Weekly Economic Report: Net Spending on Education and Health Care

by Wyoming Liberty Group Staff

Government spending in Wyoming is under scrutiny, in part because of proposals to raise taxes as an alternative to spending cuts. This Report examines three spending areas with reference to government charges, calculating the net spending by those areas.

Main finding: Because of the net balance between spending on the one hand, and charges and fees on the other, hospitals should be exempt from charges and fees by the state and local governments.

In 2016 local governments in Wyoming took in $1,137 million in fees and charges from hospitals. The state took in just over $1 million. The same year local governments spent $1,199 million on hospitals, to which the state added $4.6 million.

In total, hospitals received $1,203.8 million from government, though net spending amounted to only $66.2 million. Hospitals returned 94.5 percent of the gross amount back to government in the form of fees and charges.

Government spending is not the only revenue source for hospitals; state spending on health care – essentially the state share of Medicaid – amounted to $308.2 million in 2016. Part of this went to hospitals, adding to insurance-based revenue from other government programs (primarily Medicare) and from private insurance and cash payments. Therefore, the low net spending directly on hospitals is not primarily a matter of their bottom line.

It is, instead, a matter of government efficiency, raising the question whether or not the spending and the charges represent a redundancy in government finances.

The low net balance in hospital spending is not unique to 2016. Figure 1 reports government spending on hospitals, in Wyoming, from 1993 to 2016:*

Figure 1

Source: Census Bureau

The variations in the net margin between government hospital spending and government charges and fees on hospitals fall into three distinct periods:

• From 1993 through 2001 the net margin was dwindling but clearly positive. During this period hospitals received a total of $302.4 million more than they paid into government.
• From 2002 through 2011 hospitals paid a total of $164.2 million more than they received. This made them net contributors to the state budget.
• Since 2012 net spending on hospitals has again been consistently positive. From 2012 through 2016 they had received $255.5 million more than they paid in in fees and charges.

For comparison, education spending carries a light burden of charges and fees, with higher-education institutions (primarily the University of Wyoming) keeping a high and increasing share of government spending on them. Figure 2 reports that share, together with the nominal net-spending amount per year:

Figure 2

Source: Census Bureau

The net spending number is even higher in K-12 education, where it consistently remains above 98 percent. However, unlike hospitals and higher education, K-12 public schools do not have any other meaningful revenue sources than appropriations by the state and by local governments.

The amount of fees and charges on higher-education institutions, viewed as share of gross spending, is significantly smaller than on hospitals. It nevertheless raises the question whether or not removing those fees and charges would be a suitable way to de facto increase appropriations, as opposed to traditional increases in spending.

In 2016 higher-education institutions paid a combined $170 million to the state (69 percent of the total amount) and to local governments. They received a total of $898.2 million from those same governments.

Figure 3 reports state and local government spending on K-12 education, less charges and fees. It also reports the annual growth rates in said spending:

Source: Census Bureau

A review of fees and charges is relevant in the context of government efficiency. A later Weekly Economic Report will examine the same net-spending balances for other areas of government spending.

---

*) The Census Bureau will release 2017 numbers in August.