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2 The Government Statistics Program in Context P roviding information on government activity—revenues, spending, functions, employment, and other aspects—is a critical task of a dem- ocratic government. Such information is essential for decision makers in all branches of government, as well as for private-sector decision making, research and evaluation, and, ultimately, accountability to the public. For a federal system, such as the United States, it is important to have not only information on the national government, but also information that can be compared for the large number of state and local governments. For over 160 years, the primary duty of enumeration of state and lo- cal government activity in the United States has been the responsibility of the federal government’s experts in conducting censuses and surveys. The U.S. government tapped the Census Bureau to identify and catalogue state and local governmental bodies and collect data on them to measure their activities. Enumerating governments and measuring their activities involve a com- plex set of data collection, processing, and estimation tasks. The current Census Bureau programs, located in the Governments Division, cover three major subjects—government organization, public employment, and public finances. The information is collected in the quinquennial Census of Gov- ernments and several annual and quarterly surveys, each using separate collection forms and procedures, depending on the subject matter and level of government addressed. These censuses and surveys form the base or core programs of the Governments Division portfolio. The designation of programs as base pro- 19

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20 STATE AND LOCAL GOVERNMENT STATISTICS AT A CROSSROADS grams stems from two related ideas: (1) these undertakings have the longest history as Census Bureau programs and (2) in general, they have been the genesis of major reimbursable programs, whereby the Census Bureau re- ceives financial support from external sponsors to develop more detailed surveys pertaining to specific pieces of its base programs. The Governments Division and the Census Bureau generally are of the view that core or base programs must be supported and continued, although not necessarily at their current frequency or level of detail. In fact, the inclusion of programs as base programs is subject to change over time as priorities and sources of funding change. Some useful pieces of the base portfolio have been eliminated following congressional budget cuts (see discussion below). This chapter provides context in which to examine the current Gov- ernments Division portfolio. It first briefly lays out the history of federal data collection on state and local governments and then describes the base and reimbursable programs as they are currently implemented. It discusses issues in the classification of governments, which is a critical function of the Governments Division in light of the dynamic nature of American gov- ernmental entities, the activities they perform, and the flows of financing among them. The chapter concludes by describing cutbacks in the Governments Division programs in response to constrained budgets and the risk that these cutbacks pose to the division’s dual missions. As noted in Chapter 1, these missions are (1) to provide aggregate information for the state and local governments component of the national accounts and other key financial series and (2) to provide individual government-level information to support analyses of the operations and finances of and the relationships among various levels and types of governments in the U.S. federal system. Both missions are critical to informed decisions in such areas as fiscal and monetary policy, retirement security, income support, transportation policy, among many others, as well as to informed debate about the proper role of each level and type of government and to public accountability. HISTORICAL DATA COLLECTION Census Data Beginning in 1840 The first collection by the federal government of information about state and local governments occurred in a limited fashion as part of the 1840 population census, which included questions on numbers and types of schools and numbers of pupils by state. (U.S. Census Bureau, 1982, 1992). A few queries on state and local government taxable wealth, prop- erty taxes collected, and indebtedness were included as part of the 1850

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THE GOVERNMENT STASTISTICS PROGRAM IN CONTEXT 21 population census, and questions on these topics grew in number in suc- ceeding censuses through 1890. Collection of information on governments was separated from the population census in 1902 in the newly created permanent Census Office. The information sought on governments at that time included types and number of local governments in each state; federal, state, and local revenues and expenditures; assessed valuations; tax levies; and public debt. States were to report data that included all local units of government, although separate figures were presented only for counties. In addition, the Census Office published estimates of national wealth by state and class of property, reflecting the heavy dependence on property taxes to support state and local government expenditures. Censuses of governments, with varying scope, detail, and coverage, were subsequently conducted in 1913, 1922, 1932, and 1942. In 1950 Congress enacted legislation (Title 13, Section 161 of the U.S. Code) pro- viding for a Census of Governments every five years in the years ending in 2 and 7, although funds to complete a 1952 census were never appropriated (see Box 2-1). The first full-scale Census of Governments under the 1950 BOX 2-1 Legal Justification for State and Local Government Statistics Programs U.S. CODE TITLE 13—CENSUS CHAPTER 5—CENSUSES SUBCHAPTER III—GOVERNMENTS Sec. 161. Quinquennial censuses; inclusion of certain data The Secretary shall take, compile, and publish for the year 1957 and for every fifth year thereafter a census of governments. Each such census shall include, but shall not be limited to, data on taxes and tax valuations, governmental receipts, expenditures, indebtedness, and employees of States, counties, cities, and other governmental units. TITLE 13—CENSUS CHAPTER 5—CENSUSES SUBCHAPTER IV—INTERIM CURRENT DATA Sec. 182. Surveys The Secretary may make surveys deemed necessary to furnish annual and other interim current data on the subjects covered by the censuses provided for in this title.

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22 STATE AND LOCAL GOVERNMENT STATISTICS AT A CROSSROADS legislation was conducted in 1957, and a census has been conducted every five years since that time in conjunction with the Economic Census, which covers private-sector businesses. Intercensal Data Beginning in 1898 As early as 1898, the need for up-to-date information on state and lo- cal government finances led to the collection of data in noncensus years. Annual statistics on state government finances date back to 1915 in an unbroken time series to the present, except for a few years (1920, 1921, 1933–1936) when budget constraints precluded data collection. Annual statistics on city government finances date back even earlier—to 1902—and were skipped only in 1914 and 1920, although coverage has been selective and varied. Until 1931, statistics were provided only for cities with at least 30,000 people, rising to 100,000 people from 1932 to 1941, and dropping back to 25,000 people from 1942 through 1955. Since 1956, nationwide statistics include all municipalities (sample-based estimates are used for smaller units), but figures are published separately only for cities that meet a minimum population size (50,000 people since 1960). Data on county finances were provided from the results of mail sample-based surveys from 1943 through 1946; beginning in 1972, annual data have been published on counties with at least 100,000 people. Other annual series on state and local government finances are part of the Governments Division portfolio, including a survey of state and local public employee retirement systems and extensive reporting, since 1978, of public school system finances in a program funded by the U.S. Department of Education. Beginning in 1962, state and local tax revenues have been reported on a quarterly basis, as have the finances of about 100 major public employee retirement systems since 1968. Annual data on state and local government payroll and employment date back to 1940 for employment other than school-based employment and back to 1946 for employment including educational institutions, except that no data were collected for 1996. Since 1951, data have been collected separately on full-time and part-time employees, and, since 1952, employ- ment has been classified by function for all levels of government. Over the decades, the Governments Division has conducted special surveys and analyses in addition to those briefly sketched above. Topics covered have included labor-management relations, environmental quality control finances, and property tax assessment, among others. The spe- cial surveys have generally been funded by other agencies of the federal government.

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THE GOVERNMENT STASTISTICS PROGRAM IN CONTEXT 23 GOVERNMENTS DIVISION PORTFOLIO TODAY Basic Programs The Census of Governments is the flagship operation of the Govern- ments Division of the Census Bureau. It is the major source of informa- tion about state and local governments in the United States. The Census of Governments is conducted in three distinct but interrelated phases—a precensus directory survey to produce an updated list of local governments and other selected data necessary to identify the kind of governmental body and to produce the Governments Integrated Directory (GID); a census of finances of all state and local governments to extend the annual finance survey of 13,000 governmental units to the universe of more than 87,000 governments; and a census of public employment that extends the annual survey of public employment, which surveys about 10,000 state and local governments, to the universe of 87,000 governments. The two annual surveys of governments are the Annual Finance Survey (AFS) and the Annual Employment Survey (AES). Each of these surveys has multiple components. The AFS collects data on state and local govern- ment finances, public elementary and secondary education expenditures, and public employee retirement systems. The AES collects data for federal civilian agencies and state and local governments for March of each year on full-time and part-time employment, part-time employee hours worked, full-time-equivalent employment, and payroll statistics by type of govern- ment and governmental function, such as elementary and secondary edu- cation, police protection, financial administration, and public welfare. The annual Survey of Governmental Organizations is one of the base programs. It establishes the government universe and is indispensable for conducting the base employment and finance surveys. On a quarterly basis, the Governments Division updates some of its annual collections. The Quarterly Survey of State and Local Government Taxes provides current information on tax revenues of state and local gov- ernments, which are an important indicator of fluctuations in their financial condition. The Quarterly Survey of Public Employee Retirement System Finances provides detailed information on the composition of financial as- sets of the 100 largest systems, which amount to one of the most significant groups of institutional investors in the economy. Programs are part of the base because of the value of the statistics they produce to the user community. Major aggregate statistics (e.g., total revenue, total expenditure, total employment, total payroll) define the base by virtue of their importance in supplying adequate information for key   The programs in this section are described in greater detail in Appendix A.

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24 STATE AND LOCAL GOVERNMENT STATISTICS AT A CROSSROADS economic measures, such as those produced by the Bureau of Economic Analysis (BEA). This definition extends to subtotals as well (e.g., total tax revenue, total expenditures for current operations) which are needed by BEA in producing the national accounts. It is important to understand that the national accounts serve as the in- tegrator of economic statistics in the federal statistical system. The national accounts influence the content not only of statistical programs conducted by such agencies as the Census Bureau, the Bureau of Labor Statistics, the National Agricultural Statistics Service, and others, but also of administra- tive records programs, such as the Internal Revenue Service Statistics of Income reports. The role of national accounts in shaping economic statistics programs is recognized internationally and laid out in the Handbook of Statistical Organization, Third Edition (United Nations Statistical Divi- sion, 2003). Reimbursable Programs In addition to the programs funded in the annual and periodic budgets of the Census Bureau, the Governments Division obtains funding from other government agencies through so-called reimbursable programs. The reimbursable programs are projects for which the Governments Division acts as a contractor to conduct survey work. The sponsors, usually other federal government agencies, seek Census Bureau assistance to capitalize on the agency’s expertise in government organization and experience in dealing with and measuring the universe of public agencies. There are three major sponsors of reimbursable surveys—the National Center for Education Statistics, the Bureau of Justice Statistics, and the Of- fice of Management and Budget; Appendix B lists all current reimbursable programs. The reimbursable work changes from year to year and evolves as sponsor needs change. While several of the reimbursable survey programs have lasted more than two decades, others have come and gone as inter- est in the topics and the availability of resources have waxed and waned. Reimbursable programs that the Governments Division no longer conducts include collection of environmental expenditures for the U.S. Environmen- tal Protection Agency, election administration costs for the U.S. General Accounting Office (now the U.S. Government Accountability Office), and taxation and other data for the U.S. Department of the Treasury. The data for the Treasury Department were collected to support federal fund al- locations to state and local governments under the State and Local Fiscal Assistance Act of 1972. This legislation was the basis for general revenue sharing, a program that transferred more than $7 billion annually to states and localities before being terminated in 1986. The base programs may serve as a springboard for new reimbursable

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THE GOVERNMENT STASTISTICS PROGRAM IN CONTEXT 25 programs. A good example is a recently begun survey of state government research and development (R&D) expenditures sponsored by the National Science Foundation (NSF) Division of Science Resources Statistics. A key reason why NSF wanted the Governments Division to do the survey was its knowledge of state government structure and its ability to collect ex- penditure information that is similar to that collected by another division of the Census Bureau on private-sector R&D expenditures for the NSF- sponsored Survey of Industrial Research and Development (National Re- search Council, 2005). The Governments Division reports many benefits—tangible and in- tangible—accruing as a result of the reimbursable programs. First and foremost, they provide about half of the Governments Division’s current funding. The reimbursable activities bear some program overhead costs, allowing the base programs to extend their own resources and provide services that they would otherwise not be able to do. The reimbursable programs also support the base programs in the fol- lowing ways: • Testing. The reimbursable programs serve as a test bed for the base program operations. The reimbursable programs are smaller and easier to change. The base programs take advantage of work done in different reimbursable programs. A recent example is the introduction of automated editing techniques that were first used in reimbursable programs and later adopted by the base programs. • Data currency. The reimbursable programs shine light on aspects of state and local government economic activity that the Govern- ments Division may consider adopting in the base programs. If users show interest through reimbursable surveys, the division may decide to incorporate certain aspects of a reimbursable program into the base program to maintain the currency and relevance of the base program data. • Data accuracy. The reimbursable programs serve as an indepen- dent check on the accuracy of the base program information. • Strengthening analyst capabilities. The reimbursable programs afford opportunities for staff analysts to work on different surveys and thereby enhance their skills and knowledge. • Learning through partnerships with other agencies. The Govern- ments Division has learned a considerable amount about different data collection, processing, and analysis techniques that may be useful for its base programs. The division has become aware of   Communication with Henry Wulf, U.S. Census Bureau, Governments Division, October 18, 2006.

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26 STATE AND LOCAL GOVERNMENT STATISTICS AT A CROSSROADS ways to make its base programs more useful because of relation- ships it has developed with other federal statistical and program agencies through reimbursable work. Governments Division as Honest Broker The Governments Division faces difficult issues concerning the clas- sification of what is and what is not a government, as discussed in the next section. It also—as discussed in Chapters 3 and 4—faces difficult issues of accounting for revenues, expenditures, and employment of each recognized governmental unit. In the process of identifying governmental organizations and collecting information about them, the division does more than simply collect and release the data. It serves as the official enumerator of these governments and their impact on the American people, and it plays the role of honest broker by providing consistency of definitions and accounting treatment across governments according to a set of published rules. As an honest broker, the Governments Division sets the boundary between government and private entities; aggregates the various funds (general fund, bond funds, enterprise funds, federal funds, etc.) into consoli- dated accounts for each government; ensures consistent treatment of sub- ordinate units and special districts and classifies like transactions together, even if they have different names in different governments; provides con- sistent annual time series across governments by combining data reported for fiscal years ending in different months; and serves as the authoritative source of information on the geography of state and local entities. These tasks are both valuable and complex, given the proclivity of general- and special-purpose local governments to change their geographic profiles and organizational structures as they consolidate, separate, annex, and other- wise evolve into different bodies over time. CLASSIFICATION OF GOVERNMENTS The task of classifying governments, largely a responsibility of the Governments Division, is a bedrock function of the division. The classifica- tion function is necessary to define governmental units, and thus to build the lists of governmental units that would be in scope for the census and surveys. This task is an ongoing operation and is fraught with challenges for the staff of the Governments Division who decide on the classifications. As discussed below, the task has become more difficult over time as new, alternative forms of government have emerged and grown and others have faded.

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THE GOVERNMENT STASTISTICS PROGRAM IN CONTEXT 27 Historical Trends Government organization in the United States has been described as inherently messy, an apt descriptor over the course of the nation’s history. Beginning as a federal system with 13 states in 1790 under the newly rati- fied Constitution, the national government annexed lands, organized ter- ritories, and admitted states in a dynamic process that added 35 more states between 1791 and 1912 and then 2 more states—Alaska and Hawaii—in 1959. Each state, in turn, has sovereign authority to establish local gov- ernments within its boundaries and to delimit their functions. The states in different parts of the country have organized themselves, their subunits of government, and their division of responsibilities in a wide variety of ways for historical, geographic, political, and economic reasons. In New England, cities and towns are the dominant governing bodies; in southern states, counties provide most key functions; in other states, counties, cities, and towns all have important functions, some of which (such as providing police protection) overlap. Moreover, the governmental arrangements established by the states and the relationships among the federal government, the states, and local governments have continued to evolve. In the nearly five decades since the last state was admitted to the Union and the first modern Census of Gov- ernments was conducted, striking changes have occurred in the numbers, functions, and relationships of governments. Consider just the numbers of functioning governmental units by type (U.S. Census Bureau, 2005): • Total. The total number of units decreased from 116,807 in 1952 to 87,576 in 2002, in which year Illinois had the largest number of units (6,903) and Hawaii the smallest (19). The overall decline masks different trends by type of government. • Counties. The number of counties remained relatively stable: there were 3,052 counties in 1952 and 3,034 counties in 2002, in which year Texas had 254 counties, Delaware had 3, and Connecticut and Rhode Island had none. • Towns and townships. The number of towns and townships (ad- ministrative subdivisions of counties) also remained about the same: there were 17,202 townships and towns in 1952 compared with 16,504 in 2002. The distribution by state varied markedly: only 20 states had this type of functioning government in 2002, with the largest number in Minnesota (1,793) and the smallest number in Rhode Island (31). • Municipalities. The number of municipalities (political units in- corporated for local self-government) increased by about 20 per-

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28 STATE AND LOCAL GOVERNMENT STATISTICS AT A CROSSROADS cent—from 16,807 in 1952 to 19,429 in 2002. Illinois had the largest number of municipalities in 2002 (1,291) and Rhode Island had the smallest number (8). • School districts. The number of independent school districts de- creased dramatically from 67,355 in 1952 to 13,506 in 2002. Most of the decline occurred between 1952 and 1972 as districts were combined to achieve efficiencies and economies of scale to cope with the baby boom generation of elementary and second- ary school students. In 2002, Texas and California each had over 1,000 school districts. In Hawaii, Maryland, North Carolina, and Virginia, the counties and independent cities and even some towns operate school districts. • Special districts. In contrast to school districts, special districts, such as water boards, transit authorities, housing authorities, and development commissions, grew steadily from 12,340 in 1952 to 35,052 in 2002. Increasingly, general-purpose governments have spun off responsibility for provision of public services to single- function or multiple-function districts, authorities, commissions, boards, and other entities. Governments have also increasingly sought to privatize functions and to develop collaborative schemes for discharging functional responsibilities with other public and nonpublic organizations. Special districts have also arisen as a result of essentially new activities, such as those associated with transportation and economic or community development. In sum, state and local governmental units in the United States are not as simple and stable as they may appear. Even at the familiar and rec- ognizable level of states, counties, municipalities, and townships, units of government are diverse, fragmented, layered, and changing. From area to area, they perform different functions in different ways. The Governments Division of the Census Bureau must create statistical coherence and order out of this messy situation. Defining Governmental Units The Governments Division, in its role as the official arbiter of the definition of governments and the source of identification of governmental entities for statistical purposes, has developed and publishes a set of defi- nitions and standards for sorting out, classifying, and counting entities as governments. In addition, the international guidelines underlying the gov-   The growth in privatization and collaboration has been termed “new governance” by Lester M. Salamon (Salamon, 2005).

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THE GOVERNMENT STASTISTICS PROGRAM IN CONTEXT 29 ernment finance statistics of the International Monetary Fund (IMF) and the national income and product accounts (NIPAs) of the BEA also provide definitions of governments that the Census Bureau must consider. The Governments Division defines governmental entities by using a set of detailed guidelines. One basic definition of a governmental unit is recognized for Census Bureau reporting: A government is an organized entity which, in addition to having govern- mental character, has sufficient discretion in the management of its own affairs to distinguish it as separate from the administrative structure of any other government. (U.S. Census Bureau, 1992, p. 3–2) In other words, to be recognized as a government for Census Bureau pur- poses, an entity must possess all three of these critical attributes: existence as an organized entity, governmental character, and substantial autonomy (U.S. Census Bureau, 1992, p. 3-3). The power to tax automatically classi- fies an entity as a government, although entities that do not have this power may still be classified as a government. The task of defining a government has ramifications beyond the mainly statistical purposes for which the definition was promulgated. For example, the U.S. Department of Labor defines “public agencies” for regulatory purposes under the Family and Medical Leave Act as units of government defined by the Census of Governments. The way in which the Census Bureau defines governmental organiza- tions “puts everything in its place and provides a place for everything” (Wulf, 2005, p. 2). When it comes to general-purpose forms of govern- ment—counties, municipalities, towns, and townships—the task is fairly straightforward. They are relatively easy to identify and count because they are fairly stable; only 72 more local governments of these types were reported in 2002 than had been identified in 1997. These relatively stable forms of government account for a large share of local government expendi- tures—57 percent of direct expenditures by local governments in 2002—but they are a much smaller share of the number of governments, accounting for only about 39,000 of the 87,500 units of government as defined and measured by the Governments Division. The majority of governments are those that historically have changed the most and are continuing to change in numbers and scope; they are a hodgepodge of special-purpose governments, including school districts— 13,506 in 2002 and continuing to decline in number—together with a wide variety of other kinds of special districts—35,052 in 2002 and continuing to grow in number. It is at the boundaries of the definition of special-purpose local govern- ments that the issue of distinguishing public- and private-sector activities

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30 STATE AND LOCAL GOVERNMENT STATISTICS AT A CROSSROADS increasingly strains traditional definitions. Three examples of governmental look-alikes—charter schools, residential community associations, and busi- ness improvement districts (BIDS)—help make the point about the complex- ity of the government classification problem and the need for the continued efforts of the Governments Division to address classification issues in order to ensure that government-like organizations are included when warranted in the tallies of governmental units. The strict interpretation of classification standards often leaves these special governing bodies uncounted. Charter Schools Charter schools are a fast-growing part of the American educational landscape. In the 16 years since 1991, when Minnesota became the first state to pass a charter school law, the charter school movement has ex- panded rapidly. Today, over 1 million students are enrolled in more than 3,600 charter schools in 40 states plus the District of Columbia and Puerto Rico (Center for Education Reform, 2006). Charter schools exhibit a rich variety of organizational forms, which vary from state to state, not only because the individual charters set out unique mission and goal statements, but also because state charter laws, which significantly influence the devel- opment of charter schools, vary (U.S. Charter Schools, 2007). These new and growing types of educational establishments pose chal- lenges when the Census Bureau attempts to classify them as public or private, and to ensure that they are counted by the Governments Division or , if not, as private businesses. The standard Census Bureau rules are not always definitive in making the classifications. The criteria are “problematic in the case of charter schools” (Wulf, 2005). As organized entities, charter schools are most often creatures of other governmental units rather than independent purveyors of governmental functions. Their autonomy in terms of fiscal and administrative independence varies widely. A recent study in California classified 318 charters by their degree of autonomy, finding that some were “low-autonomy” charters in that they received “several important services” from their district or county office of education, had collective bargaining arrangements that were the same or almost the same as that of their district, and were “locally funded” (receiving funds through the local school district); others were “high-autonomy” schools, receiving from their parent school districts “oversight only, no direct services or sup- port”; and the majority were in a “mid-autonomy” category, in that they had indicators of both low and high autonomy, such as having a collective bargaining agreement that was somewhat different from one their district had with its teachers (U.S. Charter Schools, 2007). The classification of these schools on the basis of autonomy is a subjective exercise, varying by state and circumstance.

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THE GOVERNMENT STASTISTICS PROGRAM IN CONTEXT 31 A federal district court case in Ohio involving a suit against a charter school indicates not only the limits of an “independence” test for auton- omy, but also the kinds of nuance that must be considered in the context of the local situation for an appropriate classification of these new and growing forms of educational entities. The court applied four legal tests to determine when private conduct may be considered “state action”: (1) the public function test, (2) the state compulsion test, (3) the symbiotic relation- ship/nexus test, and (4) the “entwinement” test. The court concluded that “free, public education, whether provided by public or private actors, is an historical, exclusive, and traditional state function” and that the education was funded by taxpayers, as is currently the practice under Ohio’s com- munity school law. It interpreted the “entwinement” test as when private conduct is “so entwined with governmental policies or so impregnated with a governmental character as to become subject to the constitutional limi- tations on state actors.” The judge concluded that the charter school had been granted the authority to provide free public education to all students in a nondiscriminatory manner. Since only local school districts and charter schools had been granted this authority in Ohio, the charter school was so “entwined with governmental policies” that the court was forced to con- sider it and other such schools as “public actors subject to the constitutional limitations on state actors.” Residential Community Associations Residential community associations, which are nonprofit organizations that provide municipal-like services for groups of private residences, are ubiquitous. These civic associations, homeowner associations, citizens as- sociations, cooperatives, and planned communities provide services closely associated with services traditionally provided by the public sector, such as sanitation, streets, parks, maintenance, and security (Wulf, 2005, p. 3). The Community Associations Institute estimated that, in 2006, some 286,000 associations represented 23.1 million homes with over 57 million people belonging to them (Community Associations Institute, 2007). Clearly, it is important to classify these entities appropriately. The residential community associations illustrate the subjectivity of government classification. They are organized entities; they have a govern- mental character because they were created by governments and have pub-   A charter school, the Riverside Community School in Cincinnati, fired one of its teachers in 2001. The teacher sued for violation of her civil rights, and the school attempted to dismiss the suit by arguing that it was a private school and not a unit of government. The U.S. Dis- trict Court judge ruled that an Ohio “community school” is a “state actor,” and therefore is bound by the same rules that apply to the government (U.S. District Court for the Southern District of Ohio, 2002).

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32 STATE AND LOCAL GOVERNMENT STATISTICS AT A CROSSROADS lic responsibility; and they enjoy some autonomy. Nonetheless, the Census Bureau holds that residential community associations are not governments, since they cannot be legislated out of existence and they are protected by the right of citizens to freely associate (Wulf, 2005, p. 4). This example indicates the challenges posed by new and growing entities with govern- ment-like powers and the need to continually update the decision rules for identification of governmental organizations. Business Improvement Districts Since the early 1970s, downtowns and other commercial areas across the United States have been using business improvement districts as a mechanism for revitalization. The districts experienced a substantial expan- sion in the 1990s. Business Improvement Districts are a type of governance tool, in that they allow for an assessment on property within a defined area. Revenues from this assessment are then directed back to the area to finance a wide range of services, including such things as security, maintenance, marketing, economic development, parking, and special events. They are usually created by specific enabling legislation, but sometimes they are formed by voluntary coalitions of businesses in an area. They have elected governance of one form or another. They represent significant levels of public expenditures and sometimes create public debt. These public-private hybrids fundamentally contain the same combination of public and private elements as other structures of local governance and are ultimately subject to public control (Briffault, 1999). Little is systematically known about these bodies, as a whole. They generally do not qualify as special districts because, like the residential community associations, they do not meet the current standard defining a government. Whatever their classification and categorization, they are an important feature of governance that needs to be understood, and under- standing starts with information. EFFECTS OF PROGRAM CUTBACKS The need for Governments Division data increased under the provisions of the State and Local Fiscal Assistance Act of 1972 (General Revenue Shar- ing). This program required the Governments Division data on state and local taxes to determine allocations of federal funds to 39,000 eligible local governments. Following the program’s demise in 1988, constrained budgets led to significant cutbacks in the base programs of the division.

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THE GOVERNMENT STASTISTICS PROGRAM IN CONTEXT 33 Programmatic Cutbacks, 1988–1997 During the first decade after the demise of General Revenue Sharing, cutbacks accrued in the Census of Governments, special surveys, and ana- lytical reports: • Taxable property values. This survey provided important informa- tion relating to the property tax, which was the largest state and local government property tax at the time that data collection was discontinued. The data from the survey were the only nationwide, state-by-state, and county-by-county information on the ratios of property assessments to sales prices, and it did so every five years from 1957 to 1992. The Census Bureau discontinued the Taxable Property Values survey while conducting the 1992 Census of Gov- ernments because of budget constraints and the survey’s declining response rates. • Labor-management relations. This survey provided data on state and local employees who belong to employee organizations, labor relations policies, contractual agreements between governments and employee bargaining units, employees covered by contractual agreements, and employee bargaining units. Although the survey extended citizens’ understanding of the public sector, it did not fill a clear federal need and so it was not considered by the Census Bureau to be crucial to its mission. • Popularly elected officials. This survey produced data on the num- ber and demographic characteristics of elected officials in the na- tion. The report produced from the survey was popular, but the Governments Division considered the survey to be peripheral to the task of providing economic data. This survey and the report from it were discontinued after 1992. • State payments to local governments. The practice of discontinuing research reports actually began in 1982 when this report, which described in detail the flow of intergovernmental funds between states and their local governments, was dropped. The surveys still collect the information, but as is the case now with most Govern- ments Division data, no detailed analyses are produced and no user-friendly data are provided except for highly aggregated totals. Users who wish to see details or understand changes over time must access detailed data files and conduct their own analyses, an approach used for other Bureau programs. • Analytic reports. After 1992, the Governments Division stopped producing most of its descriptive and analytic reports, such as the separate report series entitled Government Finances, City Finances,

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34 STATE AND LOCAL GOVERNMENT STATISTICS AT A CROSSROADS and County Finances, as well as similar series. As an alternative, the Governments Division began placing its data on the Internet, but with little or no explanatory text and with relatively little abil- ity to compare data across governments or over time. Budget Adequacy, 1997–Present In more recent years, appropriations for core Governments Division programs have tended to grow somewhat, according to data provided to the panel by the Office of Management and Budget. Table 2-1 shows budget streams for the period, 1997–2007, separately for the Census of Govern- ments and the annual and quarterly surveys (excluding the reimbursable programs), in constant 2007 dollars. As is the case for the other components of the Economic Census, funding for the Census of Governments is cycli- cal, increasing in the years when the census is conducted and when most of the processing takes place, and then subsiding in years when activity is less intense. The trend is toward somewhat larger budgets over time. The funding for the annual and quarterly surveys in the core or base program has increased modestly in the past decade. The growth has come in spurts with funding remaining essentially flat during 1997–2000 and then increasing by 15 percent from 2000 to 2001; it again remained essentially flat during 2001–2006 and then increased by 7 percent from 2006 to 2007. These increases amount to about 2 percent per year on average over the entire period. TABLE 2-1  Governments Division Appropriations, Census of Governments and Annual and Quarterly Surveys (Base Program), Fiscal Years 1997–2007 in Constant 2007 Dollars (Dollars in Thousands) Fiscal Year Census of Governments Base Program Surveys 1997 $2,492 $7,227 1998 3,483 7,551 1999 4,482 7,598 2000 4,340 7,316 2001 3,475 8,396 2002 6,388 8,188 2003 7,086 8,519 2004 6,642 8,425 2005 5,334 8,575 2006 4,686 8,524 2007 7,755 9,156 NOTE: Appropriations data deflated using the consumer price index. SOURCE: U.S. Office of Management and Budget.

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THE GOVERNMENT STASTISTICS PROGRAM IN CONTEXT 35 Despite these trend increases in allocations, the Census Bureau has continued to make programmatic cuts (see below). The panel takes these cuts as a strong indication that resources are inadequate in light of the complexity of the data collection, processing, and analytical tasks of the Governments Division and the increasing difficulties of obtaining responses from governmental units, as discussed in Chapter 4. The panel is aware that other statistical agencies, including other divi- sions in the Census Bureau, have experienced flat or only modestly increas- ing budgets in recent years. The panel’s charge, however, is to assess the adequacy of the budget for the Governments Division when viewed against the needs for the division’s data. The Governments Division has made the following cutbacks in its programs since 1997: • Temporary reduction in sample size for the 2001 and 2003 an- nual finance surveys. In the period leading up to the 2001 Annual Finance Survey, the Governments Division investigated ways to restructure the processing and editing of the survey to improve its timing and quality, as it was not meeting adequate standards for either measure. Internal budget constraints required the Govern- ments Division to finance these improvements by cutting the sur- vey program in other ways; it did not have the ability to request additional funds. After consulting with BEA, the Federal Reserve Board, the Census Advisory Committee of Professional Associa- tions, and the Council of Professional Associations on Federal Statistics, the Governments Division developed a reduced sample of local governments for survey fiscal years 2001 and 2003, which would produce only national totals instead of the usually larger sample that yielded local government totals by state. As a result, the Governments Division did not produce state-by-state totals for local government finances in 2001 or 2003, although they were available for the surrounding years of 2000, 2002, and 2004 and also for later years. Many outside users, particularly in the research community, consider the lack of state-level data on local govern- ments in 2001 and 2003 to be a major loss (see Chapter 3). • Reduction in data on special districts. After 2002, the Govern- ments Division no longer collects data on service areas of special districts. • Reduction in debt data detail. In the redesign of the 2005 Annual   This discussion draws heavily on Governments Division Responses to CNSTAT Panel Questions for June 22-23, 2006 Meeting, as contained in “06-05_Responses to CNSTAT panel questions for June 2006 meeting_Indiv pgs_V35.doc,” Answer A.6.

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36 STATE AND LOCAL GOVERNMENT STATISTICS AT A CROSSROADS Finance Survey, the Governments Division eliminated many debt classification categories to the local government component of the survey, and scaled back details in other areas. Prior to 2005, many categories had been restricted to federal and state governments only or to large local governments. As such, estimates of U.S. totals of government finances for these classification categories did not represent true aggregates of the financial transactions of all levels of government. As part of the redesign, the Governments Division enhanced internal consistency in debt categories and simplified the classification categories across levels and types of governments, but in doing so it reduced the number of categories used to classify state and local government regular debt statistics from 66 to 8, with many of the former categories combined into broader group- ings. Perhaps the most significant element of this change is that the redesigned debt data now track only two broad purposes of debt: private purposes and unspecified public purposes. By contrast, earlier surveys provided separate information on debt incurred for elementary and secondary education, higher and other education, water supply systems, electric power systems, natural gas supply systems, and public mass transit systems (U.S. Census Bureau, 2006b). • Cutbacks in published detail. A database showing which county areas were believed to be served by each special district was posted to the Governments Division web site for years prior to 2002, but not for 2002. Although this information is included in the 2002 Census Bureau volume on government organization, users have to look up the specific entity in order to find it. The database for 2002, however, remains available from the Governments Division upon request. • Privatization and other forms of contracting out government ser- vices. The 1987 and 1992 Censuses collected and published data on whether or not local governments provided certain services and, if so, whether they were partially or totally contracted out (although it is not possible to tell whether the services were contracted out to a private provider or to another government.) These data were collected but no longer published beginning with the 1997 Census of Governments and dropped with the 2007 census. • Delaying statistical improvements. Due the lack of resources, the   The Census Bureau does conduct an annual Boundary and Annexation Survey that captures important shifts in physical space, but it applies only to general-purpose governments and cannot be used to address this user issue (see http://www.census.gov/geo/www/bas/bashome. html).

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THE GOVERNMENT STASTISTICS PROGRAM IN CONTEXT 37 Governments Division has delayed making statistical improvements in the surveys and census. The impact of these delays is discussed in Chapter 4. The decisions about which surveys and reports to scale back or elimi- nate reflected the best judgment of the Governments Division and the Eco- nomic Directorate regarding where cuts could be made without adversely affecting the division’s main missions. In particular, it seems clear that the division chose to favor the first of its two main missions: providing aggre- gate information for the national accounts and other key financial series required by BEA and the Federal Reserve Board to satisfy the information needs of the federal government for fiscal and monetary policy. The Eco- nomic Directorate has asserted the primacy of serving these needs, and the panel does not dispute their importance. We argue throughout this report, however, that the Governments Division’s second mission is also important in determining program content. Policy makers, researchers, and the public need detailed information about individual governments, the relationships among them, and the detailed functions and activities of government. Moreover, such detailed information is an important element in evaluating and validating the quality of the key financial aggregates. We take up these issues in more detail in Chapter 3 and Chapter 6.