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State personal income, 1969-85: revised estimates.

State Personal Income, 1969-85: Revised Estimates

THIS article presents revised annual estimates of State personal income for 1980-85. The estimates for 1969-79 have also been revised and are available as described on page 23. The revisions reflect the comprehensive revision of the national income and product accounts (NIPA's) described in the October 1985 SURVEY OF CURRENT BUSINESS and presented in the December 1985 SURVEY, the annual revision of the NIPA estimates for 1983-85 presented in the July 1986 SURVEY, and the use of newly available or more current data sources and improved estimating methods for many income components at the State level.

Table 1 presents total and per capita personal income for 1980-85; table 2 presents total and per capita disposable personal income for the same years. Table 3 presents detailed estimates of the sources of personal income by major type of payment and earnings by industry for 1983-85.

The sources of the revisions of State personal income are discussed in three sections: (1) Definitional and classificational changes, which affected several income components, (2) nonfarm proprietors' income, for which new source data and estimating methods at the State level were the basis for major improvements in the estimates, and (3) other income components, for which the revisions are mainly from the introduction of new source data at the State level. With one exception, the statistical changes from both the comprehensive revision and the regular annual revision of the NIPA's were extended to the State estimates as a regular part of the State estimating process and are not discussed.1

1. See State Personal Income: Estimates for 1929-82 and a Statement of Sources and Methods for a detailed description of the methodologies underlying the State personal income components that have not been affected by the use of new sources and methods at the State level. This publication (stock no. 003-010-00125-9) is available from the Superintendent of Documents, U.S. Government Printing Office, Washington, DC 20402, at a price of $9.50. The 1969-82 estimates in that publication have been superseded.

Definitional and classificational changes

Four definitional and classificational changes that were part of the comprehensive revision of the NIPA's were extended explicitly to the State level. All four relate to government reimbursement of the providers of goods and services to individuals. In each case, payments of this type were reclassified as government transfer payments to persons, thus increasing personal income. (1) Medical vendor payments, which are the largest of these payments, consist of Medicaid and general assistance medical payments of State and local governments. (The State government "buy-ins' to Medicare were already counted as part of personal income.)2 The State estimates are based on payment and enrollment data from the Department of Health and Human Services and from the State agencies that administer the programs. (2) Payments under the Civilian Health and Medical Plan of the Uniformed Services (CHAMPUS) program are for medical treatment at nonmilitary facilities of dependents of active duty military personnel and retired military personnel and their dependents. The State estimates are based on Department of Defense tabulations of payments for beneficiaries by State of residence. (3) Energy assistance payments are to energy suppliers on behalf of low-income persons. The State estimates are based on data from the Department of Health and Human Services. (4) Payments under various programs applicable in more than one-half of the States are made to individuals who suffered injury as victims of crime. The State estimates are based on data from the State and local government agencies responsible for the administration of the programs.

2. State government "buy-ins' are payments on behalf of low-income persons of premiums for the supplemental medical insurance portion of Medicare.

Two other definitional and classificational changes affected the national estimates of personal income. Major replacements to residential structures were capitalized, and a portion of imputed bank services was allocated to foreigners. For the first, proprietors' income and rental income of persons were increased. For the second, imputed personal interest income was reduced. Both of these changes involved detailed estimation that cannot be replicated at the State level. They are extended implicitly to State estimates through the changes to the national estimates.

Nonfarm proprietors' income

The revisions to the State estimates of nonfarm proprietors' income reflect both a statistical change at the national level that was explicitly extended to the State estimates and new source data and estimating methods at the State level. The statistical change at the national level is for the improved adjustments, introduced in the comprehensive revision of the NIPA's, for income not reported on tax returns used to prepare the estimates. The changes at the State level include the use of data that are more comprehensive in coverage and more complete in industrial classification than the data used previously: Estimates of both reported income for 65 of the 68 affected industries and of the adjustment for unreported income for all 68 affected industries are now based on 1981-83 tabulations from Internal Revenue Service (IRS) form 1040, Schedule C (for sole proprietors), and form 1065 (for partnerships). Tabulations either of gross receipts or of profit less loss from the two forms combined are used either to attribute a national total to the States or as direct data. Previously, the estimates were based mainly on tabulations of net income from IRS form 1040, Schedule SE, which documents the Social Security taxes paid by self-employed individuals. The use of this series as the basis for estimates beginning in 1981 was discontinued because not all self-employed individuals are required to file Schedule SE and because the partnership data on that return are not classified by industry. The series continues to be used to extend the revised 1981 estimates to earlier years.

For the adjustments for unreported income, which accounted for almost one-half of nonfarm proprietors' income in 1985, no direct data are available at the State level. The national total for each of the 68 industries is attributed to States in proportion to the IRS State distribution of gross receipts for the industry.

For the reported portion of nonfarm proprietors' income, the estimates for each of 45 industries are based on the IRS distribution of profit less loss for the industry, and the estimates for each of another 20 industries (together accounting for 3 percent of total nonfarm proprietors' income) are based on the IRS distribution of gross receipts for the industry. For the latter group, the IRS distribution of profit less loss, although preferable in concept, is not used as a basis for State estimates because the extreme year-to-year volatility of the State data suggests that they are not reliable.

For the three remaining industries, limited partners' income presents a special estimating problem. In these industries--crude petroleum and natural gas extraction, real estate, and holding and investment companies-- limited partnerships are often used as tax shelters. Limited partners' participation in partnerships is often purely financial; their participation more closely resembles that of stockholders-investors than that of working partners. Accordingly, the usual assumption that the State from which the partnership files its tax return is the same as the residence of the individual partners is unsatisfactory. No direct data on the income of partners by their place of residence are available. The national estimates of proprietors' income (other than the relatively small unreported portions) for these industries are attributed to States in the same proportion as dividends received by individuals (based on all-industry dividends reported on IRS form 1040).

Other income components

Wages and salaries.--The estimates of railroad wages and salaries now reflect State-level data from Interstate Commerce Commission on average compensation by railroad as well as the Association of American Railroads employment data used previously. Private household wages and salaries are now based on 1980 Census of Population data (drawn from a special journey-to-work tabulation) on private household wages and employment by State of work. The wage data are used for the estimates of cash pay, and the employment data are used for estimates of pay-in-kind. Previously, 1970 census data by State of residence had been used. Hospital pay-in-kind now reflects hospital employment by State, as tabulated from employers' unemployment insurance tax returns. The previous basis for the State distribution --members of Catholic religious orders working in hospitals-- was found to be inappropriate to the coverage of the national estimates.

Other labor income.--Separate national estimates of employer contributions to private welfare funds (except workers' compensation) are no longer available by industry for the private sector. Accordingly, the national industry totals of contributions to private welfare funds and pension plans combined are attributed to States in the same proportion as wages and salaries. Previously, the State welfare fund estimates had been based on employment distributions. State government contributions to privately insured pension plans for education are now based on data from the Teachers Insurance and Annuity Association/ College Retirement Equities Fund; previously, the wage and salary distribution had been used.

Farm proprietors' income.--The State estimates are now based on the revised State farm income estimates, completed by the Department of Agriculture in 1985, after adjustments to BEA concepts. One of these adjustments is new: The 1983-85 estimates of farm proprietors' income now include an estimate of defaulters' gain on farm loans. This estimate was introduced at the national level to reflect the increased occurrence of such defaults in recent years. (In national income, business loan defaults are counted as a loss to the creditor and are offset by a gain attributed to the defaulter.) The State estimates are based on farm loan charge-off data from the Federal Reserve Board and the Farm Credit Administration.

Personal interest income.--The State estimates of nonetary interest received by individuals were improved by the introduction of more appropriate State-level source data. First, interest paid by money market mutual funds, reported to the IRS as dividends, is now based on the IRS State distribution of dividends rather than on the interest distribution used previously. Second, municipal bond interest now reflects the distribution of high-income families and individuals by State from the 1980 Census of Population rather than the distribution of civilian population used previously.

Imputed interest reflects both new sources of data and estimating methods at the State level. Imputed interest from private noninsured pension funds is now based on estimated employer contributions to private pension plans by State of employee residence. This contribution series is based on 1979 prerevision national estimates of the contributions by industry, which are attributed to the States in the same proportion as 1979 wages and salaries by industry by State of residence from the 1980 Census of Population. Previously, the distribution of total private wages and salaries by State of work had been used to estimate this component of imputed interest. The estimates of the remainder of imputed interest now reflect the State distribution of the estimates of taxable monetary interest received by individuals. The State bank deposit data used previously were found to be inappropriate for these estimates because they included corporate deposits.

Rental income of persons.--The State estimates of imputed rent (except on mobile homes) are now based on State-level estimated gross rental value of owner-occupied nonfarm dwellings. The gross rental value for each State was derived from 1980 Census of Housing data as the sum of the products of the number of owner-occupied units in each sales value size class in the State and the national mean contract rent for rental housing in the same value size class. These 1980 estimates were summed to the four census regions and updated with comparable data from the American Housing Survey, available most recently for 1983. Each State's share of its region was assumed to change in proportion to prerevision nonfarm personal income. Previously, the State imputed rent estimates had been based on the sales value data.

Transfer payments.--The State estimates of interest subsidies on higher education loans are now based on Department of Education data on the number of persons enrolled in institutions of higher education. The State tabulations of interest payments used previously were classified by the location of the banks rather than the residence of the students. State government buy-ins to Medicare now reflect the number of beneficiaries by State rather than the total number of persons enrolled in the supplementary medical insurance program. State unemployment insurance compensation reflects improved adjustments, based on newly available data from the Department of Labor, for benefits received by persons not residing in the State that is liable for the payments.

Personal contributions for social insurance. --The State estimates of personal contributions for supplementary medical insurance are now based on enrollment data that exclude the beneficiaries of State government buy-ins.

Table: Local Area Personal Income, 1979-84

Table: 1.--Total and Per Capita Personal Income by States and Regions, 1980-85

Table: 2.--Total and Per Capita Disposable Personal Income by States and Regions, 1980-85

Table: 3.--Personal Income by Major Sources, 1983-85
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Publication:Survey of Current Business
Date:Aug 1, 1986
Previous Article:National income and product accounts tables.
Next Article:Fixed reproducible tangible wealth in the United States, 1982-85.

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Appendix B: Suggested Reading.

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