Spending on Social Welfare Programs in Rich and Poor States. Final Report.. State Narratives

Population (July 2003): 5.6 Million

Total State Expenditures - SFY 2002: $18,983 Million (US Total: $1,073,816 Million)

TANF Expenditures - SFY 2002 (% of total): 0.7% (US: 1.3%)

Medicaid Expenditures - SFY 2002 (% of total): 19% (US: 20.8%)

(Source: U.S. Department of Commerce, Census Bureau and NASBO 2002 State Expenditure Report)

Arizona's per capita personal income is lower than the national average, although higher than any of the other five states in the case study. As noted earlier, in 1995 and 2001, Arizona, while not in the bottom quartile, was in the second to bottom quartile when ranking states using this measure. Data from the state's Joint Legislative Budget Committee indicate that 95 percent of Arizona's state revenue comes from sales, personal income, and corporate taxes. The state relies heavily on sales tax with 52 percent of its revenue in 2003 coming from this source. The committee is projecting revenue from the three taxes to continue to recover in 2004 and 2005 after either declines or declining growth from 1999 to 2002. Information from the Center on Budget and Policy Priorities suggests that Arizona faces a significant budget deficit of approximately $1.1 billion for SFY 2005.

Arizona's overall poverty rate is higher than the national average. Arizona's rapid growth in population from 1995 to 2003, over one million new citizens or a 25 percent increase, has put pressure on the state budget by increasing need from all government services. The state has also experienced an increase in cash assistance and Medicaid caseloads. Arizona's cash assistance caseload increased 53 percent from January 2001 to June 2003, compared to a 5 percent decline for all states. Medicaid caseload has also increased due to an expansion in eligibility from a voter-driven initiative discussed below.

Population (July 2003): 4.5 Million

Total State Expenditures - SFY 2002: $17,608 Million (US Total: $1,073,816 Million)

TANF Expenditures - SFY 2002 (% of total): 0.8 % (US: 1.3%)

Medicaid Expenditures - SFY 2002 (% of total): 26.8% (US: 20.8%)

(Source: U.S. Department of Commerce, Census Bureau and NASBO 2002 State Expenditure Report)

Louisiana has low fiscal capacity as measured by per capita personal income and representative tax system (43rd on both). It ranks 26th if fiscal capacity is measured by total taxable resources, which are largely based on goods and services produced in the state, and reflect the value of oil production. Louisiana holds almost 10 percent of U.S. oil reserves, making it the country's third largest producer of petroleum. It also has large reserves of natural gas, producing over one-quarter of all U.S. supplies.

Although Louisiana's poverty rate declined in the 1990s, its level has remained high. 2001's 16.7 percent poverty rate is among the highest in the nation, exceeded only by Arkansas and New Mexico. In 2000, 51.5 percent of Louisiana's children lived in households at or below 200 percent of the federal poverty rate and 13.4 percent of those children had no health insurance, placing Louisiana second highest nationwide after New Mexico. Unemployment is above average, as well, increasing 5.1 percent in 1999 to 6.6 percent in 2003.

Population (July 2003): 2.9 Million

Total State Expenditures - SFY 2002: $10,521 Million (US Total: $1,073,816 Million)

TANF Expenditures - SFY 2002 (% of total): 0.7 % (US: 1.3%)

Medicaid Expenditures - SFY 2002 (% of total): 26% (US: 20.8%)

(Source: U.S. Department of Commerce, Census Bureau and NASBO 2002 State Expenditure Report)

Mississippi has the lowest fiscal capacity in the nation based on per capita personal income, representative tax system, and total taxable resources. Its poverty rate of 16.6 percent for 2001 is among the highest, exceeded only by New Mexico and Louisiana in the six sample states. However, in 2000 the proportion of children without health insurance was only slightly above the national average: 7.7 percent of children below 200 percent of the federal poverty level did not have health insurance, compared to an average state rate in the U.S. of 6.8 percent. Mississippi thus resembles South Carolina and West Virginia-whose percentages of children without health insurance are also near the national average-rather than New Mexico, Louisiana, and Arizona, where the percentages of children without insurance are much higher.

Although the state's poverty rate remains high, it declined greatly in the 1990s, from 25.6 percent in 1991 to 15.6 percent in 1999. Unemployment also dropped from 8.8 percent in 1991 to 5.1 percent in 1999, after which it rose to 6.8 percent in 2002. Major industries in the state have included automobiles, poultry, timber, and gambling casinos (on the river). The state's population grew more slowly than the national average: 5.5 percent between 1995 and 2002. Unlike most states, tax revenues grew every year between FY 2000 and FY 2003, though the rate of increase declined after 2000. The state has had a series of budget shortfalls due to rising needs as well as slow revenue growth.

Population (July 2003): 1.9 Million

Total State Expenditures - SFY 2002: $8,981 Million (US Total: $1,073,816 Million)

TANF Expenditures - SFY 2002 (% of total): 1.8% (US: 1.3%)

Medicaid Expenditures - SFY 2002 (% of total): 19.4% (US: 20.8%)

(Source: U.S. Department of Commerce, Census Bureau and NASBO 2002 State Expenditure Report)

Although New Mexico's per capita personal income is one of the lowest in the nation, the state does a good job raising revenue. The state's general fund recurring revenue collections are expected to increase by 8.1 percent in SFY 2004. Nearly 16 percent

of New Mexico's general fund revenues come from oil and gas production.

New Mexico has weathered the recent economic downturn well, experiencing only minor declines in revenue later than most states and maintaining an operating reserve well above five percent. The Department of Finance and Administration projects reserve balances will reach 9.6 percent of total recurring appropriations at the end of SFY 2004. State general fund revenues are expected to increase by 4.2 percent from SFY 2004 to 2005 due to abnormally high oil and gas prices as well as improvements in gross receipts, personal income, and corporate income tax collections. Projections suggest New Mexico's revenue will flatten from 2006 to 2008 as oil and gas prices decline and recent reductions in personal income taxes are phased in.

As noted earlier, New Mexico had one of the highest poverty rates in the nation in 2001, with approximately 17 percent of the state's population living in poverty, compared to 11 percent for the nation. New Mexico's unemployment rate is typically higher than most states. However, New Mexico performed better than the nation and most states during the recent economic downturn. In 2002, New Mexico's unemployment rate fell below the national rate and in 2003 and the first few months of 2004, unemployment rates in New Mexico have been only slightly above the national level. New Mexico employment growth has consistently been among the top five among all western states during the last year.

Population (July 2003): 4.1 Million

Total State Expenditures - SFY 2002: $14,894 Million (US Total: $1,073,816 Million)

TANF Expenditures - SFY 2002 (% of total): 0.2 % (US: 1.3%)

Medicaid Expenditures - SFY 2002 (% of total): 22.6% (US: 20.8%)

(Source: U.S. Department of Commerce, Census Bureau and NASBO 2002 State Expenditure Report)

South Carolina has low fiscal capacity as measured by per capita personal income, representative tax system, and total taxable resources. Its poverty rates have been above average-12.7 percent in 2001, compared to 11.1 percent in the U.S. as a whole-though they have not been as high as most of the other poor states in the site visit sample (e.g., New Mexico, West Virginia, Mississippi, and Louisiana all have poverty rates in 2001 well over 15 percent). The proportion of children without health insurance was close to the national average in 2000.

But the state has suffered more than other low fiscal capacity states from recent increases in social needs. Between 2000 and 2003, the state's average monthly unemployment rate increased by 80 percent, from 3.8 percent to 6.8 percent, the largest increase among these six states. Welfare caseloads increased 17 percent between 2000 and 2002. Population growth has been moderately high, with a 9.6 percent increase between 1995 and 2002. The state's population is also aging more rapidly than other states (a change that puts great demands on Medicaid spending). Fiscal years 2001 and 2002 showed a 3.1 percent drop in revenues, a large decline for poor states.

Population (July 2003): 1.8 Million

Total State Expenditures - SFY 2002: $8,150 Million (US Total: $1,073,816 Million)

TANF Expenditures - SFY 2002 (% of total): 2.5 % (US: 1.3%)

Medicaid Expenditures - SFY 2002 (% of total): 19.8 % (US: 20.8%)

(Source: U.S. Department of Commerce, Census Bureau and NASBO 2002 State Expenditure Report)

West Virginia's per capita personal income has been one of the lowest in the nation for the past twenty years. West Virginia did not benefit as much as other states from the economic boom of the late 1990s probably because its personal income tax is not as heavily dependent on the stock market. The recent projected state budget deficits for SFYs 2004 and 2005 have forced state officials to make difficult cuts.

West Virginia is also a high need state by most standards. The state's poverty rate has been one of the highest in the nation since 1995. Unemployment in West Virginia has also been consistently higher than the national rate, although it has decreased from 6.6 percent in 1998 to 4.8 percent in 2001, and again increased to 6.1 percent in 2003. West Virginia's labor force participation rate is especially low, ranging from 50 to 55 percent since 1995, compared to 63 to 65 percent for the nation. This may reflect large number of unemployed individuals who have stopped looking for work, as well as an aging population.