Government
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Industry Overview
The US government services sector consists of about 150,000 federal, state, and local government entities with combined budgets of over $6 trillion that administer and manage a variety of public (taxpayer supported) programs. The federal government is the largest single employer in the US, with about 4 million employees, including armed services employees. The largest government agencies by employment are the federal Department of Defense (DoD) (including all branches of the armed forces), Department of Veterans Affairs (VA), Department of Homeland Security (DHS), Treasury Department, and Department of Justice (DOJ).
The federal government manages a budget in excess of $3 trillion. State and local (including municipalities and counties) government budgets are much smaller - collectively, expenditures for the over 19,000 US municipalities, 16,500 towns and townships, and 3,000 county governments are approximately $1.4 trillion. The 50 states spend a combined $1.6 trillion.
State-specific data can be found in First Research's State profiles, for all 50 states and Washington, DC.
Competitive Landscape
Demand for federal government services is driven by population growth and changing demographics of the US population. For example, the US Census Bureau estimates that the over-65 population will double by 2030, which will increase the demand for programs like Social Security and Medicare over the next 25 years.
State and local governments experience similar demand drivers, but face increasing or decreasing revenues from which to fund services based on shifts in the population. During recent years the US population increasingly migrated to the south and west, boosting revenues for state and municipal governments in Utah, Arizona, Texas, Colorado, and North Carolina. States such as Michigan and Rhode Island, which are losing population, face revenue challenges.
Municipal governments are labor intensive, with average annual revenue per employee of about $88,000. State and federal governments are capital intensive, with average annual revenues per employee of approximately $380,000 and $880,000, respectively.
Products, Operations & Technology
Major government services include creating and enforcing policies and laws, providing operating services, building and maintaining infrastructure, and providing for public safety; the federal government provides for national defense.
FEDERAL
The federal government is divided into three branches: executive, legislative, and judicial. Each branch acts as a "check" on the other two branches in what is called a "checks and balances" system. This ensures that one branch doesn't become too powerful. For example, Congress, the legislative branch, holds hearings to review policies of the executive branch as part of its regular business.
The president is the leader of the executive branch, which includes all of the federal agencies. The president is the commander in chief because he leads the DoD and armed forces, but he also acts as a chief executive officer through leadership of the federal agencies. The president is an elected official, while leaders of the individual agencies are generally appointed by the president and confirmed by Congress.
The legislative branch is comprised of the US Congress, which includes the House of Representatives and the Senate. The legislative branch makes laws and conducts oversight functions to ensure that laws are properly carried out. All members of the House of Representatives and the Senate are elected officials. There are 435 members of the House of Representatives, allocated based on population so that more populous states, such as California, have greater representation than less populous states, such as North Dakota. States can gain or lose representation based on population shifts. There are 100 senators, two from each US state. The vice president presides over the Senate and can cast the deciding vote on a bill in the event of a tie vote.
The judicial branch includes the highest court in the US, the Supreme Court, but also consists of a series of district courts and courts of appeals. District courts are responsible for hearing federal court cases, and appeals courts are set up to hear appeals to those decisions. Judges in the federal system are appointed and thus do not serve terms; Congress has the power to remove judges through the impeachment process.
The largest line item in the federal government's budget is Social Security payments, which account for about 21 percent of federal spending. Like many items, Social Security payments increase each year as the proportion of eligible beneficiaries in the population increases. Other major line items in the federal budget include defense spending (armed forces), which accounts for 20 percent; Medicare (health care program for the elderly), 12 percent; and education, 4 percent.
The federal government funds research for, and is a large consumer of, technology. Often, technology developed for the government can be adapted for the consumer market. The government played a large role in the development of the Internet, for example. Technology created for the National Aeronautics and Space Administration (NASA) and the DoD have pioneered advances in navigational and computing technology.
Other federal agencies, including the Environmental Protection Agency (EPA) and Food and Drug Administration (FDA), utilize technology for testing soil and water samples and for food safety measures.
State and local governments do not generally need the same technological innovations as the federal government, but large cities, such as New York or Chicago, use technology to manage large public safety efforts. Additionally, state and local governments increasingly use the Internet to communicate with citizens and allow citizens to conduct business with government agencies online that previously had to be conducted in person; examples include auto registration renewal and tax preparation.
STATE
Like the federal government, state governments function within three branches of government, though there are some notable differences. For example, instead of a president, the chief executive of each state is an elected governor. Additionally, some high-level government employees, such as the secretary of state, that are appointed at the federal level, are elected at the state level.
State governments are allocated all powers not granted to the federal government. Each state also creates its own budget, and performs services of its own, as well as services that have been mandated by the federal government. The federal government's influence on state government is most evident in services within the "public welfare" category, such as Medicaid, which is in part funded by the federal government, but administered at the state level.
The largest line items in state government budgets are education, 31 percent; public welfare programs, 24 percent; and highways and roads, 6 percent.
MUNICIPAL
Municipal governments, which include city, town and township, and county governments, create and enforce local laws, make infrastructure capital improvements, and provide local planning. The services municipalities provide depend partly on the size of the town or city, but some are essentially standard: a school system, police and fire protection, street and highway maintenance, water and sewer services, waste management, and various social services. Additional services can include municipal courts, jails, hospitals, housing, parks, libraries, colleges, public transportation, parking, airports, electricity, gas, and health and welfare services.
Education is the largest item in most municipal budgets, on average accounting for 45 percent of all local spending. In large cities that provide a wide range of services, the percentage spent on education is generally lower than in suburban communities. Many municipalities don't have direct budget control over education spending on local schools, which is separately administered by independent school districts. Police and fire protection account for about 15 percent of municipal costs. Utilities (including water, sewer, electricity and gas) and public works (waste management, street and highway maintenance) account for about 25 percent.
