Why is State and Local Government Capital Spending Lower in the New England States Than in Other U.S. States?
New report finds New England states spend less on capital projects than elsewhere
New England state and local governments spend relatively less on capital projects than other states, according to new research from the Boston Fed’s New England Public Policy Center, that suggests the topic may be worthy of further attention by state and local government leaders and regional stakeholders.
“Capital spending builds schools, hospitals, and other infrastructure critical to economies and residents,” said Robert Triest, director of the Center. “Given this region’s small states and its interconnected economies, the benefits extend beyond state boundaries.”
The report, “State and Local Government Capital Spending in the New England States: Why Is It Lower Than in Other Places?” provides evidence from the Census that state-local capital expenditure was well below the national average between 2000 - 2012 in all six of the New England states by several measures. The six New England states were listed among the nation’s eight lowest-ranking states when considering capital spending relative to income.
According to the report’s authors, state and local capital expenditure per capita in the areas of highways, bridges, and school infrastructure is especially low in Maine, New Hampshire, Rhode Island, and Vermont. While capital spending in Massachusetts and Connecticut was closer to the national average, it is still below average and significantly lower in important spending categories.
So why do state and local governments in New England spend less on capital? The analysis explores likely factors, including a state’s socio-economic characteristics, quality of public capital stock, and political and structural features.
The results also confirm that the quality and quantity of the region’s public capital was not high enough to warrant relatively lower levels of spending. Differences in factors affecting a state’s demand for capital spending (such as population or income) or affecting the cost of providing these public services (such as the magnitude of federal grants, and depreciation of assets) are also not able to fully explain the relatively low levels of spending in the region.
“The relatively large role of state government in New England may have contributed to lower capital spending here,” said Riley Sullivan, a policy analyst in the Center and an author of the report. “Political choices attempting to lower state government debt may have contributed to a lessened degree of investment in public capital.”
Read the full report, "State and Local Government Capital Spending in the New England States: Why Is It Lower Than in Other Places?", here.