Income and outlays of households and of nonprofit institutions serving households

Survey of Current Business, April, 2003 by Charles Ian Mead, Clinton P. McCully, Marshall B. Reinsdorf

On average, from 1992 to 2001, over 50 percent of the expenditures of nonprofit institutions were for the provision of medical care, about 25 percent were for religious and welfare activities, and almost 15 percent were for the provision of education (chart 1). These shares vary only slightly over the years.

Table 2 provides preliminary estimates of the income and outlays of NPISH's and households from 1992 to 2001. These estimates do not reflect additional data that will be available in the upcoming comprehensive revision of the NIPA's. For comparison, the first panel of table 1 (lines 1-16) reproduces the income and outlays of the personal sector published in NIPA table 2.1. Corresponding items for the household portion of the personal sector appear in the second panel (lines 17-37), and estimates for NPISH's appear in the third panel.

Receipts from sales of program services (line 45) generally cover more than three-fourths of the expenses of nonprofit institutions (line 49), but this ratio declined slightly in 1998-2001. Medical care providers whose fees cover much of their costs are an important reason for the high expense-coverage ratio.

In table 2, the sum of household income (line 17) and the receipts of NPISH's (line 38) is larger than personal income (line 1) because one item in household income--transfers from NPISH's--and two items in the receipts of NPISH's--transfers from households and sales by NPISH's of program services--are removed when households and NPISH's are consolidated into a single sector. (6) The sum of household saving and NPISH saving does, however, equal personal saving. The transfers between households and NPISH's have no effect on the combined saving of these two sectors, because they count both as income and as outlays. The sales to households by NPISH's have no effect on the combined saving of these sectors, because they add the same amount to NPISH saving as they subtract from household saving. (7)

The preliminary estimates in table 2 suggest that households alone are responsible for the decline in personal saving from 1992 to 1998 but that NPISH's play an important role in the decline thereafter. From 1998 to 2001, NPISH saving dropped by more than $15 billion as the gap between the expenses and the sales of nonprofit institutions grew from $125.4 billion to $166.9 billion. (8) The use of capital gains to help fund operations probably played a role in the decline in saving.

A comparison of line 58 to line 1 in table 2 shows that less than 1 percent of personal income is received by NPISH's from business, government, or the rest of the world. However, the income received by NPISH's that is included in personal income is not a meaningful indicator of their importance in the personal sector, because it excludes the large amounts that NPISH's receive from households as transfers or as payments for services. Measured by the operating expenses on line 49, services of NPISH's constitute nearly 10 percent of PCE. In addition, some nonprofit institutions have sales from secondary activities (such as a restaurant operated by a golf club or by a hospital) and sales to business and government. These sales, which generally total less than 1 percent of PCE, are shown in the business sector or in the government sector rather than in the NPISH sector, but they are part of the total output produced within institutions classified as NPISH's. In addition, NPISH's gross transfers to households generally account for 0.3 to 0.4 percent of PCE.