The city of Salem is not alone in its struggle to fund the services it is expected to provide – services like police protection, firefighting, libraries, clean water and the like. Many cities, counties and other local government entities around the country are struggling as well.
The reason, simply put, is that local government services are linked to population growth. As population grows, so must services. That is expensive. But many local governments are constrained in various ways in the manner in which they raise revenue. In Oregon, a major constraint is the passage of Measure 5 in 1990 that limits tax increases on most properties to 3% a year. The property tax funds more than half the city of Salem’s general fund revenue.
Some context can be placed around the relationship between local government services and population growth by comparing them over time. Local government employment can serve as a kind of proxy for provision of services. After all, it takes people to provide services – personnel are about 75% of the city of Salem’s budget. And, local government employment is by far the largest portion of total government employment in Oregon. Three out of four government employees in 2022 statewide were local government employees.
How have local government employment and population growth increased over the years?
First, a brief discussion of what local government is – it’s more than just cities. It also includes counties and special districts.
Over one thousand special districts exist in Oregon because, according to the Special Districts Association, “inadequate revenue bases and competing demands for existing taxes make it difficult for cities and counties to provide all of the services that their constituents want.” So special districts are formed to pay for certain services. Currently 35 different types of special districts (school, fire, library, etc.) raise revenue to pay for services in ways that include issuing bonds and taxing service users. Special districts are governed by elected boards of directors.
So, the first question to ask is: has local government employment grown over the years?
The answer is: Mostly yes, compared to federal and state government employment.
Some 28,000 people worked in federal government employment in 2022, 10% of total government employment in Oregon. This was a decline of 7% from 2001.
The Salem area had a small number of federal government employees in 2022 (1,400) and this number declined slightly from 2001 as well.
State government employment growth statewide has been mostly flat for the same time period, after accounting for two large changes regarding who is classified as a state employee. In 2022, approximately 45,000 people worked in state government statewide (15% of total government).
Approximately half of state government employees work in the Salem Metropolitan Statistical Area (Marion and Polk counties combined), and this number has only grown by a small handful from 2001 to 2022.
Now let’s compare local government employment growth to population growth in the Salem area and around Oregon.
Oregon counties with population growth of 20% or higher between 2001 and 2022 were selected for comparison. It should be expected that local government employment will grow as population grows, and that is mostly what happened (see table above).
The Salem Metropolitan Statistical Area’s population grew by 24% over the time period, and local government employment grew 8%. Not surprisingly, Deschutes County is top in population growth, accompanied by a fairly hefty growth in local government employment as well.
Of the remaining selected counties, local government employment growth was mostly positive and varied considerably compared to population growth.
There’s more to this story.
Local governments face constraints in addition to those directly affecting the raising of revenue. Socioeconomic factors, such as the presence of low-wage jobs, lower levels of education and poverty rates, constrain as well.
As an example, these factors can lower bond ratings. In the Annual Comprehensive Financial Report for the Fiscal Year Ending June 2022 for the city of Salem, it is stated that “below average socioeconomic measures” are one of the factors that kept the city’s bond rating from being higher. These socioeconomic factors can also affect a local government’s ability to collect property taxes and utility fees.
Let’s look at low-wage jobs, educational attainment and poverty rates comparatively.
In 2022, approximately 103,000 people worked inside the city limits of Salem (see chart above). Approximately two-thirds of them commuted from elsewhere into the city to work in 2019 (pre-Covid), according to the U.S.Census Origin-Destination Employment Statistics.
One-third of the people who work in Salem work in industries with average earnings of less than $45,000 annually, a higher percentage than statewide. These lower-wage workers were employed in retail trade, leisure and hospitality, and other services (auto repair shops, hair salons, and the like). And, according to a recent Brookings report, low wage workers are six times less likely to be able to work from home than higher wage workers.
The percentage of the population of Salem with an educational attainment less than high school is higher than statewide, as is the percentage of Salem’s population living below the poverty line.
What does all this mean?
Although comparing government employment over time isn’t precise due to the re-classification of groups of employees from one type of government to another, it is clear that local government employment is the growth government industry.
Whether or not local government employment growth is adequate to keep up with population growth and the need for additional services is a difficult question to answer.
However, it seems clear that some local areas struggle more than others to keep services in line with population growth. The aftermath of the pandemic was somewhat of an equalizer, as wage earners on the lower end of the scale gained substantially in earnings. But, as the Oregon Office of Economic Analysis has noted, socioeconomic differences among the state’s geographical areas remain large.
Oregon’s and Salem’s population will continue to grow, services will continue to be needed, and much of the burden for paying for these services will be on local governments. How to pay for these services will likely continue to be contentious.
Pam Ferrara of the Willamette Workforce Partnership continues a regular column examining local economic issues. She may be contacted at [email protected]
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Pamela Ferrara is a part-time research associate with the Willamette Workforce Partnership, the area’s local workforce board. Ferrara has worked in research at the Oregon Employment Department, earned a Master’s in Labor Economics, and speaks fluent Spanish.