Public Welfare Expenditures
Public welfare expenditures include cash assistance through Temporary Assistance for Needy Families (TANF), Supplemental Security Income, and other payments made directly to individuals as well as payments to physicians and other service providers under programs like Medicaid.1
Census does not separate Medicaid spending into its own category. Instead, most Medicaid spending is accounted for under the public welfare category with some spending counted as hospital expenditures.
- How much do state and local governments spend on public welfare?
- How does state spending differ from local spending and what does the federal government contribute?
- How have public welfare expenditures changed over time?
- How and why does spending differ across states?
In 2017, state and local governments spent $673 billion, or 22 percent of direct general spending, on public welfare.2 Public welfare was the largest source of direct general spending at the state and local level in 2017. It was the second-largest source from 1977 to 2014. However, when looking at only state and local funds (i.e., excluding federal transfers), spending on public welfare still trails spending on elementary and secondary education.
Nearly all (96 percent) public welfare spending went toward operational costs in 2017, including payments to Medicaid providers, payments to nonprofits or other private providers of public services for low-income beneficiaries, and program administration. The largest slice of operational costs were vendor payments for medical care, which totaled $544 billion dollars in 2017 (81 percent of all state and local public welfare spending).
Most of the remaining 4 percent of public welfare spending went toward direct cash assistance to low-income beneficiaries for programs such as TANF, Supplemental Security Income, and the Federal Low Income Home Energy Assistance Program. Capital spending (e.g., construction of public nursing homes) accounted for 0.1 percent of public welfare spending in 2017.
Public welfare benefits are often provided directly to individuals by state agencies. This includes many programs that are federally funded but state administered such as TANF and Medicaid. Local governments administer these programs in a few states, though. As a result, state governments spend more directly on public welfare than local governments. In 2017, 43 percent of state direct general spending went to public welfare versus 4 percent of local direct general spending.
Nationally, 91 percent of direct spending on public welfare occurred at the state level. In 37 states, local spending accounted for less than 5 percent of total direct general expenditures on public welfare. In all 50 states, local spending accounted for less than 20 percent. In 2017, the highest percentage of direct public welfare spending at the local spending was in New York (17 percent), Wisconsin (17 percent), and California (16 percent). For example, in California, counties administer many public welfare programs, including TANF and Medicaid.
However, while administered at the state and local level, most public welfare spending is financed by federal transfers. In 2017, $438 billion (65 percent) of public welfare spending came from federal intergovernmental grants to state and local governments. This was up from 55 percent in 1977.
In 1977, state and local governments spent $140 billion on public welfare (in 2017 inflation-adjusted dollars). In 2017, they spent $673 billion. Much of this spending increase was driven by the rising cost of health care.
Between 1977 and 2017, other state spending grew more slowly than public welfare spending. In 1977, 13 percent of state and local spending went to public welfare compared with 22 percent in 2017. Much of this increase was paid for with federal funds.
Census does not provide data specifically on Medicaid spending. The National Association of State Budget Officers (NASBO) estimates that in fiscal year 2019 Medicaid alone accounted for nearly 29 percent of total state spending—up from 20 percent in 2008
Public welfare spending goes to a range of programs, many of which determine eligibility according to federal rules based on individual or family income. Within these rules, states make determinations about who can access different programs. States also have varying rates of take-up of public welfare programs among eligible populations. And states can take actions that make it easier or more difficult for people to access benefits.
As such, while state and local governments spent $2,070 per capita nationally on public welfare in 2017, per capita spending ranged from $1,068 in Connecticut to $3,624 in New York. The District of Columbia’s per capita spending was $5,649.3
Other states with high per capita public welfare spending in 2017 included Alaska ($3,483), Massachusetts ($3,242), and Vermont ($2,955). After Connecticut, the lowest per capita spending was in Georgia ($1,164), Utah ($1,262), North Carolina ($1,303), and South Dakota ($1,338).
Per capita spending, however, is an incomplete metric because it doesn’t provide any information about a state’s demographics, policy decisions, administrative procedures, or residents’ choices. States with high rates of Medicaid spending per capita, for example, tend to have shares of Medicaid enrollees who are elderly or disabled that are higher than the national average. The elderly and adults with disabilities account for roughly two-thirds of Medicaid spending even though they constitute a small fraction of total recipients.4
In states with low spending per capita on Medicaid, children tend to constitute a higher-than-average share of total recipients. Children are relatively inexpensive to cover and therefore spending per recipient and per capita is low in these states. Low per capita spending could also reflect a state's strict eligibility requirements.
If, instead of spending per capita, we consider spending as a share of the low-income population, Massachusetts spent the most of any state ($14,346), followed by Alaska ($14,181), New York ($11,716) and Minnesota ($11,255). The District of Columbia is again an outlier at $20,167. Per low-income resident, spending is lowest in Georgia ($3,310), North Carolina ($3,748), Florida ($3,904), Texas ($3,953), and Nevada ($4,166).5
Many programs, like Medicaid, have federal rules regarding eligibility. But even with Medicaid, states can apply for waivers to alter the design of the program. One other factor influencing public welfare spending is Medicaid expansion under the Affordable Care Act (ACA). Following a 2012 Supreme Court decision, states were given the choice to either expand Medicaid coverage with new federal funding or retain pre-ACA eligibility levels. This has led to changes in Medicaid spending and related outcomes across states. As of January 2020, 36 states and the District of Columbia had accepted Medicaid expansion funds.
Interactive Data Tools
The Implications of Medicaid Expansion in the Remaining States
Matthew Buettgens (2018)
Welfare Rules Databook: State TANF Policies as of July 2017
Christine Heffernan, Ben Goehring, Ian Hecker, Linda Giannarelli, and Sarah Minton (2018)
State TANF Policies: A Graphical Overview
Megan Thompson, Sarah Minton, Christine Heffernan, and Linda Giannarelli (2018)
Why Does Cash Welfare Depend on Where You Live?
Heather Hahn, Laudan Y. Aron, Cary Lou, Eleanor Pratt, and Adaeze Okoli (2017)
The Effects of the Medicaid Expansion on State Budgets: An Early Look in Select States
Stan Dorn, Norton Francis, Laura Snyder, and Robin Rudowitz (2015)
Assessing Fiscal Capacities of States: A Representative Revenue System–Representative Expenditure System Approach, Fiscal Year 2012
Tracy Gordon, Richard Auxier, and John Iselin (2016)