Formula Grants
2000 Census Redistributes Federal Funding Among States Gao ID: GAO-03-178 February 24, 2003In fiscal year 2000, about $283 billion in federal grant money was distributed to state and local governments by formula, about half of it through four formula grant programs--Medicaid, Foster Care Title IV-E, Adoption Assistance, and the Social Services Block Grant (SSBG). States receive money based in part on factors such as annual population estimates derived from the previous decennial census, which is conducted by the Department of Commerce, Bureau of the Census. GAO was asked to measure the effect that using the 2000 census data has on redistributing funding for federal formula grant programs. To do this, GAO analyzed the change in the U.S. and state populations between 1999 and 2000 that was the result of correcting prior population estimates and estimated for the four programs the extent of any redistribution of federal funding among states.
The 2000 census count of 281.4 million people exceeded the 1999 population estimate by 8.7 million people, or 3.2 percent. Three-quarters of this 1-year population increase, 6.8 million people, was the result of correcting errors in population estimates over the preceding decade; the remaining portion of the increase, 1.9 million people, was the result of population growth from 1999 to 2000. Every state's population had been underestimated during the 1990s, but the extent varied, from the smallest correction in West Virginia--0.3 percent--to the largest in the District of Columbia--10.2 percent. Twenty-eight states had a correction below the national average of 2.5 percent, and 23 states had a correction above the national average. Correcting population estimates for the 2000 census redistributes among states about $380 million in federal grant funding for Medicaid, Foster Care, Adoption Assistance, and SSBG. Funding for the 28 states that had below-average corrections to their populations decreases by an estimated $380.3 million; funding for the 23 states that had above-average corrections increases by an estimated $388.8 million. Most of the change in funding is concentrated in states with larger populations. However, changes in funding are smaller in several large states because the matching rates for Medicaid, Foster Care, and Adoption Assistance are limited by statute--matching rates cannot fall below 50 percent. Some higher-income states would receive matching rates below 50 percent if not for this limitation. Most of the shift in funding occurs in fiscal year 2003 when federal matching rates for the Medicaid, Foster Care, and Adoption Assistance programs are based on population estimates derived from the 2000 census. A small portion of the shift occurred in fiscal year 2002 because that is when the SSBG began using the 2000 census counts. The Department of Commerce provided technical comments on a draft of this report.
GAO-03-178, Formula Grants: 2000 Census Redistributes Federal Funding Among States
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Report to Congressional Requesters:
United States General Accounting Office:
GAO:
February 2003:
FORMULA GRANTS:
2000 Census Redistributes Federal Funding Among States:
GAO-03-178:
GAO Highlights:
Highlights of GAO-03-178, a report to Congressional Requesters:
February 2003:
FORMULA GRANTS:
2000 Census Redistributes Federal Funding Among States:
Why GAO Did This Study:
In fiscal year 2000, about $283 billion in federal grant money was
distributed to state and local governments by formula, about half of it
through four formula grant programs”Medicaid, Foster Care Title IV-E,
Adoption Assistance, and the Social Services Block Grant (SSBG).
States
receive money based in part on factors such as annual population
estimates
derived from the previous decennial census, which is conducted by the
Department of Commerce, Bureau of the Census. GAO was asked to measure
the effect that using the 2000 census data has on redistributing
funding
for federal formula grant programs. To do this, GAO analyzed the
change
in the U.S. and state populations between 1999 and 2000 that was the
result
of correcting prior population estimates and estimated for the four
programs
the extent of any redistribution of federal funding among states.
What GAO Found:
The 2000 census count of 281.4 million people exceeded the 1999
population
estimate by 8.7 million people, or 3.2 percent. Three-quarters of this
1-year
population increase, 6.8 million people, was the result of correcting
errors
in population estimates over the preceding decade; the remaining
portion of the
increase, 1.9 million people, was the result of population growth from
1999 to
2000. Every state‘s population had been underestimated during the
1990s, but
the extent varied, from the smallest correction in West Virginia”0.3
percent”to
the largest in the District of Columbia”10.2 percent. Twenty-eight
states had
a correction below the national average of 2.5 percent, and 23 states
had a
correction above the national average.
Correcting population estimates for the 2000 census redistributes among
states about $380 million in federal grant funding for Medicaid, Foster
Care,
Adoption Assistance, and SSBG. Funding for the 28 states that had
below-
average corrections to their populations decreases by an estimated
$380.3
million; funding for the 23 states that had above-average corrections
increases
by an estimated $388.8 million. Most of the change in funding is
concentrated
in states with larger populations. However, changes in funding are
smaller in
several large states because the matching rates for Medicaid, Foster
Care, and
Adoption Assistance are limited by statute”matching rates cannot fall
below 50
percent. Some higher-income states would receive matching rates below
50 percent
if not for this limitation. Most of the shift in funding occurs in
fiscal year
2003 when federal matching rates for the Medicaid, Foster Care, and
Adoption
Assistance programs are based on population estimates derived from the
2000
census.A small portion of the shift occurred in fiscal year 2002
because that
is when the SSBG began using the 2000 census counts.
The Department of Commerce provided technical comments on a draft of
this
report.
www.gao.gov/cgi-bin/getrpt?GAO-03-178.
To view the full report, including the scope and methodology, click on
the
link above.
For more information, contact Kathryn G. Allen at (202) 512-7114.
Contents:
Letter:
Results in Brief:
Background:
Most of Population Difference Between 1999 and 2000 Resulted from
Correction
of Errors That Occurred During 1990s:
2000 Census Correction of Population Estimates Redistributes an
Estimated
$380Million Among States for Four Formula Grant Programs:
Agency Comments:
Appendix I: Data for Population Estimates, Decennial Census Population
Counts, and the Error of Closure:
Appendix II: Analysis of Estimated Funding Changes for Four Formula
Grant
Programs:
Medicaid, Foster Care, and Adoption Assistance Social Services Block
Grant:
Tables:
Table 1: Definition of Population Terminology Used in This Report:
Table 2: Federal Formula Grant Program Funding for Fiscal Year 2000:
Table 3: Population Data Used in Four Selected Formula Grant Programs,
by Fiscal Year:
Table 4: Estimated Changes in Federal Funding as a Result of the
Correction
in Population, by Grant Program:
Table 5: Comparison of the 1999 Postcensal Population Estimates and the
2000 Census Counts:
Table 6: Comparison of the 2000 Postcensal Population Estimates and the
2000
Census Counts to Determine the Error of Closure and the Percentage
Correction in Population:
Table 7: Actual and Estimated FMAPs for the Medicaid, Adoption
Assistance,
and Foster Care Programs for Fiscal Year 2003, by State:
Table 8: Medicaid Program Exenditures and Estimated Federal Payments,
by
State:
Table 9: Foster Care Program Expenditures and Estimated Federal
Payments,
by State:
Table 10: Adoption Assistance Program Expenditures and Estimated
Federal
Payments by State:
Table 11: SSBG State Allocations, Actual and Estimated, for Fiscal Year
2002:
Figure:
Figure 1: Percentage Difference in Population Due to the Correction of
the
Error in Population Estimates, by State on April 1, 2000:
Abbreviations:
FMAP: Federal Medical Assistance Percentage:
SSBG: Social Services Block Grant:
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Letter:
February 24, 2003:
The Honorable Tom Davis
Chairman, Committee on Government Reform
House of Representatives:
The Honorable Adam H. Putnam
Chairman, Subcommittee on Technology, Information Policy,
Intergovernmental Relations, and the Census
Committee on Government Reform
House of Representatives:
The Honorable Dave Weldon
House of Representatives:
In fiscal year 2000, the federal government obligated about $332
billion in grants to state and local governments to help fund an array
of programs ranging from Medicaid to Highway Planning and Construction.
Over 85 percent, or about $283 billion, of this grant money was
distributed to state[Footnote 1] and local governments using formulas
that are based on data such as state population and personal income.
For example, the $196 billion federal-state Medicaid program finances
health care to low-income families with children and aged, blind, and
disabled individuals through a statutory formula based on state per
capita income--the ratio of total personal income to state population.
To calculate grant amounts, formula grant programs generally rely on
annual population estimates for each state developed by the Bureau of
the Census. State populations are estimated by adding to the prior
year‘s population estimate the number of births and immigrants and
subtracting the number of deaths and emigrants. These estimates are
subject to error, mainly because migration between states and between
the United States and other countries is difficult to measure. By the
end of each decade, when the decennial census is taken, a significant
gap may have arisen between the population estimate and the census
population count for the same day of the year, such as April 1, 2000.
When population data based on a new census enter into federal formula
grant calculations, states gain or lose funding depending on how the
gaps between their population estimates and their census counts compare
with the U.S. average gap. The larger the gap between a state‘s
population estimate and its census count, the larger the shift in
funding is. For formula grant programs that distribute a set amount of
federal funding, the gains in states with increased funding are offset
by the losses in states with decreased funding. For open-ended formula
grant programs, such as Medicaid, states with increased funding do not
necessarily offset states with decreased funding.
To measure the effect of using the 2000 census on the distribution of
formula grant funding among the states, you asked us to examine (1) the
change in the U.S. and each state‘s population between 1999 and 2000
due to correcting prior population estimates and (2) the extent of any
redistribution of federal funding among the states for four selected
formula grant programs as a result of the 2000 census.
To address these objectives, we used information on annual state
population estimates that were derived from the 1990 census and state
estimates that were derived from both the 1990 and 2000 censuses, as
reported by the Census Bureau. To estimate the error in population
estimates, we compared the April 1, 2000, population estimates based on
the 1990 census with the April 1, 2000, census counts. To determine the
effect of correcting the errors in population estimates on the
distribution of formula grant funding to the states, we analyzed 4
federal formula grant programs of the 172 such programs identified in
the Catalog of Federal Domestic Assistance--Social Services Block Grant
(SSBG), Medicaid, Foster Care Title IV-E, and Adoption
Assistance.[Footnote 2] We chose these 4 programs because their
formulas use population estimates to distribute federal assistance, and
they represented almost half of all formula grant funding (46 percent)
in fiscal year 2000. The SSBG distributes a set appropriation
exclusively on the basis of population data. The 3 entitlement
programs, Medicaid, Foster Care, and Adoption Assistance, use per
capita income--the ratio of personal income to state population--in
identical formulas to determine federal matching rates. We obtained
information on the formulas for these programs from the Department of
Health and Human Services, and we used funding data for each program
for the fiscal year in which the program first used population data
derived from the 2000 census to calculate grant awards. To calculate
the change in formula funding resulting from correcting population
estimates, we compared what funding would be if formula grant amounts
were calculated using two different population estimates for the same
year, one based on the 1990 census and the other on the 2000 census. We
conducted our work from July 2001 through January 2003 in accordance
with generally accepted government auditing standards.
Results in Brief:
The 2000 census count of 281.4 million people exceeded the 1999
population estimate by 8.7 million people, or 3.2 percent. Three-
quarters of this 1-year population increase, 6.8 million people, was
the result of correcting errors in population estimates over the
preceding decade; the remaining portion of the increase, 1.9 million
people, was the result of population growth from 1999 to 2000. The
error corrected by the 2000 census was substantially larger than the
error reported for the 1990 census--2.5 percent compared with 0.6
percent. The Census Bureau attributed the increase in the 2000 ’error
of closure“ to underestimates in the measurement of net international
migration and the increased accuracy of the 2000 census--it counted
people who were probably missed in the 1990 census. Every state‘s
population had been underestimated during the 1990s, but the extent
varied widely: the largest correction was in the District of Columbia-
-10.2 percent--and the smallest, West Virginia--0.3 percent. Twenty-
eight states had a correction below the national average of 2.5
percent, and 23 states had a correction above the national average. Of
the four Census regions (Northeast, South, Midwest, and West), only the
Midwest showed a pattern: all 12 midwestern states were close to or
below the U.S. average correction to the population. Overall, the
Midwest‘s correction was the smallest of the four regions--1.5 percent.
Correcting population estimates based on the 2000 census redistributes
about $380 million in federal grant funding among states for the four
programs we examined. We estimate that funding for the 28 states that
had below-average corrections to their populations decreases by $380.3
million in the first year the new population numbers are factored into
the formula grants; funding for the 23 states that had above-average
corrections in their population increases by an estimated $388.8
million. Most of the change in funding is concentrated in states with
larger populations. However, several large states have only minor
changes in funding because the funding formula used by Medicaid, Foster
Care, and Adoption Assistance limits the effect of the population
correction for high-income states by applying a minimum 50 percent
federal matching rate. Some higher-income states would receive matching
rates below 50 percent, but because of the minimum they are guaranteed
a rate no lower than 50 percent. Most of the shift in funding occurs in
fiscal year 2003 when federal matching rates for the Medicaid, Foster
Care, and Adoption Assistance programs are based on population
estimates derived from the 2000 census. A minor portion of the shift
occurred for fiscal year 2002 because the census counts were used in
the SSBG that year.
The Department of Commerce provided technical comments on a draft of
this report, which we incorporated as appropriate.
Background:
The Census Bureau counts the U.S. population once every decade through
its decennial census. For the years in between, the Bureau estimates
states‘ populations from annual data on changes in births, deaths, and
net migration (including net movements of military personnel). These
annual population estimates are called postcensal population estimates
because they are based on the prior census (see table 1 for definitions
of different population counts used in this report). This process of
making annual postcensal population estimates continues until the next
census. Once the new census is taken, the Bureau compares the
population estimates to the census population counts for the same date.
The difference between the population estimate and the census count is
called the error of closure. Subsequently, annual population estimates
are revised for the prior decade using the counts from the new census.
For example, after the 2000 census, the annual population estimates
from the 1990s were revised to be consistent with both the 1990 and
2000 censuses. These revised population estimates are called the
intercensal population estimates because they rely on the preceding and
the succeeding censuses.[Footnote 3]
Table 1: Definition of Population Terminology Used in This Report:
Term: Census population count; Description: A population count is made
at the beginning of each decade as of April 1. It is based on a count
of the entire population. The latest census counted the population as
of April 1, 2000..
Term: Postcensal population estimate; Description: Population
estimates are made annually throughout a decade, usually as of July 1
of each year. Such estimates are based on the prior census, and include
annual population changes due to births, deaths, and domestic and
international migration. The postcensal population estimates for July
1, 2001, were based on the April 1, 2000, census and the population
change between April 1, 2000, and June 30, 2001..
Term: Error of closure; Description: The error of closure is the
difference between the postcensal population estimate and census
population count for the same date. For example, the error of closure
for April 1, 2000, is the difference between the postcensal population
estimate and the census population count for April 1, 2000..
Term: Intercensal population estimate; Description: Once a new census
is completed, the annual population estimates of the prior decade (the
postcensal population estimates) are adjusted to reflect the new census
counts. The resulting population estimates, known as intercensal
population estimates, are calculated using a mathematical formula that
distributes the error of closure across the postcensal population
estimates for the prior decade. Intercensal population estimates thus
have been adjusted according to counts at both the beginning and the
end of the decade. The intercensal population estimates for 1990
through 1999 were issued in April 2002..
Source: Department of Commerce, Bureau of the Census.
[End of table]
Of the four programs we analyzed, Medicaid is the largest, comprising
43 percent of all federal formula-based programs and 94 percent of the
total funding for the four programs analyzed for this report (see table
2).
Table 2: Federal Formula Grant Program Funding for Fiscal Year 2000:
Program: Medicaid; Fiscal year 2000 federal obligations[A] (millions):
$121,809; Percentage of total federal obligations: 43.0.
Program: Foster Care Title IV-E; Fiscal year 2000 federal
obligations[A] (millions): 4,536; Percentage of total federal
obligations: 1.6.
Program: Adoption Assistance; Fiscal year 2000 federal obligations[A]
(millions): 1,008; Percentage of total federal obligations: 0.4.
Program: SSBG; Fiscal year 2000 federal obligations[A] (millions):
1,775; Percentage of total federal obligations: 0.6.
Program: Remaining 168 formula programs; Fiscal year 2000 federal
obligations[A] (millions): 154,221; Percentage of total federal
obligations: 54.4.
Program: Total obligations[B]; Fiscal year 2000 federal obligations[A]
(millions): 283,348; Percentage of total federal obligations: 100.0.
Source: U.S. General Services Administration, Catalog of Federal
Domestic Assistance (Washington, D.C.: December 2001 edition) (CD-ROM
version).
Note: Federal obligations do not add to total because of rounding.
[A] The obligated amounts shown here will differ slightly from the
amounts allocated by formula. The obligations of the allocations may
occur in years other than when the allocations occurred.
[B] Total obligations include 23 programs that are both formula and
project grants.
[End of table]
The SSBG formula allocates an amount of funding, set by annual
appropriation, directly to the states. A state‘s allocation is
proportional to its share of the total U.S. population. State
allocations for fiscal year 2002 used the April 2000 census, and
allocations for prior years used postcensal population estimates that
were based on the 1990 census.
In contrast with the SSBG‘s fixed appropriation, the Medicaid, Foster
Care, and Adoption Assistance programs are open-ended entitlement
programs--the states determine the level of program expenditures, and
the federal government reimburses a share of their expenditures
according to matching rates, called the Federal Medical Assistance
Percentages (FMAP), set by statutory formula. All three programs use
the same formula, which is based on a 3-year average of state per
capita income--the ratio of aggregate personal income to state
population. As a state‘s per capita income increases, its matching rate
decreases, and vice versa. In addition, unless a state experiences
changes in aggregate personal income, its federal payment generally
declines if the state‘s population growth is less than the national
average. Matching rates range from a minimum of 50 percent to a maximum
of 83 percent of a state‘s Medicaid expenditures. The minimum 50
percent rate affects only the high per capita income states. For fiscal
year 2002, for example, a high-income state such as Connecticut would
receive a 15 percent federal matching rate if the 50 percent minimum
was not in place.
For fiscal year 2002, the federal matching rates for Medicaid, Foster
Care, and Adoption Assistance were based on a 3-year average of per
capita income from 1997 through 1999. Rates for fiscal year 2003 are
based on a 3-year average from 1998 through 2000. Although the formulas
use overlapping years, the state population numbers used to compute per
capita income differ depending on which fiscal year the grant is for.
For these three programs, the fiscal year 2002 formula calculations
used postcensal population estimates derived from the 1990 census for
1997 through 1999 to calculate per capita income. Fiscal year 2003
formula calculations used population estimates for 1998 through 2000
derived from the 2000 census.[Footnote 4] Thus, the 2000 census affects
matching rates for these programs beginning in fiscal year 2003 (see
table 3).
Table 3: Population Data Used in Four Selected Formula Grant Programs,
by Fiscal Year:
SSBG:
Fiscal year allocation
or payment: 2001[A]; Data used: July 1998 postcensal state
population estimates[B].
Fiscal year allocation
or payment: 2002[C]; Data used: April 2000 decennial census
by state.
Medicaid, Foster Care, and Adoption Assistance:
Fiscal year allocation
or payment: 2002[A]; Data used: July 1997, 1998, and 1999
postcensal state population estimates[B].
Fiscal year allocation
or payment: 2003[C]; Data used: July 1998, 1999, and 2000
state population estimates[D].
Sources: Department of Health and Human Services, Administration for
Children and Families; and Department of Health and Human Services,
Office of the Assistant Secretary for Planning and Evaluation.
[A] The last year the population estimates based on the 1990 census
were used in the formula.
[B] These postcensal population estimates are based on the 1990 census.
[C] The first year that the counts based on the 2000 census were used
in the formula.
[D] These population estimates were published by the Department of
Commerce‘s Bureau of Economic Analysis and were based on the 2000
census.
[End of table]
Most of Population Difference Between 1999 and 2000 Resulted from
Correction of Errors That Occurred During 1990s:
The difference between the 2000 census count and the 1999 postcensal
population estimate was 3.2 percent, which is large compared with the 1
percent average annual growth rate estimated over the preceding decade.
Most of the difference was due to the correction of the error that had
occurred during the 1990s. According to the Census Bureau, the size of
the error was the result of an underestimate in the measurement of net
international migration during the 1990s and the improved coverage of
the 2000 census compared with the 1990 census. Consequently, the
postcensal population estimate for 2000 was smaller than the 2000
census count. Every state‘s population growth was underestimated and
needed correction, but the correction amounts varied widely. Among the
four Census regions, only the Midwest[Footnote 5] showed a consistent
pattern: all 12 states were close to or below the national average
correction. California, Florida, and New York accounted for a high
percentage of the correction in population estimates in their
respective regions.
Correcting Errors in Population Estimates Accounted for Three-Quarters
of the Difference Between 1999 to 2000:
The 2000 census count of 281.4 million people as reported by the Census
Bureau exceeded the 1999 postcensal population estimate by 8.7 million
people, or 3.2 percent. Slightly more than three-quarters of this
difference (2.5 percent) was the result of correcting errors in the
population estimates that occurred over the decade, called the error of
closure (see app. I for detailed data for all states). The error of
closure was 6.8 million people, substantially larger than the 1.5
million error of closure associated with the 1990 census. The error of
closure for the 2000 census was four times the corresponding percentage
error for the 1990 census (2.5 percent compared with 0.6 percent).
The large error of closure in 2000 was due to underestimating the
annual growth in population during the 1990s and to the improved
coverage of the 2000 census over the 1990 census. The postcensal
population estimates for the decade grew an average 1.0 percent
annually. However, the 2000 census showed that the average annual
growth rate in population was 0.2 percent higher than the estimated
rate, or 1.2 percent. The Census Bureau revised its annual population
estimates upward when it released its intercensal population estimates
in the spring of 2002.
The Census Bureau cited two reasons for the size of the error in its
postcensal estimated population growth through the 1990s. First, the
net international migration was underestimated during the decade,
especially for the Hispanic population. The Hispanic population was
underestimated by approximately 10 percent, four times higher than the
national average population underestimate, 2.5 percent.[Footnote 6]
Second, the 2000 census was more accurate than the 1990 census. The
population undercount from the 2000 census was much smaller compared
with the 1990 census (1.18 percent, compared with 1.62 percent, making
the 2000 census more accurate[Footnote 7]); the 2000 census counted
people who were probably missed in the 1990 census.
Size of Population Correction Differed Widely Across States:
The error of closure shows a wide variation across states. For example,
West Virginia and Michigan had the smallest percentage corrections,
0.27 and 0.34 percent, respectively. The District of Columbia and
Nevada had the largest percentage corrections in their population
estimates, 10.2 percent and 7.5 percent, respectively. Twenty-eight
states had a lower-than-average percentage difference, and 23 states
had a greater-than-average percentage difference (see fig. 1 for the
correction percentages for all states).
Among the four Census regions, the Midwest had the smallest correction
in population, 1.5 percent; all 12 Midwest states had corrections close
to or below the national average.[Footnote 8] In the other three
regions, a single state accounted for a large share of the population
change for the region. For example, in the South, Florida‘s correction
in population of 4.7 percent constituted about 25 percent of the
correction for the entire region. Similarly, New York‘s correction was
44 percent of the northeastern states‘ correction, and California‘s
correction was 26 percent of the correction for the western states.
Figure 1: Percentage Difference in Population Due to the Correction of
the Error in Population Estimates, by State, on
April 1, 2000:
[See PDF for image]
[End of figure]
2000 Census Correction of Population Estimates Redistributes an
Estimated $380 Million Among States for Four Formula Grant Programs:
The correction to the population estimates generally redistributes
federal funding for the four programs we analyzed from the states with
the smallest corrections to those having the largest. Federal funding
for the 28 states that had below-average corrections decreases by an
estimated $380.3 million. In contrast, federal funding in the 23 states
with above-average corrections to their population estimates increases
by an estimated $388.8 million. Most of the change in funding is
concentrated in states with larger populations. Michigan and Ohio, for
example, account for 57 percent of the total decrease in funding for
states with below-average population corrections. A number of high-
income states, including California and New York, are largely
unaffected by the correction in their populations because their
matching rates for the Medicaid, Foster Care, and Adoption Assistance
programs cannot decrease below the minimum 50 percent matching rate.
Without this minimum, more funding would be shifted among the states.
While the redistribution of funding in the four programs began to occur
in fiscal year 2002, almost all of it occurs in fiscal year 2003, when
the 2000 census data are used to determine federal matching rates in
the three open-ended entitlement programs.
Population Correction Causes Significant Funding Changes for Many
States:
The correction in state populations resulting from the 2000 census
causes significant changes in the funding levels among the states for
the four programs we examined. We estimate that the funding for the 28
states that had below-average corrections in their populations
decreases by a total of $380.3 million. Conversely, funding for the 23
states that had above-average corrections in their populations
increases by an estimated $388.8 million (see table 4).
Table 4: Estimated Changes in Federal Funding as a Result of the
Correction in Population, by Grant Program:
Dollars in thousands:
[See PDF for image]
Sources: GAO calculations based on data obtained from the Department of
Health and Human Services and the Department of Commerce, Bureau of the
Census.
Note: Totals may not add because of rounding.
[End of table]
These results are dominated by a few highly populated states whose
corrections were among the largest--meaning they are estimated to
receive the most additional money or to lose the most. For example,
Michigan, the eighth most populous state,[Footnote 9] has an estimated
$119 million decline in funding because of its 0.34 percent correction
in population. Michigan‘s federal funding decrease accounts for about
one-third of the decreases for the 28 states with a below-average
correction in population. Moreover, when Michigan‘s decrease is
combined with that of Ohio, the seventh most populous state, the two
states account for 57 percent of the estimated total decline in funding
from the corrections of the population estimates. Conversely, Florida,
the fourth most populous state, has the largest estimated increase in
funding (about $126 million) because of the 4.7 percent correction in
its population estimate. This is almost double the national average
correction and accounts for about one-third of the estimated increase
for the 23 states with an above-average correction in population.
Funding changes did not occur in some states and were muted in others
because the states‘ federal matching rates were fixed by the minimum 50
percent rate for the three open-ended entitlement programs. For
example, on the basis of its fiscal year 2000 spending levels,
California would receive an estimated $305 million less in matching aid
in the three entitlement programs if its matching rate were allowed to
fall below the minimum. Because of the 50 percent minimum federal
matching rate, however, California only receives an estimated $2.8
million decrease--all of it linked to the SSBG. For the three
entitlement programs, the correction in population had no effect in 11
states that were affected by the 50 percent minimum, and for 2 states
the correction in population had a diminished effect because of the
floor.[Footnote 10]
The funding changes due to the population corrections showed little
regional pattern except in the Midwest, where all 12 states had a
correction in population estimates close to or below the national
average that resulted in an estimated $289.5 million loss in funding
owing to the correction in their populations.
Medicaid Accounts for Most of the Change in Program Funding:
Most of the change in funding resulting from the corrections in
population estimates is the result of changes in Medicaid funding. The
federal share of total Medicaid payments was approximately $111 billion
in fiscal year 2000 and constituted 96 percent of the share of funding
to the states for the four programs and approximately 96 percent of the
total estimated change in funding as well.[Footnote 11]
The SSBG distributed $1.69 billion for fiscal year 2002, representing
1.5 percent of the funding we analyzed. It accounted for a slightly
higher percentage, 2.2 percent, of the estimated funding changes.
Finally, the Foster Care and Adoption Assistance programs represented
1.6 and 0.6 percent of the funding, respectively. They account for 1.4
and 0.7 percent, respectively, of the estimated funding changes for
2003.
The earliest effect of the 2000 census on any of the four programs we
analyzed occurred when it was used to calculate fiscal year 2002 SSBG
grants. For the Medicaid, Foster Care, and Adoption Assistance
programs, the 2000 census is first used for fiscal year 2003 payments.
Agency Comments:
We provided the Department of Commerce a draft of this report for
comment. The department provided technical comments, which we have
incorporated where appropriate.
As arranged with your offices, unless you release its contents earlier,
we plan no further distribution of this report until 30 days after its
issuance date. At that time, we will send copies of this report to
interested congressional committees; the Secretary of Commerce; the
Secretary of Health and Human Services; and the Director, Bureau of the
Census. We will also make copies available to others on request. In
addition, the report will be available at no charge on GAO‘s Web site
at http://www.gao.gov.
If you or your staffs have questions about this report, please call me
at (202) 512-7114 or Jerry Fastrup at (202) 512-7211. Major
contributors to this report are Gregory Dybalski, Elizabeth T.
Morrison, and Michael Rose.
Kathryn G. Allen
Director, Health Care--Medicaid
and Private Health Insurance Issues:
Signed by Kathryn G. Allen:
[End of section]
Appendix I Data for Population Estimates, Decennial Census Population
Counts, and the Error of Closure:
This appendix compares the postcensal population estimates for July 1,
1999, with the census count for April 1, 2000 (table 5), and compares
the April 1, 2000, postcensal population estimates (based on the 1990
census) with the census counts (table 6). States are listed in tables 5
and 6 by the magnitude of the percentage correction in population.
Table 5: Comparison of the 1999 Postcensal Population Estimates and the
2000 Census Counts:
[See PDF for image]
Source: Department of Commerce, Bureau of the Census, Population
Estimates Division (Washington, D.C.), http://www.census.gov
(downloaded Oct. 23, 2001).
Notes: The states are listed in order of increasing percentage of
population correction. (See table 6.):
Totals may not add because of rounding.
[End of table]
The census is a population count made at the beginning of each decade
as of April 1. It is based on a count of the entire population.
Postcensal population estimates are made annually throughout a decade,
usually as of July 1 of each year. Such estimates are based on the
prior census and include annual population changes due to births,
deaths, and domestic and international migration.
Table 6: Comparison of the 2000 Postcensal Population Estimates and the
2000 Census Counts to Determine the Error of Closure and the Percentage
Correction in Population:
[See PDF for image]
Sources: The postcensal population estimates for April 1, 2000, are
from unpublished data provided by Department of Commerce, Bureau of the
Census, Population Estimates Division. The April 1, 2000, census counts
are from the Bureau of the Census, http://www.census.gov (downloaded
Oct. 23, 2001).
Notes: The states are listed in order of increasing percentage of
population correction.
Totals may not add because of rounding.
[End of table]
The census is a population count that is made at the beginning of each
decade as of April 1. It is based on a count of the entire population.
Postcensal population estimates are made annually throughout a decade,
usually as of July 1 of each year. Such estimates are based on the
prior census and include annual population changes due to births,
deaths, and domestic and international migration. The error of closure
is the difference between the postcensal population estimate and the
census population count for the same date. The percentage correction in
population is calculated by dividing the error of closure by the July
1, 1999, postcensal population estimate.
[End of section]
Appendix II Analysis of Estimated Funding Changes for Four Formula
Grant Programs:
This appendix contains the supporting data for our calculations of the
estimated change in funding due to correcting the population estimates.
Specifically, for each state, we provide the funding amounts for the
four programs and the estimated funding changes due to the correction
in population estimates. States are listed in tables 7 through 11 by
the magnitude of the percentage correction in population.
Medicaid, Foster Care, and Adoption Assistance:
The Medicaid, Foster Care, and Adoption Assistance programs are open-
ended entitlement programs for which states determine the level of
program expenditures. The federal government reimburses states for a
share of eligible state spending based on state per capita income. To
calculate the effect of the population correction on the Federal
Medical Assistance Percentages (FMAP)--also called federal matching
rates--we compared actual matching rates for fiscal year 2003,[Footnote
12] based on the 2000 census, with the estimated matching rates based
on the 1990 census (shown in table 7). Subtracting the estimated rates
from the actual fiscal year 2003 rates shows the effect on the matching
rates of correcting population estimates.
In general, the states that had a below-average correction in
population have a decrease in federal matching rates, while the states
that had an above-average correction in population have an increase in
matching rates. For 13 high-income states, the correction in population
had no effect or had a diminished effect because of the minimum 50
percent matching rate. (Under the matching rate formula, no state can
receive less than a 50 percent matching rate.) In our analysis, 11
states receive the 50 percent matching rate for fiscal year 2003;
hence, under the estimated rates, the correction in population shows no
change in these states‘ matching rates. Two additional states,
Washington and Nevada, are partially affected. Washington‘s actual
fiscal year 2003 matching rate is at the 50 percent minimum, while its
estimated matching rate is slightly above the 50 percent minimum.
Conversely, Nevada‘s actual fiscal year 2003 matching rate is above the
minimum, and its estimated matching rate is at the 50 percent minimum.
The 70 percent matching rate for the District of Columbia is
established by a special statutory provision. Accordingly, the District
of Columbia‘s matching rate remains unchanged, and the correction in
population has no effect on funding.
Table 7: Actual and Estimated FMAPs for the Medicaid, Adoption
Assistance, and Foster Care Programs for Fiscal Year 2003, by State:
[See PDF for image]
Source: 66 Fed. Reg. 59792 (2001) and GAO calculations of Department of
Commerce, Bureau of the Census and Bureau of Economic Analysis data.
Notes: The states are listed in order of increasing percentage of
population correction (see table 6).
[End of table]
The census is a population count made at the beginning of each decade
as of April 1; it is based on a count of the entire population.
Postcensal population estimates are made annually throughout a decade,
usually as of July 1 of each year. Such estimates are based on the
prior census and include annual population changes due to births,
deaths, and domestic and international migration.
Analysis of Funding Changes for Medicaid for Fiscal Year 2003:
To measure the effect of the correction in the population estimates on
federal payments, we estimated what federal payments would be using
matching rates calculated on the basis of postcensal population
estimates derived from the 1990 census. Specifically, multiplying the
two sets of state matching rates in table 7 by program expenditures
(fiscal year 2000 Medicaid expenditures) yields the estimated payments.
The 2000 program expenditures were the latest year for which the data
were available. (See table 8.):
Overall, the states that had a below-average correction in population
show a decrease in payments, while the states that had an above-average
correction in population show an increase in payments. As discussed in
the previous section, 11 states show no effect, and 2 states show a
partial effect because of the minimum 50 percent federal matching rate.
The District of Columbia is also unaffected because of its special
statutorily set matching rate.
Table 8: Medicaid Program Expenditures and Estimated Federal Payments,
by State:
[See PDF for image]
Source: Fiscal year 2000 program expenditures obtained from the
Department of Health and Human Services, Centers for Medicare &
Medicaid Services. GAO computed the estimated payments.
Notes: States are listed in order of increasing percentage of
population correction.
Totals may not add because of rounding.
[A] Excludes administrative expenditures.
[End of table]
Analysis of Funding Changes for Foster Care and Adoption Assistance for
Fiscal Year 2003:
The effects on the funding for Foster Care and Adoption Assistance are
similar to the effects on the Medicaid programs because these programs
use the same matching rates. Table 9 shows the Foster Care program
expenditures for fiscal year 2000, the estimated federal payments, and
changes in funding for Foster Care based on these estimated payments.
Table 10 shows the Adoption Assistance program expenditures for fiscal
year 2000, the estimated federal payments, and the changes in funding
for the program based on the estimated payments.
Table 9: Foster Care Program Expenditures and Estimated Federal
Payments, by State:
[See PDF for image]
Source: Fiscal year 2000 program expenditures obtained from the
Department of Health and Human Services, Administration for Children
and Families. GAO computed the estimated payments.
Note: States are listed in order of increasing percentage of population
correction.
Totals may not add because of rounding.
[A] Excludes administrative expenditures.
[End of table]
Table 10: Adoption Assistance Program Expenditures and Estimated
Federal Payments, by State:
[See PDF for image]
Source: Fiscal year 2000 program expenditures obtained from the
Department of Health and Human Services, Administration for Children
and Families. GAO computed the estimated payments.
Notes: The states are listed in order of increasing percentage of
population correction.
Totals may not add because of rounding.
[A] Excludes administrative expenditures.
[End of table]
Social Services Block Grant:
The fiscal year 2002 formula allocations for the SSBG are based on the
April 1, 2000, decennial census population counts. To calculate the
effect of the correction in population estimates, we compared fiscal
year 2002 allocations that were calculated using the April 1, 2000,
decennial census (actual allocations) with allocations using the 1990
postcensal population estimates for April 1, 2000 (estimated
allocations). The differences in these allocations represent the effect
of the population correction reflected in the 2000 census. The change
in funding is directly proportional to the percentage correction in
population because the SSBG allocations are calculated exclusively on
the basis of population data (see table 11).
Table 11: SSBG State Allocations, Actual and Estimated, for Fiscal Year
2002:
[See PDF for image]
Source: Department of Health and Human Services, Administration for
Children and Families (Washington, D.C.), http://www.acf.hhs.gov
(downloaded July 19, 2002). GAO computed the allocations for fiscal
year 2002 based on the April 1, 2000, postcensal population estimates.
Notes: The states are listed in order of increasing percentage of
population correction.
Totals may not add because of rounding.
[End of table]
The census is a population count that is made at the beginning of each
decade as of April 1. It is based on a count of the entire population.
Postcensal population estimates are made annually throughout a decade,
usually as of July 1 of each year. Such estimates are based on the
prior census and include annual population changes due to births,
deaths, and domestic and international migration.
FOOTNOTES
[1] For this report, we use ’state“ to refer to the 50 states and the
District of Columbia.
[2] U.S. General Services Administration, Catalog of Federal Domestic
Assistance (Washington, D.C., December 2001 edition) (CD-ROM version).
[3] For more information about Census population estimates see
Department of Commerce, Bureau of the Census, Population Estimates:
Concepts and Geography (Washington, D.C.: Department of Commerce, Dec.
26, 2001), http://eire.census.gov/popest/archives/place/concepts.php
(downloaded Jan. 31, 2003).
[4] These population estimates were developed as interim estimates by
the Department of Commerce‘s Bureau of Economic Analysis.
[5] The 12 Midwest states are Illinois, Indiana, Iowa, Kansas,
Michigan, Minnesota, Missouri, Nebraska, North Dakota, Ohio, South
Dakota, and Wisconsin.
[6] J. Gregory Robinson, Accuracy and Coverage Evaluation: Demographic
Analysis Results (Washington, D.C.: Department of Commerce, Bureau of
the Census, March 2001), 9-11, http://landview.census.gov/dmd/www/
ReportRec.htm (downloaded Aug. 29, 2002).
[7] The percentages are the net undercounts for the 1990 and 2000
censuses for household population from the 1990 Post-Enumeration Survey
and 2000 Accuracy and Coverage Evaluation. Howard Hogan, Accuracy and
Coverage Evaluation: Data and Analysis to Inform the ESCAP Report
(Washington, D.C.: Department of Commerce, Bureau of the Census, March
2001), 12-14, http://landview.census.gov/dmd/www/ReportRec.htm
(downloaded Jan. 15, 2003).
[8] Nebraska and South Dakota were 0.03 and 0.04 percentage points
above the national average, respectively.
[9] State population rankings are based on the 2000 census.
[10] The 11 states are California, Colorado, Connecticut, Delaware,
Illinois, Maryland, Massachusetts, Minnesota, New Hampshire, New
Jersey, and New York. The two states partially affected are Nevada and
Washington. In addition, the District of Columbia receives a special
federal matching rate of 70 percent and consequently is unaffected by
the correction in population.
[11] See appendix II for additional detail, by state, on the changes in
federal matching rates and estimated shifts in funding under each of
the four programs.
[12] The matching rates for fiscal year 2003 are for the first year in
which population estimates based on the 2000 census are used.
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