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 2018, state and local governments spent $718 billion on public welfare, or 22 percent of direct general spending.2 As a share of direct general state and local spending, public welfare was the largest expenditure in 2018. It was the second-largest expenditure from 1977 to 2014, behind only K-12 education. 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. That's because while roughly two-thirds of Medicaid spending is provided by the federal government, typically less than a tenth of K-12 education spending comes from federal funds.
Nearly all (96 percent) public welfare spending went toward operational costs in 2018, 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 $584 billion dollars in 2018, or 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 2018.
State agencies often provide public welfare benefits directly to individuals. This includes many programs that are federally funded but state administered such as Medicaid and TANF. In only a few states do local governments administer these programs.
In fact, 92 percent of direct spending on public welfare occurred at the state level in 2018. In 37 states, local spending on public welfare accounted for less than 5 percent of total state and local public welfare spending, and in no state did local spending account for more than 20 percent. In 2018, the highest percentage of direct public welfare spending at the local level was in Wisconsin (18 percent), New York (17 percent), and California (15 percent). For example, in California, counties administer many public welfare programs, including Medicaid and TANF.
As a result, public welfare spending accounts for nearly half of state government direct expenditures but a small share of local government expenditures. In 2018, 44 percent of state direct general spending went to public welfare versus only 4 percent of local direct general spending. Among localities, public welfare spending as a share of total direct spending was highest at the county level (10 percent) in 2017 (the most recent year we have data for these levels of government), and this spending was concentrated in the few states which administer programs at the local level.
However, while administered at the state and local level, most public welfare spending is financed by federal transfers. In 2018, $459 billion (64 percent) of public welfare spending came from federal intergovernmental grants to state and local governments. This was up from 55 percent in 1977.
From 1977 to 2018, in 2018 inflation-adjusted dollars, state and local government spending on public welfare increased from $143 billion to $718 billion (402 percent increase). Over the same period, all other spending increased roughly 150 percent. Thus, public welfare spending growth far exceeded the combined spending growth for all other programs. Much of this spending growth was driven by higher Medicaid spending, which resulted from increasing federal spending on the program, rising health care costs, and more Americans receiving health insurance through the program.
Over this period, public welfare spending as a share of state and local direct general spending has increased from 13 percent to 22 percent. Census does not provide data specifically on Medicaid spending. The National Association of State Budget Officers (NASBO) estimates Medicaid’s share of total state spending increased from 20 percent in 2008 to 29 percent in 2020.
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 and how generous the programs are. 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 $2,198 per capita nationally on public welfare in 2018, per capita spending ranged from $1,090 in Connecticut to $3,911 in New York. The District of Columbia’s per capita spending was $5,359.3
Other states with high per capita public welfare spending in 2018 included Alaska ($3,649), Massachusetts ($3,448), and California ($3,336). After Connecticut, the lowest per capita spending was in Georgia ($1,208), Utah ($1,286), South Dakota($1,350), and Florida ($1,362).
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 lower 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 ($15,542), followed by Alaska ($14,663), New York ($12,997) and Minnesota ($12,997). The District of Columbia is again an outlier at $19,771. Per low-income resident, spending is lowest in Georgia ($3,559), Florida ($4,055), Texas ($4,081), North Carolina ($4,384), and Nevada ($4,415).5
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 May 2021, 38 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)