Why Does the Census Matter for State and Local Governments?

By and ·March 22, 2019
McCourt School of Public Policy, Georgetown University

The Issue:

The 2020 Census is rapidly approaching. Much attention has focused on whether including a citizenship question will impact the accuracy of the count. But other factors  – ranging from technical issues, to funding, to the ability to hire the number of census workers required  –  also present challenges. This has placed the 2020 Decennial Census on the U.S. GAO's list of high-risk programs. And the accuracy of the census has far-reaching implications.

Data from the decennial census is used to determine how half a trillion dollars in federal funds will be distributed to state and local governments.

The Facts:

  • The U.S. decennial census is unique because it is an actual enumeration of the total population living in the United States, rather than a sample. The United States does not maintain a registry of all residents, unlike some European countries (see here for example). Administrative data sources, while increasingly valuable for research, fail to capture the full population. For example, IRS data only includes those who file taxes. Other frequently used government data sources, like the American Community Survey or Current Population Survey, are structured to sample from the full population (instead of conducting a comprehensive enumeration); moreover, these sources rely on the decennial census as a basis for determining the frame and selection of their samples (see here). The comprehensiveness of the decennial census makes it an important data source for social scientists conducting research and for businesses making investment and expansion plans, among others.
  • Census data are used to apportion multiple federal funding streams. In fiscal year 2015, census data were used to determine the allocation of $675 billion for 132 programs, including Medicaid, SNAP, the Section 8 Housing Choice Voucher program, Head Start, and Highway Planning and Construction. The top five programs by amount of funds that used census-based population numbers and population characteristics to determine fund distribution in fiscal year 2015 were: Medicaid ($311 billion); the Supplemental Nutrition Assistance Program (SNAP $71 billion); Medicare Part B ($70 billion); Highway Planning and Construction ($38 billion); and the Federal Pell Grant program ($29.9 billion), according to a Census report (for a full listing of programs see page 3 here.)
  • Because the complete count of the full population is only every ten years, federal funds are distributed based on annual population estimates. The decennial census forms the backbone of these estimates: the Census Bureau uses data on births, deaths, and migration to update population estimates in between decennial census years. How the census data is used to determine funding varies from one program to another, as the examples below illustrate.
  • Census data are used to calculate the rate at which federal funds match state spending on programs including Medicaid, Temporary Assistance for Needy Families (TANF), and the Children’s Health Insurance Program (CHIP). This rate, known as the Federal Medical Assistance Percentage, depends on a state’s per capita income relative to the national average (CHIP uses an "enhanced FMAP"). For example, the federal share of Medicaid spending ranges from 50 percent in wealthier states to a maximum of 83 percent in poorer states. Annual population estimates derived from decennial census counts are used as the denominator in calculating these per capita amounts, while total personal income data come from a different source, the Bureau of Economic Analysis. If the population estimates are artificially low, the per capita income estimates will be too high – which means some states would not receive the full federal reimbursement to which they are entitled.
  • Census data feeds into the U.S. Department of Education’s two biggest elementary and secondary programs, through Title I (compensatory education) and the Individuals with Disabilities Education Act (special education). These programs rely on the Census for counts of school-aged children and children in poverty at the state and school district levels. Even though multiple data sources are used to allocate these funds, including the American Community Survey and administrative data, funding relies on annually updated Census population estimates.
  • The Highway Planning and Construction Program also relies on on annually updated Census population estimates to distribute funding for the National Highway System, a major transportation initiative. Funds support the planning, construction, and maintenance of highways and bridges. Funding depends on annual census population estimates, as well as the classification of urban and rural areas, which also depend on decennial census population counts.
  • Many states have established their own, multi-million dollar census media and outreach campaigns to ensure that all of their residents are counted. These states are devoting their own funds to promote participation in the 2020 Census among their residents – especially residents who are hard to contact or skeptical of filling out census forms – so that they can receive the appropriate distribution of federal funds and number of seats in the House of Representatives. For example, California – which is at risk of losing one Congressional seat – has approved $100 million since 2017 to hire workers and pay for media campaigns with the aim of reaching people who are hard to count, according to the Christian Science Monitor.

What this Means:

The decennial census provides a uniquely comprehensive data source. Its accuracy affects not only political representation but whether adequate funding is disbursed to where it is needed the most in areas ranging from potholes to health insurance to education. The degree to which an inaccurate count will impact state and local finances, particularly an undercount of specific population groups, varies from one location to another depending on their characteristics and the federal programs from which they receive assistance.


Economic Statistics / Federal spending / State and Local Finance
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