Arthur W. Wright

English

Research Papers in Economics

4 The Connecticut Economy Fall 2000
By Arthur W. Wright
To many people, “the Census” is like certain species of locust: it
shows up every so often, generates a lot of noise and a bit of
bother, and then goes away.  The last couple of times, the decen-
nial census has stirred up a partisan political hubbub.  But the
public’s attention soon wanders—as it did this year once the
national election heated up.  Arguably, citizens should pay more
attention than they do to the decennial counts.
The population shifts, captured by Census 2000, will affect
legislative reapportionments, both Federal and state.  The new
Census results will directly affect Federal funding of state and
local programs, and thus ultimately either services or taxes.
And that’s not all.  What follows is a primer on Census 2000,
focusing on its political aspects and also highlighting several
economic effects.  Connecticut faces challenges on both fronts.  
How Many Representatives, and So What?
Talk about hubbub!  Just wait till the next election in 2002,
when six sitting U.S. Representatives from Connecticut have to
cram themselves into five seats.  It’s not official yet, but the
odds are short that the Nutmeg state will lose a U.S. House seat
once Census 2000 results are in.  The General Assembly would
have had to redraw the House district boundaries anyway, but
the friction from having to create five districts from six should
help the legislature stay within its fuel budget this winter.
What else is at stake?  For openers, Connecticut will lose one
electoral vote and thus may receive even less attention than it
did this year from presidential candidates. And there also will be
one fewer Congressional staff looking out for the state.  We’ll of
course also lose a vote on the House floor, reducing our state’s
total representation there from 1.38% to 1.15%.  The loss of
clout could be greater, or less, depending on the split in party
affiliations of our remaining five members, and on which party
controls the House.  The loss of two or three committee and
sub-committee chairs could also make a real difference on hard-
fought issues such as where weapons systems get built.
Before we worry too much or begin feeling sorry for ourselves,
some historical and comparative perspective may help.  The citi-
zens of Connecticut and other states have survived the loss of
House seats before.  Our state finally got back to its original
Constitutional allotment of five Representatives after the 1900
Census, and kept that figure following the 1910 Census, when
the size of the House was fixed at the current 435 seats.  We
gained a seat, to the current figure of six, in 1930, the first reap-
portionment after Arizona completed the 48 states in 1912.
Massachusetts, in contrast, lost no fewer than six out of 16
House seats between 1910 and 1990.  Maine lost two of its four
seats; Rhode Island one of three; and Vermont one of two.  New
Hampshire was the only other New England state besides
Connecticut to hold its own (at two Representatives) through
most of the 20th century.
New Hampshire’s stability owed much to population gains in
its southeast corner, now an exurb of Boston.  Similarly,
Connecticut gained people moving out of New York City, as did
New Jersey, which had a more or less stable House delegation as
well.  From 1910 to 1990, New York lost 12 seats (43 to 31), with
most of the decline coming after 1970.  Pennsylvania lost 15
seats (36 to 21), again helping New Jersey stay about even with
outflows from Philadelphia.  Not surprisingly, the 20th century’s
big House-seat gainers were California, Florida, and Texas, fol-
lowed by other southern or western states.  
Nutmeggers should enjoy having five U.S. Representatives
while they can.  In the Census Bureau’s population projections
for 1995-2025, Connecticut’s growth rate ranks 39th—14 places
below the median.  The main hope for our retaining five House
seats in the future lies in the even slower growth rates projected
for more populous states like Illinois, Indiana, Iowa,
Massachusetts, Michigan, New York, Ohio, and Pennsylvania.
The Connecticut General Assembly will also have to redistrict
itself as a result of Census 2000.  The legislature will doubtless
employ the same sausage machine used to stuff six U.S.
Representatives into five seats.  After each decennial census, the
two major political parties jockey for advantage in redrawing dis-
trict boundaries for the coming five elections—here, 2002-2010.
In that light, the 2000 State legislative elections, just concluded,
had a significance missed by almost everyone but the political
pros, who spread party funds around in certain key districts in
an attempt to influence the coming reapportionments.
Bringing Home the Bacon
President Clinton may have proclaimed that the era of big gov-
ernment is over, but the fact remains, the U.S. Government
today administers some 1,425 “domestic-assistance” programs
administered by 57 different agencies.  Census 2000 matters here
because many of the eligibility formulas and grant awards
depend on allocation variables tabulated in or derived from the
Census.  Numbers of people and per capita incomes are proba-
bly the most frequently-used variables, but such derivative fig-
ures as numbers living in “poverty”, their ethnic composition, or
densities of qualifying “minority” populations, are common ele-
ments of domestic-assistance formulas.
The 1,425 programs include grants in money and in kind (e.g.,
donated Federal property, various expert services, and technical
information); they are completely separate from Federal procure-
ment of goods and services (e.g., submarines, red tape, and
expert witnesses against Microsoft).  In fiscal 2000, Connecticut
received more than $1 million each from 18 Federal programs in
education alone, according to the State Office of Policy and
Management (OPM).  Other major sources of our grants are the
Departments of Agriculture and Labor.
Federal domestic-assistance programs, in the aggregate, are
on the scale of big business.  To learn what’s available, and even
how to apply, check out the web site of the “Catalog of Federal
Domestic Assistance”: http://www.cfda.gov.  There one learns
that the programs span local or regional economic development,
emergency management, energy, health and human services,
4
Census 2000:  A Political Primer,
With An Economics Chaser
Connecticut Last In Return of Federal Tax Dollars
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Fiscal Year5 The Connecticut Economy Fall 2000
housing and home ownership, the humanities,
international activities, rural development, and vet-
erans.  These programs are so important to state
governments that the National Governors’
Association and the National Conference of State
Legislatures operate a joint subscription service
known as the “Federal Funds Information Service”
(FFIS) (http://www.ffis.org; use restricted to paid
subscribers).
Small wonder that state and local officials in
charge of functions where Federal support is avail-
able were keen to get accurate Census counts of
their “client” constituents.
Another reason Connecticut officials want to
ensure that the state receives its “fair share” of
largesse from Washington is the state’s low
“Return of Federal Tax Dollars” (RFTD).  That con-
cept measures the Federal dollars coming back to a
state in any form—grants, transfers, procurements
—per dollar of Federal taxes paid by state resi-
dents.  As the chart opposite shows, Connecticut
trailed by this measure, compared with three other
New England states and New York, from FY 1990
through 1998 (the last year available from OPM).
In fact, Connecticut’s $0.71 RFTD was dead last
among the 50 states in FY 1998, below New
Hampshire and Nevada (both at $0.75).  First on
the list was New Mexico ($1.93), with West
Virginia ($1.64) a distant second.
Connecticut’s low RFTD doubtless reflects its top
position nationally in per capita income, coupled
with the progressivity of Federal income tax rates.
But, as the chart also shows, the Nutmeg State’s
RFTD declined by about 12 cents from 1989 to
1998, as did that of Massachusetts.  In both cases,
much of the decline traces to post-Cold War mili-
tary procurement cuts and base closings, which hit
the two states hard.
It’s all well and good to accept our being tops in
average income as the explanation for having the
lowest RFTD of any state.  But state and local offi-
cials responsible for helping Connecticut residents
with below-average incomes want to be sure they
capture the Federal grant dollars the state is enti-
tled to.  By being diligent, those officials will be
helping Connecticut maintain its slice of the
Federal government spending pie.
Census 2000 will continue to be more important
than many think—to Connecticut’s economy, its
politicians, and ultimately the people they serve. 
The Connecticut Economy: 
A New, Improved View
Jeff Blodgett, VP, Research, and Dale Shannon, Sr. Economist, CERC, Inc.
Buy a boat, lease a computer, shoe a horse, go bowling, hire a lawyer, enroll
in school, conduct genetic research, seed some clouds.  That disparate set of
economic activities has but one thing in common: they’re all part of the
Connecticut “services” economy as defined by the Standard Industrial
Classification (SIC).  The venerable SIC—the reporting framework used for all
Federal, state and private data on sectoral economic activity for more than 60
years—is being phased out and replaced with the North American Industry
Classification System, or NAICS (pronounced “nakes”).
This new economic taxonomy, will change our view of the Connecticut
economy by, among other things, sharpening our focus on the importance of
services and technology.  
Why Develop NAICS, and Why Now?
The SIC ostensibly classified businesses by primary type of economic activi-
ty.  When it was initially developed in the 1930s, nearly half of U.S. employ-
ment was in manufacturing, mining and construction (MMC).  Today, despite
four or five revisions, the SIC is still mired in the depression-era economic
structure at the time of its birth.
The U.S. economy has, of course, changed profoundly since the 1930s.
Employment in MMC dropped from about half to a quarter of total employ-
ment between 1940 and 1997.  New industries never dreamt of in 1940, or
even in the late 1980s, when the SIC was last revised, have come to the fore-
front of the nation’s economy.  The limitations of the SIC in providing data on
new and emerging industries have been a growing problem, hindering the
ability of industry and government analysts to monitor and react to economic
change.  For example, computer equipment was stuck in the SIC grouping for
industrial and commercial equipment because computers were first seen as
extending the design and functionality of mechanical adding machines!
That example points to another problem with the SIC.  Some industry
groupings were based on the process used in production, while others were
based on the output of the industry.  Trying to track down an industrial niche
in the SIC can be...well, trying.
The last straw was the creation of the North American Free Trade
Agreement (NAFTA).  The implementation and enforcement of NAFTA, begin-
ning in 1994, demanded a common industrial classification system among
Canada, Mexico and the United States.
NAICS was the response to all the problems noted above and more.  Its
developers paid special attention to methodological consistency and flexibility,
so that further changes in technology and emerging industries could be readi-
ly incorporated into the classification system.
How Does the NAICS differ from the SIC?
Perhaps the most significant difference between the two taxonomies lies in
the underlying economic principles used to classify businesses.  In contrast to
the SIC, the NAICS relies solely on supply or production criteria in constructing
a consistent framework for compiling information on both inputs and outputs.
A second important difference resulted from the focus, during the NAICS
planning and design process, on new and emerging industries, on services,
and on industries involved with advanced technologies.  As a result, the
NAICS incorporates many new sectors.
While a few detailed SIC industries will retain their codes under NAICS,
there will be a number of breaks in time series at a detailed industry level and
virtually no continuity at more aggregate levels.  Where there were 1,004 SIC
categories, there are 1,170 in NAICS.  Of the latter figure, 358 are new—not
previously recognized separately under SIC; 422 are substantially unchanged;

Census 2000: A Political Primer, With An Economics Chaser

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Census 2000: A Political Primer, With An Economics Chaser

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