Financial Assistance
provided by:

The largest piece of the recipients' pie, about $1.8 billion, was paid to private businesses for the purchase of services, supplies, and equipment. The majority of that, $1.2 billion, came out of the capital budget and about $600 million came out of the operating budget.

CAPITAL BUDGET

Most of the money flowing to private companies from the capital budget was designated to pay for construction-related goods and services while a small amount was used for the purchase of capital equipment. Appropriations are for projects, some of which take several years to complete. A glimpse at the budget gives a flavor of where the money went. The 10 largest projects, which accounted for over 25% of the capital budget, were the following:

There were an additional 1,007 separate projects identified in the capital budget ranging in size down to less than $10 thousand. The next table shows that most capital projects are less than $1 million, although a few large projects get most of the dollars.

These dollars are a major source of revenue for the construction industry as well as for other sectors such as engineering services, transportation, financial services, and wholesale trade.

To give some perspective on the size of this contribution to activity in the construction industry, we can roughly estimate total construction industry receipts in 1997 and compare that with the $1.2 billion state capital budget. Using the reported wages paid to construction workers in 1997 of $600 million and a rule of thumb that 1/4 of construction industry receipts is paid out in wages, we can estimate total construction industry receipts of $2.4 billion. If capital spending were all pumped into the construction industry, it would represent 50% of the total and 50% of the 9,600 construction industry jobs.

OPERATING BUDGET

About $600 million out of the $3.5 billion spent on government operations ($3.5 billion was the operating budget net of duplicated appropriations) was paid to private businesses for providing goods and services to the state. The largest share, over $250 million was contracts, followed by commodities and equipment, over $150 million. Typical of the activities of state government that rely on contracts are the University and the Permanent Fund Corporation that paid over $35 million in management fees. The University and the Department of Transportation generate a large share of the commodity and equipment purchases. The only other category of expenditures made up primarily of purchases from private businesses was travel at $43 million.

Fiscal Policy Papers