APPENDIX K. SPENDING FOR INCOME-TESTED BENEFITS, FISCAL YEARS 1968-94 CONTENTS Overview Trends in Spending Spending Trends by Level of Government Federal Government State/Local Governments Share of Federal Budget Used for Income-Tested Benefits Medical Aid Cash Aid Food Aid Housing Aid Education Aid Other Services Jobs and Training Aid Energy Aid Other Aid List of Income-Tested Programs References OVERVIEW \1\ --------------------------------------------------------------------------- \1\ The Census Bureau (Tin, 1996), based on the Survey of Income and Program Participation, examines participation in several of the programs reviewed in this section. These include: Aid to Families with Dependent Children, General Assistance, food stamps, Supplemental Security Income, Medicaid, and housing assistance. The Census Bureau study provides measures of how many adults and children actually receive benefits from these programs. --------------------------------------------------------------------------- The Congressional Research Service (CRS) has found that more than 80 benefit programs provide cash and noncash aid that is directed primarily to persons with limited income (Burke, 1995). Such programs constitute the public ``welfare'' system, if welfare is defined as income-tested or need-based benefits (the programs are listed at the end of this chapter). This definition excludes social insurance programs, such as Social Security and Medicare. These income-tested benefit programs in fiscal year 1994 cost $344.9 billion: $246.2 billion in Federal funds and $98.6 billion in State-local funds. Total outlays by these programs amounted to 5.1 percent of the gross domestic product (GDP), the highest share in a quarter-century of records. Federal funds provided 71.4 percent of the total. These Federal welfare outlays accounted for 16.9 percent of the fiscal year 1994 Federal budget. In fiscal year 1994, almost 47 percent of welfare funds were used for medical services. Cash relief, food benefits, and housing aid together accounted for 43 percent. Slightly more than 6 percent was invested in ``human capital'' programs, ones providing education, jobs, and training. The rest (4.2 percent) went for energy aid and other services. The composition of welfare spending differed by level of government. Medical aid consumed 68.2 percent of State-local welfare funds, but only 38.1 percent of Federal welfare dollars. Most income-tested programs provide benefits, in the form of cash, goods, or services, to persons who make no payment and render no service in return. However, in the case of the job and training programs and some educational benefits, recipients must work or study. Further, the Aid to Families with Dependent Children (AFDC) and Food Stamp Programs require some able- bodied recipients to engage in work or a work-related activity. Finally, the Earned Income Credit (EIC) is available only to workers. An unduplicated count of welfare beneficiaries is not available. Record large numbers of recipients were served by the four most costly programs in 1994: Medicaid, 34 million persons; AFDC, 14.2 million persons in 5 million families; Supplemental Security Income (SSI), 6.4 million aged, blind, or disabled persons; and food stamps, 28.9 million persons (the last 3 numbers are monthly averages). The largest program, EIC, went to an estimated 54.2 million persons in 18.1 million families. TRENDS IN SPENDING The CRS data series provides annual spending figures for 22 fiscal years (1968, 1973, and 1975-94). Total expenditures on cash and noncash welfare programs were 21 times as great in 1994 as in 1968 (table 18-1). Even after allowance for price inflation, spending more than quintupled (rising 435 percent) over the 26 years, a period when the U.S. population rose 30 percent. Trends shown in table 18-1 are consistent with those in a less inclusive data series maintained by the Social Security Administration (SSA). The SSA series, called public aid, is a category within SSA reports on social welfare expenditures. SSA data on public aid exclude income-tested child nutrition, subsidized housing, educational benefits, adoption assistance, foster care, some job training, and other programs covered in the CRS series. Public aid expenditures reported by SSA generally are about 30 percent below income- tested outlays reported by CRS. Adjusted for price inflation, public aid outlays in the SSA series rose 371 percent, and income-tested outlays in the CRS series rose 379 percent, between 1968 and 1992. (For fiscal year 1992 public aid data of SSA, see Bixby, 1995.) The CRS data series is somewhat different from one presented in a recent study by Rector and Lauber (1995) of the Heritage Foundation. The list of 80 major programs included in their analysis (see their Appendix One, pp. 45ff) is similar to the CRS list. However, the Rector and Lauber list includes some programs (grants to local education authorities for educationally deprived children and programs of community development aid) not in the CRS series, which is restricted to programs that provide benefits to individuals or families who meet a needs test. Moreover, the Rector and Lauber study provides estimates for years (1965-67; 1969-72; and 1974) that are not covered in the CRS study. Even so, results from the two studies are similar. The most recent year for comparison of results is 1993. In that year, Rector and Lauber estimate total (Federal and State) welfare spending at $324.4 billion, as compared with $310.5 billion in the CRS analysis. Almost all of the diference between the two estimates is accounted for by the education and community development programs included in the Rector and Lauber analysis. For the period 1965-93, the Rector and Lauber study estimated that a total of $5.4 trillion in constant 1993 dollars was spent by Federal and State governments on the programs included in their analysis. The total for the CRS series, which does not include all the programs and all the years used in the Rector and Lauber series, is $4.5 trillion in 1994 dollars (see table 18-1). TABLE 18-1.--EXPENDITURES FOR INCOME-TESTED BENEFITS, FISCAL YEARS 1968-94 [In billions] ---------------------------------------------------------------------------------------------------------------- Total spending ------------------------------- Fiscal year Federal State/local Current Constant 1994 dollars dollars ---------------------------------------------------------------------------------------------------------------- 1968.................................................. $11.406 $4.710 $16.116 $64.474 1973.................................................. 26.876 10.054 36.930 119.075 1975.................................................. 39.461 14.753 54.214 147.289 1976.................................................. 49.954 16.990 66.944 170.410 1977.................................................. 55.113 18.892 74.005 174.158 1978.................................................. 63.964 20.151 84.115 184.828 1979.................................................. 70.172 21.304 91.476 185.441 1980.................................................. 80.043 24.633 104.676 192.401 1981.................................................. 87.936 29.045 116.981 196.438 1982.................................................. 88.977 31.706 120.683 190.397 1983.................................................. 93.830 33.982 127.812 192.146 1984.................................................. 99.151 36.191 135.342 195.248 1985.................................................. 105.064 38.230 143.294 199.354 1986.................................................. 107.775 40.811 148.586 199.562 1987.................................................. 114.789 43.364 158.153 204.997 1988.................................................. 125.047 46.580 171.627 213.270 1989.................................................. 134.715 51.587 186.302 220.897 1990.................................................. 151.478 59.339 210.817 238.365 1991.................................................. 177.899 72.194 250.093 269.715 1992.................................................. 208.211 87.094 295.305 308.712 1993.................................................. 223.528 87.700 311.228 316.652 1994.................................................. 246.240 98.621 344.861 344.861 ---------------------------------------------------------------------------------------------------------------- Source: Burke, 1995. Measured in constant 1994 dollars (calculated by use of the implicit price deflators for personal consumption expenditures), the annual rate of growth in spending for income-tested benefits over the whole period, 1968-94, was 6.7 percent in the CRS study. However, the growth pattern was uneven. During the first 8 years (1968-75) spending climbed at an annual rate of 12.9 percent; in the next 8 years (1976-83) the annual rate of increase dropped to 1.7 percent (in 1 year, 1982, real spending declined, and it remained below the 1981 level until 1985); in the last 11 years (1984-94) the annual growth rate rose to 5.8 percent. Total per capita welfare spending grew in constant 1994 dollars from $321 in fiscal year 1968 to $854 in fiscal year 1981, an increase of 166 percent. However, in fiscal year 1982, welfare spending failed to keep pace with inflation. In 1994 dollars welfare outlays fell 3 percent ($6 billion), and per capita spending declined to $820. In fiscal year 1984 real per capita welfare spending increased, but it did not regain (and overtake) its 1981 level until 1988, when it reached $870. Each year since then real per capita welfare spending has set new records: 1989, $893; 1990, $954; 1991, $1,068; 1992, $1,218; 1993, $1,232; and 1994, $1,325. SPENDING TRENDS BY LEVEL OF GOVERNMENT Federal Government Measured in constant 1994 dollars, Federal spending for income-tested benefits climbed from $45.6 billion in fiscal year 1968 to $246.2 billion in fiscal year 1994, an increase of 440 percent (table 18-2). Cash aid was the leading form of Federal welfare until 1980, when it was overtaken in value by medical benefits. Two years later, in 1982, Federal welfare spending declined for all forms of aid except subsidized housing, in which case outlays reflected earlier commitments, and education benefits. In 1983, Federal spending declined further for medical benefits, cash aid, and energy aid. Between 1983 and 1994, real Federal welfare spending climbed $105 billion, or 75 percent. The increases were dominated by medical benefits ($58.5 billion) and cash aid ($28 billion). Next came increases for food benefits ($9 billion), housing aid ($7 billion), education ($3 billion) and services ($2.4 billion). Real Federal outlays for jobs/training benefits and energy aid spending declined. A comparison of 1983 and 1994 data shows a marked change in the composition of Federal income-tested spending. Shares of Federal welfare outlays: Medical benefits, 25 percent in 1983 and 38 percent in 1994; cash benefits, 24 percent and 25 percent, respectively; food benefits, 19 percent and 15 percent; housing benefits, 13 percent and 10.5 percent; job/ training aid, 5 percent and 2 percent; and services, 3.5 percent and 3 percent. State/Local Governments Measured in constant 1994 dollars, State/local spending for income-tested benefits climbed from $18.8 billion in fiscal year 1968 to $98.6 billion in fiscal year 1994, an increase of 423 percent (table 18-3). Cash aid was overtaken by medical benefits as the dominant form of State/local welfare spending in 1976. Unlike Federal welfare spending, which fell below 1981 levels in real value in 1982-86, State-local spending rose steadily in all years except two, 1978 and 1993. TABLE 18-2.--FEDERAL SPENDING FOR INCOME-TESTED BENEFITS BY FORM OF BENEFIT, FISCAL YEARS 1968-94 [Millions of constant fiscal year 1994 dollars] -------------------------------------------------------------------------------------------------------------------------------------------------------- Jobs/ Fiscal year Medical Cash aid Food Housing Education training Services/ Energy Total benefits benefits benefits benefits aid other \1\ aid -------------------------------------------------------------------------------------------------------------------------------------------------------- 1968................................................. $10,966 $20,151 $3,573 $3,133 $3,441 $2,836 $1,532 $0 $45,631 1973................................................. 21,471 27,649 12,430 10,827 5,872 2,976 5,433 0 86,658 1975................................................. 26,041 34,609 17,493 11,775 5,923 5,838 5,529 0 107,208 1976................................................. 27,862 37,983 19,670 13,517 9,404 11,725 6,932 71 127,161 1977................................................. 31,017 36,940 18,252 14,214 8,183 12,762 7,620 711 129,699 1978................................................. 32,006 35,260 18,697 16,131 8,936 21,314 7,605 600 140,549 1979................................................. 33,268 34,325 21,036 17,148 9,753 18,784 7,405 533 142,253 1980................................................. 35,657 34,883 24,058 17,656 8,988 15,853 6,865 3,163 147,124 1981................................................. 37,368 35,197 26,345 18,235 8,038 12,621 6,487 3,374 147,665 1982................................................. 36,349 34,038 24,728 18,590 12,282 6,293 4,895 3,199 140,375 1983................................................. 35,440 33,677 27,205 18,760 11,159 6,776 4,967 3,076 141,060 1984................................................. 35,841 34,310 27,000 18,516 11,557 7,757 4,961 3,096 143,038 1985................................................. 38,787 34,066 26,937 19,634 13,239 5,419 4,940 3,146 146,168 1986................................................. 39,989 35,360 25,709 17,816 13,505 4,870 4,553 2,948 144,750 1987................................................. 45,494 35,592 25,785 17,124 12,661 4,902 4,675 2,555 148,789 1988................................................. 47,976 37,669 25,121 18,268 13,852 4,657 5,578 2,267 155,388 1989................................................. 50,265 39,321 24,704 18,882 14,802 4,523 5,301 1,931 159,730 1990................................................. 56,748 41,207 26,990 19,841 15,559 4,494 4,618 1,814 171,272 1991................................................. 67,293 45,589 30,202 20,449 16,029 4,733 5,614 1,948 191,857 1992................................................. 82,187 50,928 34,299 22,917 14,220 5,246 6,106 1,762 217,664 1993................................................. 86,466 54,280 35,378 24,373 14,562 4,854 5,950 1,561 227,424 1994................................................. 93,892 61,477 36,233 25,738 14,804 4,870 7,389 1,837 246,240 -------------------------------------------------------------------------------------------------------------------------------------------------------- \1\ ``Other'' represents State Legalization Impact Assistance Grants, first available in fiscal year 1988, which fund medical, cash, educational, and other benefits. Source: Burke, 1995. TABLE 18-3.--STATE/LOCAL SPENDING FOR INCOME-TESTED BENEFITS BY FORM OF BENEFIT, FISCAL YEARS 1968-94 \1\ -------------------------------------------------------------------------------------------------------------------------------------------------------- Jobs/ Fiscal year Medical Cash aid Food Housing Education training Services/ Energy Total benefits benefits benefits benefits aid other \2\ aid -------------------------------------------------------------------------------------------------------------------------------------------------------- 1968................................................. $8,245 $9,962 $0 NA $0 $172 $464 $0 $18,843 1973................................................. 13,429 17,079 0 NA 0 181 1,728 0 32,418 1975................................................. 17,961 18,341 1,519 NA 389 106 1,766 0 40,081 1976................................................. 19,866 19,525 1,611 NA 397 99 1,751 0 43,249 1977................................................. 20,919 19,238 1,913 NA 435 134 1,819 0 44,459 1978................................................. 21,448 18,462 1,918 NA 521 138 1,791 0 44,278 1979................................................. 22,575 17,381 801 NA 509 158 1,764 0 43,188 1980................................................. 24,262 17,914 840 NA 526 149 1,586 0 45,277 1981................................................. 26,246 18,467 974 NA 490 141 2,455 0 48,773 1982................................................. 27,697 17,626 1,134 NA 424 118 2,998 24 50,021 1983................................................. 28,388 17,755 1,177 NA 454 119 3,157 38 51,087 1984................................................. 29,619 17,870 1,370 NA 436 113 2,741 62 52,210 1985................................................. 29,995 18,295 1,432 NA 632 113 2,678 43 53,187 1986................................................. 30,982 18,967 1,481 NA 665 98 2,552 67 54,812 1987................................................. 31,895 19,210 1,513 NA 662 92 2,566 270 56,208 1988................................................. 33,744 19,128 1,415 NA 676 89 2,610 220 57,882 1989................................................. 36,773 19,551 1,378 NA 646 115 2,490 213 61,166 1990................................................. 41,377 20,137 1,396 NA 711 302 3,029 140 67,093 1991................................................. 51,183 20,869 1,415 NA 590 473 3,206 122 77,858 1992................................................. 59,753 22,065 1,509 $2,404 642 498 4,085 92 91,048 1993................................................. 59,016 21,825 1,593 1,353 779 572 4,018 72 89,228 1994................................................. 67,247 22,272 1,867 392 903 661 5,245 34 98,621 -------------------------------------------------------------------------------------------------------------------------------------------------------- \1\ In millions of constant fiscal year 1994 dollars. \2\ The spending ``decline'' in 1979 represents a change in accounting. Data for 1975-78 include estimated State-local funds used for free and reduced price school lunches. For subsequent years these estimates could not be made. NA--Not available. Source: Burke, 1995. Between 1983 and 1994, State-local spending for income- tested benefits almost doubled in real value, rising by $47.5 billion. More than four out of five of these extra dollars ($38.9 billion in all) were spent on medical benefits. Other sizable increases: cash aid, up $4.5 billion; and services, up $2 billion. In both years medical benefits and cash aid together consumed 90 percent of state-local welfare dollars, but their shares were drastically changed. The share spent on medical aid climbed by almost 13 percentage points (to 68.2 cents out of the benefit dollar); the share spent on cash aid declined by 12 percentage points (to 22.6 cents out of the benefit dollar). SHARE OF FEDERAL BUDGET USED FOR INCOME-TESTED BENEFITS The share of the Federal budget used for income-tested benefits climbed from 6.4 percent in fiscal year 1968 to 16.9 percent in fiscal year 1994 (table 18-4). Most of the increase of 10.5 percentage points was accounted for by medical benefits (4.9 percentage point gain). Measured in percentage points, increases for other forms of aid are: cash benefits, 1.5; food aid, 2; housing benefits, 1.3; education, 0.5; services, 0.3; energy aid, 0.1. Federal spending for income-tested jobs/ training benefits declined as a percent of the budget (down 0.1 percentage point). TABLE 18-4.--SHARE OF FEDERAL BUDGET USED FOR INCOME-TESTED AID, BY FORM OF AID, SELECTED FISCAL YEARS 1968-94 [In percent] ---------------------------------------------------------------------------------------------------------------- Medical Cash Food Housing Education Jobs/ Fiscal year aid aid aid aid aid training Energy Services ---------------------------------------------------------------------------------------------------------------- 1968................................... 1.54 2.83 0.50 0.44 0.48 0.40 0.00 0.22 1973................................... 2.71 3.49 1.57 1.37 0.74 0.38 0.00 0.69 1978................................... 3.18 3.50 1.85 1.60 0.89 \1\ 2.11 0.06 0.75 1983................................... 2.92 2.77 2.24 1.54 0.92 0.56 0.25 0.41 1988................................... 3.63 2.85 1.90 1.38 1.05 0.35 0.17 0.42 1990................................... 4.01 2.91 1.91 1.40 1.10 0.32 0.13 0.33 1991................................... 4.71 3.19 2.12 1.43 1.12 0.33 0.14 0.39 1992................................... 5.69 3.53 2.38 1.59 0.99 0.36 0.12 0.42 1993................................... 6.03 3.79 2.47 1.70 1.02 0.34 0.11 0.42 1994................................... 6.43 4.21 2.48 1.76 1.01 0.33 0.13 0.51 ---------------------------------------------------------------------------------------------------------------- \1\ In fiscal year 1978, jobs and training benefit outlays were $9.7 billion of this total; $5.8 billion represented public service employment and $2 billion employment and training services. Source: Burke, 1995. LIST OF INCOME-TESTED PROGRAMS Below is the list of programs providing income-tested benefits. Within each category, the programs are listed in the order of their total cost (fiscal year 1994, in millions of dollars) to Federal and State/local governments. Medical Aid 1. Medicaid (143,593) 2. Medical care for veterans without service-connected disability (8,162) 3. General assistance (medical care component) (5,370) 4. Indian health services (1,943) 5. Maternal and child health services block grant (1,118) 6. Community health centers (604) 7. Title X family planning services (181) 8. Medical assistance to refugees and Cuban/Haitian entrants (109) 9. Migrant health centers (59) Cash Aid 10. Supplemental Security Income (SSI) (27,310) 11. Aid to Families with Dependent Children (AFDC) (25,920) 12. Earned Income Tax Credit (EITC) (16,549) 13. Foster care (5,159) 14. General assistance (nonmedical care component) (3,250) 15. Pensions for needy veterans, their dependents, and survivors (3,159) 16. Emergency assistance (EA) to needy families with children (1,564) 17. Adoption assistance (629) 18. General assistance to Indians (84) 19. Cash assistance to refugees and Cuban/Haitian entrants (70) 20. Dependency and indemnity compensation (DIC) and death compensation for parents of veterans (54.5) Food Aid 21. Food stamps (27,396) 22. School lunch program (free and reduced price segments) (4,438) 23. Special Supplemental Nutrition Program for Women, Infants, and Children (WIC) (3,309) 24. School breakfast program (free and reduced price segments) (936) 25. Child and adult care food program (774) 26. Nutrition program for the elderly (689) 27. Summer food service program for children (243) 28. The Emergency Food Assistance Program (TEFAP) (169) 29. Commodity Supplemental Food Program (CSFP) (90) 30. Food distribution program on Indian reservations (55) 31. Special milk program (free segment) (1) Housing Aid 32. Section 8 low-income housing assistance (14,576) 33. Low-rent public housing (6,609) 34. Rural housing loans (section 502) (2,384) 35. Section 236 interest reduction payments (659) 36. Home Investment Partnerships Program (HOME) (595) 37. Rural rental housing loans (section 515) (512) 38. Rural rental assistance payments (section 521) (445) 39. Home Ownership and Opportunity for People Everywhere (HOPE) Programs (81) 40. Farm labor housing loans (section 514) and grants (section 516) (59) 41. Section 101 rent supplements (56) 42. Rural housing repair loans and grants (section 504) (53) 43. Section 235 home ownership assistance for low-income families (46) 44. Rural housing preservation grants (section 533) (23) 45. Indian housing improvement grants (20) 46. Rural housing self-help technical assistance grants (section 523) and rural housing site loans (sections 523 and 524) (13) Education Aid 47. Federal Pell grants (6,459) 48. Head Start (4,156) 49. Subsidized Federal Stafford loans (2,757) 50. Federal work-study program (617) 51. Supplemental educational opportunity grants (584) 52. Federal trio programs (388) 53. Chapter 1 Migrant Education Program (303) 54. Perkins loans (166) 55. State Student Incentive Grant (SSIG) Program (145) 56. Fellowships for graduate and professional study (65) 57. Health professions student loans and scholarships (43) 58. Follow through (9) 59. Migrant High School Equivalency Program (HEP) (8) 60. Ellender fellowships (4) 61. College Assistance Migrant Program (CAMP) (2) 62. Child Development Associate Scholarship Program (1) Other Services 63. Social services block grant (Title XX) (8,322) 64. Child care for recipients (and ex-recipients) of AFDC (1,199) 65. Child Care and Development Block Grant (893) 66. ``At risk'' child care (to avert eligibility for AFDC) (505) 67. Community services block grant (464) 68. Legal services (400) 69. Emergency Food and Shelter Program (130) 70. Social services for refugees and Cuban/Haitian entrants (69) Jobs and Training Aid 71. Job Opportunities and Basic Skills Training Program (JOBS) (1,417) 72. Job corps (1,040) 73. Adult training (988) 74. Summer Youth Employment and Training Program (877) 75. Youth training (609) 76. Senior Community Service Employment Program (456) 77. Foster grandparents (97) 78. Senior companions (48) Energy Aid 79. Low-Income Home Energy Assistance Program (LIHEAP) (1,731) 80. Weatherization assistance (140) Other Aid 81. State legalization impact assistance grants (652) REFERENCES Bixby, A.K. (1995). Public Social Welfare Expenditures, Fiscal Year 1992. Social Security Bulletin, 58(2), pp. 65-73. Burke, V. (1995). Cash and noncash benefits for persons with limited income: Eligibility rules, recipient and expenditure data, fiscal years 1992-1994 (96-159 EPW). Washington, DC: Congressional Research Service. Rector, R., & Lauber, W.F. (1995). America's failed $5.4 trillion war on poverty. Washington, DC: Heritage Foundation. Tin J. (1996, July). Who gets assistance? Current Population Reports (Household Economic Studies, P70-58). Washington, DC: U.S. Bureau of the Census.