Stimulus End Means Lower State Spending on State Safety Net Programs

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November, 2013; NASBO

The latest report of the National Association of State Budget Officers (NASBO) reveals what we have long anticipated: With the end of stimulus funds, state government funding is declining in a number of program categories of critical importance to nonprofits. The report examines state spending in Fiscal 2011 and 2012 and estimated expenditures for fiscal 2013. The key findings for nonprofits include these:

  • In 2012, federal dollars for state programs in elementary and secondary education declined 21.6 percent due to the reduction of federal stimulus funding.
  • Federal funds for higher education declined 10.2 percent in fiscal 2012 and are estimated to decline another 2.0 percent in fiscal 2013.
  • Medicaid spending by the states declined in 2012 due to the end of the enhanced federal Medicaid match rate in the stimulus program.
  • The states generally estimate increased spending in most program categories in fiscal 2013, perhaps attributable to their improving revenue, but public assistance spending declined between 2011 and 2012 and is predicted to decline again in 2013. (Note: Although TANF cash assistance caseloads have declined, cash assistance is only 29 percent of TANF expenditures, the remainder going for services such as child care and employment programs.)
  • Although federal funds constitute over 57 percent of state TANF cash expenditures, federal dollars as a percentage of state public assistance cash expenditures increased by 69 percent in the New England states and 37 percent in the Southeastern states between 2011 and 2012, but declined by almost 21 percent in the Great Lakes states, 17 percent in the Plains states, and 16 percent in the Far West. Federal funds for cash assistance are expected to decline by almost 10 percent in 2013 in the Great Lakes states, but almost 27 percent in the Southeast and 22 percent in the Rocky Mountain states.
  • TANF expenditures for cash assistance declined from 1.1 percent of total state expenditures in fiscal 2011 to 0.9 percent in 2012 and are projected to decline further to 0.8 percent in 2013.
  • Federal funds as a component of state government expenditures declined from $567,694,000 in fiscal 2011 to $516,211,000 in fiscal 2012.

Perhaps nonprofits can anticipate increases in state spending from state revenues due to an improving economy, but the losses in federal funding point to looming problems in maintaining the social safety net. If the economy doesn’t continue to improve as projected, the upward projections for state spending in 2013 might be seriously incorrect.—Rick Cohen