[Background Material and Data on Programs within the Jurisdiction of the Committee on Ways and Means (Green Book)] [Appendices] [Appendix K. Spending for Income-Tested Benefits, Fiscal Years 1968-2000] [From the U.S. Government Printing Office, www.gpo.gov] APPENDIX K - SPENDING FOR INCOME-TESTED BENEFITS, FISCAL YEARS 1968-2002 CONTENTS Overview Participation in Income-Tested Programs Trends in Spending Spending Trends by Level of Government Federal Government State and Local Governments Total Spending Share of Federal Budget Used for Income-Tested Benefits List of Income-Tested Benefit Programs Medical Aid Cash Aid Food Aid Housing Aid Education Aid Other Services Jobs and Training Aid Energy Aid References OVERVIEW The Congressional Research Service (CRS) has found that more than 80 benefit programs provide cash and noncash aid that is directed primarily to persons with limited income (Burke, 2003). Such programs constitute the public "welfare" system, if welfare is defined as income-tested or need-based benefits (the programs, and their FY2002 expenditures, are listed at the end of this chapter). This definition excludes social insurance programs, such as Social Security and Medicare. These income-tested benefit programs in fiscal year (FY) 2002 cost $522.2 billion: $373.2 billion in Federal funds and $149 billion in State and local funds. Total welfare spending set a new record, up $45.3 billion (9.5 percent) from the previous peak of 2001. Spending increased for all forms of aid except jobs and training. Higher medical spending accounted for $32.8 billion of the net increase, and 54 cents of every welfare dollar went for medical assistance. Expressed in constant FY2002 dollars, welfare spending increased by $38.2 billion (7.9 percent) from the 2001 level. Other real spending increases by form of benefits included: education benefits, $4.1 billion; food benefits, $3.3 billion; housing, $2.3 billion; and services, $1.2 billion. Real outlays for cash aid dropped by $1.2 billion; and for jobs and training, by $0.5 billion. In FY2002, medical services represented 54.1 percent of total welfare spending; cash benefits,19.6 percent; food and housing benefits, 14.3 percent; education andjobs/training, 7.3 percent; and services and energy aid accounted for the remaining 4.7 percent. The composition of welfare spending differed by level of government. Medical aid consumed 79.7 percent of State and local welfare funds, but only 43.9 percent of Federal welfare dollars. Most income-tested programs provide benefits, in the form of cash, goods, or services, to persons who make no payment and render no service in return. However, in the case of the job and training programs and some educational benefits, recipients must work or study. Further, the block grant program of Temporary Assistance for Needy Families (TANF) requires adults to start work after a period of enrollment, the food stamp program imposes work and training requirements, and public housing requires residents to engage in "self-sufficiency" activities or perform community service. Finally, the Earned Income Tax Credit (EITC) is available only to workers. PARTICIPATION IN INCOME-TESTED PROGRAMS An unduplicated count of welfare beneficiaries is not available. Enrollment in TANF and food stamps remained far below 1994/1995 peak levels during 2000-2002, but Medicaid enrollment set a new record high. Average 2002 monthly numbers: Food stamps, 20.2 million recipients; TANF, 5.1 million; and Supplemental Security Income (SSI), 6.9 million. In 2002, EITC payments went to 16.8 million tax filers, and during the year, 50.9 million persons received Medicaid services. Census Bureau data indicate that 5.1 million families with children were poor in 2002 before receiving cash aid from TANF, General Assistance (GA) or the EITC (compared with 5.1 million in 2001 and with 6.7 million in 1996, the last full year of the pre-TANF welfare program). Among these families in 2002, the EITC was received by 53.7 percent of those with a female head and by 71.7 percent of those with a male present. The Census Bureau examined participation in major means-tested government programs in 2002 (Census, 2003). It found that 23 million poor persons (two out of three persons with pre-tax money income below the poverty threshold) lived in a household that received means-tested assistance that year. More than one-half of the poverty population (52.7 percent) was in a Medicaid-recipient household. Almost one-third of the poor population (32.9 percent) lived in a household that received food stamps; for means-tested cash assistance, the proportion was 21.5 percent; and for subsidized or public housing, 17.5 percent. Out of the total U.S. population (all income levels), the Census Bureau reported that 25.1 percent lived in a household that received some form of major means-tested aid in 2002 (Medicaid, 18.6 percent; means-tested cash assistance, 6.1 percent; food stamps, 6.7 percent; and public or subsidized housing, 3.9 percent). TRENDS IN SPENDING The CRS data series provides annual spending figures for 30 fiscal years (1968, 1973, and 1975-2002). Total expenditures on cash and noncash welfare programs were 32 times as great in 2002 as in 1968 (see Table K-1). Even after allowance for price inflation, spending sextupled (rising 523 percent) over the 32 years, a period when the U.S. population rose by an estimated 43 percent. Measured in constant 2002 dollars, the annual rate of growth in spending over the whole period was 5.5 percent. However, the growth pattern was uneven. Real spending almost tripled in the first 10 years, declined in some years (1982, 1996, and 1997), and in the last 5 years rose at an annual rate of 3.9 percent. Total per capita welfare spending grew in real terms (constant FY2002 dollars) from $416 in FY1968 to a peak of $1,826 in FY2002. The rise since the late 1960s in overall need-tested spending tabulated by CRS is sharper than the increase in spending reported by the Social Security Administration (SSA) for a smaller group of need-tested programs. The SSA data series, called public aid, is a category within SSA reports on social welfare expenditures, and it excludes numerous income-tested programs that are in the CRS series. Not counted as public aid in the SSA series are the Earned Income Tax Credit, child nutrition, subsidized housing, educational benefits, adoption assistance, foster care, some job training programs, and others. Some of these programs did not exist 32 years ago, and many have grown rapidly. Adjusted for price inflation, public aid outlays in the SSA series rose 268 percent between 1968 and 1995 (the most recent year for which SSA data are available). For fiscal year 1995 social welfare expenditure data of SSA, see Bixby, 1999. SSA also has published data on private social welfare expenditures. (See Kerns, 1997.) In nominal dollars, total spending by programs in the CRS series more than doubled from FY1990 ($213.1 billion) to FY2000 ($437 billion)-an increase of 105 percent. Calculations by Robert E. Rector of the Heritage Foundation also found that nominal spending more than doubled during the decade. The Rector data series (which includes more than 70 means-tested programs) showed total Federal and State spending of $215 billion in FY1990 and $434 billion in FY2000-an increase of 102 percent (Rector, 2001). TABLE K-1--EXPENDITURES FOR INCOME-TESTED BENEFITS, SELECTED FISCAL YEARS 1968-2002 [GRAPHICS NOT AVAILABLE IN TIFF FORMAT] SPENDING TRENDS BY LEVEL OF GOVERNMENT FEDERAL GOVERNMENT Table K-2 presents 1968- 2002 Federal welfare spending in constant 2002 dollars, by form of benefit. Measured in constant 2002 dollars, Federal spending for income-tested benefits climbed from $59.4 billion in fiscal year 1968 to $373.2 billion in fiscal year 2002, an increase of 529 percent. As the table shows, cash aid was the leading form of Federal welfare until 1980, when it was overtaken in value by medical benefits. Two years later, in 1982, Federal welfare spending declined for all forms of aid except subsidized housing, in which case outlays reflected earlier commitments, and education benefits. In most subsequent years, aggregate real federal welfare outlays steadily increased. Declines occurred in 1986, 1996, and 1997. STATE AND LOCAL GOVERNMENTS Table K-3 shows that State and local spending for income-tested benefits, measured in FY2002 dollars, climbed from $24.5 billion in fiscal year 1968 to $149 billion in fiscal year 2002, an increase of 508 percent. Cash aid was overtaken by medical benefits as the dominant form of State and local welfare spending in 1976. State and local spending rose steadily in all years after 1979 except for 1993 and 1996. TOTAL SPENDING Table K-4 shows total (Federal plus State and local) spending on income- tested benefits in FY2002 dollars. Total spending rose from $83.9 billion in FY1968 to $522.2 billion in FY2002, an increase of 523 percent. Aggregate spending rose in all years except 1979, 1982, 1996, and 1997. Real spending for medical benefits, education benefits, and services reached new historic peaks in fiscal year 2002. For other forms of benefits, peak spending took place in earlier years: Jobs and training, 1978; energy, 1981; cash aid, 1995, food aid, 1994, and housing benefits, 1996. SHARE OF FEDERAL BUDGET USED FOR INCOME-TESTED BENEFITS The share of the Federal budget used for income-tested benefits climbed from 6.4 percent in fiscal year 1968 to 17.3 percent in fiscal year 1995, then declined slightly, to 17.0 percent, in fiscal year 1998, but resumed climbing thereafter, and reached a new record peak of 18.6 percent in 2002 (see Table K-5). Most of the 1968-2002 increase of 12.2 percentage points was accounted for by medical benefits (6.6 percentage point gain). Measured in percentage points, increases for other forms of aid were: cash benefits, 1.3; food aid, 1.4; housing benefits, 1.3; education, 1.0; services, 0.6; and energy aid, 0.1. Federal spending for income-tested jobs/training benefits declined as a percent of the budget (down 0.1 percentage point). TABLE K-2-- FEDERAL SPENDING FOR INCOME-TESTED BENEFITS BY FORM OF BENEFIT, SELECTED FISCAL YEARS 1968-2002 [GRAPHICS NOT AVAILABLE IN TIFF FORMAT] TABLE K-3-- STATE AND LOCAL SPENDING FOR INCOME-TESTED BENEFITS BY FORM OF BENEFIT, SELECTED FISCAL YEARS 1968-2002 [GRAPHICS NOT AVAILABLE IN TIFF FORMAT] TABLE K-4-- TOTAL SPENDING FOR INCOME-TESTED BENEFITS BY FORM OF BENEFIT,SELECTED FISCAL YEARS, 1968-2002 [GRAPHICS NOT AVAILABLE IN TIFF FORMAT] TABLE K-5-- SHARE OF FEDERAL BUDGET USED FOR INCOME-TESTED AID, BY FORM [GRAPHICS NOT AVAILABLE IN TIFF FORMAT] 1In FY1978, jobs and training benefit outlays were $9.7 billion. Of this total, $5.8 billion represented public service employment and $2 billion employment and training services. Source: Table prepared by Congressional Research Service (CRS). LIST OF INCOME-TESTED BENEFIT PROGRAMS Below is the list of programs providing income-tested benefits. Within each category, the programs are listed in the order of their total cost in fiscal year 2002 to Federal and State and local governments. Amounts shown are in millions of dollars. MEDICAL AID 1. Medicaid ($258,216) 2. Medical care for veterans without service-connected disability ($8,185) 3. State Children=s Health Insurance (S-CHIP) ($5,407) 4. General assistance (medical care component) - no Federal dollars ($4,956) 5. Indian health services ($2,758) 6. Consolidated health centers $1,328) 7. Maternal and child health services block grant ($1,279) 8. Title X family planning services ($265) 9. Medical assistance to refugees, asylees, other humanitarian cases ($74) CASH AID 10. Supplemental Security Income (SSI) ($38,522) 11. Earned Income Tax Credit (EITC) -- refundable portion only ($27,830) 12. Temporary Assistance for Needy Families (TANF) ($13,035) 13. Foster care ($8,618) 14. Child tax credit - refundable portion only ($5,060) 15. General assistance (nonmedical care component)--no Federal dollars ($3.251) 16. Pensions for needy veterans, their dependents, and survivors, ($3,177) 17. Adoption assistance ($2,472) 18. Dependency and indemnity compensation (DIC) and death compensation for parents of veterans ($84) 19. General assistance to Indians ($66.5) 20. Cash assistance to refugees, asylees, other humanitarian cases($41) FOOD AID 21. Food stamps ($24,054) 22. School lunch program (free and reduced price segments) ($6,064) 23. Special Supplemental Nutrition Program for Women, Infants, and Children (WIC) ($4,350) 24. Child and adult care food program, lower-income components($1,638) 25. School breakfast program (free and reduced price segments)($1,515) 26. Nutrition program for the elderly ($801) 27. The Emergency Food Assistance Program (TEFAP) ($361) 28. Summer food service program for children ($307) 29. Commodity Supplemental Food Program (CSFP) ($105) 30. Food distribution program on Indian reservations ($74) 31. Farmers' market nutrition programs ($36) 32. Special milk program (free segment) ($1) HOUSING AID 33. Section 8 low-income housing assistance ($18,499) 34. Low-rent public housing ($8,213) 35. Rural housing loans (section 502) ($3,499) 36. Home investment partnerships (HOME) ($2,500) 37. Housing for special populations (elderly and disabled) ($895) 38. Rural rental assistance payments (section 521) ($705) 39. Section 236 interest reduction payments ($579) 40. Housing opportunities for people with AIDS (HOPWA) ($314) 41. Rural rental housing loans (section 515) ($114) 42. Rural housing repair loans and grants (section 504) ($62.4) 43. Farm labor housing loans (section 514) and grants (section 516) ($61.8) 44. Section 101 rent supplements ($53.7. 45. Rural housing self-help technical assistance grants (section 523) and rural housing site loans (sections 523 and 524) ($27.1) 46. Indian housing improvement grants ($19.6) 47. Section 235 homeownership aid ($10.8) 48. Rural housing preservation grants (section 533) ($8.6) 49. Home ownership and opportunity for people everywhere (HOPE) ($3.8) EDUCATION AID 50. Federal Pell grants ($11.364) 51. Head Start ($8,172) 52. Subsidized Federal Stafford loans and Stafford/Ford loans ($7,523) 53. Federal work-study program ($1,000) 54. Federal Trio programs ($827) 55. Supplemental educational opportunity grants ($760) 56. Chapter 1 migrant education program ($395) 57. Perkins loans ($166) 58. Leveraging educational assistance partnerships (LEAP) ($134) 59. Health professions student loans and scholarships ($58) 60. Fellowships for graduate and professional study ($45) 61. Migrant high school equivalency program (HEP) ($23) 62. College assistance migrant program (CAMP) ($15) 63. Close Up fellowships ($1.5) OTHER SERVICES 64. Child care and development block grant ($8,589) 65. TANF services ($6.147) 66. Social services block grant (Title XX) ($2,743) 67. TANF child care ($2,322) 68. Homeless assistance ($1,044) 69. Community services block grant ($739) 70. Legal services ($329) 71. Social services for refugees, asylees, other humanitarian cases ($159) 72. Emergency food and shelter program ($143) JOBS AND TRAINING AID 73. TANF work activities ($2,727) 74. Job Corps ($1,532) 75. Youth activities ($1,000) 76. Adult activities ($950) 77. Senior community service employment program ($494) 78. Welfare-to-work grant program ($413) 79. Food stamp employment and training ($410) 80. Foster grandparents ($155) 81. Senior companions ($69) 82. Targeted assistance for refugees, asylees, other humanitarian cases ($49.5) 83. Native employment works (NEW) ($7.6) ENERGY AID 84. Low-income home energy assistance program (LIHEAP) ($1,800) 85. Weatherization assistance ($352) REFERENCES Bixby, A.K. (1999). Public Social Welfare Expenditures, Fiscal Year 1995. Social Security Bulletin, 62 (2), p. 86-94. Burke, V. (2003) Cash and Noncash Benefits for Persons with Limited Income: Eligibility Rules, Recipient and Expenditure Data, Fiscal Years 2000- 2002. (forthcoming) Washington, DC: Congressional Research Service. Rector, R. (2001). The Size and Scope of Means-tested Welfare Spending. Testimony. August 1, 2001. [http://www.heritage.org/Research/Welfare/Test080101.cf] Kerns, Wilmer L. (1997), Private social welfare expenditures, 1972-94. Social Security Bulletin, 60 (1) p. 54-60. U. S. Bureau of the Census (2003). Program Participation Status of Household -- Poverty Status of Persons in 2002. Unpublished table (POV26). Current Population Survey. Annual Social and Economic Supploment. Current dollars were translated into FY2002 constant value dollars by use of the Consumer Price Index for all urban consumers (CPI-U).