Formula Grants: 2000 Census Redistributes Federal Funding Among  
States (24-FEB-03, GAO-03-178). 				 
                                                                 
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. 		 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-03-178 					        
    ACCNO:   A06160						        
  TITLE:     Formula Grants: 2000 Census Redistributes Federal Funding
Among States							 
     DATE:   02/24/2003 
  SUBJECT:   Census						 
	     Federal grants					 
	     Grants to states					 
	     Funds management					 
	     Data integrity					 
	     Population growth					 
	     Social Services Block Grant			 
	     Title IV-E Foster Care Program			 
	     1990 Decennial Census				 
	     2000 Decennial Census				 
	     Medicaid Program					 
	     Adoption Assistance Program			 

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GAO-03-178

Report to Congressional Requesters

United States General Accounting Office

GAO

February 2003 FORMULA GRANTS 2000 Census Redistributes Federal Funding
Among States

GAO- 03- 178

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.

FORMULA GRANTS

2000 Census Redistributes Federal Funding Among States

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. Highlights of
GAO- 03- 178, a report to

Congressional Requesters

February 2003

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.

Page i GAO- 03- 178 Federal Formula Grant Funding Letter 1 Results in
Brief 3 Background 4 Most of Population Difference Between 1999 and 2000
Resulted from Correction of Errors That Occurred During 1990s 8 2000
Census Correction of Population Estimates Redistributes an

Estimated $380 Million Among States for Four Formula Grant Programs 12
Agency Comments 16 Appendix I Data for Population Estimates, Decennial
Census

Population Counts, and the Error of Closure 17

Appendix II Analysis of Estimated Funding Changes for Four Formula Grant
Programs 21

Medicaid, Foster Care, and Adoption Assistance 21 Social Services Block
Grant 29 Tables

Table 1: Definition of Population Terminology Used in This Report 5 Table
2: Federal Formula Grant Program Funding for Fiscal Year 2000 6 Table 3:
Population Data Used in Four Selected Formula Grant Programs, by Fiscal
Year 7 Table 4: Estimated Changes in Federal Funding as a Result of the
Correction in Population, by Grant Program 13 Table 5: Comparison of the
1999 Postcensal Population Estimates and the 2000 Census Counts 17 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 19 Table 7: Actual and Estimated FMAPs for the
Medicaid, Adoption

Assistance, and Foster Care Programs for Fiscal Year 2003, by State 22
Table 8: Medicaid Program Expenditures and Estimated Federal

Payments, by State 24 Table 9: Foster Care Program Expenditures and
Estimated Federal Payments, by State 26 Contents

Page ii GAO- 03- 178 Federal Formula Grant Funding

Table 10: Adoption Assistance Program Expenditures and Estimated Federal
Payments, by State 28 Table 11: SSBG State Allocations, Actual and
Estimated, for Fiscal

Year 2002 30 Figure

Figure 1: Percentage Difference in Population Due to the Correction of the
Error in Population Estimates, by State, on April 1, 2000 11 Abbreviations

FMAP Federal Medical Assistance Percentage SSBG Social Services Block
Grant

This is a work of the U. S. Government and is not subject to copyright
protection in the United States. It may be reproduced and distributed in
its entirety without further permission from GAO. It may contain
copyrighted graphics, images or other materials. Permission from the
copyright holder may be necessary should you wish to reproduce copyrighted
materials separately from GAO*s product.

Page 1 GAO- 03- 178 Federal Formula Grant Funding

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 1 and local governments using formulas that are based on data such
as state population and personal income. For example, the $196 billion
federalstate 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.

1 For this report, we use *state* to refer to the 50 states and the
District of Columbia.

United States General Accounting Office Washington, DC 20548

Page 2 GAO- 03- 178 Federal Formula Grant Funding

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. 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

2 U. S. General Services Administration, Catalog of Federal Domestic
Assistance

(Washington, D. C., December 2001 edition) (CD- ROM version).

Page 3 GAO- 03- 178 Federal Formula Grant Funding

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.

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 Results in Brief

Page 4 GAO- 03- 178 Federal Formula Grant Funding

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.

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. 3 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). Background

Page 5 GAO- 03- 178 Federal Formula Grant Funding

Table 1: Definition of Population Terminology Used in This Report Term
Description

Census population count 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. Postcensal population

estimate 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.
Error of closure 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.

Intercensal population estimate 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.

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).

Page 6 GAO- 03- 178 Federal Formula Grant Funding

Table 2: Federal Formula Grant Program Funding for Fiscal Year 2000
Program

Fiscal year 2000 federal obligations a

(millions) Percentage of total federal obligations

Medicaid $121,809 43.0 Foster Care Title IV- E 4,536 1.6 Adoption
Assistance 1,008 0.4 SSBG 1,775 0.6 Remaining 168 formula programs 154,221
54.4

Total obligations b 283,348 100.0

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.

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.

Page 7 GAO- 03- 178 Federal Formula Grant Funding

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. 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

Fiscal year allocation or payment Data used SSBG

2001 a July 1998 postcensal state population estimates b 2002 c April 2000
decennial census by state

Medicaid, Foster Care, and Adoption Assistance

2002 a July 1997, 1998, and 1999 postcensal state population estimates b
2003 c 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.

4 These population estimates were developed as interim estimates by the
Department of Commerce*s Bureau of Economic Analysis.

Page 8 GAO- 03- 178 Federal Formula Grant Funding

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 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.

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.

5 The 12 Midwest states are Illinois, Indiana, Iowa, Kansas, Michigan,
Minnesota, Missouri, Nebraska, North Dakota, Ohio, South Dakota, and
Wisconsin. Most of Population

Difference Between 1999 and 2000 Resulted from Correction of Errors That
Occurred During 1990s

Correcting Errors in Population Estimates Accounted for ThreeQuarters of
the Difference Between 1999 to 2000

Page 9 GAO- 03- 178 Federal Formula Grant Funding

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. 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 7 ); the
2000 census counted people who were probably missed in the 1990 census.

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).

Page 10 GAO- 03- 178 Federal Formula Grant Funding

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
lowerthan- average percentage difference, and 23 states had a greater-
thanaverage 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. 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.

8 Nebraska and South Dakota were 0.03 and 0. 04 percentage points above
the national average, respectively. Size of Population

Correction Differed Widely Across States

Page 11 GAO- 03- 178 Federal Formula Grant Funding

Figure 1: Percentage Difference in Population Due to the Correction of the
Error in Population Estimates, by State, on April 1, 2000

West Virginia Michigan

Ohio Alaska Kansas California

Maine Alabama Kentucky Maryland Washington

Wisconsin Iowa Montana Missouri North Dakota

Indiana Virginia New Hampshire

Vermont Illinois

Idaho Louisiana Minnesota

Oklahoma Mississippi Massachusetts

Pennsylvania U. S. average correction, 2.5%

Nebraska South Carolina

South Dakota Oregon

Texas Hawaii New Jersey

Wyoming Tennessee

Delaware Connecticut

Utah Georgia New York Arkansas North Carolina

New Mexico Colorado

Florida Rhode Island

Arizona Nevada District of Columbia

Percentage 012 34 5 67891011

Source: GAO calculations based on data obtained from the Department of
Commerce, Bureau of the Census.

Page 12 GAO- 03- 178 Federal Formula Grant Funding

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
aboveaverage 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
belowaverage 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. 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
aboveaverage

corrections in their populations increases by an estimated $388.8 million
(see table 4). 2000 Census

Correction of Population Estimates Redistributes an Estimated $380 Million
Among States for Four Formula Grant Programs Population Correction

Causes Significant Funding Changes for Many States

Page 13 GAO- 03- 178 Federal Formula Grant Funding

Table 4: Estimated Changes in Federal Funding as a Result of the
Correction in Population, by Grant Program

Dollars in thousands

Entitlement program State Percentage correction in

population Social Services Block Grant Medicaid Foster Care Adoption
Assistance Total estimated change in funding

States below the U. S. average percentage correction of 2.50

West Virginia 0.27 $- 240 $- 13,105 $- 142 $- 38 $- 13,526 Michigan 0.34
-1,272 -113,807 -2,311 -1,999 -119,389 Ohio 0.78 -1,150 -92,161 -2,562
-748 -96,620 Alaska 0.90 -59 -5,342 -66 -66 -5,534 Kansas 0.96 -244
-14,672 -218 -122 -15,256 California 1.08 -2,841 0 0 0 -2,841 Maine 1.49
-75 -8,124 -284 -55 -8,538 Alabama 1.51 -256 -12,442 -19 -2 -12,718
Kentucky 1.59 -215 -14,855 -169 -37 -15,275 Maryland 1.65 -263 0 0 0 -263
Washington 1.70 -277 -4,359 -25 -22 -4,682 Wisconsin 1.76 -232 -17,462
-311 -160 -18,165 Iowa 1.77 -124 -7,596 -151 -119 -7,989 Montana 1.77 -38
-1,351 -23 -7 -1,419 Missouri 1.86 -206 -17,177 -194 -71 -17,649 North
Dakota 1.90 -22 -1,115 -17 -4 -1,157 Indiana 1.92 -205 -13,430 -166 -98
-13,899 Virginia 1.92 -242 -15,554 -189 -69 -16,054 New Hampshire 1.99 -37
0 0 0 -37 Vermont 2.03 -16 -1,757 -54 -18 -1,846 Illinois 2.06 -312 0 0 0
-312 Idaho 2.09 -32 -1,054 -4 -3 -1,093 Louisiana 2.18 -80 -4,168 -47 -11
-4,307 Minnesota 2.19 -90 0 0 0 -90 Oklahoma 2.20 -59 -1,844 -23 -12
-1,938 Mississippi 2.24 -43 -1,795 -4 -3 -1,844 Massachusetts 2.47 -6 0 0
0 -6 Pennsylvania 2.48 -1 2,078 64 9 2,149 Subtotal -8,639 -361,094 -6,914
-3,654 -380,300

States above the U. S. average percentage correction of 2.50

Nebraska 2.53 5 844 17 5 871 South Carolina 2.54 9 816 3 3 831 South
Dakota 2.54 2 120 1 0 124 Oregon 2.63 27 4,433 42 39 4,540 Texas 2.71 242
14,911 140 63 15,356 Hawaii 2.73 19 2,056 31 20 2,125 New Jersey 2.75 124
0 0 0 124

Page 14 GAO- 03- 178 Federal Formula Grant Funding

Dollars in thousands

Entitlement program State Percentage correction in

population Social Services Block Grant Medicaid Foster Care Adoption
Assistance Total estimated change in funding

Wyoming 2.77 8 547 6 1 562 Tennessee 3.08 192 19,976 102 35 20,305
Delaware 3.14 29 0 0 0 29 Connecticut 3.41 182 0 0 0 182 Utah 3.59 138
4,942 48 35 5,164 Georgia 3.65 528 32,841 266 167 33,803 New York 3.92
1,560 0 0 0 1,560 Arkansas 3.99 228 11,070 31 31 11,359 North Carolina
4.27 814 66,125 474 230 67,642 New Mexico 4.30 189 11,284 56 65 11,595
Colorado 4.55 495 0 0 0 495 Florida 4.68 1,968 121,783 1,281 537 125,569
Rhode Island 5.41 174 26,137 188 152 26,651 Arizona 5.77 932 42,721 525
354 44,532 Nevada 7.47 534 14,297 227 47 15,105 District of Columbia 10.23
242 0 0 0 242 Subtotal 8,639 374,902 3,439 1,786 388,766

Total 0 $13,808 $- 3,475 $- 1,868 $8,466

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.

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, 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 9
State population rankings are based on the 2000 census.

Page 15 GAO- 03- 178 Federal Formula Grant Funding

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. 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.

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. 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

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. Medicaid
Accounts for

Most of the Change in Program Funding

Page 16 GAO- 03- 178 Federal Formula Grant Funding

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.

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 Agency Comments

Appendix I: Data for Population Estimates, Decennial Census Population
Counts, and the Error of Closure

Page 17 GAO- 03- 178 Federal Formula Grant Funding

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

Population in thousands

Population count Difference State April 1, 2000, census July 1, 1999,

postcensal estimate Population Percentage States below the U. S. average
percentage correction of 2.50

West Virginia 1,808 1,807 1 0.08 Michigan 9,938 9,864 75 0.76 Ohio 11,353
11,257 96 0.86 Alaska 627 620 7 1.20 Kansas 2,688 2,654 34 1.29 California
33,872 33,145 727 2.19 Maine 1,275 1,253 22 1.75 Alabama 4,447 4,370 77
1.77 Kentucky 4,042 3,961 81 2.04 Maryland 5,296 5,172 125 2.41 Washington
5,894 5,756 138 2.39 Wisconsin 5,364 5,250 113 2.16 Iowa 2,926 2,869 57
1.98 Montana 902 883 19 2.20 Missouri 5,595 5,468 127 2.32 North Dakota
642 634 9 1.35 Indiana 6,080 5,943 138 2.32 Virginia 7,079 6,873 206 2.99
New Hampshire 1,236 1,201 35 2.88 Vermont 609 594 15 2.54 Illinois 12,419
12,128 291 2.40 Idaho 1,294 1,252 42 3.38 Louisiana 4,469 4,372 97 2.22
Minnesota 4,919 4,776 144 3.01 Oklahoma 3,451 3,358 93 2.76 Mississippi
2,845 2,769 76 2.75 Massachusetts 6,349 6,175 174 2.82 Pennsylvania 12,281
11,994 287 2.39

States above the U. S. average percentage correction of 2.50

Nebraska 1,711 1,666 45 2.72 South Carolina 4,012 3,886 126 3.25 South
Dakota 755 733 22 2.96

Appendix I: Data for Population Estimates, Decennial Census Population
Counts, and the Error of Closure

Appendix I: Data for Population Estimates, Decennial Census Population
Counts, and the Error of Closure

Page 18 GAO- 03- 178 Federal Formula Grant Funding

Population in thousands

Population count Difference State April 1, 2000, census July 1, 1999,

postcensal estimate Population Percentage

Oregon 3,421 3,316 105 3.17 Texas 20,852 20,044 808 4.03 Hawaii 1,212
1,185 26 2.20 New Jersey 8,414 8,143 271 3.33 Wyoming 494 480 14 2.96
Tennessee 5,689 5,484 206 3.75 Delaware 784 754 30 3.99 Connecticut 3,406
3,282 124 3.76 Utah 2,233 2,130 103 4.85 Georgia 8,186 7,788 398 5.11 New
York 18,976 18,197 780 4.29 Arkansas 2,673 2,551 122 4.78 North Carolina
8,049 7,651 399 5.21 New Mexico 1,819 1,740 79 4.55 Colorado 4,301 4,056
245 6.04 Florida 15,982 15,111 871 5.76 Rhode Island 1,048 991 58 5.80
Arizona 5,131 4,778 352 7.37 Nevada 1,998 1,809 189 10.45 District of
Columbia 572 519 53 10.22 United States 281,422 272,691 8,731 3.20

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. 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.

Appendix I: Data for Population Estimates, Decennial Census Population
Counts, and the Error of Closure

Page 19 GAO- 03- 178 Federal Formula Grant Funding

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 Population in thousands April 1, 2000, population
State Census count

Postcensal estimate (based on 1990 census) Error of closure

Percentage correction in

population States below the U. S. average percentage correction of 2.50

West Virginia 1,808 1,804 5 0.27 Michigan 9,938 9,904 34 0.34 Ohio 11,353
11,265 88 0.78 Alaska 627 621 6 0.90 Kansas 2,688 2,663 26 0.96 California
33,872 33,513 359 1.08 Maine 1,275 1,256 19 1.49 Alabama 4,447 4,381 66
1.51 Kentucky 4,042 3,979 63 1.59 Maryland 5,296 5,211 85 1.65 Washington
5,894 5,796 98 1.70 Wisconsin 5,364 5,271 92 1.76 Iowa 2,926 2,876 51 1.77
Montana 902 887 16 1.77 Missouri 5,595 5,493 102 1.86 North Dakota 642 630
12 1.90 Indiana 6,080 5,967 114 1.92 Virginia 7,079 6,946 132 1.92 New
Hampshire 1,236 1,212 24 1.99 Vermont 609 597 12 2.03 Illinois 12,419
12,169 250 2.06 Idaho 1,294 1,268 26 2.09 Louisiana 4,469 4,374 95 2.18
Minnesota 4,919 4,815 104 2.19 Oklahoma 3,451 3,377 74 2.20 Mississippi
2,845 2,783 62 2.24 Massachusetts 6,349 6,196 153 2.47 Pennsylvania 12,281
11,984 297 2.48

States above the U. S. average percentage correction of 2.50

Nebraska 1,711 1,669 42 2.53 South Carolina 4,012 3,913 99 2.54 South
Dakota 755 736 19 2.54 Oregon 3,421 3,334 87 2.63 Texas 20,852 20,308 544
2.71 Hawaii 1,212 1,179 32 2.73 New Jersey 8,414 8,191 224 2.75 Wyoming
494 480 13 2.77

Appendix I: Data for Population Estimates, Decennial Census Population
Counts, and the Error of Closure

Page 20 GAO- 03- 178 Federal Formula Grant Funding

Population in thousands April 1, 2000, population State Census count
Postcensal estimate (based on 1990 census) Error of closure

Percentage correction in

population

Tennessee 5,689 5,520 169 3.08 Delaware 784 760 24 3.14 Connecticut 3,406
3,294 112 3.41 Utah 2,233 2,157 76 3.59 Georgia 8,186 7,903 284 3.65 New
York 18,976 18,264 713 3.92 Arkansas 2,673 2,572 102 3.99 North Carolina
8,049 7,722 327 4.27 New Mexico 1,819 1,744 75 4.30 Colorado 4,301 4,117
185 4.55 Florida 15,982 15,276 707 4.68 Rhode Island 1,048 995 54 5.41
Arizona 5,131 4,855 276 5.77 Nevada 1,998 1,863 135 7.47 District of
Columbia 572 519 53 10.23 United States 281,422 274,608 6,814 2.50

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. 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.

Appendix II: Analysis of Estimated Funding Changes for Four Formula Grant
Programs Page 21 GAO- 03- 178 Federal Formula Grant Funding

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.

The Medicaid, Foster Care, and Adoption Assistance programs are openended
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, 1 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

1 The matching rates for fiscal year 2003 are for the first year in which
population estimates based on the 2000 census are used. Appendix II:
Analysis of Estimated Funding

Changes for Four Formula Grant Programs Medicaid, Foster Care, and
Adoption Assistance

Appendix II: Analysis of Estimated Funding Changes for Four Formula Grant
Programs Page 22 GAO- 03- 178 Federal Formula Grant Funding

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

FMAP State Actual rate based on population

estimate derived from the 2000 census

Estimated rate based on postcensal population estimate

derived from the 1990 census Difference States below the U. S. average
percentage correction of 2.50

West Virginia 75.04 75.99 -0.95 Michigan 55.42 57.10 -1.68 Ohio 58.83
60.05 -1.22 Alaska 58.27 59.33 -1.06 Kansas 60.15 61.19 -1.04 California
50.00 50.00 0 Maine 66.22 66.90 -0.68 Alabama 70.60 71.06 -0.46 Kentucky
69.89 70.37 -0.48 Maryland 50.00 50.00 0 Washington 50.00 50.11 -0.11
Wisconsin 58.43 58.96 -0.53 Iowa 63.50 63.96 -0.46 Montana 72.96 73.26
-0.30 Missouri 61.23 61.66 -0.43 North Dakota 68.36 68.62 -0.26 Indiana
61.97 62.35 -0.38 Virginia 50.53 51.10 -0.57 New Hampshire 50.00 50.00 0
Vermont 62.41 62.75 -0.34 Illinois 50.00 50.00 0 Idaho 70.96 71.14 -0.18
Louisiana 71.28 71.40 -0.12 Minnesota 50.00 50.00 0 Oklahoma 70.56 70.67
-0.11 Mississippi 76.62 76.71 -0.09 Massachusetts 50.00 50.00 0
Pennsylvania 54.69 54.67 0.02

States above the U. S. average percentage correction of 2.50

Nebraska 59.52 59.44 0.08 South Carolina 69.81 69.78 0.03 South Dakota
65.29 65.26 0.03 Oregon 60.16 59.95 0.21 Texas 59.99 59.85 0.14

Appendix II: Analysis of Estimated Funding Changes for Four Formula Grant
Programs Page 23 GAO- 03- 178 Federal Formula Grant Funding

FMAP State Actual rate based on population

estimate derived from the 2000 census

Estimated rate based on postcensal population estimate

derived from the 1990 census Difference

Hawaii 58.77 58.45 0.32 New Jersey 50.00 50.00 0 Wyoming 61.32 61.07 0.25
Tennessee 64.59 64.19 0.40 Delaware 50.00 50.00 0 Connecticut 50.00 50.00
0 Utah 71.24 70.63 0.61 Georgia 59.60 58.84 0.76 New York 50.00 50.00 0
Arkansas 74.28 73.58 0.70 North Carolina 62.56 61.35 1.21 New Mexico 74.56
73.64 0.92 Colorado 50.00 50.00 0 Florida 58.83 57.22 1.61 Rhode Island
55.40 53.16 2.24 Arizona 67.25 65.33 1.92 Nevada 52.39 50.00 2.39 District
of Columbia 70.00 70.00 0

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).

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.

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.) Analysis of Funding

Changes for Medicaid for Fiscal Year 2003

Appendix II: Analysis of Estimated Funding Changes for Four Formula Grant
Programs Page 24 GAO- 03- 178 Federal Formula Grant Funding

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

Dollars in thousands

Estimated federal Medicaid payments Difference State

FY 2000 Medicaid expenditures (combined

federal and state) a Based on actual FY 2003 FMAP

Based on estimated FY 2003

FMAP Amount Percentage States below the U. S. average percentage
correction of 2.50

West Virginia $1,379,499 $1,035,176 $1,048,281 -$ 13,105 -1.25 Michigan
6,774,253 3,754,291 3,868,098 -113,807 -2.94 Ohio 7,554,151 4,444,107
4,536,268 -92,161 -2.03 Alaska 503,994 293,677 299,020 -5,342 -1.79 Kansas
1,410,785 848,587 863,259 -14,672 -1.70 California 21,164,278 10,582,139
10,582,139 0 0 Maine 1,194,667 791,109 799,232 -8,124 -1.02 Alabama
2,704,806 1,909,593 1,922,035 -12,442 -0.65 Kentucky 3,094,832 2,162,978
2,177,833 -14,855 -0.68 Maryland 3,170,221 1,585,111 1,585,111 0 0
Washington 3,962,522 1,981,261 1,985,620 -4,359 -0.22 Wisconsin 3,294,787
1,925,144 1,942,607 -17,462 -0.90 Iowa 1,651,264 1,048,553 1,056,149
-7,596 -0.72 Montana 450,228 328,486 329,837 -1,351 -0.41 Missouri
3,994,735 2,445,976 2,463,154 -17,177 -0.70 North Dakota 428,777 293,112
294,227 -1,115 -0.38 Indiana 3,534,321 2,190,219 2,203,649 -13,430 -0.61
Virginia 2,728,848 1,378,887 1,394,442 -15,554 -1.12 New Hampshire 792,027
396,014 396,014 0 0 Vermont 516,874 322,581 324,339 -1,757 -0.54 Illinois
7,524,230 3,762,115 3,762,115 0 0 Idaho 585,831 415,706 416,760 -1,054
-0.25 Louisiana 3,473,131 2,475,648 2,479,816 -4,168 -0.17 Minnesota
3,322,283 1,661,142 1,661,142 0 0 Oklahoma 1,676,208 1,182,732 1,184,576
-1,844 -0.16 Mississippi 1,993,936 1,527,754 1,529,548 -1,795 -0.12
Massachusetts 6,396,706 3,198,353 3,198,353 0 0

Appendix II: Analysis of Estimated Funding Changes for Four Formula Grant
Programs Page 25 GAO- 03- 178 Federal Formula Grant Funding

Dollars in thousands

Estimated federal Medicaid payments Difference State

FY 2000 Medicaid expenditures (combined

federal and state) a Based on actual FY 2003 FMAP

Based on estimated FY 2003

FMAP Amount Percentage

Pennsylvania 10,387,923 5,681,155 5,679,078 2,078 0.04 Subtotal
105,666,121 59,621,606 59,982,700 -361,094 -0.60

States above the U. S. average percentage correction of 2.50

Nebraska 1,055,079 627,983 627,139 844 0.13 South Carolina 2,720,980
1,899,516 1,898,700 816 0.04 South Dakota 399,231 260,658 260,538 120 0.05
Oregon 2,110,836 1,269,879 1,265,446 4,433 0.35 Texas 10,650,570 6,389,277
6,374,366 14,911 0.23 Hawaii 642,350 377,509 375,454 2,056 0.55 New Jersey
6,109,609 3,054,804 3,054,804 0 0 Wyoming 218,851 134,200 133,653 547 0.41
Tennessee 4,993,965 3,225,602 3,205,626 19,976 0.62 Delaware 523,748
261,874 261,874 0 0 Connecticut 3,151,669 1,575,835 1,575,835 0 0 Utah
810,161 577,158 572,217 4,942 0.86 Georgia 4,321,247 2,575,463 2,542,622
32,841 1.29 New York 30,191,583 15,095,792 15,095,792 0 0 Arkansas
1,581,362 1,174,636 1,163,566 11,070 0.95 North Carolina 5,464,863
3,418,818 3,352,693 66,125 1.97 New Mexico 1,226,572 914,532 903,248
11,284 1.25 Colorado 1,944,315 972,158 972,158 0 0 Florida 7,564,164
4,449,998 4,328,215 121,783 2.81 Rhode Island 1,166,831 646,424 620,287
26,137 4.21 Arizona 2,225,045 1,496,342 1,453,622 42,721 2.94 Nevada
598,189 313,391 299,094 14,297 4.78 District of Columbia 834,958 584,470
584,470 0 0 Subtotal 90,506,178 51,296,320 50,921,418 374,902 0.74 United
States $196,172,298 $110,917,926 $110,904,118 $13,808 0.01

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.

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.
Analysis of Funding

Changes for Foster Care and Adoption Assistance for Fiscal Year 2003

Appendix II: Analysis of Estimated Funding Changes for Four Formula Grant
Programs Page 26 GAO- 03- 178 Federal Formula Grant Funding

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

Dollars in thousands

Estimated federal Foster Care payments Difference State

FY 2000 Foster Care expenditures (federal and state) a Based on actual

FY 2003 FMAP Based on estimated

FY 2003 FMAP Amount Percentage States below the U. S. average percentage
correction of 2.50

West Virginia $14,979 $11,240 $11,382 -$ 142 -1.25 Michigan 137,531 76,219
78,530 -2,311 -2.94 Ohio 209,987 123,536 126,097 -2,562 -2.03 Alaska 6,199
3,612 3,678 -66 -1.79 Kansas 20,985 12,623 12,841 -218 -1.70 California
759,267 379,633 379,633 0 0 Maine 41,730 27,633 27,917 -284 -1.02 Alabama
4,080 2,881 2,900 -19 -0.65 Kentucky 35,113 24,540 24,709 -169 -0.68
Maryland 132,096 66,048 66,048 0 0 Washington 22,699 11,349 11,374 -25
-0.22 Wisconsin 58,765 34,337 34,648 -311 -0.90 Iowa 32,746 20,794 20,944
-151 -0.72 Montana 7,639 5,574 5,596 -23 -0.41 Missouri 45,115 27,624
27,818 -194 -0.70 North Dakota 6,503 4,445 4,462 -17 -0.38 Indiana 43,766
27,122 27,288 -166 -0.61 Virginia 33,079 16,715 16,903 -189 -1.12 New
Hampshire 11,782 5,891 5,891 0 0 Vermont 15,881 9,911 9,965 -54 -0.54
Illinois 145,408 72,704 72,704 0 0 Idaho 2,288 1,624 1,628 -4 -0.25
Louisiana 39,562 28,200 28,248 -47 -0.17 Minnesota 50,706 25,353 25,353 0
0 Oklahoma 20,457 14,434 14,457 -23 -0.16 Mississippi 4,440 3,402 3,406 -4
-0.12 Massachusetts 37,332 18,666 18,666 0 0 Pennsylvania 318,222 174,036
173,972 64 0.04 Subtotal 2,258,354 1,230,144 1,237,058 -6,914 -0.56

States above the U. S. average percentage correction of 2.50

Nebraska 21,072 12,542 12,525 17 0.13 South Carolina 9,555 6,670 6,667 3
0.04

Appendix II: Analysis of Estimated Funding Changes for Four Formula Grant
Programs Page 27 GAO- 03- 178 Federal Formula Grant Funding

Dollars in thousands

Estimated federal Foster Care payments Difference State

FY 2000 Foster Care expenditures (federal and state) a Based on actual

FY 2003 FMAP Based on estimated

FY 2003 FMAP Amount Percentage

South Dakota 3,887 2,538 2,537 1 0.05 Oregon 19,950 12,002 11,960 42 0.35
Texas 100,329 60,187 60,047 140 0.23 Hawaii 9,747 5,728 5,697 31 0.55 New
Jersey 70,203 35,101 35,101 0 0 Wyoming 2,220 1,361 1,356 6 0.41 Tennessee
25,604 16,538 16,435 102 0.62 Delaware 3,943 1,972 1,972 0 0 Connecticut
71,404 35,702 35,702 0 0 Utah 7,928 5,648 5,600 48 0.86 Georgia 35,038
20,883 20,617 266 1.29 New York 530,264 265,132 265,132 0 0 Arkansas 4,386
3,258 3,227 31 0.95 North Carolina 39,165 24,502 24,028 474 1.97 New
Mexico 6,132 4,572 4,516 56 1.25 Colorado 15,512 7,756 7,756 0 0 Florida
79,566 46,808 45,527 1,281 2.81 Rhode Island 8,401 4,654 4,466 188 4.21
Arizona 27,341 18,387 17,862 525 2.94 Nevada 9,490 4,972 4,745 227 4.78
District of Columbia 41,299 28,909 28,909 0 0 Subtotal 1,142,436 625,822
622,383 3,439 0.55 United States $3,400,790 $1,855,966 $1,859,441 -$ 3,475
-0.19

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.

Appendix II: Analysis of Estimated Funding Changes for Four Formula Grant
Programs Page 28 GAO- 03- 178 Federal Formula Grant Funding

Table 10: Adoption Assistance Program Expenditures and Estimated Federal
Payments, by State

Dollars in thousands

Estimated federal Adoption Assistance payments Difference State

FY 2000 Adoption Assistance expenditures (federal and state) a Based on
actual

FY 2003 FMAP Based on

estimated FY 2003 FMAP Amount Percentage States below the U. S. average
percentage correction of 2.50

West Virginia $4,048 $3,037 $3,076 -$ 38 -1.25 Michigan 119,003 65,951
67,951 -1,999 -2.94 Ohio 61,308 36,068 36,816 -748 -2.03 Alaska 6,254
3,644 3,711 -66 -1.79 Kansas 11,684 7,028 7,150 -122 -1.70 California
205,556 102,778 102,778 0 0 Maine 8,093 5,359 5,414 -55 -1.02 Alabama 341
241 242 -2 -0.65 Kentucky 7,657 5,351 5,388 -37 -0.68 Maryland 18,512
9,256 9,256 0 0 Washington 19,734 9,867 9,889 -22 -0.22 Wisconsin 30,116
17,597 17,757 -160 -0.90 Iowa 25,825 16,399 16,518 -119 -0.72 Montana
2,347 1,712 1,720 -7 -0.41 Missouri 16,547 10,132 10,203 -71 -0.70 North
Dakota 1,396 954 958 -4 -0.38 Indiana 25,750 15,957 16,055 -98 -0.61
Virginia 12,045 6,086 6,155 -69 -1.12 New Hampshire 1,557 779 779 0 0
Vermont 5,268 3,288 3,306 -18 -0.54 Illinois 68,226 34,113 34,113 0 0
Idaho 1,620 1,149 1,152 -3 -0.25 Louisiana 9,533 6,795 6,806 -11 -0.17
Minnesota 16,959 8,479 8,479 0 0 Oklahoma 11,081 7,819 7,831 -12 -0.16
Mississippi 2,852 2,185 2,188 -3 -0.12 Massachusetts 6,368 3,184 3,184 0 0
Pennsylvania 43,264 23,661 23,652 9 0.04 Subtotal 742,943 408,871 412,524
-3,654 -0.89

States above the U. S. average percentage correction of 2.50

Nebraska 6,242 3,715 3,710 5 0.13 South Carolina 9,336 6,518 6,515 3 0.04
South Dakota 1,602 1,046 1,046 0 0.05 Oregon 18,611 11,196 11,157 39 0.35
Texas 45,057 27,030 26,967 63 0.23 Hawaii 6,290 3,697 3,677 20 0.55

Appendix II: Analysis of Estimated Funding Changes for Four Formula Grant
Programs Page 29 GAO- 03- 178 Federal Formula Grant Funding

Dollars in thousands

Estimated federal Adoption Assistance payments Difference State

FY 2000 Adoption Assistance expenditures (federal and state) a Based on
actual

FY 2003 FMAP Based on

estimated FY 2003 FMAP Amount Percentage

New Jersey 27,734 13,867 13,867 0 0 Wyoming 390 239 238 1 0.41 Tennessee
8,811 5,691 5,656 35 0.62 Delaware 1,560 780 780 0 0 Connecticut 16,949
8,475 8,475 0 0 Utah 5,815 4,143 4,107 35 0.86 Georgia 22,006 13,116
12,949 167 1.29 New York 277,214 138,607 138,607 0 0 Arkansas 4,386 3,258
3,227 31 0.95 North Carolina 18,973 11,869 11,640 230 1.97 New Mexico
7,097 5,292 5,227 65 1.25 Colorado 14,170 7,085 7,085 0 0 Florida 33,369
19,631 19,094 537 2.81 Rhode Island 6,793 3,763 3,611 152 4.21 Arizona
18,463 12,416 12,062 354 2.94 Nevada 1,969 1,031 984 47 4.78 District of
Columbia 3,268 2,288 2,288 0 0 Subtotal 556,105 304,752 302,966 1,786 0.59
United States $1,299,048 $713,623 $715,490 -$ 1,868 -0.26

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.

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). Social Services Block

Grant

Appendix II: Analysis of Estimated Funding Changes for Four Formula Grant
Programs Page 30 GAO- 03- 178 Federal Formula Grant Funding

Table 11: SSBG State Allocations, Actual and Estimated, for Fiscal Year
2002

Dollars in thousands

Formula allocations for FY 2002 Difference State Using the census

population counts Estimated using the

2000 postcensal population estimates Amount Percentage States below the U.
S. average percentage correction of 2.50

West Virginia $10,863 $11,103 -$ 240 -2.16 Michigan 59,700 60,973 -1,272
-2.09 Ohio 68,199 69,348 -1,150 -1.66 Alaska 3,766 3,825 -59 -1.55 Kansas
16,149 16,393 -244 -1.49 California 203,468 206,309 -2,841 -1.38 Maine
7,658 7,734 -75 -0.98 Alabama 26,714 26,970 -256 -0.95 Kentucky 24,279
24,494 -215 -0.88 Maryland 31,816 32,079 -263 -0.82 Washington 35,406
35,683 -277 -0.78 Wisconsin 32,220 32,452 -232 -0.71 Iowa 17,578 17,703
-124 -0.70 Montana 5,420 5,458 -38 -0.70 Missouri 33,611 33,817 -206 -0.61
North Dakota 3,858 3,879 -22 -0.56 Indiana 36,526 36,730 -205 -0.56
Virginia 42,521 42,763 -242 -0.57 New Hampshire 7,423 7,460 -37 -0.49
Vermont 3,657 3,674 -16 -0.45 Illinois 74,603 74,915 -312 -0.42 Idaho
7,773 7,805 -32 -0.41 Louisiana 26,845 26,926 -80 -0.30 Minnesota 29,551
29,642 -90 -0.30 Oklahoma 20,728 20,787 -59 -0.29 Mississippi 17,088
17,130 -43 -0.25 Massachusetts 38,139 38,146 -6 -0.02 Pennsylvania 73,773
73,774 -1 0 Subtotal 959,332 967,970 -8,639 -0.89

States above the U. S. average percentage correction of 2.50

Nebraska 10,280 10,275 5 0.05 South Carolina 24,100 24,091 9 0.04 South
Dakota 4,534 4,532 2 0.05 Oregon 20,552 20,526 27 0.13 Texas 125,257
125,016 242 0.19 Hawaii 7,278 7,259 19 0.26 New Jersey 50,545 50,422 124
0.25

Appendix II: Analysis of Estimated Funding Changes for Four Formula Grant
Programs Page 31 GAO- 03- 178 Federal Formula Grant Funding

Dollars in thousands

Formula allocations for FY 2002 Difference State Using the census

population counts Estimated using the

2000 postcensal population estimates Amount Percentage

Wyoming 2,966 2,958 8 0.28 Tennessee 34,176 33,984 192 0.56 Delaware 4,707
4,678 29 0.62 Connecticut 20,457 20,275 182 0.90 Utah 13,415 13,277 138
1.04 Georgia 49,176 48,648 528 1.09 New York 113,992 112,432 1,560 1.39
Arkansas 16,059 15,831 228 1.44 North Carolina 48,352 47,539 814 1.71 New
Mexico 10,927 10,738 189 1.76 Colorado 25,838 25,342 495 1.96 Florida
96,007 94,038 1,968 2.09 Rhode Island 6,297 6,123 174 2.84 Arizona 30,820
29,888 932 3.12 Nevada 12,004 11,469 534 4.66 District of Columbia 3,436
3,195 242 7.57 Subtotal 731,176 722,537 8,639 1.20 United States
$1,690,508 $1,690,508 0 0

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. 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.

(290093)

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