The Commerce Department released its latest breakdown of income growth by state Thursday morning, and the results were good. Incomes grew at a rate of roughly 1.1 percent from the second to the third quarters of the year. People were pulling in more dough.
But growth in one state outpaced all the others by a healthy margin. That state was Mississippi, which saw growth of 1.9 percent, compared to second-ranked Colorado’s 1.4 percent. Most of Mississippi’s substantial growth can be explained by one thing: an $1 billion settlement over racial discrimination.
Let’s say that again. A lawsuit settlement was so large that it skewed an entire state’s income results. Not over the course of a week. Not a month. But over an entire quarter. Here’s the Commerce Department explaining what happened:
Slightly more than half of the personal income increase in Mississippi—$1.0 billion—was a current transfer receipt representing a settlement for a class-action suit that alleged racial discrimination by the U.S. Department of Agriculture in its evaluation of farm loan applicants between 1981 and 1996.
In other words, more than half of Mississippi’s increase was due to payouts from this settlement. Here’s what happened:
In the late 1990s, two class action lawsuits were filed against the government alleging that the Agriculture Department was discriminating against black farmers by either denying them loans or making them wait longer to get loans. Those two class-action suits were eventually combined, and a settlement agreement was reached. President Obama signed it into law in late 2010. Claims were then collected, and payments finally started going out this fall.
The final settlement was valued at $1.25 billion and went out to about 18,000 farmers. That translates to roughly $69,500 a head. And it was big enough to skew Mississippi’s third-quarter income results.
But that’s not the only federal action that affected incomes at the state level. The decline in civilian federal earnings in the third quarter was the largest in seven consecutive quarterly declines. Earnings fell by $5 billion because of furloughs, and those declines in turn reduced income growth by 0.2 percentage points in Maryland and Hawaii, and by 0.3 percentage points in Virginia.