How Much Does the Nation Spend on Welfare? - State Expenditures For Social Welfare

In fiscal year 2002 state governments spent over $1 trillion, an increase of 5.7 percent over 2001. The largest specified expenditures were on elementary and secondary education (21.6 percent) and Medicaid (20.8 percent), followed by higher education (11.2 percent) and transportation (8.1 percent). (See Figure 1.1.) About 2.1 percent went for public assistance to the needy, which totaled $23 FIGURE 1.1
Total state expenditures, by function, fiscal 2002 billion. About one-third (32.6 percent) went to the "all other" category.

As increased demands were made on state and local funding, much of the impetus for welfare reform came at the state level before federal welfare programs were overhauled in 1996. Furthermore, welfare reform became a key

TABLE 1.3
National health expenditures by type, 1990–2000 [In billions of dollars (696.0 represents $696,000,000,000), except percent. Includes Puerto Rico and outlying areas]

Type of expenditure	1990	1994	1995	1996	1997	1998	1999	2000
Total	696.0	937.2	990.3	1,040.0	1,091.2	1,149.8	1,215.6	1,299.5
Annual percent change1	11.8	5.5	5.7	5.0	4.9	5.4	5.7	6.9
Percent of gross domestic product	12.0	13.3	13.4	13.3	13.1	13.1	13.1	13.2
Private expenditures	413.5	510.3	534.1	558.2	588.8	628.8	666.5	712.3
Health services and supplies	401.9	496.8	521.6	545.0	573.9	613.3	651.1	695.6
Out-of-pocket payments	137.3	143.9	146.5	152.1	162.3	174.5	184.4	194.5
Insurance premiums2	233.5	312.1	330.1	344.8	359.4	383.2	409.4	443.9
Other	31.1	40.7	44.9	48.2	52.1	55.6	57.3	57.2
Medical research	1.0	1.4	1.4	1.6	1.6	2.0	2.2	2.3
Medical facilities construction	10.7	12.1	11.1	11.6	13.3	13.6	13.3	14.3
Public expenditures	282.5	427.0	456.2	481.8	502.4	520.9	549.0	587.2
Percent federal of public	68.2	69.9	70.6	71.4	71.4	70.6	70.1	70.1
Health services and supplies	267.7	408.0	436.1	460.8	480.1	498.2	524.0	559.9
Medicare3	110.2	165.8	182.7	197.5	208.2	209.5	212.6	224.4
Public assistance medical payments4	78.7	139.2	149.5	157.6	164.8	176.6	191.8	208.5
Temporary disability insurance5	0.1	0.1	0.1	0.1	0.1	0.1	0.1	0.1
Workers' compensation (medical)5	17.5	22.2	21.9	21.9	20.5	20.8	22.5	23.3
Defense Dept. hospital, medical	10.4	11.8	12.1	12.0	12.1	12.2	12.5	13.0
Maternal, child health programs	1.8	2.2	2.2	2.3	2.3	2.4	2.5	2.6
Public health activities	20.2	30.0	31.4	33.0	35.5	37.9	40.9	44.2
Veterans' hospital, medical care	11.3	15.1	15.4	16.3	16.3	16.9	17.7	18.9
Medical vocational rehabilitation	0.5	0.7	0.7	0.7	0.7	0.8	0.7	0.8
State and local hospitals6	13.1	15.3	14.1	13.6	13.4	14.2	14.8	15.6
Other7	3.8	5.6	6.0	6.0	6.1	6.9	7.8	8.7
Medical research	11.7	14.8	15.7	16.2	17.1	18.6	20.9	23.0
Medical facilities construction	3.1	4.2	4.4	4.8	5.2	4.1	4.2	4.3
1Change from immediate prior year.
2Covers insurance benefits and amount retained by insurance companies for expenses, additions to reserves, and profits (net cost of insurance).
3Represents expenditures for benefits and administrative cost from federal hospital and medical insurance trust funds under old-age, survivors, disability, and health insurance programs.
4Payments made directly to suppliers of medical care (primarily medicaid).
5Includes medical benefits paid under public law by private insurance carriers, state governments, and self-insurers.
6Expenditures not offset by other revenues.
7Covers expenditures for Substance Abuse and Mental Health Services Administration, Indian Health Service; school health and other programs.
SOURCE: "No. 113. National Health Expenditures by Type, 1990 to 2000," in "Health and Nutrition," Statistical Abstract of the United States: 2002, U.S. Census Bureau [Online] http://www.census.gov/prod/2003pubs/02statab/health.pdf [accessed January 7, 2004]

goal for President Bill Clinton. In August 1996 he signed into law the Personal Responsibility and Work Opportunity Reconciliation Act of 1996 (PRWORA; PL 104-193). This controversial law repealed the sixty-year-old program that provided Aid to Families with Dependent Children (AFDC) and created the block grant program known as Temporary Assistance for Needy Families (TANF). Though states must comply with federal time limits, work requirements, and child protection guidelines, they were given the flexibility to design their own welfare programs. Each state was required to submit a complete plan of implementation no later than July 1, 1997.

Prior to the passage of Public Law 104-193, forty-three states were granted federal waivers to set aside federal regulations and guidelines to introduce their own reform proposals. For example, in March 1996 a Texas plan was approved limiting benefits to a maximum of three years but allowing the recipients to hold more assets, including up to $2,000 in savings, without reducing welfare benefits. Under the TANF law signed on October 1, 2003, states may continue operating under federal waivers that exempt programs from meeting the mandates of the new law.

The state and federal governments jointly fund cash assistance. In 2000 the federal government provided more than half (60.7 percent) of the funding while the states funded the rest, mostly from general funds. (See Figure 1.2.) Spending for cash assistance took 2.1 percent of total state expenditures: 1.3 percent was for cash assistance under TANF and the remainder was for other cash assistance programs. The federal government paid a larger proportion of TANF (38.5 percent) than it did for all other state cash-assistance programs. State spending on cash assistance under TANF and other cash welfare programs dropped following the enactment of welfare reform legislation in 1996; expenditures remained stable between 2001 and 2002.

Medicaid

The National Association of State Budget Officers observed in the 2000 State Expenditure Report (Washington, DC, 2001), "Medicaid expenditures have escalated and are consuming a greater portion of states' budgets." As a percent of total state expenditures, Medicaid spending increased from 10 percent in 1987 to 14 percent in 1991 and 19.5 percent in 2000. Two factors that help explain this dramatic increase are the rate of inflation for

TABLE 1.4
Government transfer payments to individuals, by type, 1990–2000
[In millions of dollars (561,399 represents $561,399,000,000)]

Item	1990	1995	1996	1997	1998	1999	2000
Total	561,399	841,041	883,042	914,942	965,206	965,206	1,013,424
Retirement & disability insurance benefit payments	263,854	350,027	364,623	379,415	402,990	402,990	425,333
Old age, survivors, & disability insurance	244,135	327,667	341,987	356,602	379,895	379,895	401,408
Railroad retirement and disability	7,221	8,028	8,085	8,193	8,203	8,203	8,265
Worker's compensation payments (federal & state)	8,618	10,530	10,795	10,606	10,560	10,560	11,111
Other government disability insurance & retirement1	3,880	3,802	3,756	4,014	4,332	4,332	4,549
Medical payments	189,099	337,532	361,342	379,557	399,597	399,597	423,180
Medicare	107,929	180,283	195,581	209,198	208,126	208,126	215,882
Public assistance medical care2	78,176	155,017	163,629	168,288	189,464	189,464	205,281
Military medical insurance3	2,994	2,232	2,132	2,071	2,007	2,007	2,017
Income maintenance benefit payments	63,481	100,444	102,494	100,288	104,421	104,421	106,421
Supplemental Security Income (SSI)	16,670	27,726	28,903	29,154	31,023	31,023	31,675
Family assistance4	19,187	22,637	20,325	17,717	17,683	17,683	18,277
Food stamps	14,741	22,447	21,955	18,732	15,473	15,473	14,939
Other income maintenance5	12,883	27,634	31,311	34,685	40,242	40,242	41,530
Unemployment insurance benefit payments	18,208	21,864	22,480	20,299	20,724	20,724	20,707
State unemployment insurance compensation	17,644	20,975	21,614	19,469	20,010	20,010	19,938
Unemployment compensation for federal civilian employees	215	339	326	281	206	206	227
Unemployment compensation for railroad employees	89	62	65	72	65	65	81
Unemployment compensation for veterans	144	320	279	259	201	201	182
Other unemployment compensation6	116	168	196	218	242	242	279
Veterans benefit payments	17,687	20,545	21,430	22,233	24,058	24,058	24,939
Veterans pension and disability	15,550	17,565	18,286	19,061	20,904	20,904	21,885
Veterans readjustment7	257	1,086	1,138	1,234	1,323	1,323	1,331
Veterans life insurance benefits	1,868	1,883	1,997	1,929	1,823	1,823	1,714
Other assistance to veterans8	12	11	9	9	8	8	9
Federal education & training assistance payments9	7,300	9,007	8,568	11,481	11,366	11,366	10,729
Other payments to individuals10	1,770	1,622	2,105	1,669	2,050	2,050	2,115
1Consists largely of temporary disability payments, pension benefit guaranty payments, and black lung payments.
2Consists of medicaid and other medical vendor payments.
3Consists of payments made under the TriCare Management Program (formerly called CHAMPUS) for the medical care of dependents of active duty military personnel and of retired military personnel and their dependents at nonmilitary medical facilities.
4Through 1995, consists of emergency assistance and aid to families with dependent children. Beginning with 1998, consists of benefits—generally known as temporary assistance for needy families—provided under the Personal Responsibility and Work Opportunity Reconciliation Act of 1996. For 1996–97, consists of payments under all three of these programs.
5Consists largely of general assistance, expenditures for food under the supplemental program for women, infants, and children; refugee assistance; foster home care and adoption assistance; earned income tax credits; and energy assistance.
6Consists of trade readjustment allowance payments, Redwood Park benefit payments, public service employment benefit payments, and transitional benefit payments.
7Consists largely of veterans' readjustment benefit payments, educational assistance to spouses and children of disabled or deceased veterans, payments to paraplegics, and payments for autos and conveyances for disabled veterans.
8Consists largely of state and local government payments to veterans.
9Excludes veterans. Consists largely of federal fellowship payments (National Science Foundation fellowships and traineeships, subsistence payments to state maritime academy cadets, and other federal fellowships), interest subsidy on higher education loans, basic educational opportunity grants, and Job Corps payments.
10Consists largely of Bureau of Indian Affairs payments, education exchange payments, Alaska Permanent Fund dividend payments, compensation of survivors of public safety officers, compensation of victims of crime, disaster relief payments, compensation for Japanese internment, and other special payments to individuals.
SOURCE: "No. 511. Government Transfer Payments to Individuals by Type: 1990 to 2000," in "Social Insurance and Human Services," Statistical Abstract of the United States: 2002, U.S. Census Bureau [Online] F48 http://www.census.gov/prod/2003pubs/02statab/socinsur.pdf [accessed January 7, 2004]

medical goods and services and the increased number of persons eligible for Medicaid.

In 2002 the federal government paid 55.8 percent of Medicaid expenditures, and the states paid the remaining 44.2 percent. (See Figure 1.3.) That year the states spent $112 billion on Medicaid, more than triple the 1990 amount. In 2003 state Medicaid spending was estimated to rise to $122 billion. (See Figure 1.4.)