How Does the Census Affect Local and State Budgeting?

This is the twelfth and final blog post in an in-depth series exploring the history and future of the US Census. If you’re interested in other subjects related to Census 2020, check out the list of all our blog posts about it at the end of this post.

In 2016, the State of Michigan received 35.9% of its 57.8 billion-dollar budget from the U.S. federal government. A significant amount of federal dollars, from highway planning to Medicare to Head Start, are determined by Census counts of population.  So how could an undercount affect funding to states and municipalities like Detroit?

Types of Federal Assistance

The Catalog of Federal Domestic Assistance (CFDA) defines four types of assistance in the form of direct loans, direct payments for specified use, formula grants, and project grants. Although there are many other types of federal funds, their allocation doesn’t depend on accurate census data. Direct loans are financial assistance from the federal government by federal dollars with expectation of repayment, according to the U.S. General Services Administration (GSA). There are only a few examples of programs funded by direct loans: projects like the Rural Energy Savings Program or Fisheries Finance Program qualify. GSA also defines direct payments for specified use as “monies given directly to private firms, individuals, and private entities to encourage or subsidize a particular activity” like Section 8 Housing Assistance Payments Program. Formula grants usually provide money to States, counties, or cities calculated by distribution formulas that are not restricted to specific plans. Medicare and Medicaid assistance are the most common and heavily funded type of formula grants. Lastly, project grants are funding confined to specific project for fixed periods of time, like Citizenship Education and Training provided by U.S. Citizenship and Immigration Services. There are currently 132 programs ranging from veterans’ outreach to highway planning and construction that are listed in the report provided that distribute the four types of assistance. The aggregate total of money determined from these types of assistance is all computed with the help of census data. Essential services provided by government programs are all influenced by the census count. In 2016, Michigan received $77.4 billion from contracts, grants, loans, and other financial assistance. Wayne county received the most of all Michigan counties ($6.5 billion). The top funded agencies were the Social Security Administration, Department of Health and Human Services, and Department of Veteran Affairs. At usaspending.gov, you can see how every tax dollar is spent in the United States including businesses and organizations who received contracts from the federal government.

Allocating Funds There are three usual criteria that programs use to determine how to allocate federal funds with decennial data according to research published by the U.S. Census. You can find a complete report here. First is by a population count threshold. For example, the Community Development Block Grant (CDBG), which serves urban areas, requires a population of 50,000 to establish eligibility. Second, demographic data like age or economic characteristics allows programs to measure an area’s need for funding through formulaic calculations. The CDBG also accounts for total population, people in poverty, and overcrowded units in an entitlement formula. Finally, using another data element in combination with Census data can calculate per capita variables like per capita income which is also important for apportioning funds.  
Effects of Possible Undercount Without an accurate census count, federal money provided to states will be distributed incorrectly. Findings published by the Brookings Institute in a comprehensive report detailing the geographic distribution of federal funds by 2010 census data concluded several things. First, a little over 440 billion dollars are distributed every year; 90% is calculated using census data. This means an accurate census will govern fair allocation. Second, the majority of federal assistance is distributed through formula grants to state governments. Undercounts could potentially skew per capita data to higher income levels or miss certain threshold requirements. For example, a lower per capita income means a higher reimbursement rate from Medicaid, adding several hundred to several thousand dollars per person depending on which state a person lives in.  Therefore, it is beneficial for state and local government to advocate for increased participation because of a likely increase in the distribution of federal funds. At the George Washington Institute of Public Policy, researchers have published two of four planned reports on funding related to the 2020 Census. They found that Michigan receives $1,467 per person when looking at the 16 largest federal assistance programs, that’s over $14.5 billion overall. In estimating losses for each state due to undercounting, the researchers found a 1% undercount in Michigan could cost the state nearly $1 billion. In 2010, Lt. Governor John D. Cherry said that for every person that is not counted in the 2010 Census, Michigan loses $10,000 in federal funds. Although Michigan had a net over count, estimates say Detroit was undercounted by almost 200,000 people. Michigan was the only state that suffered a population loss, which was especially hard on the economy in the midst of the recession and resulted in the loss of seat in the House of Representatives. Detroit is continuing to lose population according to the American Community Survey and with it necessary funding.