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Public welfare expenditures include cash assistance through Temporary Assistance for Needy Families (TANF), Supplemental Security Income, and other payments made directly to individuals, as well as payments to physicians and other service providers under programs like Medicaid.¹

Census does not separate Medicaid spending into its own category. Instead, most Medicaid spending is accounted for under the public welfare category with some spending counted as hospital expenditures.

• How much do state and local governments spend on public welfare?
• How does state spending differ from local spending and what does the federal government contribute?
• How have public welfare expenditures changed over time?
• How and why does spending differ across states?

How much do state and local governments spend on public welfare?

In 2020, state and local governments spent $791 billion on public welfare, or 23 percent of direct general expenditures.² As a share of direct general state and local spending, public welfare was the largest expenditure in 2020. It was the second-largest expenditure from 1977 to 2014, behind only elementary and secondary education. However, when looking only at state and local funds (i.e., excluding federal transfers), spending on public welfare still trails spending on elementary and secondary education. That's because roughly two-thirds of Medicaid spending is provided by the federal government, while typically less than a tenth of elementary and secondary education spending comes from federal funds.

Nearly all (97 percent) public welfare spending went toward operational costs in 2020, including payments to Medicaid providers, payments to nonprofits or other private providers of public services for low-income beneficiaries, and program administration. The largest slice of operational costs were vendor payments for medical care, which totaled $639 billion dollars in 2020, or 81 percent of all state and local public welfare spending.

Beyond operational costs, most of the remaining 3 percent of public welfare spending went toward direct cash assistance to low-income beneficiaries for programs such as TANF, Supplemental Security Income, and the Federal Low Income Home Energy Assistance Program. Capital spending (e.g., construction of public nursing homes) accounted for 0.1 percent of public welfare spending in 2020.

How does state spending differ from local spending and what does the federal government contribute?

State agencies, rather than local governments, typically provide public welfare benefits directly to individuals. This includes many programs that are federally funded but administered by state governments such as Medicaid and TANF. In only a few states do local governments administer these programs.

In fact, 92 percent of direct spending on public welfare occurred at the state level in 2020. In 37 states, local direct spending on public welfare accounted for less than 5 percent of total state and local public welfare spending, and in no state did local direct spending account for more than 20 percent. In 2020, the highest share of local direct spending on public welfare was in California and New York (both 16 percent). For example, counties administer many public welfare programs, including Medicaid and TANF, in California.

As a result, in 2020, public welfare spending accounted for nearly half of state government direct expenditures (44 percent) but a small share of local government direct expenditures (3 percent). Among different levels of local government, public welfare spending as a share of total direct spending was highest at the county level (10 percent) in 2017 (the most recent year we have data for these levels of government), and this spending was concentrated in the few states which administer programs at the local level.

However, most state and local public welfare spending is financed by federal transfers. In 2020, $523 billion (66 percent) of public welfare spending came from federal intergovernmental grants to state and local governments. This was up from 55 percent in 1977.

How have public welfare expenditures changed over time?

From 1977 to 2020, in 2020 inflation-adjusted dollars, state and local government spending on public welfare increased from $147 billion to $791 billion (437 percent increase). This was the largest spending growth of any major expenditure program over this period. Much of the growth in state and local public welfare spending was driven by higher Medicaid spending, which resulted mostly from increased federal spending on the program, rising health care costs, and more Americans receiving health insurance through the program. Not coincidentally, growth in health and hospitals spending was also faster than growth in other major state and local expenditures. (For more information on spending growth see our state and local expenditures page.)

Over this period, public welfare spending as a share of state and local direct general spending increased from 13 percent to 23 percent. Census does not provide data specifically on Medicaid spending. The National Association of State Budget Officers (NASBO) estimates Medicaid’s share of total state spending increased from 20 percent in 2008 to 28 percent in 2020.

How and why does spending differ across states?

State and local public welfare spending goes to a range of programs that often use federal rules to determine eligibility (e.g.,  Medicaid). Within these rules, states can also make determinations about who can access different programs and how generous the programs are. For example, different states use different income eligibility limits for their Medicaid and Children's Health Insurance Programs, and states can additionally apply for waivers to alter the design of their programs.

States also have varying rates of take-up of public welfare programs among eligible populations. But states can take policy actions that make it easier or more difficult for people to access benefits.

A large factor influencing state and local public welfare spending in 2020 is Medicaid expansion under the Affordable Care Act (ACA). Following a 2012 Supreme Court decision, states were given the choice to either expand Medicaid coverage with new federal funding or retain pre-ACA eligibility levels. This has led to changes in Medicaid spending and related outcomes across states. As of January 2023, 39 states and the District of Columbia had accepted Medicaid expansion funds. States that have not accepted federal funds to expand Medicaid coverage generally spend relatively low amounts on overall public welfare expenditures.

As such, while state and local governments spent $2,387 per capita nationally on public welfare in 2020, per capita spending ranged from $1,093 in Connecticut to $4,119 in New York. The District of Columbia’s per capita spending was $6,367.³

Other states with high per capita public welfare spending in 2020 included Alaska ($3,729), Massachusetts ($3,657), and New Mexico ($3,488). After Connecticut, the lowest per capita spending was in Georgia ($1,285), South Dakota ($1,391), Florida ($1,421), and Utah ($1,465).

Data: View and download each state's per capita spending by spending category

Per capita spending, however, is an incomplete metric because it doesn’t provide any information about a state’s demographics, policy decisions, administrative procedures, or residents’ choices. States with high rates of Medicaid spending per capita, for example, tend to have shares of Medicaid enrollees who are elderly or disabled that are higher than the national average. The elderly and adults with disabilities account for roughly two-thirds of Medicaid spending even though they constitute a small fraction of total recipients.⁴ Additionally, in states with low spending per capita on Medicaid, children tend to constitute a higher-than-average share of total recipients. Children are relatively inexpensive to cover and therefore spending per recipient and per capita is lower in these states. But high or low per capita spending could also reflect policy decisions, and specifically generous or strict eligibility requirements.  

Thus, if we consider spending as a share of the low-income population, state spending looks different. In 2019, Massachusetts spent the most of any state per low-income resident ($17,734), followed by Alaska ($16,276), New York ($15,280), and Minnesota ($14,042). The District of Columbia is again an outlier at $23,951. Per low-income resident, spending is lowest in Georgia ($4,038), Florida ($4,288), Texas ($4,486), Alabama ($4,689), and North Carolina ($4,816).⁵

(Note: Both the expenditure data and low-income population data in the text and map above are from 2019. The American Community Survey, which is the source for the low-income population data, did not release one-year estimates for 2020 due to significant data collection disruptions brought on by the pandemic. We will update the text and map when both expenditure and low-income population data are published for 2021.)

Interactive Data Tools

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What everyone should know about their state’s budget

Further Reading

3 .7 Million People Would Gain Health Coverage in 2023 If the Remaining 12 States Were to Expand Medicaid Eligibility
Matthew Buettgens and Urmi Ramchandani (2022)

The Implications of Medicaid Expansion in the Remaining States
Matthew Buettgens (2018)

Welfare Rules Databook: State TANF Policies as of July 2017
Christine Heffernan, Ben Goehring, Ian Hecker, Linda Giannarelli, and Sarah Minton (2018)

State TANF Policies: A Graphical Overview
Megan Thompson, Sarah Minton, Christine Heffernan, and Linda Giannarelli (2018)

Why Does Cash Welfare Depend on Where You Live?
Heather Hahn, Laudan Y. Aron, Cary Lou, Eleanor Pratt, and Adaeze Okoli (2017)

The Effects of the Medicaid Expansion on State Budgets: An Early Look in Select States
Stan Dorn, Norton Francis, Laura Snyder, and Robin Rudowitz (2015)

Assessing Fiscal Capacities of States: A Representative Revenue System–Representative Expenditure System Approach, Fiscal Year 2012
Tracy Gordon, Richard Auxier, and John Iselin (2016)

Notes

Research Areas State and local finance

Policy Centers Urban-Brookings Tax Policy Center