Since I work for the state here, my experience with contractors is the opposite. They are usually the skilled ones and FTEs are a mixed bag, though usually much better managers. This is true even in consulting companies themselves. Consulting companies also hire consultants and even then it somehow holds true.
Edit: The reason being, it is much, much easier to let a contractor go (for all intents impossible to let a state FTE go), so the ones who are there for any period of time usually are competent.
Edit: The reason being, it is much, much easier to let a contractor go (for all intents impossible to let a state FTE go), so the ones who are there for any period of time usually are competent.