Spending on Social Welfare Programs in Rich and Poor States. Final Report.. Chapter I: Introduction

07/01/2004

Social welfare programs strive to improve the well-being of needy and vulnerable populations. Government spending on social welfare programs, although not a guarantee that programs will meet this goal, nonetheless constitutes important tangible evidence of state policies and commitment to social welfare programs. Certainly, a low level of state social welfare spending in poor states relative to a high level of need would constitute cause for concern among policymakers.

States vary enormously in their need for social welfare services and their capacity to finance the services. Presumably, states that have higher proportions of individuals living in poverty have a greater need for programs that provide cash benefits, health care, employment supports, and other services. Often, however, these states bring in fewer tax revenues.

In addition, worsening economic conditions increase the need for these types of services but reduce tax revenue to fund them. Entitlement programs, which provide pre-established benefit levels to all individuals meeting the eligibility criteria, provide some protection to ensure increased funding when the economy worsens. States determine the benefit levels and eligibility criteria based, in part, on the long-term fiscal capacity of the state. Nevertheless, programs that include a state match, such as Medicaid, can place great stress on state budgets as they expand to satisfy needs while state revenues are declining.

This study, produced for the U.S. Department of Health and Human Services (HHS) Office of the Assistance Secretary for Planning and Evaluation (ASPE) by The Lewin Group and the Rockefeller Institute of Government, examines the extent to which fiscal capacity affects state social welfare spending. First, we reviewed the relevant literature regarding this topic. Then, we analyzed spending patterns across the 50 states and over time using Census of Governments (Census) data. Finally, we conducted site visits to six low fiscal capacity states and used qualitative and quantitative information to describe the differences among these states in their spending on social programs.

This report is organized into four major sections plus two appendixes. Section I, Introduction, presents information on the project, policy context, research questions, and a brief literature review. Section II, Approach, describes our methodology for analyzing the spending data as well as our methodology for selecting the six states for field visits and the data collection and analysis. Section III, Findings and Results, lays out the detailed findings from primarily the cross-state spending analysis. Section IV, A Closer Look at Poor States, describes the integrated analysis using the results from the Census data spending analysis and the quantitative and qualitative data collected in the field visits. Lastly, Section V, Final Observations and Conclusions, summarizes and comments on the projects major findings. The two appendixes provide additional information on the econometric modeling (Appendix A) and the six states visited (Appendix B).

 

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