The study included site visits to six states for in-depth answers to questions about how state fiscal capacity affects state spending on social programs. We visited states with low fiscal capacity and high social needs to understand how such states coped with this seeming imbalance. Three questions were of particular interest:
Spending on Social Welfare Programs in Rich and Poor States. Final Report.. 2. Overview of Data Sources and How the Data Were Used
We considered several data sources on state spending for estimating the 50-state econometric model, including data from the U.S. Census Bureau (Census Bureau), the National Association of State Budget Officers (NASBO), the National Conference of State Legislatures (NCSL), and federal departments. No data source provides comprehensive, detailed mea
An important question is how state and local spending responds to changes in the level of overall economic activity such as booms and recessions and changes in state labor market conditions. To some extent, the unemployment variable in the need analysis incorporates the effects of unemployment on state and local spending. In addition, we developed
Spending on Social Welfare Programs in Rich and Poor States. Final Report.. b. Linear Expenditure Models
Following McGuire (1978) for the basic theoretical model, we assumed that the decision-maker is the combined state and local system. This approach allowed us to model state and local spending on both public and private goods in a consistent way. The budget constraint consists of state fiscal capacity augmented by federal grants. The state and loca
Spending on Social Welfare Programs in Rich and Poor States. Final Report.. a. Analysis of Trends and Patterns
Our analysis of time trends and cross-state patterns in social welfare spending involved examining Census data on per capita spending by state and local governments for the period 1977 to 2000 for each of the 50 states plus the District of Columbia. In subsection IIC below, we describe in detail the data examined.
Our analysis of Census spending data involved both examining time trends and patterns across states and estimating an econometric model. The analysis of trends and patterns entailed primarily the study of time trends and cross-state patterns for different components of spending. We developed the econometric model to give insight into the determina
To answer the research questions identified in the Introduction, first we analyzed spending trends and patterns over 24 years for the 50 states plus the District of Columbia by using sample means from Census data and an econometric model estimated from the pooled time series and cross-section data. We supplemented this analysis with site visits an
2 The Food Stamp Program requires a state match for administrative costs.
Spending on Social Welfare Programs in Rich and Poor States. Final Report.. c. Political and Institutional Determinants
State political cultures and institutions might also affect state spending on social welfare programs. But prior research often showed unstable results, and it failed to cover the wide range of program areas dealt with in this study. In political science, the investigation into the effects of political and institutional factors on redistributive p
It is hypothesized that the higher the poverty and other indicators of need, the more the state will spend on programs benefiting the poor. Mogull (1989) suggests that poverty affects expenditures in two ways. First, high levels of poverty increase the pool of eligible persons. Second, increased visibility of concentrations of poor people can incr
Overall, research has found a positive association between fiscal capacity and social welfare spending. One study (Mogull, 1978) found that primarily fiscal resources, measured by per capita personal income and federal aid, determined state and local expenditures on antipoverty programs. Other studies (Jennings, 1980; Orr, 1976; Plotnick & Win
Spending on Social Welfare Programs in Rich and Poor States. Final Report.. 3. Determinants of Social Welfare Spending
We hypothesized that three factors drive state spending on social welfare programs: fiscal capacity, need, and political and institutional factors. Prior literature has attempted to explain the connection between these factors and spending.
Spending on Social Welfare Programs in Rich and Poor States. Final Report.. 2. Measuring Fiscal Capacity
The term fiscal capacity can be measured several ways, although this term is generally used to represent a states potential to raise revenue and not the actual fiscal choices made. Common ways for measuring fiscal capacity include the following:
Spending on Social Welfare Programs in Rich and Poor States. Final Report.. 1. Trends in Spending on Social Welfare Programs
Researchers have tracked changes in spending over time. According to Census data, total real general expenditures on social welfare increased from about $2,000 to about $2,600 per capita from 1988 to 1997, a 30 percent increase. Almost half of the increase in state spending resulted from increased spending for social welfare. Merriman (2000a) foun
Spending on Social Welfare Programs in Rich and Poor States. Final Report.. C. Review of Related Literature
The following literature review touches on the highlights of prior literature on trends in social welfare spending, issues in measurement of state fiscal capacity, and determinants of state and local spending on social welfare, including state fiscal capacity, need for services, and political and institutional factors.
In an effort to understand the relationship between fiscal capacity and state spending on social welfare programs, this study addresses several research questions:
The fact that states spend differing amounts per capita on social welfare is well known; the extent to which these differences relate to differences in state fiscal capacity is less understood. The federal government has long played an important role in offsetting state fiscal disparities. However, significant changes have occurred in federal gran