About State & Local Government Fiscal Conditions

How much money do state and local governments receive from the federal government?

In 2014, state and local governments received $495 billion in federal grant funding. This amount is based on data from the Bureau of Economic Analysis’s National Income and Product Accounts.

What are the key categories of federal grant funding to state and local governments and how has this funding to state and local governments shifted over time?

Key categories of federal grants to state and local governments include: health, income security, education, housing and community services, general public services, economic affairs, and other. Health care grants (including Medicaid) have increased as a share of federal grants to state and local governments and grew from 31 percent of federal funds provided to the sector in 1984 to 66 percent in 2014 (the most recent year of data available by category). Federal grants ranged from approximately 2 to 3 percent of GDP during this time.

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Federal Grants to State and Local Governments, 1984 and 2014

Source: GAO analysis of historical data from the Bureau of Economic Analysis’s National Income and Product Accounts.

Note: Medicaid grants comprised approximately 97 percent of health grants in 2014. ‘Other’ includes national defense, public order and safety, and recreation and culture.

Federal Grant Revenues 1984 and 2014: TXT PDF

What are the key sources of state and local government revenues and how have they shifted over time?

The state and local government sector’s key sources of revenue include personal income, sales, and property taxes (these sources total about 60 percent—or $1.3 trillion—of the sector’s 2014 receipts). Federal grants-in-aid are a large source of receipts for the sector, providing about $495 billion (about 20 percent of current receipts) to the sector in 2014. The sector received about $213 billion in interest and other receipts in 2013 (about 10 percent of current receipts), including income on assets and contributions for government insurance. Total state and local government receipts increased from $476 billion in 1984 nominal dollars ($930 billion adjusted for inflation using 2014 dollars) to more than $2 trillion in 2014. 

State and Local Revenues, by Type, 1984 and 2014

Source: GAO analysis of historical data from the Bureau of Economic Analysis’s National Income and Product Accounts.

Notes: Federal grants as a percentage of state and local revenues increased from 15 percent in 1984 to 22 percent in 2014. Percentages do not sum to 100 because of rounding.

Total State and Local Revenues 1984 and 2014: TXT PDF

How have overall levels of state and local government revenues changed over time?

Growth in state and local government tax revenue slowed around the start of the recession that began in December 2007 (see figure below). State and local governments’ current tax receipts declined for four consecutive quarters, starting in the fourth quarter of 2008. In the second quarter of calendar year 2015, state and local tax revenues were higher than in the same period in 2014.

Source: GAO analysis of historical data from the Bureau of Economic Analysis’s National Income and Product Accounts.

Year-over-Year Percentage Change in State and Local Government Tax Receipts: TXT PDF

What are the key categories of state and local government expenditures and how have they shifted over time?

In 2014, education was the largest category of state and local government expenditures, followed by health care expenditures. During the last 30 years, education expenditures declined as a share of state and local government spending, from 36 percent in 1984 to 33 percent in 2014. However, inflation-adjusted spending on education increased over this time period, so this decline in education spending as a share of all state and local government spending largely reflects shifts resulting from faster growth in spending on health care. Health care spending has increased as a share of state and local spending, growing from 12 percent of overall state and local expenditures in 1984 to 23 percent in 2014 (see figure below).

State and Local Expenditures, by Category, 1984 and 2014

Source: GAO analysis of historical data from the Bureau of Economic Analysis’s National Income and Product accounts.

Note: The Other category includes Housing and Community Services and Recreation and Culture. Economic affairs include transportation, agriculture, and natural resources. Health includes Medicaid. General public services include interest payments and tax collection and financial management services. Income security includes disability, welfare, and social services. State and local government pension contributions are considered part of employee compensation and accounted for within the categories.

Total State and Local Expenditures 1984 and 2014: TXT PDF

How have overall levels of total state and local government expenditures changed over time?

Current state and local expenditures totaled $2,393 billion in calendar year 2014, up from the $2,324 billion expended in 2013.

Source: GAO analysis of historical data from the Bureau of Economic Analysis’s National Income and Product Accounts.

Year-over-Year Percentage Change in State and Local Government Current Expenditures: TXT PDF