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
- How much do state and local governments spend on public welfare?
- How does state spending differ from local spending?
- How have public welfare expenditures changed over time?
- How and why does spending differ across states?
In 2016, state and local governments spent $638 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 2016. It was the second-largest source from 1977 to 2015. However, considering only state and local funds (i.e., no federal transfers), it still ranks behind elementary and secondary education.
Nearly all (96 percent) of public welfare spending went toward operational costs, such as payments to Medicaid providers, payments to nonprofits or other private providers of public services for low-income beneficiaries, and program administration in 2016. The largest slice of current operational costs were vendor payments for medical care, which totaled $451 billion dollars in 2016, or 84 percent of state and local public welfare spending. The remaining 4 percent 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. Less than 1 percent of expenditures were capital outlays.
Public welfare services are often provided directly to individuals by state agencies. This includes many programs, such as TANF and Medicaid, that are federally funded (at least partially) but typically state administered (these programs are locally administered in a few states). As a result, state governments spend more directly on public welfare than do local governments.
In 2016, 42 percent of state direct general spending went to public welfare versus 4 percent of local direct general spending.
Nationally, 91 percent of state and local direct spending on public welfare occurred at the state level. In 35 states, local spending accounts for less than 5 percent of total direct general expenditures on public welfare. In all 50 states, local spending accounts for less than 20 percent. California (19 percent) New York (17 percent), and Wisconsin (16 percent) had the highest percentage of their public welfare spending at the local level in 2016. In California, this is because counties administer many public welfare programs, including TANF and Medicaid.
Public welfare spending is primarily financed by federal transfers. In 2016, $422 billion (66 percent) of state and local public welfare spending came from federal intergovernmental grants to state and local governments. This is up from 59 percent of total state and local public welfare spending in 1992. The remaining 34 percent came from state and local funds.
In 1977, state and local governments spent $137 billion on public welfare (in 2016 inflation-adjusted dollars). In 2016, they spent $638 billion. Much of this spending increase was driven by the rising cost of health care.
Between 1977 and 2016, 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 2016. As noted previously, much of this increase was paid for with federal funds.
State and local governments spent $1,972 per capita on public welfare in 2016. 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. Take-up rates can reflect individual and family decisions to apply for assistance, but states can also take actions that make it easier or more difficult for people to access benefits.
Among the states, the District of Columbia had the highest level of state and local public welfare spending per capita at $5,332, followed by New York ($3,307), Alaska ($3,013), Massachusetts ($2,927), and Vermont ($2,843).3 Georgia spent the least on public welfare at $1,139 per person, followed by Utah ($1,171), South Dakota ($1,230), Florida ($1,294), and North Carolina ($1,318).
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 and disabled 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 and the Children’s Health Insurance Program, 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, the District of Columbia spent more than any state at $19,426.5 It was followed by Massachusetts ($12,877), Alaska ($12,295), Minnesota ($11,539), and New York ($10,827). Per low-income resident, spending is lowest in Georgia ($3,206), Florida ($3,699), and North Carolina ($3,748).6
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. 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.
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)