for the years 1991 and 1998. Also, her data did not include an unknown amount of federal corporate income taxes paid in those years.

Even so, Kuharski said the EWU report lays a good groundwork.

“It opens the door to looking further at these areas,” Kuharski said.

He especially would like to see future studies that correlate swings in payments to specific government policies, he added.