Many States Use Decennial Census Data to Distribute State Money

By William P. O’Hare, President, O’Hare Data and Demographic Services LLC

In the past few years, a lot of valuable information has been generated regarding how Decennial Census data are used to distribute federal funding to states and localities, usually from Professor Andrew Reamer’s Counting for Dollars project at George Washington University, whose most recent analysis indicates more than $1.5 trillion was distributed in Fiscal Year 2017 based on Census data.

However, while we have pretty good evidence about the use of Census data for distributing federal funds, much less is known about how much state money is distributed based on Census data. This includes state-generated estimates and projections that are based on the decennial Census counts. This paper provides some evidence on that issue by documenting the use of census-derived data distribution of state money in five states.

At a recent Committee on National Statistics workshop, Nicholas Nagle (2019), a Professor at the University of Tennessee, reported that in Tennessee, the money raised by state sales taxes is redistributed to localities based on total population counts.  Currently, this amounts to about $115 per person per year.

The North Carolina State Demographer, Michael Cline, says that state provides at least $205 per person per year based on census-derived data including population estimates (see slide 28 in this PowerPoint presentation). The $205 per person per year is based on just two programs and Cline is certain there are other programs that use census-derived data to distribute state money.

In the State of Washington, Mike Mohrman found that the state annually allocates about $200 million in shared state revenues to cities and counties on a per capita basis. These allotments are based on census counts when they are available and on county and city population estimates produced by the Office of Financial Management for non-census years. Current per capita allotments are estimated by Washington’s Municipal Research Services Center and can be found in their “2020 Budget Suggestions” publication. Washington also distributes some other monies to legislatively-mandated districts using funding formulas which include population as part of the formula. These populations are estimated by the Office of Financial Management and can be found on the ‘Special Area’ page of their website. Washington uses population estimates for program management for several other non-statutory districts as well. These estimates are based on census block data for census years and Office of Financial Management’s Small Area Estimate Program data for non-census years. The small area estimation methodology is described in the Small Area Estimates Program user guide. For more information on this situation, go to these websites: http://mrsc.org/Home.aspxhttp://mrsc.org/Home/Stay-Informed/MRSC-Insight/July-2019/2020-Budget-Suggestions-is-Here.aspx;   https://ofm.wa.gov/washington-data-research/population-demographics/population-estimates/april-1-official-population-estimates

Jan Vink from Cornell University in New York says some New York counties use census data to re-distribute sales tax revenue to subcounty units. For more information on this, see Appendix A in this paper which describes how county sales tax is divided among localities.

In his presentation at a recent Committee on National Statistics workshop, Jeff Hardcastle (2019) noted that $79 million was distributed in Fiscal Year 2019 among 82 Nevada government units based on population estimates.

The point is that many states use Census data to distribute state money to localities. For many people, the connection between census counts and government funding is a strong incentive to make sure everyone in their community is counted in the Census. When respondents learn that communities do not get their fair share of government money when people are missed in the Census, it is a powerful motivation to make sure everyone in their community gets counted in the Census. The fact that many states use census data to distribute state money makes the accuracy of the Census count even more important.

The data shown here is based on a small haphazard sample, but it suggests a more systematic and thorough investigation of how census data are used to distribute state money is warranted. Nationwide, hundreds of millions of dollars in state financial aid is distributed based on census-derived data. If readers know of additional situations where state money is distributed based on census-derived data, please send the information to me at billohare1@gmail.com. I would like to produce a more comprehensive study on this topic in the future.

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