Spending on Social Welfare Programs in Rich and Poor States. Final Report.. 3. Selection of Poor States

07/01/2004

Selected for site visits through a three-step process, the six states were Arizona, Louisiana, Mississippi, New Mexico, South Carolina, and West Virginia. First, we ranked all states by an index composed of state fiscal incapacity (i.e., per capita personal income, inversely scored) and social needs (i.e., federal poverty rates) and eliminated the two lower quartiles. Second, we scored the states on several other indicators of need and resources (e.g., children without health insurance, unemployment rates, and alternative measures of fiscal incapacity) and eliminated states that showed several discrepancies (i.e., indicators of wealth or low needs). Third, we reviewed the remaining 12 states to ensure that they fit the basic criteria while still offering useful variation for comparisons. When selected, the six states seemed to divide into three main groupings:

  • Louisiana and Mississippi. Especially poor with large needy populations and traditions of providing few benefits to low income families, both Louisiana and Mississippi were also hit by the economic slowdown early, with unemployment levels increasing after 1999. Louisiana (population 4.48 million, 2000) is more liberal and Democratic than Mississippi and other southern states. On measures of fiscal capacity, Louisiana also varies more than most states. It is especially low on PCPI, but, due to its oil and natural gas industries, its TTR fiscal capacity ranking is about average. Mississippi (population 2.87 million, 2000) also has a high poverty rate, though it is especially low on all fiscal capacity measures. Nonetheless, its poverty rate has declined significantly in recent years, from 24.4 percent in 1990 to 15.8 percent in 2000. Until this year, Mississippi was controlled by Democrats, but it has long shown conservative tendencies in national voting.
  • West Virginia and New Mexico. Although poor with large needy populations, as well, West Virginia and New Mexico demonstrate traditions of greater benefits to low income families. West Virginia (population 1.80 million, 2000) has low fiscal capacity and great needs on all measures. Poverty is high, but it has declined substantially since 1992. Unemployment has fallen in the last decade. Despite a large and important decline in the coal industry, employment, largely low-wage services, has grown. Still, West Virginia's labor participation rate remains low, in part due to an aging population. The state's political culture is more liberal than other poor border states. New Mexico (population 1.86 million, 2000) exhibits the highest poverty rate in the nation and is extremely low on all measures of fiscal capacity, though it differs from other poor states. A southwestern state, its politics and policies are less conservative than those in the poor southern states. For example, New Mexico's TANF maximum cash benefit level is more than twice that of Louisiana and Mississippi.
  • Arizona and South Carolina. With greater fiscal capacity though substantial needs, Arizona and South Carolina face severe short-run fiscal problems due to large recent increases in unemployment, population, and revenue shortfalls. Arizona (population 5.46 million, 2000) is higher than the national average on overall poverty and unemployment and lower than average on per capita personal income, but it is not among the neediest states on these indicators. It does have particularly high levels of child poverty. The most striking characteristic of Arizona has been the growth of demands for social programs due to population increases. Its population increase of 23 percent between 1995 and 2002 tops all states. South Carolina (population 4.11 million, 2000) has also suffered from substantial increases in social needs in recent years. The state's unemployment rate has increased significantly, as did welfare caseloads (17 percent between 2000 and 2002). Population growth has been moderately high, with a 9.6 percent increase between 1995 and 2002. And FYs 2001 and 2002 showed a 3.1 percent drop in revenues, a relatively large decline for poor states.

These states offered sufficient variation in spending levels, program emphases, political cultures, budget processes, constituencies, and other factors to give us leverage in generating plausible hypotheses about influences (i.e., how the effects of fiscal capacity might play out under different governmental, economic, and cultural conditions).

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