===================================================================== Center for Community Economic Development University of Wisconsin-Extension Community Economics Newsletter No. 302 December 2001 ===================================================================== A Newsletter from the Center for Community Economic Development; Community,Natural Resource and Economic Development Programs, and University of Wisconsin-Extension, Cooperative Extension Service ===================================================================== INCREASE AIDS RECEIVED FROM BROADER GOVERNMENTS* by Glen C. Pulver* On this Community Economics and the previous four we are repeating the community economics numbers 112 through 116. We take this unprecedented step because as many of you start to wrestle with the economic development portion of smart growth/comprehensive planning it strikes us that what the late Glen Pulver said has relevance in terms of economic development planning. A community may strive to reacquire dollars taxed away by broader governmental units and if possible acquire dollars taxed in wealthier areas. Not only are state and national governments major employers, but they return large quantities of funds to local governments through grants and aids. These funds do not always come by an aid formula, but often require specific requests by the local government. In addition, social security, medicare, and medicaid payments are major sources of personal income throughout the country. Communities must be sensitive to all these sources of income. In 1983, one in six dollars of personal income in the United States came directly from manufacturing industries. Nearly half of the dollars available for personal expenditure comes from the service-producing sector. Slightly more than one in nine came from government employment. Less well recognized is the large share of personal income controlled primarily by people of retirement age. In 1983, 14.2% of personal income came from transfer payments, most of which are social security, medicare and medicaid payments. Another 17.7% came from dividends, interest, and rent. This property income also goes in substantial measure to the elderly population. Nearly one out of three dollars of personal income are "non-earned" income controlled largely by elderly people. Positive community effort can increase the likelihood of these funds flowing to a specific locality. 1) The organization of education and other program efforts can help assure the correct use of public assistance programs for the elderly, handicapped and others who cannot work. People do not always know what kinds of financial assistance is available from the state and national government. They almost always require some form of supportive structure. 2) Well-organized public transportation, meal service, outpatient health care, recreation and other services focused on the elderly can make a community a more attractive place in which retirees might choose to live. Most of these activities are within the financial grasp of well-organized small communities. This kind of effort can go a long way toward keeping the buying power of the "silver-haired industrial base" in the community. In years past, developers frequently perceived the elderly as an economic drag on the rest of the community. It was felt that they added to the costs of public and private services (e.g., hospitals, nursing homes)) with little benefit to community income. These perceptions are changing. Recent research has shown that the elderly population is not only an important source of income and thus local sales and service revenue, and bank deposits, but they also produce high employment multipliers. Summers and Hirschl found that $4,000 of social security payments is sufficient to create a full time equivalent job in the local economy. This does not account for related income from other sources such as retirement programs, dividends, interest, rent and medicare. They contrast this with the need for $91,743 in manufacturing or $65,516 in agricultural sales to produce one job. The elderly are more apt to spend their income locally and on items with a high labor content than are younger workers or proprietors. 3) Communities should utilize aids from broader governments whenever possible (e.g., streets, parks, sewers) through active monitoring of government programs and support by local officials. It is almost impossible for a single individual to be aware of all the programs from which financial or other assistance might be acquired. This is a task which can be clearly divided by an organization in cooperation with local government officials. 4) Community leaders can support political activities which insure fair treatment of community concerns by broader governmental units. ongoing monitoring and positive political effort are necessary. Once again, this requires organization. *Professor of Agricultural Economics, University of Wisconsin-Madison and Community Development Specialist, University of Wisconsin-Extension. *There are five general strategies by which employment and income can be improved: (1) improving the efficiency of existing firms; (2) improving the ability to capture dollars; (3) attracting new basic employers; (4) encouraging business formation; and (5) increasing aids received from broader governments. This issue of Community Economics is one of five which focus on ways communities can improve their job and income prospects. Ron Shaffer Community Development Economist Issued in furtherance of Cooperative Extension work, Acts of May 8, and June 30, 1914, in cooperation with the U.S. Department of Agriculture. Carl O‘Connor, Cooperative Extension, University of Wisconsin-Extension. University of Wisconsin-Extension, U.S. Department of Agriculture and Wisconsin counties cooperating. UW-Extension provides equal opportunities in employment and programming, including Title IX and ADA.