Formula Grants

Twenty-two of the 25 large grant programs rely partly on decennial census data to apportion federal funding among state and local governments. In fiscal year 1998, $167 billion was obligated for them. By comparing statistical sampling results to the actual 1990 census count, the Census Bureau estimated that it had undercounted the U.S. population by 4 million persons. GAO recalculated current funding amounts for 15 of the 22 programs, assuming the same proportional net undercount. These 15 represented $147 billion, or 79 percent, of population-based programs. Using the adjusted population counts would have reallocated $449 million among the 50 states and the District of Columbia. California, Arizona, New Mexico, and Texas--the four states bordering Mexico--accounted for more than one-third of the adjusted populations and would have received nearly 75 percent of the total reallocated, or $336 million. California accounted for about 20 percent and would have received $223 million. Pennsylvania would have received the largest dollar reduction ($110 million); Rhode Island the largest percentage reduction (1.8 percent). Medicaid accounted for 90 percent of all reallocated funds. Funding would have generally shifted from northeastern and midwestern states to southern and western states. The Bureau proposes to use statistical sampling techniques to estimate the population for the 2000 census. Although the Supreme Court has ruled that the Census Act prohibits using sampling techniques for reapportioning seats in the House of Representatives, the ruling did not address the use of adjusted counts for apportioning federal grant funding.

GAO noted that: (1) 22 of the 25 large formula grant programs rely, at least in part, on data derived from the decennial census to apportion funding among states and units of local government; (2) Medicaid was the single largest program, representing 63 percent of the $167 billion in fiscal year 1998 obligations under the 25 programs GAO reviewed; (3) for the 15 programs included in GAO's detailed analysis, using adjusted population counts would reallocate a total of $449 million among the 50 states and the District of Columbia, 0.33 percent of the $138 billion in funds apportioned by formula in GAO's detailed analysis; and (4) specifically, reallocating funding would result in the following: (a) California accounted for about 20 percent of the adjusted population and would receive nearly half of the total reallocated, or $223 million; (b) the four states that border Mexico (California, Arizona, New Mexico, and Texas) accounted for over one-third of the adjusted population and would receive nearly 75 percent of the total reallocated, or $336 million; (c) the largest dollar reduction would occur in Pennsylvania ($110 million), and the largest percentage reduction would occur in Rhode Island (1.8 percent); (d) Medicaid accounted for 90 percent of all funds reallocated; and (e) funding would generally shift from northeastern and midwestern states to the southern and western states.