Federal Expenditures Data for FY 2002 Released; California Share of Contracts Rises, Formula Grant Share Falls -- California Capitol Hill Bulletin -- Volume 10, Bulletin 16 -- June 6, 2003

On June 4, 2003, the U.S. Census Bureau released its annual tally of federal government expenditures by state entitled the Consolidated Federal Funds Report. For fiscal year 2002, the new report shows total federal expenditures in California rising to $206 billion, a 9.5 percent increase from the 2001 spending level.

Calculated as a percentage of the $1.9 trillion total that the U.S. government spent in all states, California's share of federal expenditures rose from 10.8 percent in 2001 to 11.0 percent in 2002.

Although the state's 11 percent share of federal spending is still below the state's 12.2 percent share of the nation's population, California did rebound somewhat from FY 2001 levels. The increase was primarily due to a considerably faster-than-average rise in procurement expenditures and to a slight increase in the state's share of the huge direct payments category. Direct payments are comprised of social security, disability, retirement and other payments made by the federal government directly to individual recipients.

After nearly 20 years of slipping downward, California's share of federal procurement expenditures climbed to 13.7 percent in 2002. California was the destination of one-fifth of the nation's increase in federal procurement contract expenditures between 2001 and 2002. The nation's spending rose from $226 billion to $254 billion, and spending in California rose from $29 billion to $35 billion. Despite the increase, federal procurement contract spending in California is still slightly below the actual spending level in 1986, and thus it is far below that level in inflation-adjusted dollars.

For direct payments, which now accounts for nearly half of the federal budget and more than $1 trillion nationwide, expenditures in California rose from $99 billion to $104 billion, and the state's share increased from 9.9 percent to 10.2 percent. The change is only the second time California's share of direct payments has increased in the past decade.

For grant payments to states, comprised primarily of federal formula grant expenditures for such programs as Medicaid, highways, welfare, education assistance and nutrition programs, California receipts rose from $40 billion to $48 billion, but the state's share of the nation's total declined from 11.9 percent in 2001 to 11.8 percent in 2002. Grant expenditures in all states rose sharply, from $335 billion in 2001 to $407 billion in 2002. Formula grant spending represents roughly 85 percent of the grants category, with the remainder spent on competitive or project grants.

In the fourth major category of federal spending, California's share of salaries and wages increased slightly, from 9.6 percent to 9.8 percent, or from $18 billion to $19 billion. Prior to the four rounds of base closures in the past 15 years, California's share of federal salaries and wages had peaked in 1986 at 12.6 percent of the nation's total.

It is important to note that the California Institute adjusts the Census Bureau's expenditure data (by deleting spending for territories and for undistributed funds) in order to facilitate comparisons among states. For example, the report's total for all federal grant spending is $412 billion, whereas our states-only total for consistency purposes is reduced to $408 billion. The adjustment is most pronounced in procurement, where more than $15 billion is categorized as undistributed. (Procurement contracts under $25,000 are not tracked by state, and some defense spending is not tracked by geography.) We thus reduce the report's $271 billion procurement spending total for the U.S. to a total that is allocable by state of only $254 billion. As a result, the Census Bureau figures show California receiving 12.8 percent of total procurement spending, whereas we show the state receiving 13.7 percent of spending allocated to the states. Likewise, the report shows California receiving 10.8 percent of total spending, whereas our adjusting of figures returns 11.0 percent.

These expenditure data provide half of the equation that allows us to calculate the annual "balance of payments" total, the difference between the amount that California taxpayers send to Washington in taxes and the amount the federal government spends in the state. The taxing figures are expected this summer. In 2001, the most recent year for which there are comparable figures, California taxpayers paid $47 billion more federal taxes than the federal government spent in the state.

To view the Census Bureau's report, see http://www.census.gov/prod/2003pubs/cffr02.pdf . For additional information, refer also to the California Institute's website at http://www.calinst.org/datapages/fedspend/pie2002.pdf http://www.calinst.org/datapages/fedspend/line2002.pdf , and http://www.calinst.org/datapages/fedspend/pie2002.gif .

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