^f\.2.-~z.^ ^.jiMus-m, A SUMMARY DESCRIPTION OF THE SOURCES AND METHODS USED ESTIMATING COUNTY PERSONAL INCOME 1969-74 ^TOr CQ c ..<*x. X / U.S. DEPARTMENT OF COMMERCE Bureau of Economic Analysis July 1976 ATTENTION INCOME DATA USERS! Here, for the first time, is a comprehensive and detailed source of personal income data for 3,618 areas. Prepared by the Bureau of Economic Analysis and published through the National Technical Information Service, a 4-volume set titled LOCAL AREA PERSONAL INCOME, 1969-74 shows total and per capita personal income by place of residence, personal income by type of payment, and labor and proprietors' income by major industry and place of work. SPECIAL FEATURE: DETAIL AVAILABLE FOR ALL COUNTIES Volume I includes methodology and classification of SMSA's and BEA economic areas. Shows data for all States, BEA economic areas, and SMSA's. Accession No. PB 254055. Price $10 paper, $2.25 microfiche. A summary methodology is included in each of the following volumes. Volume II shows data for counties and SMSA's in the following States: Connecticut, Del- aware, District of Columbia, Illinois, Indiana, Iowa, Maine, Maryland, Massachusetts, Michigan, Minnesota, Missouri, New Hampshire, New Jersey, New York, Ohio, Pennsylvania, Rhode Island, Vermont, and Wisconsin. Accession No. PB 254056. Price $13.75 paper, $2.25 microfiche. Volume III covers Alabama, Arkansas, Florida, Georgia, Kentucky, Louisiana, Mississippi, North Carolina, South Carolina, Tennessee, Virginia, and West Virginia. Accession No. PB 254057. Price $16.25 paper, $2.25 microfiche. Volume IV covers Alaska, Arizona, California, Colorado, Hawaii, Idaho, Kansas, Montana, Nebraska, Nevada, New Mexico, North Dakota, Oklahoma, South Dakota, Texas, Utah, Wash- ington, and Wyoming. Accession No. PB 254058. Price $16.25 paper, $2.25 microfiche. The volumes can be ordered from the National Technical Informa- tion Service, 5285 Port Royal Road, Springfield, Virginia 22161. Be sure to mention the accession numbers of the volumes desired. A GENERAL VIEW OF THE ESTIMATES PERSONAL INCOME DEFINED Personal income is the current income of residents of an area from all sources. It is measured after deduction of personal contributions to Social Security, government retirement, and other social insurance programs but before deduction of income and other personal taxes. It includes income received from business, Federal, State, and local governments, households, institutions, and foreign governments. It consists of wages and salaries (in cash and in kind, including tips and bonuses as well as contractual compensation), various types of supple- mentary earnings termed "other labor income" (the largest item being employer contributions to private pension, health, and welfare funds), the net incomes of owners of unincorporated businesses (farm and nonfarm, with the latter in- cluding the incomes of independent professionals), net rental income, royalties, dividends, interest, and government and business transfer payments (consisting, in general, of disbursements to persons for which no services are rendered cur- rently, such as unemployment benefits, Social Security payments, Medicare bene- fits, retirement pay of governmental programs, and welfare and relief payments). For the measurement of personal income on a regional basis, BEA assigns the in- come flows to the State, county, or SMSA in which the individual resides. How- ever, BEA also presents labor and entrepreneurial income in industrial detail by place of work since the bulk of labor 1/ and proprietors' income is reported by industry at the point of disbursement {establishment location) 2/ . This income is then adjusted to a place-of-residence basis at an all-industry level. A more precise residence adjustment may be achieved by computing adjustment factors for each major industry group, thus reflecting industrial differentials in commuting flows. The information needed to effect a detailed industry-by- industry adjustment, however, is not available. Personal contributions for social insurance, which are included in personal income as explicit deductions, are also subject to residence adjustment. Since employee contributions to most social insurance programs are withheld at the source of payroll disbursement, they are estimated, like wages and salaries, on a place-of-work basis. Accordingly, most personal contributions must be adjusted to reflect place of residence when incorporated into the personal income estimates. Several contribution items obtained by place of residence, the most important of which are contributions of the self-employed and Govern- ment Life Insurance contributions, do not require adjustment. Regional measures of labor and proprietors' income are important on both a place-of-work and place-of-residence basis. The estimates based on place of work (where earned), which include detail by industry, are useful in the analy- ]_/ Labor income is the sum of wages and salaries plus other labor income. 2/ In the contract construction industry, point of disbursement may or may not be the actual work site. Therefore, the wage and salary estimates for the construction industry do not necessarily reflect the county of work. This is the only industry where this distinction is of importance. sis of the industrial structure of a given area. The estimates based on place of residence (where received) are useful for the analysis of consumer markets and purchasing power. Estimates for the other components of personal income—transfer payments, dividends, personal interest income, and rental income of persons--are made on a where-received basis only. In the case of transfer payments, there is no eco- nomic relevance to the where-earned concept. Dividends, interest, and rent are not estimated on a where-earned basis because of the lack of data suitable for assigning such income to the areas in which it is generated. Moreover, there is also a question as to the economic relevance of measuring the investment income components of personal income in this context since they do not repre- sent a complete measure of the contribution of capital to production (dividends being the only part of corporate profits included). ORIGIN AND USE OF COUNTY INCOME ESTIMATES BEA's work on regional income estimation began in the midthirties with the con- struction of a series of "State income payments" to individuals. State income payments were the sums of wages and salaries, proprietors' income, dividends, personal interest income, rental income (the last three components, in aggre- gate, formerly referred to as "property" income), and "other" income, and were produced as part of a broad effort to explain the processes and structure of the nation's economy in the thirties. The estimation of State income payments was the precursor of the extensive work carried out during the forties and early fifties on the more comprehensive annual State-by-State breakdowns of total personal income, and of work completed in the sixties on the development of quarterly estimates of State personal income. Currently, a condensed set of State personal income estimates is prepared quarterly. Additional detail on State personal income is prepared annually. The quarterly estimates cover the post-World War II period, and the annual record extends back to 1929. During the latter half of the fifties, BEA inaugurated its sub-State estimates and projections of personal income and related measures. During this period, the local area measurement effort was limited to the development of estimates of personal income and employment for a relatively small number of counties in the mideastern and plains States. In the rnidsixties, BEA constructed an his- torical series of personal income estimates covering selected years 1929 to 1962 for the nation's SMSA's and non-SMSA counties. BEA is currently producing annual personal and money income estimates for each State, SMSA, and county as well as for the parishes of Louisiana, the independ- ent cities of Virginia, and the census divisions of Alaska. County personal income data are available for the years 1929, 1940, 1950, 1959, 1962, and for 1965-74. Estimates of per capita personal income by State, SMSA, and county have been prepared for the same years as the aggregate personal income measures. In this publication BEA is introducing, for the first time in published form, a comparable set of State, economic area, metropolitan area, and county esti- mates of personal income by type of payment and of labor and proprietors' income by major industry group. Similar tables for the earlier years (1929, 1940, 1950, 1959, 1962, and 1965-68) are available upon request. Samples of other local area income tables available upon request are shown as Exhibits A and B in the Appendix. Regional measures of personal income serve a wide range of uses. Federal, State, and local governments use them to analyze economic conditions in various areas, to serve as a basis for allocating funds, to monitor the effectiveness of government programs, to estimate in advance of adoption the regional effects of alternative development programs, to measure the capacity of local areas to provide tax revenues, and to gauge differences in welfare. The National School Lunch Act and the General Revenue Sharing Act are two examples of programs that use BEA's estimates of personal income to allocate funds. Business uses BEA's estimates as a direct measure of consumer markets by geographic area and as an indirect measure of regional industrial markets. Universities and research organizations use these same estimates to identify and measure the factors responsible for area differences in levels of income and in rates of economic growth. DERIVATION OF THE ESTIMATES The local area income estimates prepared by the Regional Economic Measurement Division are tied directly to BEA's official estimates of personal income by States. 3/ That is, the State total for each income component, as taken from the official State income series before adjustment for residence, is allocated to the counties of the State in accordance with each county's proportionate share of the same or some related series that is available on a county basis. For some income items, more information is available for SMSA's than for indi- vidual counties. In these instances, State totals are first allocated to the individual SMSA's of each State on the basis of a particular allocator and the remainder assigned to all non-SMSA counties by the most appropriate allocator available. Prior to the release of the 1973 estimates, it was not possible to provide county breakdowns of multicounty SMSA's due to a lack of sufficient information. However, the recent availability of Census commuting flows data and IRS county tabulations of selected income items has enabled BEA to make estimates of personal income for all counties. Because of the availability of State control totals, a different allocator may be used in each State without impairing the interstate comparability of the estimates. This application of individual State totals makes it possible to utilize the best county estimating series in each State. In addition, the insertion of comparatively accurate benchmark "controls" at the State level insures increased accuracy of sub-State estimates. The allocation procedure also makes for greater accuracy in the county estimates because most components of personal income can be estimated more reliably for 3/ A supplement to the Survey of Current Business entitled Personal Income by States Since 1929 contains definitions, sources of data, and methods of estimation used to construct the State personal income series. Although out of print, copies of this volume are available at the libraries and Bureaus of Business Research of most colleges and universities throughout the country. States than for smaller geographic areas. Allocation permits the utilization of numerous related series of data which, while approximating, may not precisely "match" the basic series to be allocated. More than 300 series of separate estimates go into the derivation of the 30 line items shown in the published personal income tables for the SMSA's and counties. This detailed approach provides the information needed to audit both the sources and methods of estimation, and assures that the final estimates will reflect appropriate interindustry and intercomponent differentials at both the State and county levels. While the publication of more detail would enhance the usefulness of the estimates, Federal and State regulations established to safeguard the privacy of individuals or individual establishments prohibit the release of more detailed statistics. The bulk of the source materials used to prepare the estimates is culled from the administrative records of Federal and State government programs, with the remainder of the data coming from the various censuses and from nongovernment sources. Several of the more important sources of administrative record infor- mation include data generated as the by-product of the State unemployment pro- grams of the Employment and Training Administration, the insurance programs of the Social Security Administration, and the Federal tax program of the Treasury Department. Two of the more important censuses utilized are the Censuses of Agriculture and Population. The data obtained from these sources yield more than 90 percent of the data needed for the preparation of State and county income estimates. BEA supplements these basic statistics, which may be presumed to be "reliable," with data of lesser quality, scope, and relevance. In order to adjust for the gaps and deficiencies in the poorer quality data, indirect procedures and arbi- trary assumptions are sometimes required. The use of such indirect procedures varies considerably over the 45-year estimating span. Moreover, the impact of these procedures on the individual State and county estimates varies in accord- ance with regional differences in industrial structure. It is not possible, therefore, to provide measures of the error introduced into the income esti- mates by the indirect procedures. Because the estimates are based on several million administrative records, the data are understandably subject to a wide range of errors as they are encoded and processed by the agencies administering their respective programs. Since it is not possible to verify each individual record or accept the various admin- istrative record files at their face value, BEA has developed several computer- ized edit routines to locate major errors in the source materials. The routines test the change over time in the industrial composition of employment and wages in each county as well as the change over time in the county distribution of employment and wages in each industry. Without the use of these or similar com- puterized techniques, the reliability of the many components of BEA's county income series would be greatly reduced. Although the use of computerized techniques improves the quality of the personal income figures, it is not desirable at the present time to completely automate the county income estimation procedures. Since much of the reported statistical information is not directly or wholly suited for income measurement, close attention must be paid to each input source, not only to identify and correct errors but to adjust for differences in definition, to close data gaps, and to obtain statistical comparability among geographic units and over time. The major alternative to BEA's present approach to income measurement would be to collect the necessary information in surveys of income recipients. The sur- vey approach would provide data directly suited for the measurement of personal income, eliminating the necessity of adjusting for definitional and conceptual differences among the various inputs. Unfortunately, the cost associated with this alternative would be prohibitive because a wery large sample would be necessary to permit reliable local area estimates. On the other hand, the use of administrative records is both reliable and economical because the data are usually subject to internal review by the agency administering the program, and it costs much less to use data collected by other agencies for other purposes than to conduct regional surveys. Table 1. - Relative Importance of Wage and Salary Disbursements, by Component, to Total Personal Income, United States, 1969 and 1974* Dollars (000,000) Percent of TPI 1969 Total personal income 751,425 Wage and salary disbursements 510,180 Farms 3,088 Other industries ]_/ 1,006 Mining 5,414 Construction 31 ,041 Manufacturing 157,616 Durables (selected) Lumber and furniture 6,668 Primary metals 12,237 Fabricated metals and ordnance 14,462 Machinery except electrical 18,130 Electrical equipment and supplies 16,216 Motor vehicles and equipment 8,993 Transportation excluding motor vehicles: 10,885 Nondurables (selected) Food and kindred products 12,725 Textile mill products 5,647 Apparel and other fabric products 6,903 Paper and al 1 ied products 5 ,770 Printing and publishing 8,660 Chemicals and allied products 9,736 Petroleum refining 1,937 All other manufacturing, n.e.c 18,647 Transportation, communications and public utilities 37,576 Railroads 5,936 Trucking and warehousing 8,744 Other transportation 8,455 Communications and public utilities 14,441 Wholesale and retail trade 83,901 Wholesale trade 31 ,651 Retai 1 trade 52 ,250 Finance, insurance and real estate 25,665 Services 65,288 Hotels and other lodging places 3,315 Business and repair services 13,340 Amusement and recreation 3,617 Personal services and private households 9,513 Professional services , 35 ; 503 Government 99 , 585 Federal civilian 25,271 Federal military 15,380 State and local 58,934 1974 1969 1974 1,151,622 100.00 100.00 757,289 67.90 65.76 4,817 .41 .42 1,872 .13 .16 8,903 .72 .77 46,260 4.13 4.02 211,885 20.98 18.40 9,542 .89 .83 17,680 1.63 1.54 18,489 1.92 1.61 26,366 2.41 2.29 21,375 2.16 1.86 12,536 1.20 1.09 11,515 1.45 1.00 16,815 1.69 1.46 7,452 .75 .65 8,361 .92 .73 7,902 .77 .69 11,536 1.15 1.00 13,672 1.30 1.19 2,810 .26 .24 25,834 2.48 2.24 56,939 5.00 4.96 7,900 .79 .69 13,891 1.16 1.21 11,724 1.12 1.02 23,424 1.92 2.03 127,330 11.17 11.06 49,400 4.21 4.29 77,930 6.95 6.77 39,791 3.42 3.46 105,145 8.69 9.13 4,686 .44 .41 21,190 1.78 1.84 5,372 .48 .47 10,472 1.27 .91 63,425 4.72 5.51 154,347 13.25 13.40 36,863 3.36 3.20 18,210 2.05 1.58 99,274 7.84 8.62 * Detail may not add to higher level totals because of rounding. 1/ Includes agricultural services, forestry, fisheries, and rest-of-world. SOURCES AND METHODS OF ESTIMATION ' WAGE AND SALARY DISBURSEMENTS The definition of wage and salary disbursements is in accord with common usage. It includes executives' compensation, commissions, tips and bonuses, and the value of payments in kind which represent income to the recipient. They are measured before deductions for Social Security contributions, union dues, or other purposes. All disbursements in the current period are covered, includ- ing any payments retroactive to past periods; that is, retroactive wages are counted when paid rather than when earned. 4/ The contributions made by employees under the various social insurance programs, although counted in wage and salary disbursements, are not part of the personal income total. They are excluded by means of the deduction made for "personal contributions for social insurance." Estimates of wage and salary disbursements (which account for about 65 percent of all personal income) are, with perhaps the exception of transfer payments, more complete and reliable than those for any other type of income, and, because of their sizable weight in the total income flows, impart a large measure of re- liability to the estimates of aggregate income. For the private sector of each subarea's economy, the payroll component covers employees not only of all non- farm business establishments, but also of farms, private households, hospitals, and private educational, social service, and nonprofit institutions. Also, all government employees are covered by the measure, including those of the State governments, local governments, and Federal government (both civilian and military) . "Covered" Wages and Salaries The bulk of the county wage and employment data used to estimate payrolls has been obtained from the administrative records of the Employment and Training Administration's unemployment insurance program (ES-202). Firms covered by the State unemployment insurance regulations submit regular quarterly reports to their respective State Bureaus of Employment Security (BES). These quarterly reports include wage disbursements by each firm for the reporting quarter as well as the monthly number of full- and part-time workers employed. As part of its data acquisition program, BEA obtains from each State BES agency two-digit level tapes and/or tabulations of quarterly wages and monthly employ- ment which, after editing and correcting, form the basis for more than 80 per- cent of total wage and salary disbursements. Until 1972, more than half of the States excluded from mandatory coverage those establishments with less than four employees (referred to as "sma"n firms"). Beginning with the first quarter of 1972, the UI coverage of payrolls and employment was extended to cover most firms in all but a few industries. The size-of-firm exclusions were eliminated entirely, with firms of all sizes falling under the provisions of the Unemploy- ment Act. The sole exception is nonprofit organizations, for which mandatory coverage extends only to those with four or more employees. 4/ While the timing of wages when paid is a clear conceptual feature of per- sonal income measurement, the difference between wages earned and wages paid has been negligible in most years. Adjustments to "Covered" Wages and Salaries The UI "industry" data reported by the State Bureaus of Employment Security have had to be supplemented and modified in several ways for the purpose of deriving a complete measure of covered wages and salaries for the county per- sonal income series. Most obvious and important was the necessity of adjusting for the payrolls of small firms excluded from coverage by the differing size- of-firm provisions of the State laws. Employees of firms too small for inclusion in the UI program were nonetheless covered under the Old Age and Survivors Insurance (OASI) law, the scope of which is not conditioned or affected by the size-of-firm factor. Under the OASI pro- gram, however, employers' quarterly reports are required to show only taxable payroll, not total and_ taxable, as is the case with employers reporting under the UI programs. Through statistical analysis of the employers' reports for Old Age and Survivors' Insurance, it was possible to derive direct measures from the taxable payroll of firms with too few employees to be covered by the UI laws. Such payroll data were provided BEA, by the Bureau of the Census in cooperation with the Bureau of Old Age and Survivors' Insurance, on a two-digit industry basis for each State and county covering the first quarter of 1965. For that year, the county distributions indicated by the reported quarterly figures were used to allocate the State estimates of calendar year payrolls (taxable and nontaxable combined) of small firms in each industry. The 1965 distribution was extrapolated by "covered" payrolls from 1966 to 1971 to obtain comparable distributions on an individual industry basis. In making these extensions of the reported quarterly data to the later years, it was necessary to adjust for any changes in the State laws with respect to the size-of-firm coverage provision. Both the UI tabulations and the OASI data regularly show minor amounts of pay- roll which have not been assigned to any industry. Since the individual clas- sification scheme followed in the national, State, and county income estimates permits no "unclassified" category, it is necessary to adopt some convention, necessarily arbitrary, to allocate such unclassified payroll among the industry groups. The procedure for doing this in the State series, so as to achieve con- formity with the independent national estimates, is rather complex and need not be detailed here. It should be noted, however, that this particular adjustment of the reported UI industry data is usually quite small --approximately $800 mil- lion, or about one-tenth of 1 percent 5/ , on a national basis in 1974--and that it cannot introduce error into the State payroll totals since only the appor- tionment by industry of amounts reported for particular States and counties is involved. Portions of several "covered" industry payrolls still remain outside the scope of the State unemployment insurance laws. These excluded elements consist of wages and salaries of the Federal Reserve Board, national banks, State banks that are members of the Federal Reserve System in New Jersey (prior to 1972), elec- tric railways, carrier affiliates in the transportation industry, insurance 5/ The size of the "unclassified payrolls" has increased somewhat since 1972 because of the extended coverage to small firms. solicitors working on commission, and employees' tips. In some instances, pay- rolls of these industrial segments can be estimated quite readily by counties. In others, the task is difficult and the results less satisfactory. "Noncovered" Wages and Salaries At one time or another, industries not covered or partially covered by UI data included farms, Federal, State and local governments, railroads, private house- holds, hospitals, nonprofit membership organizations, "museums, art galleries, etc.," private educational services, forestry, fisheries, and "rest of the world." Hospitals, educational services, nonprofit membership organizations, museums, and forestry and fisheries were covered more extensively by the UI regulations in 1972. This extension of coverage represents an improvement in the estimating data base for these industries, but additional estimation is still required be- cause the new coverage of nonprofit membership organizations does not extend to religious organizations or to other nonprofit organizations with less than four employees and nonprofit schools other than institutions of higher education. The formulation of estimates for each of these industries is covered in the subsequent sections. Government Wage and Salary Disbursements In 1974, government wages and salaries accounted for 20 percent of total pay- rolls and 13 percent of personal income. Thus, the adequacy of the government payroll component has considerable bearing on the quality of the State personal income estimates. Payments to civilian employees comprise almost 90 percent of total government payrolls in the current period. The statistical basis for estimating civilian government wages has generally been good despite variations in the relative accuracy of the Federal, State, and local segments. Apart from dependency allotments, for which some direct State and county data have been available, military payroll disbursements have been estimated by al- location of State totals on the basis of the number of personnel stationed in each county. While the lack of payroll data by county is a significant limi- tation, the basis of allocation in this case is reasonably satisfactory. Government payroll information available from both the Federal civilian and Federal military establishments, as well as from the units of State and local governments, still lags behind the growing flows of local area wage data avail- able from administrative record files in the private sector. The reliability of the county estimates for government wages may therefore vary in quality from State to State. In most cases, it has been possible to compensate for the de- ficiencies in the raw materials by using secondary data sources, and BEA has stepped up its efforts to obtain county wage data directly from the respective State governments in an effort to improve the quality of the county wage esti- mates for State and local government units. 10 Federal civilian wages and salaries have been covered by the UI program since 1967. However, Federal Government units in many States report on an agency, rather than an establishment, basis. This reporting of Federal civilian wages by agency restricts the usefulness of the UI data as a source for estimating Federal civilian wages at the county level. At the present time, UI data are used directly in preparing the estimates of Federal civilian wages in only 15 States; for the other States, county allocations are based on Civil Service Commission (CSC) employment data. To offset this limitation, the county allo- cation is made in considerable detail. The county employment totals of the major departments, as reported by the CSC, are weighted by the appropriate UI average wages to derive a more reliable county allocator. Although employment represents a secondary source, its use for Federal civilian wages was acceptable since regional differentials in average wages of Federal agencies outside the Washington, D.C., area tend to be minimal. State and local government payrolls represent the fastest growing component in the government sector, having increased almost tenfold in the last 25 years. Benchmark estimates of local government wages and salaries were prepared for each county from the local government payroll data reported in the 1967 and 1972 Censuses of Government. Estimates for the intervening years were the products of straight-line interpolation. The 1973 and 1974 estimates were made in two parts. For the 372 largest counties, the local government payrolls were obtained from the annual Bureau of the Census publication, "Local Government Employment in Selected Metropolitan Areas and Large Counties." These 372 counties accounted for 71 percent of all local government wages and salaries. The estimates for the remaining small counties were made by extrapolating the 1972 benchmark estimates by population and using the extrapolated series to distribute the residual State control totals (derived by summing the large county payrolls for each State and subtracting the aggregates from the State control totals). State government payrolls were constructed using the 1967 Census of Governments county tabulations of full-time employment of State government units, since the 1972 Census of Governments did not include the information necessary to prepare a new benchmark. Military disbursements - With one exception, wage and salary disbursements for all industrial components represent gross earnings of employees without deduc- tions of any kind. The exception to this general rule is the military payroll, which differs significantly in concept from a measure of the gross earnings of military personnel stationed in each State or county. Military disbursements by local area are derived as the sum of two separate flows: (1) the gross earn- ings of military personnel stationed in each State or county less the amounts withheld by the government and sent to their dependents or other individuals in the form of voluntary allotments of pay or benefits under the government's family allowance or dependency assistance programs: and (2) allowances and allotments received by individuals residing in the State or county. The second flow represents amounts withheld from the pay of military personnel wherever stationed. A noteworthy aspect of this item is that it represents an element-- the only one--of wage and salary disbursements received by individuals not in an employee status. In brief, the military payroll component of personal income represents, for each year, that part of the State total military gross pay which is disbursed to residents of the various counties. 11 Little direct data on military payroll disbursements have been available and, as a result, county estimates oiF military payrolls had to be constructed from military strength data obtained from the decennial Censuses of Population and from the U.S. Department of Defense. Military payrolls were allocated in two parts--pay to military personnel and allowances and allotments. State totals of cash pay and pay in kind (clothing and food) received directly by military personnel were distributed among counties in proportion to military strength. State totals of allowances and allotments were allocated to counties by civilian and military population with the latter given twice the weight of the former. Civilian population was included to take account of the substantial volume of pay allotments that military personnel remit to their dependents. The two-to-one weighting system was derived from tabulations of actual disburse- ments on a State basis. Private Wage and Salary Disbursements Farm wages at the county level were measured by allocating the State totals of farm wages, as estimated by the U.S. Department of Agriculture and adjusted to BEA definitions, in proportion to the county distribution of cash farm wages reported in the 1969 Census of Agriculture. Farm pay in kind was estimated by allocating State totals to the counties on the basis of the number of workers on a farm 150 days or more in a year, also reported in the Census of Agriculture, Forestry, fisheries, private education, and nonprofit membership organizations - With the extension of UI coverage in 1972 and the improvement of OASI coverage under the elective coverage provisions, the methods for estimating wages in these industries have been designed to take advantage of whichever program yields the best coverage for a given industry in a given State. The 1972-74 county estimates of wages in forestry (accounting for an insignifi- cant fraction of all wages in the U.S.) were based on the UI wage distributions. Estimates for 1969-71 were made in two parts. For those States with the UI laws providing mandatory coverage of firms with one or more employees, estimates were based on the UI county distributions. Estimates for all other States were based on the county distributions of first quarter wages reported by County Business Patterns (CBP). 6/ The wage estimates for the fishing industry (also accounting for a very small fraction of total wages) were, for the most part, based on UI data. UI wages, adjusted for small firms where necessary, served as allocators for 22 States, including all the major fishing States except Oregon, Rhode Island, Mississippi, and Maryland. Estimates for these four States were based on modified UI data. For the few remaining States having a significant fishing industry, CJ3P data were used to distribute the State totals. Although UI data were used in estimating wages and salaries in private education at the State level, it was not possible to use them for the county estimates. Since nonprofit schools other than "institutions of higher education" are explic- itly excluded from UI coverage, the elementary and secondary schools component of private education should be separated out from the remainder of the industry in order to have a comparable data base for allocation purposes. This is pos- sible at the State level because UI data are available in greater detail (by 6/ Based on OASI administrative records, 12 three-digit industry). At the county level, however, BEA receives wage data for two-digit industry groups only. The county estimates were therefore based on the CBP first quarter wage distributions. Although nonprofit schools other than "institutions of higher education" are excluded from mandatory coverage under OASI regulations as well, the degree of coverage is higher because the provisions of elective coverage encourage a high rate of participation. Nonprofit membership organizations are excluded from the "one or more" manda- tory coverage provisions of the 1972 UI extended coverage law. Moreover, em- ployees of religious organizations are explicitly excluded from coverage as well, Therefore, the UI data were considered unsuitable as allocators for the county estimates. CBP coverage, on the other hand, is somewhat better than the UI since employees of religious organizations are not specifically excluded and the elective coverage provisions of OASI have encouraged a high rate of participation. However, under OASI guidelines, the clergy are consiuored to be self-employed and, therefore, they are excluded from the CBP data. Although this clearly reduces their relevancy as an allocator, in the absence of better data, the CBP first quarter wage distributions were used as the basis for the estimates of wages and salaries in nonprofit membership organizations. Railroads - County estimates of wages in the railroad industry were based on the biennial employment series for Class 1 railroads (line-haul and switching and terminal companies) prepared by the Association of American Railroads (AAR). These AAR data are for selected SMSA counties and account for approximately 70 percent of total railroad employment. For the remaining counties, AAR's residual -counties employment estimate in each State was disaggregated in pro- portion to the railroad employment reported by counties in the 1970 Census of Population. Estimates for the intervening years were derived by averaging the biennial benchmark data. The resulting employment series was used to allocate the State totals of wages and salaries in the railroad industry. The 1973 distribution was also used to allocate the 1974 State totals. Private households - Due to a complete lack of any other relevant local area statistics, wages and salaries are computed on the basis of Census income and employment data. A 1969 benchmark distribution for allocating the State totals of wages and salaries received by private household workers was computed as the product of the number of private household workers in each county and an aver- age earnings estimate. The average earnings of persons employed by private households was derived from Census tabulations of earnings of persons by income- size class and by industry. Such averages could be prepared only for the State and for each SMSA with a population of 250,000 or more. 7/ An estimate of the combined average earnings for all areas outside the reported SMSA's was computed from the residual resulting from the subtraction of the SMSA data from the State totals. This residual average was used for each county lying outside the re- ported SMSA's. The number of private household workers (other than unpaid family workers) in each State and SMSA with a population of 250,000 or more was tabulated directly from the 1970 Census. The SMSA employment numbers were disaggregated into estimates for the constituent counties on the basis of a Census county distri- bution of employment reflecting the total work force (the difference in concept is not significant in the case of private household workers). The residual employment number for the counties outside the reported SMSA's was also disag- 7/ New England SMSA's were excluded for reasons explained in the section entitled "Classification of SMSA's." 13 gregated into its constituent counties by the Census county employment distribution. The 1969 distribution was used to allocate the State totals for 1970 and sub- sequent years. Hospitals - The county distributions of hospital payrolls for the years 1969-71 were based on data presented in the Journal of the American Hospital Associatio n's "Hospital Guide Issue" (called "Hospitals" in recent years) . The AHA data on payroll expenses were obtained directly from the hospitals in an annual ques- tionnaire survey. As a result of the 1972 UI coverage extension, Ul-based estimates of wages re- ported for this industry are now considered to be complete; therefore, the use of the AHA data has been discontinued, and the estimates for the years 1972-74 reflect the introduction of the UI data. It was not necessary to revise the estimates prior to 1972 because of the close similarity between the two sets of data. Private museums, art galleries, etc. - County estimates of wages and salaries were based on first quarter payroll data for this industry as reported in County Business Patterns . UI data were not introduced into the estimates for 1972-74 because substantia; differences between the UI and CBP distributions warrant further investigation. The rest-of-the-world components of wages and salaries represent wage payments to United States residents from international organizations (such as the United Nations) and from foreign governments. The State totals were distributed to the counties in which the United Nations, embassies, and consulates of foreign governments are located. Wages in Kind The wage and salary estimates for the various States and counties include allow- ances for the food, clothing, and lodging paid in kind to employees which repre- sent income to them. The concept of valuation is cost to the employer. Market value to the employee would be a preferable concept for some purposes, although it is more elusive and less subject to quantitative determination. This area of wage imputation is rather imprecise and involves a number of diffi- cult decisions which can be settled only in a pragmatic fashion. For instance, the imputation is confined to food, clothing, and lodging because other types of perquisites, such as medical and recreational services, are generally less important and cannot be estimated satisfactorily from available data. It is frequently difficult, moreover, to determine whether or not a particular type of payment in kind clearly represents an addition to cash wages and salaries. Payments in kind are a significant element of military wages. They include the value of the food and clothing provided enlisted personnel as part of th^ir total pay and allowances. The clothing imputation is confined to "standard" issues. It does not include clothing and equipment designed for use on special duties or under unusual conditions. 14 As to other industrial segments of the State and county estimates, wages in kind (comprising either food or food plus lodging) are of some significance in eating and drinking places, farming, private households (domestic servants), water transportation, hotels, private education, nonprofit organizations, and hospitals. They are quite minor, however, in other areas of private employment and in the government sector apart from the military. In terms of national income accounting, the imputation of wages depicts the accounts as though the payments in kind had taken the form of cash flows. In the simple case of food furnished restaurant workers, the imputation assumes that the employer, instead of furnishing his employees with free food, pays them corresponding amounts of wages and the employees in turn use these wages to buy items previously purchased by the employer. Employees' wages and busi- ness sales to consumers (recorded in personal consumption expenditures) are raised by equivalent amounts. Omission of the imputation would understate the measures of personal income, personal consumption expenditures, and total output, It would also understate the real earnings of employees receiving food relative to those paid wholly on a cash basis. A breakdown between payments in cash and in kind of private nonfarm wages and salaries in the "covered" industries is not available for States or counties. This is because such a breakdown is not provided in the basic payroll data for industries covered by Social Security legislation. The value of income in kind is covered in the payroll tabulations relating to both the State unemployment insurance systems and Old Age and Survivors Insurance, but is not reported separately by employers. Estimates of pay in kind are made for some of the noncovered industries at the national and State levels. Those estimates are of varying quality. At the county level, except for farms, the State totals of cash pay and pay in kind are distributed by the same allocator. OTHER LABOR INCOME Other labor income consists of supplementary types of labor income paid out or accruing in the current period. These include employer contributions to private pension, health and welfare, and group insurance plans; compensation for injur- ies; pay of military reservists; directors' fees; and several other minor items. The pay of members of the military reserve consists of compensation for inactive duty training under the various reserve programs. The employer contribution component currently accounts for 85 percent of other labor income nationally. The reliability of the county estimates for other labor income thus depends very largely upon the employer contribution item. Data on the other components remain inadequate. Since employer contributions to private pension funds are made on behalf of employees, they have been distributed to counties on the basis of payrolls. The allocations have been carried out in considerable detail because the ratio of employer contributions to wages and salaries differs widely by industry. The procedure for estimating employer contributions to health and welfare funds fol- lowed the same pattern, using employment as the primary county allocator. A simi- lar procedure was utilized for estimating compensation for injuries, employer contributions to supplementary unemployment benefit funds, and directors' fees. 15 Table 2. - Relative Importance of Other Labor Income, by Component, to Total Personal Income, United States, 1969 and 1974* Dollars (000,000) Percent of TPI Total personal income 751,425 Other labor income Compensation for injuries Employer contributions to private pension plans Employer contributions to health and wel fare funds All other 1/ 1969 1974 1969 1974 751,425 1,151,622 100.00 100.00 28,415 51,378 3.78 4.46 2,766 4,651 .37 .40 11,527 22,132 1.53 1.92 12,118 21,334 1.61 1.85 2,004 3,261 .27 .28 * Detail may not add to higher level totals because of rounding. ]_/ Includes pay of military reservists, directors' fees, compensation of prison inmates, marriage fees to Justices of the Peace, jury and witness fees, Federal Government contributions to Government Life Insurance, and employer contributions to supplementary unemployment benefit funds. 16 The remaining minor items of other labor income include compensation of prison inmates, marriage fees to Justices of the Peace, jury and witness fees, and Federal contributions to group life insurance. Together, these items account for less than one-tenth of total other labor income, and have been apportioned to the counties in terms of payrolls or civilian population as deemed most appropriate. PROPRIETORS' INCOME Proprietors' income measures the net business earnings of owners of unincorpo- rated enterprises. Farmers, independent professional practitioners (such as physicians, dentists, and lawyers), entrepreneurs in nonfarm businesses, and others in a self-employment status are included in the scope of proprietors' income. Two broad segments of this income component may be distinguished with respect to source material and methods of estimation--nonfarm and farm pro- prietors' income. Under business accounting practices generally followed in reporting for tax purposes, inventories are charged to cost of sales in terms of original, not current, costs. The result of these practices is the inclusion in business profit of an element of inventory gain (or loss) due solely to price change and therefore akin to capital gain (or loss). This is not suitable for national income purposes, which require a measure of business profits accruing from cur- rent production. Such a measure is obtained by adding to profits derived from tax return tabulations an "inventory valuation adjustment." This adjustment represents the difference between the current replacement cost of inventories charged to cost of sales and their reported "book" value which, as indicated, usually reflects prior period costs. No such valuation adjustment is required in the case of farm inventories, since the farm income estimates are not based on tax return information and are computed directly so as to exclude inventory profit or loss. Nonfarm Proprietors' Income For the country as a whole, nonfarm proprietors' income is identical with the "business and professional" category of table 1.10 appearing in the July issues of the Survey of Current Business prior to 1976. The newly revised national income and product accounts, published in the January 1976 SCB , Parts I and II, introduce an additional modification of nonfarm proprietors' income: the capital consumption adjustment. The new format appears in table 1.13, Part II, of the January issue. State and local area personal income estimates will reflect this and other conceptual changes newly introduced into the national income and prod- uct accounts when the Regional Economic Measurement Division's own benchmark revisions are released in late 1977 (State estimates) and early 1978 (local area estimates) . Nonfarm proprietors' income (prior to revision) consists of two items--" incomes of unincorporated enterprises" and "inventory valuation adjustment." The former items consists wholly of monetary earnings. These accord closely in definition with net business profit (gross receipts from business or profession less ex- 17 Table 3. - Relative Importance of Proprietors' Income, by Component, to Total Personal Income, United States, 1969 and 1974* Dollars (000,000) 1969 1974 Total personal income 751,425 1,152,622 Proprietors' income 67,191 87,654 Farm 16,741 28,154 Nonfarm 50,450 59,500 Agricultural services, forestry and fisheries 781 885 Mining 32 125 Contract construction 5,122 7,217 Manufacturing 1,794 2,259 Transportation, communications and public utilities 1,338 1,883 Wholesale and retail trade 13,418 15,566 Finance, insurance and real estate 4,055 2,912 Services 23,910 28,653 Business services 5,790 7,116 Professional services 18,120 21,537 Percent of TPI 1969 1974 0.00 100.00 8.94 7.61 2.23 2.44 6.71 5.17 .10 .08 1/ .01 .68 .63 .24 .20 .18 .16 1.79 1.35 .54 .25 3.18 2.49 .77 .62 2.41 1.87 * Detail may not add to higher level total because of rounding, 1/ Less than .005 percent. 18 pense of doing business) as reported by individuals and partnerships on their Federal income tax returns. While separate estimates of "book" profits and inventory valuation adjustment are made at the national level, lack of relevant information precludes the devel- opment of estimates in similar detail at the State and county levels. Nonfarm proprietors' income was based essentially on a 1962 county distribution of the all -industry State estimate derived from two sources. About two- thirds of the aggregate was allocated by reported Internal Revenue Service (IRS) data and the remaining one-third by the product of the number of nonfarm proprietors and average wages. This series was disaggregated by industry and extended to 1973 and intervening years by OASI data on the number of small establishments by industry and by county. In each instance, the preliminary county distribu- tions were adjusted to equal, when summed, the independently and more accurately measured State control totals. The 1973 distributions were used to allocate 1974 State totals. Self -employment income data from OASI administrative records for the period 1968-73 have been secured from the IRS in cooperation with the Social Security Administration. The acquisition of this data file by BEA has made possible significant improvements in the county estimates of nonfarm proprietors' income at the two-digit industry level. Specifically, the IRS/OASI data file contains the self-employment income reported by nonfarm proprietors to IRS when filing Schedule SE of Form 1040, the schedule for computing the Social Security self- employment tax. The records are identified geographically by a city name, State name, and zip code. The sole proprietors' records are coded by IRS with the SIC codes. No industrial classification was assigned to the records of partners' income. In order to ensure confidentiality, the industrial records are summed to county and industry and the data suppressed in those instances where there are three or less proprietors or partnerships or where the income of one or two establishments might be revealed. Tabulations of these data are still being edited and evaluated. The processing of the OASI data for the trade and service industries, for the years 1968-70, has been completed. Since these two industry groups together account for almost 75 percent of total nonfarm proprietors' income, the applicable 1968-70 self- employment income data were incorporated into the estimates during the recent estimating cycle rather than deferring their inclusion until all the data were processed. The 1970 benchmark estimates for trade and services at the two-digit level were extrapolated forward to 1973 by the OASI small establishment data published annually in County Business P atterns and adjusted to the State totals. The 1974 estimates were based on the 1973 distributions. Fa rm Proprietors' Income Estimates of the net income of farm proprietors at both the State and county levels are equal to (and derived statistically as) the gross income of all farm operators minus production expenses and adjusted to exclude the income of cor- porate farms (see Exhibit B). Although unpublished, copies of these tables for the various counties are available upon request. The concepts underlying the BEA county estimates of farm income are the same as those used for the national and State farm income estimates prepared by the 19 U.S. Department of Agriculture. The major conceptual difference between the two series is that the USDA totals include income of corporate farms while the BEA figures exclude income of corporate farms. It should be noted that total net farm income estimates measure income arising out of the current year's production in the farm sector. In order to arrive at this level, income is adjusted by the value of the net change during the year in farm inventories of livestock and crops held for sale. If farmers sell crops in the current year that were produced in prior years, cash receipts from marketing will be overstated by the amount of sales from storage, the amount held in inventory will decline, and the net change in value of inventories will be negative. Conversely, if farmers store more of current output than they sell from storage, cash receipts will be understated and the net change in value of inventories will be positive. In either case, the cor- rection yields a measure of farm income reflecting the results of current production. The methods used to generate farm proprietors' income rely heavily on quinquen- nial data obtained from the Censuses of Agriculture and on selected intercensal data prepared by the Economic Research Service (ERS) at the State level and by the Statistical Reporting Service (SRS) at the county level. These data are used, where possible, to bridge the intercensal gap. In addition to these basic sources, other statistical sources in the U.S. Department of Agriculture, such as the Agricultural Stabilization and Conservation Service and the Federal Crop Insurance Corporation, are utilized in the preparation of a fairly detailed income and expense statement covering all farms in each State and county. A substantial amount of farm data is reported to the IRS. However, these data are of limited use for local area farm income estimation due to a lack of stan- dard accounting procedures on the part of the small independent proprietors. The diversity of accounting methods makes it difficult to calculate net income on any uniform basis. IRS tabulations have an additional limitation in that the tax concepts of income and deductions are not comparable with national in- come accounting concepts. Finally, IRS tabulations do not adequately cover the incomes of many farmers in the lower income brackets. Gross income covers the following separately estimated items: (1) cash receipts from farm marketing of crops and livestock, (2) payments to farmers under the several government payment programs, (3) the value of food and fuel produced and consumed on farms, (4) the gross rental value of farm dwellings, and (5) the value of the net change in inventories of crops and livestock. Cash receipts from marketings is the most important component of gross income. The USDA includes some 150 different commodities and generally has production, marketing, and price data available for preparing the estimates on a State basis However, with the exception of a few States, annual county estimates of cash receipts by component are not available. To offset this lack of current county data, estimates of cash receipts from marketings have been made by summing the USDA State estimates of cash receipts for individual commodities into the groups for which cash marketing data have been reported by county in the quinquennial Census of Agriculture. These aggre- gates were then allocated by a 1969 Census county distribution based on value of sales. In order to take account of the specific influence of weather upon 20 crop production, supplemental county estimates of annual production of selected field crops, available from the SRS, have been used to extrapolate the related Census of Agriculture benchmarks. In addition, SRS county data on production or cash receipts for commodities other than field crops, when available, have also been used as extrapolators. The county estimates for 1971-73 include for the first time county data on cash receipts from marketing crops prepared by the State SRS offices in Illinois, Montana, North Carolina, Ohio, Pennsylvania, South Dakota, and Texas. County data from three additional States — Colorado, Arizona, and Oregon—were introduced into the 1974 estimates. We had assumed in the past that the relationships among counties with respect to livestock tend to be fairly constant from one census to the next and that marketings in the counties will move up or down together. For some of the important livestock-producing States, however, annual SRS county estimates of livestock on feed or cattle and calves on farms as of January 1 are now used to extrapolate cash receipts from the latest Census benchmark distributions. Moreover, the county estimates of cash receipts from the marketing of livestock prepared by six State SRS offices—Illinois, Montana, North Carolina, Ohio, Pennsylvania, and South Dakota—were first incorporated into the estimates for 1971-73. The 1974 estimates include data from Arizona and Oregon, as well. These changes were dictated by intercounty shifts in livestock production. All State and national estimates prepared by the USDA, with the exception of livestock marketed and purchased and rent paid, are used as control totals in making county allocations. However, because of differences in timing between the farm income and other components of personal income, it is not always pos- sible to incorporate the most current USDA totals. When this situation arises, the national and State farm control totals are estimated in-house, using USDA and BEA data to ensure a consistent series. Because interfarm, intra-State transfers are compensating income and expense items when State accounts are aggregated } the USDA excludes these transactions in its estimates of cash re- ceipts from marketing livestock and expenses of livestock purchased. However, at the county level, such transactions are not necessarily between farmers within a county, and an estimate of both income and expenses (equal at the State level) is made by BEA and distributed among counties by two different allocators— cash receipts for livestock and expenses for livestock purchased. Similarly, for net rent, the allocators for rent received are different from the allocators for rent paid. Estimates of total government payments to farmers are available by county from the Agricultural Stabilization and Conservation Service (ASCS) on an annual basis. There is relatively little direct information available for estimating county totals of such nonmoney income items as value of home consumption, gross rental value of farm dwellings and inventory change. The county estimates for these items are, for the most part, based on related data obtained from the Census of Agriculture. Estimates of the change in farm inventories are weak. Production data were used to allocate inventory change in the same detail that State estimates were available. SRS production data were used when and where available. A seri- ous drawback in using this technique is that it imposes upon each county the change registered at the State level, even though some counties may change in the opposite direction. 21 Production expenses were estimated by counties for some 45 items using direct and indirect county allocators to distribute the USDA-based State totals. Expenses of farmers by county for items comprising, on the national level, over half of total production expenses were available from the 1969 Census of Agriculture. These items are: feed purchased, seed purchased, expenditures for petroleum fuel and oil, livestock and poultry purchased, fertilizer and lime pur- chased, expenditures for pesticides, and cash outlays for hired farm workers. Data on the above items were used directly as reported, adjusting to the USDA levels when necessary. (Annual SRS county estimates of cash receipts from live- stock and products were used to extrapolate the Census benchmark estimates of feed and livestock purchases in Illinois, Montana, North Carolina, Ohio, Pennsylvania, Arizona, and Oregon.) The remaining production expenses itemized at the State level were allocated to counties by using indirect, but related, Census data such as crop produc- tion, machinery on farms, acres in farms, value of land and buildings, etc. Because personal income refers to only that part of farm net income accruing to sole proprietors and partnerships, whereas the methodology used (as described above) estimated the net farm income of all farms, a further adjustment was made to exclude corporate farms. The method introduced in the 1973 estimating cycle (and incorporated into the system for prior years) splits the aggregate net income of all farms in a given county on the basis of the division of acreage between corporate and noncor- porate farms in that county, as reported in the 1969 Census of Agriculture. The resulting distributions were then scaled to State levels. Using this pro- cedure, the net incomes of corporate and noncorporate farms were both either positive or negative, depending upon whether the estimate for all farms was a profit or loss. DIVIDENDS, INTEREST, AND RENTAL AND ROYALTY INCOME Dividends, personal interest income, and rental and royalty income of persons, both monetary and imputed, have maintained a relatively stable 12 to 14 percent share of the total personal income over the last 25 years. The quality of the estimates of dividends and monetary interest has improved significantly in rpcent. years with the introduction of comprehensive and direct data at the county level made available by the internal Revenue Service (IRS). Prior to this, only indirect, incomplete and/or summary data were available for most counties. Monetary rents, royalties, and the imputed items (imputed interest and imputed rent), which together represent the remaining 40 percent of this type of payment, are still based on partial or incomplete data. Because of this, the county estimates of rental income as well as estimates for the imputed items continue to be of a relatively low order of reliability. The monetary income components include dividends, interest, and rent and royal- ties received by individuals, fiduciaries, and nonprofit institutions. At the State level, it is possible to make separate estimates tor each category of recipient. Because of the lack of detailed sub-State information pertaining to the income receipts of fiduciaries and nonprofit institutions, county esti- mates of dividends, monetary interest and monetary rent contain no breakdown 22 Table 4. - Relative Importance of Dividend, Interest, and Rental and Royalty Income, by Component, to Total Personal Income, United States, 1969 and 1974* Dollars (000,000) Percent of TPI 1969 Total personal income 751,425 Dividends, interest, and rents and royalties 106,147 Dividends . .. '. . 24,331 Interest 59,265 Monetary 35 ,256 Imputed 24,009 Rents and royalties.. 22,551 Monetary 9,502 Imputed 13,049 1974 1969 1974 1,151,622 100.00 100.00 163,000 14.13 14.15 32,700 3.24 2.84 103,800 7.89 9.01 70,197 4.69 6.10 33,603 3.20 2.92 26,500 3.00 2.30 7,595 1.26 .66 18,905 1.74 1.64 Detail may not add to higher level totals because of rounding 23 of income flows by category of recipient. The proportion of monetary property income received by fiduciaries and nonprofit insitutions is estimated at about 10 percent. The method of estimation places most of the income of these quasi- individual s in the more urbanized or higher-income counties. Dividends, Monetary Interest, and Monetary Rents and Royalties Dividends and Monetary Interest Separate special tabulations by county of dividend and interest income as re- ported on individual income tax returns for 1972 have recently been made avail- able to BEA by IRS, enabling the establishment of reliable and more current benchmark estimates. Similar county tabulations are expected for 1974 and biennially thereafter. Five-digit zip-coded tabulations of dividend and inter- est income were also provided by the IRS for 1969. The zip-coded data required conversion to a county basis, posing some problems where a zip code overlapped more than one county. The summation of the five-digit zip code to county levels produced a 1969 county distribution that is somewhat less reliable than the 1972 estimates which were based on actual county tabulations. Benchmark estimates of total dividends and total monetary interest for 1969 and 1972 were produced by disaggregating State control totals for each income flow by the corresponding 1969 and 1972 IRS-based county tabulations. The 1973 esti- mates were made by disaggregating the State totals by county distributions de- rived by extrapolating the 1972 benchmarks to 1973 by per capita personal income modified to exclude dividends, interest, rent, and farm proprietors' income. The 1974 State control totals were allocated to counties by the 1973 distribu- tions because of the lag in the availability of the IRS data. Estimates for 1970 and 1971 were derived by interpolating between the 1969 and 1972 benchmarks by the annual change in the modified per capita personal income for each county. The interpolated series for each income flow was used to distribute the relevant State control totals. Monetary Rents and Royalties Since there are no five-digit zip-coded or county tabulations of rental and royalty income available from IRS, the 1969-74 estimates of monetary rents and royalties were developed, in part, directly from the IRS sample data for the top 125 SMSA'r- 8/ ds published biennially in the Statistics of Income (SOI) and, in part, on the relationship between monetary rents dnc\ royalties and per capita personal income less farm proprietors' and investment income. For the benchmark years, thp county distribution of monetary rent was b^pd on the assumption that it paralleled that of monetary interest. The Statistics of Income SMSA data on rents for 1967, 1969, and 1971 were disaggregated to trie county level on the basis of the 1969 benchmark for monetary interest. The 1969 distribution of monetary rent was subsequently adjusted for sampling variability by averaging the 1967, 1969, and 1971 distributions. The derived 1969 estimates, adjusted to BEA levels, provided the final estimates for the constituent counties of the selected iarge SMSA's. The 1970-73 estimates for these counties were produced by extrapolating the 1969 final estimates forward to 1973 by the change in per capita personal income modified to exclude farm proprietors' income, divi- dends, interest, and rent. 8/ New England SMSA's were excluded for reasons explained in the section, "Classification of SMSA's." 24 Estimates of monetary rent and royalty income for the remaining counties for 1969 and 1972 were prepared by disaggregating the "residual counties" control totals (derived as the difference between the State control total and the sum of the final estimates for the SMSA counties) by the corresponding 1969 and 1972 benchmark distributions of monetary interest. Estimates of rental income for 1970, 1971, and 1973 were developed by extrapolating, or interpolating between, the 1969 and 1972 final distributions by the change in the modified per capita personal income. The resulting series were used to allocate the "residual counties" control totals for the relevant years. Because of the lack of current county information on monetary rents and royalties, the 1974 esti- mates were made by allocating the 1974 State control totals on the basis of the 1973 county distributions. The foregoing procedure was followed for all States except California. The California Franchise Tax Board in its "Annual Report" publishes county data on income and losses from rents and royalties. County distributions of net in- come from rents and royalties derived from these data were used as allocators of the California State control totals. Furthermore, 1972 rental incomes in New York and Pennsylvania were adjusted to include losses due to flood damage incurred from Hurricane Agnes. County estimates of rental loss in these two States were developed by distributing the State totals of rental loss by data on total assistance to counties damaged by flood, which were made available by the Small Business Administration. This distribution of rental loss was subtracted from a recomputed county distribution of monetary rents and royalties (which had been constructed by allocating a State control total, in which the rental loss was added back) proportionate to the original unadjusted county distribution of monetary rents and royalties. Imputed Interest and Imputed Rent Imputed Interest Imputed interest represents the excess of income received by financial inter- mediaries from funds entrusted to them by persons over income disbursed by these intermediaries to persons. Part of imputed interest reflects the value of financial services rendered persons by financial intermediaries without charge. The remainder is the property income withheld by life insurance companies and mutual financial intermediaries on the account of persons, such as the addi- tion of income to policyholder reserves held by life insurance companies. In the absence of any information reflecting the amounts of imputed interest accruing to residents of the various counties, State totals of this item for 1969-74 were allocated by the county estimates of monetary interest. Imputed Rent Imputed rent measures the gross rental income accruing to nonfarm residents of owner-occupied nonfarm dwelling units less the normal expenses incurred in home ownership. A similar imputation for farm dwellings is implied in the estimates of the net income of farm operators. County estimates of nonfarm imputed net rent were prepared by allocating State totals to the county by the estimated 25 market value of owner-occupied, single-family nonfarm homes. This estimated market value was prepared for 1970 by multiplying the number of owner-occupied, single-family nonfarm dwellings in each county by their median value. Both numbers of houses and median values were reported in the 1970 Census of Housing. The 1970 amounts were used to allocate State totals for 1969 and subsequent years. As in the case of monetary rental income, special estimating procedures were used for New York and Pennsylvania in 1972 to take account of the losses in- curred due to the flood damage resulting from Hurricane Agnes. County estimates of imputed rental loss were derived by allocating the State totals of imputed rental loss by the data on total assistance to counties damaged by flood (as reported by the Small Business Administration). This distribution of imputed rental loss was subtracted from a county distribution of unadjusted imputed rent (i.e., unadjusted for losses from flood damage) to yield the final estimates of imputed rent for the counties of New York and Pennsylvania. The county distri- bution of unadjusted imputed rent for each State was constructed by allocating a State total (the sum of imputed rent and the absolute value of the imputed rental loss) by the Census-based county distribution of the market value of owner-occupied, single-family nonfarm homes. TRANSFER PAYMENTS Transfer payments, one of the fastest growing components of personal income, are, in general, receipts of persons from government and business (other than government interest) for which no services are rendered currently. The estimates of total transfer payments represent the summation of over 50 separate series. Many of the components are the result of detailed data collection. Others are estimated by means of allocators which vary considerably in quality. Nationally, data from administrative or fiscal records underlie approximately three-fourths of total transfer payments. At the county level, the proportion of total trans- fer payments based on the fiscal records of government agencies may vary from 50 to 80 percent, depending on the importance of the income flow to individuals from such programs as Old Age and Survivors Insurance, State unemployment insur- ance, Medicare, and various welfare and relief programs. Federal Government Benefits from Social Insurance Funds Old Age, Survivors and Disability Insurance (0ASDI) County data on benefit payments disbursed by States under the Federal Old Age and Survivors Insurance program were tabulated from information reported by the Social Security Administration (SSA). The total cash benefits paid during the year include monthly benefits paid to retired workers, dependents and survivors, and special payments to persons 72 years of age and over; lump sum death payments; and disability payments to workers and their dependents. 25 Table 5. - Relative Importance of Transfer Payments, by Component, to Total Personal Income, United States, 1969 and 1974* Dollars (000,000) Percent of TPI Total personal income Transfer payments Federal Government Benefits from social insurance 0ASDI benefits State unemployment insurance benefits Unemployment compensation for Federal employees Railroad benefits Government life insurance benefits Federal civilian pensions Medicare benefits Veterans' benefits Veterans' pensions and compensation Unemployment insurance benefits for veterans Veterans' readjustment benefits Other V Black Lung benefits (1970) Educational assistance 2/ Public assistance Food stamps Supplemental Security Income (1974) Basic benefits "Hold-harmless" Other 3/ Al 1 other Federal Government transfers 4/ State and local government Benefits from social insurance State and local government retirement benefits , Cash sickness benefits Public assistance , Direct relief , Aid to Families with Dependent Children General assistance Supplemental Security Income: State Supplementation (1974) State and local Medicare benefits .. All other State and local transfer payments 6/ Business 7/ 1969 1974 1969 1974 751,425 1,151,622 100.00 100.00 65,768 140,092 8.75 12.16 50,338 114,632 6.70 9.95 40,049 86,846 5.33 7.54 26,381 57,626 3.51 5.00 2,102 6,550 .28 .57 47 154 .01 .01 1,634 2,839 .22 .25 744 817 .10 .07 2,559 6,355 .34 .55 6,582 12,505 .88 1.09 8,238 15,966 1.10 1.39 5,050 6,984 .67 .61 86 228 .01 .02 705 3,381 .09 .29 2,397 5,373 .32 .47 - 952 - .08 320 767 .04 .07 305 7,808 .04 .68 237 3,430 .03 .30 - 4,242 - .37 - 4,136 - .36 - 106 - .01 68 136 .01 . 1 1,426 2,293 .19 .20 11,593 20,252 1.54 1.76 3,771 8,228 .50 .71 3,415 7,705 .45 .67 356 523 .05 .04 6,685 9,878 .89 .86 6,603 8,720 .88 .76 5/ 7.922 5/ .*69 5/ 798 5/ .07 - 959 - .08 82 199 .01 .02 1,137 2.146 .15 .19 3,837 5,208 .51 .45 * Detail may not add to higher level total because of rounding. 1/ Includes military retirement, payments to paraplegics, payments to war orphans, payments to children of disabled veterans, payments for automobile and other conveyances for disabled veterans, and educa- tional assistance to wives and widows of veterans. 2/ Includes Federal fellowship payments, Area Redevelopment Act benefits, Manpower Development and Training Act benefits, Job Corps benefits, interest subsidy payments on higher education loans, Education Exchange (1970), and Basic Education Opportunity Grants (1973). 3/ Includes Bureau of Indian Affairs' payments and refugee assistance payments. 4/ Includes Panama Canal Construction Annuity Act payments, Alaska Native Claims Settlement Act benefits (1974), Federal payments to nonprofit institutions, Federal auto depreciation payments, and trade adjust- ment assistance. 5/ Prior to 1974, estimated in combination with other types of public assistance to derive a single estimate of "Direct relief." (See text, p. 35.) 6/ Includes veterans' aid, veterans' bonuses, payments to nonprofit institutions, public foster home care payments, and State and local government auto depreciation payments. 7/ Includes consumer bad debts, corporate gifts to nonprofit institutions, cash prizes, unrecovered thefts of cash and capital assets, and personal injury payments from business to other than employees. 27 Estimates of total OASDI benefits at the county level were based on SSA tabula- tions of the amount of monthly benefits paid to those in current payment status as of December 31 . Special procedures were followed for estimating benefits for Alaska's census divisions. An allocator was constructed, based on 1970 Census of Population data, by multiplying the number of families receiving Social Security income in each census division by the mean amount of Social Security income receiyed. State Unemployment Insurance Benefits State totals were allocated to counties by benefit data supplied by the State Employment Security Offices. While most States report benefits directly by county, a few report by local office. In the latter case, local office sta- tistics were distributed among the counties that fall within the jurisdiction of the district office on the basis of Census of Population data on county unemployment. This is a weak procedure, and efforts are being made to obtain the more current county unemployment totals being developed by the Employment and Training Administration as part of the administrative record requirement of the comprehensive Employment Training Act. Unemployment Compensation for Federal Employees Employment Security Offices in a number of States now supply county or local office data on unemployment compensation paid to Federal employees. Where county data are available, State totals were allocated directly. Local office data were disaggregated using the procedure outlined for "State Unemployment Insurance Benefits." For the remaining States, estimates of Federal civilian wages and salaries were used as county allocators. Railroad Benefits Five types of benefits — retirement, survivors, unemployment, cash sickness,, and maternity--are paid out under the Railroad Retirement Act and the Railroad Unemployment Insurance Act. For the period 1969-74, benefit payments made under the provisions of the Rail- road Retirement Act were based on a 1971 benchmark estimate constructed from 1971 zip code data compiled by the Railroad Retirement Board. The zip code data were summed to county totals and extrapolated forward to 1973 and back to 1969 by county estimates of railroad wages and salaries. The 1973 estimates were used to distribute the 1974 State totals. Benefits paid out under the provisions of the Railroad Unemployment Insurance Act were estimated by allocating State totals by county estimates of railroad wages and salaries. Government Life Insurance Benefits This series is composed of (1) death benefits paid under the National Life Insurance Act to survivors of veterans of World War II, the Korean Conflict, and the Vietnam Era, (2) death benefits paid from the Government Life Insurance Fund 28 to survivors of World War I veterans, and (3) special dividends disbursed to veterans holding National Service Life Insurance policies. County estimates of Government Life Insurance benefits (including Military and Naval Insurance and Servicemen's Indemnity) for the period 1969-74 were based on a county distribution of total veteran population as reported periodically by the Veterans Administration. (Benchmark data are available for 1969, 1973, and 1974. For the 1969-73 period, annual estimates of veteran population were derived by interpolating between the benchmarks.) Federal Civilian Pensions This component includes payments made to, or on behalf of, former employees of the Federal Government covered by the Civil Service Retirement and Disability Fund or by special contributory and noncontributory retirement systems. Federal civilian pensions for the period 1969-74 were estimated in three seg- ments—employee annuities, survivor annuities, and all other. Zip code dis- tributions of benefit payments for 1971, 1972, and 1973, compiled by the Civil Service Commission, were summed to county totals and used as allocators of State totals for those years. The 1973 distributions were also used for the 1974 estimates. For years prior to 1971, county allocators were prepared by extrapo- lating the 1971 Civil Service distributions of benefit payments back to earlier years by the change in Federal civilian payrolls. Medicare Benefits Included in this category are the benefits received from both the hospital insurance and supplementary medical insurance provisions of Medicare. For all States except Alaska, the county distributions of Medicare benefits were based on the dollar amount reimbursed by Medicare to persons for medical and hospital expenses incurred as reported by the Social Security Administration. Due to the lag in the availability of data, the 1973 distributions were used to allocate the 1974 State totals. The amount of Medicare benefits paid to persons residing in Alaska's census divisions for the period 1969-74 were based on estimates of income received from Social Security, derived for each division by multiplying the number of families receiving Social Security income by the mean amount of Social Security income received in 1969 as reported in the 1970 Census of Population. Vetera ns' Benefi ts Veterans' Pensions and Compensation This item consists primarily of compensation to veterans for disability and payments to their survivors, including "survivors' indemnity payments" to sur- vivors of veterans who were in the Armed Forces on or after June 27, 1950. Those eligible for benefits include veterans of all wars since the Spanish- 29 American War, as well as those who served in peacetime and incurred service- connected disabilities. Veterans with nonservice-connected disabilities who are permanently and totally disabled and meet specified income requirements are also eligible for benefits. An allocating series was constructed from a 1972 zip code distribution of vet- erans' pension payments for one month, compiled by the Veterans Administration. The zip code data were summed to the county level and extrapolated back to 1969 by the change in the county distribution of the total veteran population as reported by the Veterans Administration (see "Government Life Insurance benefits"). This series was used to disaggregate the State totals of veterans' pensions and compensation for the years 1969-72. The 1972 distribution was used to disaggregate the 1973 and 1974 State totals. Military Retirement Benefits An allocating series was constructed for this component from the June 1972 and June 1974 zip code distributions of military retirement payments compiled by the U.S. Department of Defense. The 1972 zip code data were summed to counties and extrapolated back to 1969 by the change in the county distributions of civilian population. (County estimates of civilian population for 1970 were derived by subtracting Armed Forces population from total population as reported in the decennial Census of Population. For 1971 and 1972, Bureau of the Census postcensal county estimates of population were adjusted to exclude the military, using BEA estimates.) State totals of military retirement benefits for 1969-72 were then disaggregated to constituent counties by this derived allocating series. The 1974 zip code data (summed to county totals) were used to allocate the 1973 and 1974 State totals of benefits paid. Payments to Paraplegics This item consists primarily of grants to veterans with service-connected dis- abilities requiring specially adapted "wheelchair homes." It applies to all veterans since World War II. Due to the lack of more relevant data, county estimates have been based on county distributions of total veteran population obtained from the Veterans Administration. Payments for Autos and Conveyances for Disabled Veterans This component covers payment to veterans with specified, service-connected physical handicaps toward the purchase price of an automobile (or other convey- ance) and necessary adaptive equipment, as well as for the repair, reinstalla- tion, or replacement of such equipment. As is the case of payments to para- plegics, county estimates have been based on the distribution of total veteran population because of the lack of more direct data. Veterans' Readjustment Benefits The benefits included in this component are subsistence payments for schooling and educational allowances made to veterans of the post-Korean Conflict period under the Veterans' Readjustment Benefits Act of 1966. 30 County estimates of veterans' readjustment benefits were assumed to be in pro- portion to the county distributions of veterans of the post-Korean Conflict period as reported by the Veterans Administration. Unemployment Allowances for Veterans (UCX) This item covers unemployment compensation payments to veterans who, in general, had 90 days or more of continuous active service and are not receiving certain educational assistance or vocational subsistence allowances from the Veterans Administration. Although the amount and duration of payments are governed by State laws, the benefits are paid from Federal funds. The Employment Security Offices in slightly less than half of the States cur- rently provide county or local office data on unemployment compensation paid to veterans. A varying number of States have been supplying such UCX data since 1965. Where county benefit data were available, State totals were allocated directly. "Local office" data were processed, as described in "State Unemploy- ment Insurance Benefits," in order to develop a comprehensive county allocator. For the "nonreporting States," the State totals were apportioned among the counties in accordance with total veteran population as published by the Veterans Administration. Other Veterans' Benefits This category, comprising less than 10 percent of total veterans' benefit pay- ments, includes payments to war orphans, payments to children of disabled vet- erans, and educational assistance to wives and widows of veterans. Because of the lack of more relevant data, the county estimates of all three of these components were made by distributing the State totals in proportion to estimates of civilian population for corresponding years. (See "Military Retirement Benefits" for the description of the method used for estimating civilian population.) Other Federal Government Transfers While other types of transfer payments are made by the Federal Government in addition to social insurance and veterans' benefits, they currently represent, in aggregate, less than 5 percent of all Federal benefit payments. A descrip- tion of the methods of estimation at the county level of these "other" Federal transfer payments are detailed below in order to provide a more complete picture Federal Fellowship Payments This component includes only the subsistence portion of the fellowship, which is paid directly to the individual. The far larger portion is given by the government directly to the school and, therefore, is treated in the national accounts as either a transfer payment to a nonprofit institution or a govern- ment grant-in-aid. Separate estimates are made for Atomic Energy Commission 31 (AEC) fellowships, National Science Foundation (NSF) fellowships, payments to State Marine School cadets, and "all other" fellowships. Since 1970, annual data on the dollar amounts of newly awarded AEC fellowships by institution have been available from NSF. The county in which each institution is located was identified, and the data were then summed to form a county allocating series which was used to distribute the State totals of AEC fellowship subsis- tence payments for the period 1970-74. Due to the lack of more pertinent data, State totals for 1969 were allocated to counties by civilian population for the corresponding years. Civilian population was used for all years for Alaska. NSF fellowships are granted to outstanding science students to encourage careers in science and engineering. Annual NSF data on the number of students receiving such fellowships, by institution, were summed to counties and used to allocate the State totals of NSF fellowship subsistence payments for the period 1969-74. The Federal Government makes subsistence payments to cadets attending State Marine Schools as authorized by the Maritime Academy Act of 1958. Since there is only one such school in each of the six States involved, the county estimates were made by assigning the State totals to the county in which each school is located. County estimates of subsistence payments of "all other" fellowships were derived by apportioning the State totals in accordance with the county distri- bution of the civilian population for the corresponding years. Alaska Native Claims Settlement Act Payments The Alaska Native Claims Settlement Act, enacted in 1971, provides "for the fair and just settlement of all claims by Natives and Native groups in Alaska, based on aboriginal land claims." Settlement is made through the granting of land rights to groups of Natives and through money payments to resident and non- resident Natives. (The claimant, however, must have been a resident of a non- urban village comprising at least 25 Natives at the time of the 1970 Census enumeration. ) Estimates of these payments at the Alaska census division level for 1971-74 were made by allocating the State control totals by the distribution of the number of Natives as reported in the 1970 Census of Population. NOTE: The transfer payment component, "Alaska Native Service," which appears in the accounts in prior years, and estimated as an insignificant $1 million annually, refers to a different Federal program. The Alaska Native Service was designed to raise the educational level of the Alaska Natives as well as to assist in improving their economic and social conditions. Bureau of Indian Affairs (BIA) Payments Included in this category are a variety of programs for the benefit of Indians on reservations, such as general assistance to needy Indians, adult vocational training, and direct aid to college students. County estimates were based on 1962-63 data on U.S. Indian population on land administered by the Bureau of Indian Affairs. 32 More current data on the Indian population on reservations are being made available by BIA and will be incorporated into the estimates at a later date. Alaska totals were distributed among the census divisions by the 1970 Census of Population data on Indian population. Federal Auto Depreciation Payments These are payments for depreciation of privately owned automobiles used in Federal Government service. In making the county estimates, State totals for all years were allocated to counties by REMD estimates of Federal civilian payrolls . Food Stamp Act Payments This item reflects the net value of the bonus coupons issued to qualifying household units. Selected fiscal year county data on bonus coupons issued, as reported by the U.S. Department of Agriculture, are available for most States. These data were converted to a calendar year basis and then adjusted to State totals. For those States for which there are only partial or no county data available, allocations were made on the basis of direct relief payments reported on a county-by-county basis (see State and Local Government Transfer Payments) . Refugee Assistance Program This component represents the financial assistance for resettlement paid mainly to Cuban refugees, as authorized by the Immigration and Refugee Assistance Act of 1962. (Similar assistance to Vietnamese refugees, authorized by the Indo- china Refugee Assistance Act of 1975, will be reflected in the 1975 estimates.) Direct county data have been available from most State Departments of Public Welfare. For those States from which no such data were available, civilian population was used as the county allocator. Black Lung Benefits These benefits are the monthly cash payments (beginning in 1970) paid to coal miners who are totally disabled by "black lung" disease. Payments are also made to dependents as well as specified survivors of miners who died due to the disease. Beginning in 1974, regional benefit data for the month of June became available from the Social Security Administration. These data were con- verted to a county basis for the 15 States in which 95 percent of the benefit payments are made. For the remaining States, State totals were allocated to counties by the number of persons 60 years of age and over receiving OASDHI benefits. 33 Basic Education Opportunity Grants This program, inaugurated in 1973, provides grants for the education and train- ing of persons with low incomes. Estimates of payments made under this program are based on 1974 disbursement data supplied by the Department of Health, Education, and Welfare. These data, tabulated by institution, street address, zip code, and State, were subsequently county coded and summed to county totals. The resulting distributions were used to allocate both the 1973 and 1974 State totals. Supplemental Security Income (SSI) Program, Federal Payments The new Federal program of Supplemental Security Income payments for the aged, blind, and disabled, administered by the Social Security Administration and financed from the general revenue of the Treasury, became operational January 1 , 1974. The Federal payments, in combination with supplementary State payments (see State and local government transfers), have replaced payments under the Federal -State welfare system whereby matching Federal grants were made to States for benefit payments to persons eligible for Old Age Assistance, Aid to the Blind, and Aid to the Permanently and Totally Disabled. For personal income purposes, these Federal transfers are estimated in two parts: "SSI Basic Benefits" and "Hold-Harmless." The latter item refers to the section of the new law which requires those States already paying benefits above the new Federal minimum to maintain the level of payment in effect as of January 1972 for all eligible recipients. However, to minimize the financial burden of this mandatory supplementation, the law also provides that those States concerned need pay only an amount not to exceed their 1972 cash public assistance payments to adult welfare recipients and that the remaining necessary funds be provided by the Federal Government. Estimates of the "SSI Basic Benefits" and the "Hold-Harmless" payments were made by allocating the State totals among the counties by the distribution of the number of persons on the SSI rolls. This information was made available by the Social Security Administration. All Other Federal Transfer Payments, n.e.c. The remaining Federal transfers, with the exception of payments to nonprofit institutions, represent relatively minor dollar amounts. They include Panama Canal Construction Annuity Act payments, Area Redevelopment Act payments, inter- est subsidy payments on higher education loans, trade adjustment assistance, and benefit payments made under the Manpower Development Training Act, Job Corps, and the Education Exchange program. Because of the absence of specific geo- graphic data, estimates of these transfers were based on the county distribution of civilian population. 34 State and Local Government Benefits from Social Insurance Funds State and Local Government Retirement Benefits Representing nearly one-third of all State and local government transfers, these cash payments include not only monthly benefit payments but lump sum pay- ments and withdrawals as well. Since direct data are unavailable, county esti- mates were made using the REMD county estimates of State and local government payrolls as distributors of the State estimates. Efforts are being made to develop alternative allocators based on data more closely associated with retirement payments. However, additional testing is needed to determine the extent of their validity. Cash Sickness or Temporary Disability Payments These are weekly cash benefits from State-administered programs to insured workers unemployed because of nonoccupational illness or accident. This type of program is in effect in only four States — Rhode Island, California, New York, and New Jersey. County tabulations of actual dollar amounts are not available. County estimates of cash sickness payments were made by apportion- ing the State totals in accordance with the annual distribution of civilian population. Veterans' Benefits Veterans' Aid The major portion of the benefits included in this category are welfare payments made by State and local governments to indigent veterans. Since there are no direct data available, county estimates of veterans' aid are based on selected population data. State totals for 1969-74 were distributed to counties by the number of veterans of the post-Korean Conflict period, tabulations of which are available from the Veterans Administration. Veterans ' Bonuses Bonuses were paid to veterans of World War II, Korea and Vietnam. The amount of veterans' bonuses paid out in 1967-74 were based on the county distributions of veterans of the post-Korean Conflict period. Other State and Local Government Transfer Payments Direct Relief Payments This component had, in recent years, comprised slightly more than half of total State and local government transfers. County information on the amount of bene- 35 fit payments made, separately, for Aid to the Aged, Aid to Families with Depend- ent Children, Aid to the Blind, Aid to the Disabled, and General Assistance (maintenance payments only) were available annually from the State Departments of Welfare and/or the National Center for Social Statistics of the U.S. Department of Health, Education and Welfare. These data were summed and used to distribute a combined total of programs falling into the category of direct relief payments. The measurement of these components would have been improved by the construction of county distributions for each individual program. How- ever, this was not possible because of frequent changes in the structure and com- position of the various programs. The introduction of the new Supplemental Security Income Program in 1974 (see Federal Government transfer payments) has made this component obsolete. Bene- fit payments under the various programs are now grouped differently (see below). Supplemental Security Income (SSI) Program, State Supplementation This item includes the State mandatory supplementation payments made under the Hold-Harmless provision of the SSI law (discussed under Federal Government Transfer Payments, SSI Program) and State optional supplementation payments. This latter category derives from the provision of the SSI law that allows States to voluntarily make benefit payments above the Federal minimum require- ments through their own (State-administered) programs. The county estimates are based on county distributions of the number of persons enrolled in the SSI program, available from the Social Security Administration, which were used to allocate the State control totals. Aid to Families with Dependent Children (AFDC) Prior to 1974, this category of public assistance was estimated in combination with four other programs under the general heading "Direct Relief Payments." Three of these programs are now covered by SSI and are estimated for 1974 as such (see Federal Government Transfer Payments, SSI Program). AFDC still oper- ates under the Federal -State welfare system whereby matching Federal grants are provided to the States for money payments to persons in need of public assistance. Estimates for 1974 were based on benefit payments data made available by vari- ous State Departments of Welfare and by the National Center for Social Statis- tics of the U.S. Department of Health, Education and Welfare. General Assistance This is the fifth of the five programs that had formerly been estimated in aggregate as "Direct. Relief Payments." It is aid furnished by State or local governments to needy individuals or families who do not qualify for help under the Federally aided assistance programs. There is no Federal financial par- ticipation in this program. 36 With the introduction of SSI in January 1974, as described for AFDC, General Assistance is now estimated separately. The county estimates are based on direct data provided by the State Departments of Welfare. State and Local Medicare Benefits These transfers represent the premiums for the Supplementary Medical Insurance program of Medicare paid by State and local public assistance agencies for aged persons receiving welfare. County tabulations of persons enrolled in the Sup- plementary Medical Insurance program, obtained from the Social Security Admin- istration, were used to apportion State and local Medicare benefits to indi- vidual counties. Public Foster Home Care County estimates of payments for public foster home care for the period 1970-74 were estimated by allocating the total amount expended by the State to individual counties on the basis of the number of children 18 years of age and under as reported in the 1970 Census of Population. The 1969 State expenditures for this item were allocated to the counties by the 1960 Census of Population dis- tribution of the number of children 14 years of age and under extrapolated forward to 1969 by the change in civilian population. State and Local Government Auto Depreciation Payments This item is similar to the auto depreciation component in Federal transfers. County estimates for all years are derived by allocating the State estimates of the amount of State and local government auto depreciation payments according to the county disbursements of State and local government payrolls. State and Local Government Payments to Nonprofit Institutions The estimates were made in three pieces--private foster home care payments, educational assistance payments, and "other payments." For private foster home care payments, State totals were distributed to counties by the same allocators as were used for estimating public foster home care payments. The amounts paid out by States for educational assistance and for "other payments" were allocated to counties by civilian population. Business Transfer Payments Business transfers account for about 4 percent of total transfer payments in the United States. The estimates, of varying quality at the national level, are of questionable validity at the State and county levels. There are no direct data available except at the national level and little relevant secondary information available to use as allocators. 37 Consumer Bad Debts County estimates were derived by apportioning the State totals in accordance with the county distributions of retail sales as published in the quinquennial Census of Business. Corporate Gifts to Nonprofit Institutions State totals were allocated to counties by civilian population. Other Business Transfers Included in this category are cash prizes, unrecovered thefts from business of cash and capital assets, and personal injury payments from business other than to employees. County estimates were made by distributing State totals in pro- portion to the civilian population. PERSONAL CONTRIBUTIONS FOR SOCIAL INSURANCE Contributions made by individuals under the various social insurance programs are excluded from personal income by handling them as explicit deductions. Pay- ments by both employees and nonfarm self-employed are included in the series. The employee portion covers contributions for Old Age, Survivors, Disability, and Health Insurance (OASDHI), State unemployment insurance, railroad retirement insurance, cash sickness insurance, and Federal, State, and local public employee retirement systems, as well as premium payments for Government Life Insurance. Contributions of the self-employed relate to OASDHI only. These were first made in 1952 under amendments extending coverage of the OASI system as of January 1, 1951. In most cases, contributions of employees are withheld from payrolls; those made by self-employed individuals are paid annually with their Federal income tax returns. The personal contributions item in the State and county personal income series is the same as that which enters the national accounts except for an adjustment for contributions to retirement systems made by Federal employees stationed abroad. 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