Spending on Social Welfare Programs in Rich and Poor States. Final Report.. A. Differences Among the Six Poor States Selected for Case Studies

07/01/2004

The division among the poor states we noted in section III was also found among the six poor states selected for site visits. Exhibit IV-1 shows the estimated state effects for cash assistance, Medicaid, non-health social services, public hospitals, and non-social welfare. Again, these state effect scores were scaled to equal zero for the mean state effect and 100 (or -100) for a state effect one standard deviation above, or below, the mean.

  Cash Assistance Medicaid Non-health Social Services Public Hospitals Non-social Welfare
Exhibit IV-1.
State Effects for Six States Selected for Site Visits, Based on Estimates from Spending Data, 1977-2000
New Mexico -52 -98 -5 -7 43
Arizona -36 -21 -77 -85 34
West Virginia -111 41 -21 -68 -17
South Carolina -113 15 -33 137 -17
Louisiana -125 -39 -33 153 -15
Mississippi -169 30 -37 172 -23

New Mexico and Arizona were higher than the southern states on cash assistance spending but lower on Medicaid and public hospitals. Mississippi, Louisiana, South Carolina, and West Virginia were all low on cash assistance as well as spending on non-social welfare. Yet they were relatively high on payments to medical vendors or public hospitals. Spending on non-health services was less clearly related to other expenditures. It was high in New Mexico but low in Arizona; high for West Virginia but lower in Mississippi, Louisiana, and South Carolina.

These basic differences among poor states also seemed to be reflected in spending changes from 1977 to 2000, as displayed in Exhibit IV-2. Because the spending patterns of the two western states generally differed from those found among the four southern and border states, we divided the states into those two groupings for the purpose of comparing trends. Thus, the left side of Exhibit IV-2 shows the changes in spending on cash assistance, Medicaid, and non-health social services for New Mexico and Arizona, while the right side traces those changes for Mississippi, Louisiana, South Carolina, and West Virginia.

Exhibit IV-2.
Trends in Spending on Social Welfare Programs Among Six Poor States, 1977-2000

Arizona and New Mexico
Medicaid

Trends in Spending on Social Welfare Programs Among Six Poor States, 1977-2000
Louisiana, Mississippi, South Carolina, and West Virginia
Medicaid

Trends in Spending on Social Welfare Programs Among Six Poor States, 1977-2000
Cash Assistance
Trends in Spending on Social Welfare Programs Among Six Poor States, 1977-2000
Cash Assistance
Trends in Spending on Social Welfare Programs Among Six Poor States, 1977-2000
Non-health Social Services
Trends in Spending on Social Welfare Programs Among Six Poor States, 1977-2000
Non-health Social Services
Trends in Spending on Social Welfare Programs Among Six Poor States, 1977-2000

The most consistent pattern in spending changes across all states was the strong growth of Medicaid in the early 1990s. Most of the states continued to show growth or at least stability for the remainder of the decade. The two exceptions were Arizona and Louisiana, which showed some decline in real spending on Medicaid in the late 1990s.

Most states also showed a marked decline in spending on cash assistance from the middle 1990s onward, due presumably to a combination of welfare reforms and economic growth. However, the western states differed from the others in that this decline came after a substantial increase in spending on cash assistance in the early 1990s. The southern states experienced no such increase. In fact, Mississippi and Louisiana were already seeing declines in real spending on cash assistance before the bigger drops in spending of the middle and late 1990s. Changes in non-health social services spending were typically less dramatic. Most states showed overall though slow increases in spending over these years, with the western states and West Virginia showing more volatility than the southern states.

Perhaps the most striking finding from these data involves the different linkages between spending trends in each state. In Arizona and New Mexico, spending changes in cash assistance, Medicaid, and non-health social services showed a rough correspondence, with slow change before the 1990s, strong growth in the early 1990s, and some stalling or even a decline in real spending in the late 1990s. Arizona, for example, showed strong increases in all three forms of spending in the early 1990s, reversals in the late 1990s, and an uptick in 2000. In contrast, spending changes in other states showed less linkage or even negative relationships. In Mississippi and South Carolina, Medicaid and non-health social services grew rapidly while spending on cash assistance grew slowly or fell. West Virginia and Louisiana showed little linkage in spending trends across functional areas.

Thus, the dynamic patterns of spending reflected some of the state differences we found in the estimated state effects. Arizona and New Mexico treated all three major functional spending areas in roughly similar ways-to some extent, like the wealthier states did. Their spending on cash assistance was not extremely low, nor did it show secular decline. The other states showed a sharp divergence between long-run staticity or decline in cash assistance spending and rapid growth in spending on Medicaid, starting in the early 1990s. In these latter states, other public welfare spending also grew, though usually more fitfully and less strongly. Thus, at least among the southern states, little evidence of a linked package of social welfare programs emerged. In fact, different program areas showed some indications of negative relationships over time.

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