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JULIA ISAACS

KATHERINE TORAN

HEATHER HAHN

KARINA FORTUNY

C. EUGENE STEUERLE

KIDSSHARE2012REPORT ON FEDERAL EXPENDITURE

ON CHILDREN THROUGH 201

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Acknowledgments:Te authors are grateul to the Annie E. Casey Foundation and First Focus or sponsoring this research and to the authors o

revious reports on childrens budgets or laying the groundwork or this series. We also express appreciation to Ralph Forsht,

ared Solomon, Ed Walz, and Olivia Golden or their insightul comments.

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ContentsLIST OF TABLES AND FIGURES 2

EXECUTIVE SUMMARY 3

Current Expenditures on Children 4

Federal Spending, 1960 to 2011 5

Projections, 2012 to 2022 6

INTRODUCTION 10

Methods 11

Dening and Identiying Programs Beneting Children 11

Collecting Expenditure Data 13

Calculating the Share o Program Spending on Children 13

Methods or State and Local Estimates 14

Methods or Projections 14

Changes in Methods in This Years Report 16

CURRENT EXPENDITURES ON CHILDREN 18

Federal Expenditures on Children in 2011, in the Aggregate 18

Federal Expenditures on Children, by Program and Category 20

State and Local Spending on Children 24

Total Spending on Children during the Recession 27

TRENDS IN FEDERAL SPENDING, 1960-2011 31

Broad Budget Trends 32

Kids Share o the Domestic Budget 33

Kids Share o the Economy 34

Trends in Expenditures on Children, 1960-2011 36

FUTURE TRENDS, 20122022 41

Childrens Expenditures in the Immediate Future: The Efects o ARRA 41

Ten-Year Projections o Federal Spending, in Total and on Children 42

Childrens Expenditures by Category in 2022 44

Efects o the Budget Control Act on Spending or Children 45

CONCLUSION 48

SELECTED REFERENCES 49

ENDNOTES 51

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Executive SummaryFederal spending on children ell by $2 billion in 2011, the rst such decline in nearly

30 years. Spending is expected to decline urther in 2012, as unds provided under the

American Recovery and Reinvestment Act o 2009 (ARRA) are nearly exhausted. States

and localities, which provide two-thirds o all public spending on children, will be hard-

strapped to ll the breach caused by the drop in ederal unding. An ongoing imbalance

between spending (scheduled to grow steadily in programs that largely exclude children)

and revenues (which all ar short o actual spending levels) maintains the squeeze on

ederal spending on children over the next decade. Continuation along this path shows

spending on children declining in the uture, particularly when measured as a share o the

ederal budget or a share o the economy.

Tis sixth annual Kids Sharereport examines ederal expenditures on children in 2011,

when the temporary boost in ederal unding to address the recession was dwindling,

yet states and amilies were still struggling to recover rom the recession. Tis report

provides in-depth analysis o dozens o ederal programs and tax provisions that allocate

resources to children and places these expenditures in the broader context o the overall

ederal budget. Te report is organized into three major sections: current expenditures,

historical trends, and uture projections. While the primary ocus is ederal expenditures,

including direct spending rom ederal programs (outlays) and reductions in taxes (tax

expenditures), the current expenditures section also provides inormation about state

and local spending on children.

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Kids Share 20124

Current Expenditures on Children

Analysis o 2011 data, the most recent year or which complete ederal data are available, reveal

the ollowing:

Federal outlays on children ell by $2 billion, rom $378 billion in 2010 to $376 billion

in 2011 (all gures are in ination-adjusted 2011 dollars). Tis is the rst time spending

on children has allen since the early 1980s. ax expenditures such as the Child ax Credit

(CC), along with the dependent exemption, also ell in aggregate, rom $72 to $69 billion.

Combined, total expenditures ell by $5 billion, rom $450 to $445 billion.

While the ederal government spent less on children, total ederal spending increased,

rom $3.52 to $3.60 trillion. As a result, the share o the ederal budget allocated to

children ell rom 10.7 to 10.4 percent. Spending on children also ell when measured

as a share o total economic output, rom 2.6 percent to 2.5 percent o gross domestic

product (GDP). Tat is, spending on children ell rom 2010 to 2011, whether measured

in real dollars, as a share o total ederal outlays, or as a share o GDP.

en programs and tax provisions account or three-quarters (75 percent) o the $445

billion in expenditures on children. Medicaid alone spent an estimated $74 billion on

children in 2011, more than any other program. Children account or about one-quarter

o all Medicaid spending. Ater Medicaid, the largest sources o expenditures on children

are the Earned Income ax Credit (EIC, $52 billion), the Child ax Credit ($46

billion), the Supplemental Nutrition Assistance Program (SNAP, ormerly ood stamps,

$37 billion), and the dependent exemption ($35 billion). Other programs providing large

amounts o expenditures on children include Social Security survivors and dependent

benets, itle I/Education or the Disadvantaged, Child Nutrition, Special Education,

and the emporary Assistance or Needy Families (ANF) program.

Federal spending on education was $5 billion lower in 2011 than in 2010, a drop

equivalent to the total decline in outlays and tax expenditures. An $8 billion drop in

support to K12 education through the ARRA-unded State Fiscal Stabilization Fund

and declines in other education programs were only partially oset by an increase in

spending rom the temporary Jobs or Education und. Expenditures also ell in the areas

o health, social services, training and tax provisions, but they rose in nutrition (due to

more amilies receiving SNAP benets) and income security (driven by an increase in SSI

payments to disabled children and veterans survivors and dependent benets).

Childrens spending in 2011 continues to benet rom the temporary increase in ederal

unding under the American Recovery and Reinvestment Act o 2009. ARRA accounted oran estimated $42 billion o the $445 billion, or nearly 10 percent, o children-ocused ederal

expenditures, and this spending is projected to all dramatically next year (rom $42 to $12

billion). As a result, total ederal expenditures on children are projected to all rom $445

to $428 billion, or 4 percent, between 2011 and 2012. Te drop in ARRA unding will have

a particularly dramatic eect on K12 education spending, even more so i these declines are

combined with any simultaneous reductions in state and local spending.

While the ederal

government spent

ess on children,

otal ederal

spending increased,

rom $3.52 to

$3.60 trillion.

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Report on Federal Expenditures on Children through 2011 5

State and local budgets, which in the past have contributed as much as two-thirds o total

spending on children, have been hard hit by the recession. We estimate that state and local

spending per child ell between 2008 and 2011.

While we do not have complete state and local data or the recession years, the data we

have compiled indicate that the ARRA increases in ederal spending were barely enough to

compensate or decreased state spending during the recession. In other words, overall public

spending per child showed no strong upward or downward trend between 2008 and

2011, but was more or less at, ater adjusting or ination. Our estimates indicate that totaleducation spending across all levels o government declined somewhat between 2008 and

2011, while total child health spending increased modestly.

In 2012, ederal unding on children is projected to decline signicantly. State unding is

uncertain, but with states still recovering rom the recession, it will be challenging or them to

ll the gap caused by the drop in ederal unding. As a result, there may be cutbacks in services

and benets or children in 2012.

Historical rends in Federal Spending, 1960 to 2011

During the past hal-century, the size and composition o expenditures on children has changedconsiderably. Childrens health programs and child-related tax credits have grown, while

support through the dependent exemption and income security programs has declined. Back

in 1960, the largest ederal contributions to amilies with children came rom the dependent

exemption, Social Security, Aid to Families with Dependent Children (now called emporary

Assistance or Needy Families), and education. Fity years later, the dependent exemption has

much less relative value, and Medicaid, the Earned Income ax Credit, and the Child ax

Credit have become the three largest sources o ederal expenditures on children.

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Kids Share 20126

In recent years, childrens spending has represented about 10 percent o total ederal outlays, a

considerable increase rom its share in 1960, or even 1990. In general, the childrens share o

budget outlays has grown, though by ts and starts, over the past hal-century. Te 10 percent

spent on children compares to 41 percent spent on the elderly and disabled portions o

Social Security, Medicare, and Medicaid; 20 percent on deense; 6 percent on interest

payments on the debt; and 23 percent on all other government unctions (e.g., agriculture,

commerce, the environment, transportation, veterans benets).

o get a sense o how spending on children ranks as a domestic priority, we calculate another

measure, the kids share o the domestic budget. Tis alternative measure excludes spending on

deense and international aairs rom the budget totals, and it broadens the concept o childrens

spending to include tax expenditures as well as outlays. By this measure, expenditures on children

have allen by 23 percent since 1960, rom 20 to 15 percent o the domestic budget.

Te share o the budget spent on deense has declined over the past 50 years. Te share spent

on deense ell dramatically between 1960 and 2000, rom 52 to 16 percent o the budget,

then increased to its current level o 20 percent in response to the wars in Iraq and Aghanistan.

A second historical trend shaping current budgets is the steady increase in spending on theelderly and disabled. Te non-child portions o Social Security, Medicare, and Medicaid have

grown rom about one-tenth to two-ths o the ederal budget over the past ve decades and

are projected to grow more rapidly in the next decade, representing hal o all ederal spending

and strongly shaping uture budgets. Finally, low revenues relative to total spending have

signicantly increased ederal debt relative to a mid-1970s low, with adverse consequences or

interest payments in the uture.

Projections, 2012 to 2022

As the temporary boost in spending under ARRA comes to an end, ederal spending on

children is projected to all. In the absence o legislative action, our projections suggest thatederal outlays on children will all by 6 percent in 2012 and an additional 2 percent in

2013. Only once in the last hal-century was there a similar decline, when real outlays on

children ell by 7 percent between 1980 and 1985.

Outlays on children are projected to drop by $24 billion in 2012. Tis substantial decline

in outlays will be partially oset by a modest rise in the dollar value o tax expenditures

or amilies with children, but even so, total expenditures on children are projected to all

by $17 billion in 2012.

Te areas with the largest drops in ARRA unding are education (loss o $13 billion,

primarily in the State Fiscal Stabilization Fund, Special Education, and itle I/Educationor the Disadvantaged), and reundable tax credits (loss o $9 billion in the EIC and

CC). While Congress enacted urther temporary expansions in these two areas to

partially oset the loss in ARRA unding, the net eect is still a $17 billion decline in

total expenditures, rom $445 billion in 2011 to $428 billion in 2012.

en-year projections, while much more uncertain than one- or two-year projections, show that

the downward trend is not a temporary phenomenon. Following the same assumptions as the

2/5The non-child portions oSocial Security, Medicare,

nd Medicaid have grown

rom about one-tenth to

wo-fths o the ederal

udget

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Report on Federal Expenditures on Children through 2011 7

Congressional Budget Ofces baseline projectionscontinuation o current law, including

the caps on discretionary spending and automatic spending reductions under the Budget

Control Act o 2011 (BCA) and implementation o the Aordable Care Actour projections

o childrens spending in the uture suggest the ollowing, absent policy change:

Over the next 10 years, ederal outlays on children will all as a percentage o the

budget (rom 10 to 8 percent); ederal spending is projected to increase by nearly $1

trillion, but childrens spending remains essentially unchanged in absolute dollars.

Childrens spending also drops as a share o the economy, rom 2.5 to 1.9 percent o

GDP. Te percentage o the economy allocated to ederal investments in children

will drop below pre-recession levels, lower than in any year since 2002.

Te largest drops expected over the next decade are in education, which drops sharply

in 2012 as ARRA unds are exhausted, and then is urther reduced in 2013 due to

the discretionary caps under the Budget Control Act. Early care and education, social

services, housing, and training also are aected by the caps on and cuts to discretionary

spending.

Health spending on children is the one area with growth over the next decade, due

to continued high growth in economy-wide health care costs, along with expanded

coverage under Medicaid and the introduction o the health insurance exchanges under

the Aordable Care Act.

Health and retirement spending on the elderly and disabled populations is projected to grow

more rapidly than health spending on children. Te non-child portions o Social Security,

Medicare, and Medicaid are projected to consume more than hal (51 percent) o all ederal

outlays by 2022, representing more than one-tenth o the nations economic output. Te

strong growth in the three big entitlement programs, Medicare, Medicaid, and Social Security,

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Kids Share 20128

places upward pressure on total governmental outlays, which ar outpace ederal revenues in

every year o the projection period, even ater the spending constraints introduced by the

Budget Control Act. Tis spending growth stems rom several actors, including growth in

level o benets per elderly person (due to steadily rising health care costs and Social Security

benets) and an increase in the share o the population that becomes eligible or elderly

benets. Since these programs are mandatory, they automatically grow unabated unless current

law is changed.

Meanwhile, revenues continue to underund programs, so that as spending continues to

outpace revenues, interest payments on the growing national debt are expected to rise rom

1.5 to 2.5 percent o GDP by 2022. In act, under current policies, the ederal government

is projected to spend more on interest payments than on children, beginning in 2017.

Interest payments on the debt would exceed investments in children even earlier (as, indeed,

was projected in last years Kids Share report), except that interest rates are projected to be

extremely low over the next ew years.

Te Budget Control Act plays a small role in contributing to the projected decline in spending

on children over the next decade. While education, childrens housing benets, youth training,and many early care and education programs receive an additional 10 percent cut rom the BCA,

three-quarters o the childrens budget is exempt rom its provisions, so childrens spending

as a whole is cut about 2 percent as a result o the BCA. Te percentage reduction in total

ederal outlays under this budget law is largerroughly 4 percentbecause o projected cuts

in deense spending. As a result, while the Budget Control Act reduces childrens spending in

real dollars, it results in a slight increase in childrens spending as ashareo total outlays (rom

8.2 to 8.4 percent). In summary, the particular budget controls in this law spare childrens

programs rom deep cuts, but they do not change the downward path o childrens spending

relative to the overall budget or the total economy: childrens spending is projected to all to

1.9 percent o GDP in 2022 with or without implementation o the BCA.

One implication o our analysis o the BCA is that the design o various proposals to reorm

the budget will greatly aect children. Other grand budgetary packages may have a larger

impact on children, depending on specics. Critical details include which types and broad

categories o spending are cut most heavily (e.g., deense or non-deense, mandatory or

discretionary), which programs are exempted rom cuts (e.g., retirement programs and/or low-

income programs), and whether changes in revenues are part o the decit-reduction package.

Because investing in children remains essential or improving economic stability and growth,

any plans to curtail spending, increase taxes, or redesign programs to be more efcient should

give attention to the long-term consequences or childrenthe next generation o leaders,

workers, parents, and citizens.

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Report on Federal Expenditures on Children through 2011 9

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Kids Share 201210

IntroductionTe ederal government aces many competing priorities in the allocation o ederal resources.

In the heat o budget battles, children, the poorest age group, are oten overlooked. Yet, the

ederal governmentas well as state and local governmentsprovides critical investments

in the health, education, nutrition, saety, and overall development o children. Te ederal

government partners with state and local governments to provide services to children (e.g., a

public education system, child protective services) and benets that support parents in their

role as primary caregivers o children (e.g., tax credits directed toward amilies with children,

survivors and dependent benets under Social Security, housing benets). Directing public

resources toward children represents an important investment in the countrys uture.

o monitor the governments investment in children, the Urban Institute has developed a

database o ederal expenditures on children across dozens o ederal programs and tax

provisions and has published a series o childrens budget reports.1 Tis sixth annual Kids

Share report provides updated analysis o ederal expenditures on children through 2011,

the latest year or which complete ederal data are available. It also updates projections ochildrens spending through 2022, to provide a sense o how budget priorities may unold,

absent changes to current law.

Te primary ocus o the report is 2011, when children and amilies were struggling to recover

rom the lingering eects o the recession. While unemployment dropped in the past year, it

remained stubbornly high, averaging 9.2 percent during ederal scal year 2011 (which runs

rom October 2010 to September 2011). Child poverty also remained high, at 22 percent,

or more than one in ve children, in 2010, the last year or which data are available. Child

poverty is likely to be even higher in 2011 judging rom the ongoing increase in the number o

amilies applying or nutrition assistance; one in our American children were receiving SNAP

or ood stamp benets in spring 2011 (Isaacs 2011). In short, despite the small improvement

in the employment situation, economic conditions remained stark in 2011 or many amilies

with children.

States also continue to be aected by the recession, which caused the largest decline in state

revenues on record. State revenues began to recover in 2011, but they remained below pre-

recession 2008 levels, and many states continued to ace large budget shortalls (McNichol,

Oli, and Johnson 2012).

Te countrys ongoing struggle to recover rom the recession provides important context or

considering the level o ederal expenditures on children in 2011. It is beyond the scope o

these Kids Sharereports, however, to directly compare spending amounts to levels o need,

or to quantiy the amount o unmet need that may exist. Nor does this series o childrens

budget reports analyze the efciency, success, or worth o a particular program or spending

level. Instead, this report compiles spending data on programs scattered across many ederal

agencies and estimates the childrens share o spending or these programs, to develop a

comprehensive estimate o spending and tax expenditures on children rom 1960 through

the present.

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Report on Federal Expenditures on Children through 2011 11

Te report begins with a discussion o methods, and then presents its ndings in three major

sections: present, past, and uture. Te rst set o ndings conveys the most current inormationon ederal spending on children, and also sets ederal spending in the context o total (ederal/

state/local) public spending on children. Next, a historical section traces patterns o ederal

spending on children and other major items in the ederal budget over more than 50 years. Te

nal set o ndings projects uture ederal spending on children, with and without the budget

enorcement provisions o the Budget Control Act o 2011 (BCA).

Methods

Estimating the childrens share o public expenditures requires collecting data rom multiple

sources and making many assumptions and judgment calls. Te rst task is to select programs

or inclusion. Only programs directly beneting children or beneting households because o

the presence o children are included. Second, expenditure data are collected or each program,

using outlay estimates rom the Appendix to the Budget of the U.S. Government, Fiscal Year

2013 (and past years) as the primary source. Many analyses also include inormation on tax

expenditures, gathered rom theAnalytical Perspectivesvolume o the budget. Finally, signicant

eorts are put into estimating the portions o programs that go specically to children. Each

o these three tasks is described below, and urther methodological details are provided in the

companion publication to this report, Data Appendix to Kids Share 2012.2

Dening and Identiying Programs Beneting Children

Dening spending on children raises broad conceptual questions. When does childhood begin,

and when does it end? What is spending on children compared with spending on their parents

or the general population? Should expenditures include reductions in taxes as well as direct

spending programs? Reasonable people may provide dierent answers to these questions.

In this analysis, childhood is generally dened as extending rom birth until a childs 19th

birthday. As a result, both ederal spending on college or postsecondary vocational training and

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Kids Share 201212

prenatal spending through Medicaid or other programs are excluded (the latter largely because

o data limitations). While the general rule is to include 18-year olds, they are excluded rom

certain programs that dene childhood as ending on a childs 18th birthday, as detailed in the

data appendix.

o be included in this analysis (as a whole or in part), a program must meet at least one o the

ollowing criteria:

1. benets or services are entirely or children (e.g., elementary and secondary education

programs, oster care payments); this also includes programs where a portion provides

benets directly or children (e.g., Supplemental Security Income (SSI) payments or

disabled children, Medicaid services or children);

2. amily benet levels increase when children are included in the application or the benet

(e.g., Supplemental Nutrition Assistance Program (SNAP)/ood stamps, low-rent public

housing); or

3. children are necessary or a amily to qualiy or any benets (e.g., emporary Assistance

or Needy Families (ANF), the Child ax Credit (CC), the dependent exemption).

Not all programs that provide benets to amilies are included under our denition o spend-

ing on children. Excluded, or example, are unemployment compensation, tax benets or

home ownership, and other benets where the amount o the benet the adult receives is not

related to presence or number o children.3 Further, this analysis does not include programs

that provide benets to the population at large, such as roads, communications, national parks,

and environmental protection.

In reporting expenditures on children, several key measures ocus on ederal outlayson children

(e.g., the share o the ederal budget spent on children, ederal vs. state/local spending on

children, and children vs. elderly outlays). However, our most comprehensive measure oederal expenditures on children includes tax expenditures(i.e., reduced tax liabilities as a result

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Report on Federal Expenditures on Children through 2011 13

o the Child ax Credit, the dependent exemption, or other provisions in the tax code) as well

as direct program outlays. Troughout the report, we note clearly where our analysis ocuses

on outlays only and where it broadens to include reductions in taxes. Even when the analysis

is restricted to outlays, however, it includes the direct outlays related to the tax law, chiey the

portions o the Earned Income ax Credit and Child ax Credit that are paid out to amilies as

a tax reund, rather than a reduction in tax liability. Note that this last division is undertaken

to achieve consistency with budget accounting that divides tax subsidies between outlays orthe reundable portion and tax expenditures or the nonreundable portion.

Collecting Expenditure Data

We rely on reported outlays rom theAppendix to the Budget of the U.S. Government, Fiscal Year

2013 (and past years) as the primary source or expenditure data or programs included in this

analysis. For estimated expenditures rom tax provisions, we turn to the Analytical Perspectives

volume o the budget. For smaller programs not listed in the appendix, we obtain expenditure

inormation rom budgetary documents on agency web sites or directly rom representatives

at various government agencies. All budget numbers presented in this report represent ederal

scal years and are expressed in 2011 dollars, unless otherwise noted.

Calculating the Share o Program Spending on Children

Some programs devote all their resources to children, while other programs allocate unds to

children as well as older age groups. As a result, we calculate the share o program resources

dedicated to children in one o the ollowing ways:

For programs that serve children only, we assume 100 percent o program expenditures

(benets and associated administrative costs) go to children.

For programs that provide direct services to children and adults (e.g., Medicaid), wecalculate the percentage o program expenditures that go to children.

For programs that provide benets only to amilies with children, and i the benet size is

determined by the number o children, we assume 100 percent o program expenditures

go to children (e.g., Child ax Credit, dependent exemption).

For other programs where benets are provided to amilies without any delineation

o parents and childrens shares, we generally estimate a childrens share based on the

number o children and adults in the amily and assuming equal benets per capita

within the amily (e.g., ANF, SNAP, housing).

We put signicant eort into estimating the portions o large programs, such as SNAP,

Medicaid, or SSI, that go just to children. For these calculations, the most requently used

data sources are unpublished tabulations o survey and administrative data generated by the

authors or other researchers at the Urban Institute (including tabulations generated by the

ranser Income Model) and reports rom the agencies that administer the programs. In some

cases, we scour government web sites or contact ederal agency sta directly to obtain program

participation inormation. Further inormation is provided in the data appendix.

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Kids Share 201214

Methods or State and Local Estimates

While Kids Share ocuses primarily on ederal expenditures on children, the report includes

estimates o state and local spending on children or the 13 years between 1998 and 2011.

Estimates or 19982008 are taken rom Rockeeller Institute State Funding Database

(described in Billen et al. 2007). Aggregate state and local spending estimates or 200911

were generated by the authors, using estimates o spending on state education and health

rom various sources and a range o assumptions about possible growth in local education

spending (the major piece o state and local spending that is missing or 2010 and 2011).

Our lower-bound projection assumed local education spending dropped twice as much as

state education spending over those two years, while our upper-bound projection assumedlocal spending increased to oset the drop in state spending. We present a possible spending

scenario between these extremes in our ndings, and we discuss the sensitivity o the ndings

to alternate assumptions about local spending on education.

Consultations between the authors o this report and researchers at the Rockeeller Institute

have increased consistency between the two sets o estimates. However, dierences remain.4

Methods or Projections

o assess trends o spending on children in the uture, we turn primarily to the Congressional

Budget Ofces projections (specically, projections in the Budget and Economic Outlook, Fiscal

Years 20122022, updated in March 2012). For projecting expenditures under tax provisions,

we turn to the Urban-Brookings ax Policy Center Microsimulation Model or major tax

provisions and the Ofce o Management and Budgets projections in Analytical Perspectives

or smaller tax provisions.

With a ew exceptions, most notably the extension o certain tax provisions that are set to expire

at the end o 2012, the baseline projections assume current law as o January 2012. Tis means

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Report on Federal Expenditures on Children through 2011 15

that our baseline projections incorporate the spending caps and automatic spending reductions

established by the Budget Control Act o 2011 (BCA) and assume ull implementation o the

Patient Protection and Aordable Care Act o 2010 (ACA). Our baseline projections do not

incorporate budget resolutions adopted in spring 2012, proposals to replace the BCA with

another decit reduction policy, changes in the ACA, or any other legislative proposals or

judicial actions.

Te projection methodology diers depending on whether a program is mandatory (with

spending governed by programmatic rules, such as Medicaid or Social Security), discretionary

(with spending set by appropriations action annually and overall spending subject to the BCA

caps), or a tax expenditure. In the mandatory spending area, the Congressional Budget Ofce

(CBO) baseline projections assume a continuation o current law, except that certain expiring

programs that have been continually reauthorized in the past are assumed to continue. Te

mandatory spending projections assume automatic spending reductions o certain budgetary

resources in 201321 under the BCA. Tese reductions, however, have a nominal eect,

because most mandatory programs (including those serving children) are exempt rom the

BCA spending reductions.

For discretionary spending other than the one-time American Recovery and Reinvestment

Act o 2009 (ARRA) unds, the traditional CBO baseline assumption is that spending is

kept constant in real termsthat is, spending is adjusted upward or ination but does not

include increases or growth in population or gross domestic product (GDP). Under the

Budget Control Act, however, the traditional CBO baseline is adjusted downward to reect

the caps on deense and non-deense spending, as well as an additional sequestration o

resources scheduled in January 2013. Our baseline projections assume the cuts required by

the BCA spending caps are applied equally to all discretionary programs, while recognizing

that Congress will use its judgment in deciding how much to und each program and stay

within the overall spending targets.

Expenditures or the our largest tax provisionsthe dependent exemption, the Child ax

Credit, the Earned Income ax Credit, and the Child and Dependent Care Creditcome

rom 10-year projections rom the Urban-Brookings ax Policy Center Microsimulation

Model. Our tax expenditure projections dier rom the strict CBO baseline: we ollow current

policy assumptions, which assume an extension o the individual income tax provisions

originally included in the 2001 and 2003 tax bills (as detailed in the methodological

appendix). For all other, smaller tax provisions, we use the ve-year projections provided in

theAnalytical Perspectivesand then apply the average growth rate o these projections to the

ollowing ve years.

In general, we assume that the childrens share o spending within each program will remain

constant rom 2011 to 2022. In the case o Medicaid, Social Security, and SSI, we are able to

use detailed CBO baseline projections, which project program outlays separately or children

and other categories o beneciaries. Because our uture projections are rough, we generally

do not provide program-specic projections but limit ourselves to broad statements about

childrens spending in budget unction categories (health, education) or spending on children

as a whole.

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Kids Share 201216

Changes in Methods in Tis Years Report

One new challenge this year was developing a methodology or applying the spending

restrictions in the Budget Control Act to childrens programs. o do this, we studied CBOs

estimates o the BCAs impact on its aggregate baseline projections or both mandatory and

discretionary programs, studied the list o exempt programs in the U.S. Code, and consulted

with CBO sta. We ended up developing two sets o projections: a baseline projection under

current law, with the caps and automatic spending reductions required under the BCA, and an

alternate projection o spending in the absence o the BCA.

We also developed new methods or doing short-term projections o state and local spending

through 2011, as noted above. In addition, two new health programs, authorized in 2010

under the Aordable Care Act, had sufcient outlays in 2011 to be added to the database

on ederal expenditures on children. Tese two new programs are Maternal, Inant and Early

Childhood Home Visiting and School-Based Health Care Centers. (Tough it has no outlays

in 2010 or 2011, we do include a rough estimate o the projected costs or the new health

insurance exchanges in our uture projections, as was done in last years report).

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Kids Share 201218

Current Expenditures onChildrenWe begin by presenting our ndings or 2011, the most recent year or which complete

ederal spending data are available. In addition to reporting total ederal expenditures on

children, we present spending by program and broad category, and provide estimates o

the lingering eects o the American Recovery and Reinvestment Act o 2009 (ARRA).

We then report on state and local expenditures, using available data to try to determine

whether the recent temporary ederal increases have compensated or state and local declines

in expenditures on children.

Federal Expenditures on Children in 2011, in theAggregate

Federal outlays on children ell rom $378 billion in 2010 to $376 billion in 2011 (all guresare in ination-adjusted 2011 dollars). While this $2 billion decline is small in percentage

terms (less than 1 percent), this is the rst time since the early 1980s that outlays on children

have allen. Moreover, a urther decline o $24 billion, or 6 percent, is expected in 2012 (see

gure 1). As will be discussed urther below, the largest declines are in education and other

programs receiving a temporary boost o unding under ARRA.

this is the rst

time since the early

1980s that outlays

on children have

allen.

B

illionsof2011dollars

2008 2009 2010 2011 2012 2013

7674

72 6976 78

Figure 1 Federal Outlays and Tax Expenditures on Children in Fiscal Years 200813

Actuals

300328

378 376352 346

Projections

Tax reductionsOutlays

Source: The Urban Institute, 2012. Authors estimates based on the Budget of the U.S. Government Fiscal Year 2013and previousyears and CBO projections.

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Report on Federal Expenditures on Children through 2011 19

6%Tax expenditures on

children represented

about 6 percent o the

approximately $1.1 tr

in individual and corp

tax expenditures

identifed by the Ofc

Management and Bud

(OMB) in 2011.

While the ederal government spent less on children, total ederal spending increased, rom

$3.52 to $3.60 trillion. As a result, the share o the ederal budget spent on children ell rom

10.7 to 10.4 percent between 2010 and 2011. Te remainder o the budget was divided as

ollows: 41 percent o the ederal budget, or nearly $1.5 trillion, was spent on the elderly anddisabled portions o Social Security, Medicare, and Medicaid; 20 percent was spent on deense;

6 percent was spent on interest payments on the debt; and 23 percent was spent on all other

government unctions (see gure 2).

Outlays on children as a percentage o total ederal outlays is our rst denition o the kids

share o the ederal budget. For consistency with the governments measure o total outlays,

our measure o childrens outlays includes not only spending rom Medicaid, Child Nutrition,

Special Education, and dozens o other ederal programs, but also the outlay portion o tax

provisions, chiey the reundable portions o the EIC and the CC.

Another way o looking at the childrens share o ederal expenditures is to examine tax breaks toamilies with children provided through the dependent exemption, the non-reunded portions

o tax credits, and other tax provisions. ax expenditures on children, including the value

o the dependent exemption, totaled $69 billion in 2011, down rom $72 billion in 2010.

ax expenditures on children represented only about 6 percent o the approximately $1.1

trillion in individual and corporate tax expenditures identied by the Ofce o Management

and Budget (OMB) in 2011.5Although these measures are not strictly additive because o

dierent computation methods, summing the $376 billion in outlays and $69 billion in tax

FIGURE 2 Share o Federal Budget Outlays Spent on Children andOther Items, 2011

Children10%

Deense20%

All otherspending

23%

Interest onthe debt

Non-childportions o

Social Security,Medicare and

Medicaid41%

6%

Source: The Urban Institute, 2012. Authors estimates based on the Budget of the U.S.Government Fiscal Year 2013.

Note: Social Security, Medicare, and Medicaid category excludes spending already capturedas childrens spending.

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Kids Share 201220

reductions results in a total o $445 billion in expenditures on children. When total ederal

outlays and total tax expenditures are added similarly, ederal expenditures on children in 2011

are approximately 10 percent o total ederal expenditures.

Yet another measure o the kids share is ederal spending on children as a share o the

total economy (GDP). Under this measure, too, the kids share dropped last year: outlays on

children ell rom 2.6 to 2.5 percent o GDP, and total expenditures on children, including tax

expenditures, dropped rom 3.1 to 3.0 percent o GDP. Under each o these various measures,

childrens spending declined last year.

Federal Expenditures on Children, by Program andCategory

Dozens o programs and tax provisions are included in the $445 billion in expenditures, as

detailed in table 1, which shows all expenditures on children in both 2010 and 2011, by

program and major category. Te table includes estimates o ARRA spending in both years,

based on the authors analysis o unpublished data rom the Congressional Budget Ofce.

Highlights rom table 1 are presented in the next two gures, which show spending on the 10largest programs (gure 3) and across nine broad categories o spending (gure 4).

ogether, the 10 largest programs and tax provisions account or three-quarters (75 percent) o

all expenditures on children in 2011. Medicaid, which spent $74 billion on children in 2011,

or about one-quarter o all Medicaid spending, was the single largest childrens program in the

ederal budget (see gure 3). Federal spending on Medicaid services or children ell by $1.6 billion

in 2011 because the ederal match rate declined rom the enhanced rate provided under ARRA.6

Tese Medicaid gures do not include the Childrens Health Insurance Program (CHIP),

which spent $8 billion on children in 2011.

10%ederal expenditures

on children in 2011

are approximately 10

percent o total ederal

expenditures.

Figure 3 The Ten Largest Spending and Tax Programs by Expenditures on Children in Fiscal Year 2011

80

60

40

20

0

Medicaid EITC Childtax credit

SNAP(ood

stamps)

Depexempt

SocialSecurity

Title I Childnutrition

Specialed

TANF

ARRA (a) 31 27 68 58 47 52 13

Tax Reductions 09 234 349

Outlays 707 489 159 310 213 148 172 119 124

Billio

nsofdollars

ARRA (a)Tax reductionsOutlays

Source: The Urban Institute, 2012. Authors estimates based on the Budget of the U.S. Government Fiscal Year 2013 andunpublished tabulations rom the Congressional Budget Oce.

a ARRAprimarily aects outlays, but it has a small impact on tax reductions, as detailed in table 1.

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Total (Including ARRA) ARRA

2010 2011 Change 2010 2011 Change

1. Health $88.8 $87.9 -$0.9 $11.0 3.2 -$7.8

Medicaid 75.5 73.9 -1.6 10.8 3.1 -7.7

CHIP 7.6 8.3 0.7 - - -

Vaccines or children 3.6 3.7 0.1 - - -

Other healtha 2.2 2.1 -0.1 0.2 0.1 -0.1

2. Income Security 52.2 53.1 0.9 3.2 1.3 -1.9

Social Security 20.4 21.3 1.0 - - -

Temporary Assistance or Needy Families 15.0 13.7 -1.3 2.0 1.3 -0.8Supplemental Security Income 10.0 11.0 1.0 - - -

Child support enorcement 4.0 3.7 -0.3 1.2 - -1.2

Veterans benets 2.8 3.4 0.6 - - -

Other (Railroad Retirement) + + + - - -

3. Education 69.5 64.1 -5.4 27.2 19.3 -7.9

Education or the disadvantaged (Title I, Part A) 19.9 19.5 -0.4 4.4 4.7 0.3

Special education 17.6 17.1 -0.6 5.4 5.2 -0.2

State Fiscal Stabilization Fund 17.1 8.9 -8.1 17.1 8.9 -8.1

School improvement 5.4 5.4 + 0.3 0.3 0.1

Education Jobs Fund 1.3 5.1 3.8 - - -

Impact Aid 1.2 1.3 0.1 + + +

Dependents schools abroad 1.2 1.2 + - - -

Innovation and improvement 1.0 1.0 + + + +

Other educationb 4.7 4.5 -0.3 + + +

4. Nutrition 55.4 59.9 4.5 5.4 5.8 0.4

SNAP 32.9 36.7 3.8 5.3 5.8 0.4Child nutrition 16.7 17.2 0.5 0.1 - -0.1

Special Sup. or Women, Inants & Children (WIC) 5.8 6.0 0.2 + + +

Other nutrition (CSFP) + + + - - -

5. Early Education and Care 14.1 14.5 0.3 2.0 1.6 -0.4

Head Start and Early Head Start 8.2 8.4 0.2 0.8 1.0 0.2

Child Care and Development Fund 6.0 6.1 0.1 1.2 0.6 -0.6

6. Social Services 10.5 9.8 -0.7 0.8 0.2 -0.6

Foster care 4.5 4.4 -0.2 0.5 0.1 -0.4

Adoption assistance 2.4 2.3 -0.1 ++ ++ ++

Social Services Block Grant 1.1 0.9 -0.2 - - -

Other social servicesc 2.4 2.2 -0.3 0.3 0.1 -0.2

7. Housing 9.7 9.8 + 0.2 0.0 -0.2

Section 8 Low-Income Housing Assistance 7.3 7.3 0.1 0.2 - -0.2

Low-rent public housing 1.2 1.2 + - - -

Low Income Home Energy Assistance 1.1 1.1 + - - -

Other housingd 0.1 0.1 + - - -8. Traininge 1.6 1.5 -0.2 0.6 0.1 -0.5

9. Refundable Portions of Tax Credits 76.1 75.7 -0.4 12.3 9.7 -2.7

Child Tax credit 23.1 22.7 -0.4 8.7 6.8 -1.9

Earned Income tax credit 51.5 51.4 -0.1 3.2 2.4 -0.7

Adoption credit and exclusion (reundable portion) 1.0 1.2 0.2 - - -

Other outlays associated with tax provisions 0.5 0.4 + 0.5 0.4 +

10. Tax Expenditures 36.1 33.5 -2.6 0.4 0.5 0.1

Child Tax Credit (nonreundable portion) 23.5 23.4 -0.1 - - -

Earned Income Tax Credit (nonreundable portion) 4.6 1.1 -3.5 0.3 0.2 -0.1

Dependent care credit 3.4 4.1 0.6 - - -

Other tax credits/exemptionsg 4.5 4.9 0.4 0.1 0.2 0.2

11. Dependent Exemption 35.9 34.9 -1.1 - - -

TOTAL EXPENDITURES ON CHILDREN 450.1 444.8 -5.4 63.1 41.5 -21.6

OUTLAYS SUBTOTAL (19) 378.0 376.2 -1.8 62.7 41.1 -21.6

TAX EXPENDITURES SUBTOTAL (1011) 72.0 68.3 -3.7 0.4 0.5 0.1

Source: The Urban Institute, 2012. Authors estimates based on the Budget of the U.S. Government Fiscal Year 2013and tabulations provided by the Congressional Budget OcNotes: Because this analysis shows outlays, rather than appropriated or authorized levels, and because the dollars are adjusted or infation, these ARRA estimates may dier roother published estimates.+ Less than $500 million.++ The ARRA increase or oster care and adoption assistance is shown together.a Other health includes immunizations, Maternal and Child Health (block grant), childrens graduate medical education, lead hazard reduction, abstinence education, childrensmental health, birth deects/developmental disabilities, Healthy Start, emergency medical services or children, universal newborn hearing, home visiting, and school-basedhealth care.b Other education includes vocational (and adult) education, sae schools and citizenship education, bilingual and immigrant education, Indian education, domestic schools, thInstitute or Education Studies, Junior ROTC, hurricane education recovery, and Sae Routes to Schools.c Other social services include amily preservation and support, juvenile justice, child welare services and training, Community Services Block Grant, independent living, missinchildren, childrens research and technical assistance, and certain children and amily services programs.d Other housing includes rental housing assistance and rent supplement.e Training includes WIA Youth Formula Grants, Job Corps, Youth Oender Grants, and YouthBuild Grants. Other outlays associated with tax provisions include outlays rom Qualied Zone Academy Bonds and Qualied School Construction Bonds.g Other tax credits and exemptions include exclusion o employer-provided child care, exclusion o certain oster care payments, adoption credit and exclusion, assistance

or adopted oster children, exclusion or Social Security retirement and dependents & survivors benets, exclusion or Social Security disability benets, exclusion or publicassistance benets, exclusion or veterans death benets and disability compensation, Qualied Zone Academy Bonds, and Qualied School Construction Bonds.

Table 1 Eects o the American Recovery and Reinvestment Act (ARRA) on Expenditures on Children in 2010and 2011, by Major Category and Major Program (billions o 2011 dollars)

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Kids Share 201222

Te next two largest programs are the Earned Income ax Credit and the Child ax Credit,

accounting or $52 billion and $46 billion, respectively. Tese reundable tax credits are split

between cash payments reunded to amilies (outlays) and reductions in tax liabilities. Most o the

EIC comes in the orm o cash reunds, while the CC is split more evenly between reunded

tax credits and reductions in tax liabilities. Te EIC and the CC were both expanded under

ARRA or tax years 2009 and 2010, resulting in increased expenditures in 200911.

Nearly hal o all expenditures rom the Supplemental Nutrition Assistance Program (ormerly

ood stamps) are spent on children, accounting or $37 billion in expenditures on children in

2011. While ARRA increased the amount o SNAP benets received by amilies, most o the

recent growth in the program is driven by the rising number o economically needy amilies

applying or assistance during the recession. During the past our years, the number o children

receiving nutrition assistance through SNAP increased by 8 million, or more than 60 percent.

About 21 million children, or approximately one in our American children, received SNAP

benets during the spring o 2011.

Te dependent exemption was similar in size to SNAP spending on children in 2011, reducingthe tax liability o amilies by $35 billion compared with what they would have paid i they

had not had children.

Te remaining ve largest programs each provide between $14 and $22 billion or children

and include Social Security (survivors and dependent benets), itle I/Education or the

Disadvantaged, Child Nutrition (including the school lunch and breakast programs), Special

Education, and ANF, which provides cash payments, work supports, and other services to

low-income amilies with children. Social Security and Child Nutrition spent a little more in

$74billionMedicaid, which spent $74

illion on children in 2011,

r about one-quarter o all

Medicaid spending, was the

ngle largest childrens

rogram in the ederal

udget (see fgure 3).

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Report on Federal Expenditures on Children through 2011 23

60%During the past our

years, the number

o children receiving

nutrition assistance

through SNAP increa

by 8 million, or more

than 60 percent.

2011 than in 2010, while dwindling ARRA unds led to declines in spending under the two

largest ederal education programs and ANF. Te State Fiscal Stabilization Fund, a temporary

und established under ARRA, dropped out o the list o top 10 programs in 2011 because its

expenditures in support o K12 education dropped rom $17 to $9 billion.

otal expenditures on children in 2011 can be broken into nine broad budget categories, as

shown in gure 4. Expenditures or child-related tax provisions, totaling $144 billion, compose

the largest category o expenditures, i one combines the outlay and tax expenditure portion o

tax credits, the dependent exemption, and other tax provisions. Nearly $88 billion was spent on

childrens health, making it the second largest in total expenditures and the largest in outlays.

Tis category includes not only Medicaid and CHIP, but also the Maternal and Child Health

Block Grant, vaccine and immunization programs, and several smaller health programs. Te

third largest category is education ($64 billion), ollowed by childrens spending in the areas o

nutrition and income security, at $60 and $53 billion, respectively. Early education and care,

social services or children (e.g., oster care and adoption assistance), and housing benets

or children are much smaller ($10$14 billion each), while less than $2 billion is spent on

training services or youth under 19.

As already noted, total expenditures ell by $5 billion between 2010 and 2011, including a $2

billion decline in outlays and $3 billion decline in tax expenditures. Even so, spending increased

in three categories (see table 1). Spending increased in nutrition (primarily in SNAP) and in

income security programs, where increases in SSI payments to disabled children and veterans

survivors and dependent benets were greater than decreases in ANF. Early care and education

spending also increased slightly. One categoryhousingsaw no signicant change, while

the remaining categories saw declines in spending. Expenditures decreased most dramatically

Figure 4 Federal Expenditures on Children in Fiscal Year 2011, by Category

Source: The Urban Institute, 2012. Authors estimates based on the Budget of the U.S. Government Fiscal Year 2013 and unpublishedtabulations rom the Congressional Budget Oce.

a ARRAprimarily aects outlays, but it has a small impact on tax reductions, as detailed in table 1.

Taxprovisions

Health Education Nutrition Incomesecurity

Earlyeducationand care

Socialservices

Housing Training

ARRA (a) 101 32 193 58 13 16 02 01

Tax Reductions 681Outlays 660 848 448 541 519 123 102 98 13

160

60

120

20

140

40

100

0

Billionsofdollars

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Kids Share 201224

in education, but also ell in health, social services, training, and tax provisions (with declines

in each o the three tax-related categoriesreundable tax credits, tax expenditures, and the

dependent exemption).

Education spending decreased by $5 billion between 2010 and 2011, commensurate with the

entire decline in expenditures or children. An $8 billion drop in support to K12 education

through the ARRA-unded State Fiscal Stabilization Fund and declines in other education

programs were only partially oset by an increase in spending rom the temporary Education

Jobs Fund. Despite the decline in ARRA education investments, ARRA continued to account

or 30 percent o all ederal education spending in 2011, highlighting the uture drop in

education unding that will occur as the remaining ARRA unds are exhausted (as discussed

urther in the projections section).

ARRA had a powerul impact on spending on children in 2010 and 2011, as shown in table 1

and the accompanying gures. Almost one-quarter o ARRA outlays (24 percent) were targeted

toward children over the 200919 period, meaning that the kids share o ARRA outlays was

more than twice as high as the kids share o overall budget outlays (24 percent compared with

10 percent). Only 3 percent o ARRA tax reductions were targeted toward children, but evenso, the overall kids share o expenditures was 19 percent, a sizable proportion.

For the second year, we have made preliminary estimates o two programs or tax provisions

that are not yet in our 19602011 database o childrens expenditures, and thus not included in

table 1 or any o the gures. One, the childrens share o the tax subsidy or employer-provided

health care, is large enough (an estimated $19.4 billion) that it would all into our top 10 list

i it were added to our database. Te other, the childrens share o dependent allowances under

unemployment compensation, is much smaller ($1.2 billion). See the text box or urther details.

State and Local Spending on Children

We now broaden our analysis to include state and local spending, to see how the recent trends

in ederal spending aect total public spending on children. First, we examine total public

spending in 2008, beore the recession, combining our estimates o ederal spending or that

year with state and local expenditure data collected by the Rockeeller Institute. Second, we

present estimates o state and local spending through 2011, to get a sense o how total public

investments changed during the recession. We ocus on outlays, not tax reductions, because

the state and local spending estimates do not include child-related tax provisions other than

the earned income tax credit. Even with this narrower denition, there are some dierences in

state/local compared with ederal spending.7

State and local spending on public schools dwars all other orms o spending on children,averaging $7,154 per child, out o a total public investment o $11,822 per child in 2008 (these

amounts are expressed in ination-adjusted, 2011 dollars and are spread across all children

under 19, including those not in school). Te ederal government paid only $537 per capita,

or 7 cents o the average dollar spent on elementary and secondary education (see table 2). Te

large ARRA increases in ederal unding or education in 200911, while signicant, represent

a modest proportion o total spending on education. Spending on education represents 65

the kids share

o ARRA outlays

was more than

twice as high as

the kids share

o overall budget

outlays

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Additional Federal Expenditures on Children

Te Kids Sharedatabase contains inormation on more than 100 programs and tax provisions. Even so, we

continue to seek out new programs or additional orms o spending that might be added. For both 2010 and

2011, we have developed estimates or two programs or tax provisions: the childrens share o the tax subsidy or

employer-provided health insurance and the childrens share o unemployment benets in states that provide

dependent allowances or children. Tere was an estimated $19.4 billion in tax expenditures on employer-

provided health insurance or children in 2011 and $1.2 billion spent on dependent allowances in certain states

unemployment programs. Because these are ballpark estimates that were only calculated or two years, we do

not include them in the Kids Shareestimate o total expenditures on children. I we did, total expenditures

would increase rom $445 billion to $465 billion.

We plan to continue estimating tax expenditures on employer-provided health insurance in order to determine

whether uture declines in such tax expenditures may oset increases in spending or public coverage. We are

less certain o the value o tracking dependent allowances to unemployed workers with children because less

than a third o the states include such a benet, and it is small relative to the program as a whole.

ax exclusion or employer-provided health insurance. Te exclusion o employer-provided health insurance

rom income tax is the largest single tax expenditure or individuals, valued at approximately $163 billion in

2011. Because the cost o health insurance or amilies is greater than the cost or individuals, the resulting

subsidies are higher or workers with children than workers without children; thus, these tax expenditures t

with the Kids Sharedenition o spending on children. o estimate the childrens share o the tax exclusion or

employer-provided health insurance, we worked with analysts rom the Urban Institutes Health Policy Center

to combine estimates rom the Urban Institutes Health Insurance Policy Simulation Model and the National

Bureau o Economic Researchs AXSIM model. Te total tax advantage or a amily policy is allocated to

children based on the marginal costs o providing health insurance to dependents, calculated as the dierence

between a amily plan and individual coverage. In this case, we use marginal costs, rather than dividing the cost

o the amily plan equally among all members in a amily, because dependent coverage is always in addition to

primary coverage o the primary worker. Based on this methodology, and distinguishing between coverage or

spouses and coverage or children, we estimate that 12 percent o the health insurance exclusion benet can be

attributed to children, representing $19.4 billion in 2011.

Unemployment benefts. Unemployment benets are not classied as childrens spending in the Kids Share

analysis because benets do not generally increase with the presence o children. However, some states provide

increased benets or workers with children. While some states have done so or decades, two additional states

began doing so in 2010, although one o these dropped out in 2011, bringing the number o states with

dependent allowances to 14. Unortunately, there are no good data on the amount o unemployment benets

provided in the orm o dependent allowances to minor children. By combining data rom various sources, we

arrived at a ballpark estimate o roughly 1 percent o total unemployment benets. In 2011, 1 percent o ederal

unding or unemployment compensation comes to $1.2 billion; the amount would be much less in years with

lower unemployment.

Further inormation on both these estimates is provided in the Data Appendix.

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Kids Share 201226

percent o total public spending on children, as well as 89 percent o state/local spending on

children. Nationwide, the state/local spending on public schools is airly evenly split between

state governments and local school districts.

Both ederal and state governments contribute to childrens health spending, with the ederal

government providing 59 percent o the total, or $798 per capita, and the states 41 percent, or

$549 per capita (as shown in table 2). Health spending accounted or 11 percent o total public

investments in children in 2008.

State and local governments und only 10 percent o spending on income security and tax

credits, through their share o ANF and child support enorcement programs, and, in some

states, state earned income tax credits. Tey also provide about the same proportion (11

percent) o all other spending on children; while states contribute a substantial share o total

spending on child care, oster care, and other social services, they spend very little on nutrition,

housing and training, also included in this other category.

Across all categories, public investments in children totaled $11,822 per child in 2008 (in

ination-adjusted 2011 dollars), split roughly one-third (32 percent) ederal and two-thirdsstate/local. Spending is, o course, higher on some children than others, and in some states

than others. For example, per capita spending is roughly twice as high on low-income children

as on children rom amilies with higher incomes; it is also twice as high on elementary school

age children as on inants and toddlers, according to other reports in this series (Vericker et

al. 2012; Macomber et al. 2010). In addition, spending varies considerably across states; state

and local spending on children was 2.5 times higher in New Jersey than in Utah in 2004, and

ederal expenditures on children also varied across states (Billen et al. 2007).

Categories Federal State/Local Total Federal shareChildren

Health 798 549 1,347 59%Education 537 7,154 7,691 7Income security and taxcredits

1,560 183 1,743 90

Othera 927 114 1,041 89Total 3,882 8,000 11,822 32

ElderlyHealth 10,179 849 11,029 92Education - - - naIncome security and taxcredits

14,901 50 14,952 100

Othera 375 b 375 100

Total 25,455 901 26,355 97

Table 2 Federal and State/Local Per Capita Spending on Children and the Elderly, 2008(2011 dollars, except where noted)

Source: The Urban Institute, 2012. Authors estimates based on data rom the Budget of the U.S. Government Fiscal Year 2013and data romBillen et al. (2007).

Note: Tax expenditures are not included in these gures. The population o children (those < age 19) and elderly (age 65 and older) were used tocalculate per capita amounts.

a Includes nutrition, early education and care, social services, housing, and training.

b Minimal amounts, not included in estimate.

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Report on Federal Expenditures on Children through 2011 27

Elderly spending shows sharply dierent patterns, both in total amounts per person and in

the relative role o state and local governments (see table 2). In total, public spending on the

elderly was $26,355 per person, or 2.2 times the amount spent per child in 2008.8 Health care

expenses are a signicant portion o public expenditures on the elderlymore than $11,000

per personbut per capita spending on the elderly remains considerably higher than per

capita spending on children even when health spending is excluded.

As shown in gure 5, the vast majority o public spending on the elderly is ederally unded,

primarily through Social Security and Medicare. Less than 5 percent comes rom state and

local governments. Looking solely at the ederal budget, an elderly person receives close to

seven ederal dollars or every dollar received by a child.

Te size o the elderly population is about hal that o the child population; there were 38.7

million elderly age 65 and older, representing 13 percent o the population in 2008, compared

with 79.2 million children age 18 and younger, or 26 percent o the population. In aggregate,

ederal outlays on the elderly were 3.2 times those on children in 2008; 31 percent o ederal

outlays in 2008 were spent on the elderly, compared with 10 percent on children. In other

words, the ederal budget spends three times as much on hal as many people.

otal Spending on Children during the Recession

While we do not have complete state and local data or 2009, 2010, or 2011, the data we

have compiled indicate that state and local spending per child has allen since 2008. Our

best estimates o the magnitude o that decrease suggest that the ARRA increases in ederal

spending were barely sufcient to oset decreased state and local spending over the past ew

years. In other words, total spending per child showed no strong upward or downward trend

between 2008 and 2011 but was more or less at, as shown in gure 6.

We caution that the estimates in gure 6 are preliminary. In particular, while state spending

on education and health can be estimated airly reliably, data on local education spending

are only complete through 2009, so we had to project these spending levels through 2011.

an elderly pers

receives close to

seven ederal doll

or every dollar

received by a chil

2011dollars

901

25,455

8,000

3,822

Children (65)

$26,355

$11,822

Source: The Urban Institute, 2012.

Note: Tax expenditures are not included in either the children or elderly gures.

State/localFederal

Figure 5 Per Capita Spending on Children and the Elderly in 2008 (in 2011 dollars)

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Kids Share 201228

Under a range o dierent assumptions, we nd that state and local spending ell (though the

exact magnitude may be somewhat larger or smaller than that shown in gure 6) and that,

coupled with the increase in ederal spending, total spending per child did not change radically

(although it may have small increases or decreases in any year).9

Our estimates indicate that in the area o childrens health, total public spending rose over

the past three years, consistent with the increases in the number o amilies qualiying or

assistance in times o high unemployment and the ARRA restrictions on cutting back states

eligibility rules or Medicaid. In contrast, there is considerable evidence that total investments

in education declined, despite the ederal increases under ARRA. Tis decline is seen not only

in the spending projections shown in gure 6, but also in elementary and secondary education

employment data rom the Bureau o Labor Statistics. Te number o people employed in the

local public educational sector (e.g., K12 teachers, principals, superintendents, support sta)

ell 2 percent between 2009 and 2011, without a comparable decline in student enrollment

(see gure 7).10

What will happen in 2012? Federal unding is expected to drop by much more than in 2011,

and with many states acing ongoing budget shortalls, it will be challenging or states to ll

the gap caused by the drop in ederal unding. As a result, there may be cutbacks in services

and benets or children in 2012.

Data through March 2012 indicate that public school employment dropped urther in school

year 201112, suggesting a urther decline in total spending on education, which represents

2011dollars

Figure 6 Recent Trends in Per Capita Spending on Children, by Level o Government

Federal State/local

| Preliminarya |

| Preliminarya |

Total

Source: The Urban Institute, 2012.

Note: Tax expenditures are not included in either the ederal or state/local numbers.

a State/local numbers or 2010 and 2011 are preliminary estimates and subject to revision. The small other state/local number or 2009is also a preliminary estimate, subject to revision.

HealthEducationOther

$14,000

$12,000

$10,000

$8,000

$6,000

$4,000

$2,000

0

07 08 09 10 11 07 08 09 10 11 07 08 09 10 11

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Report on Federal Expenditures on Children through 2011 29

65 percent o all public spending on children. However, the second largest component o total

public spending, childrens health spending, is expected to rise moderately. With the slow

economic recovery, many amilies are still eligible or Medicaid, health care costs continue

to rise, and states are generally prohibited rom restricting rules about Medicaid eligibility in

order to cut costs under one provision o the Aordable Care Act. With available inormation,

it is hard to predict total childrens spending in 2012 with certainty, but a decline in total

spending per child is likely.

We have not compiled much historical data on state and local expenditures on children, nor

do we attempt to project state and local expenditures into the uture, so the remainder o

this report ocuses on ederal expenditures. We do note, however, one trend in state and local

expenditures: Te state/local share o expenditures on children has been alling gradually as

a share o total spending on children, at least over the 13 years or which we have data. Te

state/local share o expenditures ell slightly, rom 7071 percent in 19982002 to 6769

percent in 200308. It ell urtherto 65 percentin 2009 and, based on the preliminary

estimates described above, is projected to all to 61 percent in 2010 and 2011, as a result o

the temporary boost in ederal spending under ARRA. It is unclear what will happen in 2012and later years, as both ederal and state budgets are tight. However, population shits may

contribute to a declining state/local share in the uture. Te population under 19 is growing

most rapidly in southern and southwestern states, where state and local spending on children

has traditionally been lower than in other parts o the country; this geographic shit in the

child population may exert downward pressure on the aggregate contribution o state/local

spending to public spending on children.

Localelementaryschoolenrollme

nt(millions)

Figure 7 Local Public School Employees and Public Elementary and Secondary Enrollment, 200212

Source: Data rom the Bureau o Labor Statistics and the National Center on Education Statistics.

85

75

76

77

78

79

80

81

82

83

84

02 0603 07 1004 08 1105 09 12

510

500

490

480

470

460

450

Local public school employeesLocal public school enrollment

Localpublicschoolemployment(millions)

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Kids Share 201230

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Report on Federal Expenditures on Children through 2011 31

rends in Federal Spending,19602011During the past hal-century, the size and composition o both the overall ederal budget and

the childrens budget has changed considerably. American society has undergone signicant

changes over this period as well. Te amily o today is very dierent rom the amily o

the past, with the average number o children per amily shrinking rom 1.4 to 0.9 between

1960 and 2011. While this trend might suggest more parental resources per child, many

more athers are living apart rom their children. Family incomes have risen, but only because

many more mothers are working in both married and single-parent amilies. Child poverty

has remained stubbornly high or much o the past 50 years, declining in better times (to 16

percent in 2000) and increasing in times o recession (to 22 percent in 2010, the most recent

year or which ull data are available); ater all these uctuations, nearly the same number o

children are poor today as in the early 1960s. Te job market has changed in innumerable

ways, including evolving changes in the availability o employer-provided health insuranceand other private-sector job benets. Health care costs have risen much aster than ination,

leading to higher costs or both private and public health insurance.

People are living longer, and the share o the population that is 65 or older has grown rom

9 percent in 1960 to 13 percent in 2010. At the same time, the share o the population that

is under 19 has declined rom 36 percent in 1960 to 24 percent today. Immigration also has

changed the ace o America, with particularly strong eects or younger populations. Ethnic

minorities make up 46 percent o all children, compared with 23 percent in the mid-1970s

(Steuerle, C.E. et al 2011).

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Report on Federal Expenditures on Children through 2011 33

A second important historical trend is the share o the budget spent on deense. Tis share

ell dramatically between 1960 and 2000, rom 52 to 16 percent o the budget, then rose

somewhat, to 20 percent in 2011, in response to the wars in Iraq and Aghanistan. Under the

Budget Control Acts caps on discretionary spending, deense spending is projected to shrink

urther as a share o ederal outlays, to a record low o 13 percent in 2022.

Te rest o the budget has not shown such consistent trends over the past 50 years. Interest

payments on the debt have uctuated over the past hal-century; they accounted or 6 percent

o all budget outlays in 2011 and are expected to rise to 11 percent in 2022. A residual

category, which includes all other ederal spending priorities such as agriculture, commerce,

the environment, transportation, and veterans benets, has accounted or about one-quarter

to one-third o all government spending over the past several decades, and represented 23

percent o all spending in 2011 (similar to low levels experienced in the mid-1990s). Tis

category is projected to shrink to 16 percent by 2022.

Kids Share o the Domestic Budget

ax expenditures are not included in ederal budget totals, so the more than $1.1 trillion in

total tax expenditures (and the $69 billion in childrens tax expenditures) are not included

in gure 8 (or gure 10 below). However, childrens tax expenditures are included in our

measure o the kids share o the domestic budget, shown in gure 9. Because this estimate

aims to get a sense o spending on children relative to other domestic priorities, we exclude

Shareoffederalbudget

Figure 8 Share o Federal Budget Outlays Spent on Children and Other Items, Selected Years, 19602022

All outlays notcategorizedbelow

Interest on thedebt

Deense

Social SecurityMedicare, andMedicaid (non-child)

Children

100%

75%

50%

25%

0% 1960($06)

2000($23)

1970($09)

2010($35)

2011($36)

projected 2022($46)

1980($14)

1990($20)

Source: The Urban Institute, 2012. Authors estimates based on data rom the Budget of the U.S. Government Fiscal Year 2013andprevious years and CBO projections.

Notes: Social Security, Medicare, and Medicaid category excludes spending already captured as childrens spending. Dollars at thebottom show total ederal outlays in trillions o 2011 dollars.

26%

8%

52%

11%

3%

27%

7%

42%

18%

5%

36%

9%

23%

26%

7%

26%

15%

24%

30%

5%

28%

9%

16%

38%

9%

25%

6%

20%

38%

11%

23%

6%

20%

41%

10%

16%

11%

13%

51%

8%

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Kids Share 201234

spending on deense and international aairs rom the domestic budget totals (and also add tax

expenditures on children to the spending estimates or children).

Under this alternative measure, we estimate that expenditures on children made up 15 percent

o domestic expenditures in 2011 compared with 20 percent o the domestic budget in 1960. As

discussed urther below, this decline is driven primarily by a drop in the value o the dependent

exemption.In contrast, spending on Social Security, Medicare, and Medicaid (excluding any

money going or children) increased rom 22 to 50 percent o the domestic budget during

the same period. In other words, the childrens share o the domestic budget declined by 23

percent during the past 50 years, while non-children spending on Social Security, Medicare,

and Medicaid more than doubled.

Kids Share o the Economy

urning back to the analysis o total ederal outlays, the dramatic decline in spending on

deense between 1960 and 2000 allowed an increase in spending on children and the elderly

and disabled or several decades without substantial expansion in total ederal outlays relative

to the size o the economy. Recently, however, both deense and non-deense spending havebeen increasing, and revenues have been alling, leading to a historically large gap between

revenues and spending, as shown in gure 10 and detailed below.

As a share o the economy, the non-child portions o Social Security, Medicare, and Medicaid

have increased nearly veold, rom 2.0 to 9.8 percent o GDP between 1960 and 2011.

Federal outlays on children also have grown, rom a low base o 0.6 percent o GDP in 1960

Source: The Urban Institute, 2012. Authors estimates based on data rom the Budget of the U.S. Government Fiscal Year 2013and previous years and CBO projections.

Notes: Social Security, Medicare, and Medicaid category excludes spending already captured as childrens spending.Domestic spending includes tax expenditures on children as well as outlays on all budget items other than deense andinternational aairs.

Figure 9 Share o Domestic Budget Spent on Children and Other Items, Selected Years, 19602022

Percentageofdomes

ticspending

All outlays notcategorized below

Interest on thedebt

Social Security,Medicare, andMedicaid (non-child)

Children: sum ooutlays and taxreductions (topand bottom o bar,respectively)

1960 20001970 2010 2011projected

20221980 1990

100%

75%

50%

25%

0%

43% 41% 43%33% 31% 30%

27%17%

15%12% 11%

19%

10%7% 8%

12%

22% 31% 34% 38%

45%48% 50% 58%

20%

16%12% 10% 14% 16% 15% 12%

23%the childrens

share o the domestic

budget declined by

23 percent during the

past 50 years, while

non-children spending

on Social Security,

Medicare, and Medicaid

more than doubled.

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Report on Federal Expenditures on Children through 2011 35

to 2.6 percent o GDP in 2010, beore alling back to 2.5 percent o GDP in 2011. (See below

or description o expansion in programs on children, particularly in the 1960s and 1970s).

With deense spending alling between 1960 and 2000, total ederal outlays did not experience

substantial upward growth, but instead experienced periods o expansion and contraction.

Between 1960 and 2000, ederal outlays uctuated between 17 and 23 percent o GDP, while

ederal revenues uctuated between 17 and 20 percent o GDP (see gure 10). While outlays

surpassed revenues in most years, the size o the decit varied, and or a ew brie years (1997

2001), there was a small surplus. Tis surplus vanished in recent years rom a combination o

eects: a substantial decline in revenues ollowing the tax bill o 2001; increased spending on

both domestic priorities and deense; and, in the past three years, a dramatic growth in total

ederal spending in response to the recession and the increased needs o unemployed amilies,

struggling industries, and cash-strapped states and localities.

In 2011, ederal spending accounted or 24 percent o GDP, while revenues were 15 percent,

leading to a decit o 9 percent o GDP, only slightly below the record-level decit at the height

o the recession (10 percent o GDP in 2009). While the latest recession is partly to blame or the

historically high gap between spending and taxes, a structural imbalance between revenues andspending is projected to continue over the next decade. While the spending restrictions required

under the Budget Control Act are expected to reduce spending somewhat (and, consequently,

reduce the decit and interest payments on the debt), urther measures to address spendingand

revenuesare needed i the country is to reduce the size o the decit relative to the economy.

Any broad changes to the ederal budget are likely to have implications or children.

Figure 10 Federal Outlays and Revenues as a Share o GDP, 19602011

Source: The Urban Institute, 2012. Authors estimates based on the Budget of the U.S. Government Fiscal Year 2013 and unpublishedtabulations rom the Congressional Budget Oce.

PercentageofGDP

25%

20%

15%

5%

10%

0%

196006%

200016%

197010%

201026%

198014%

199012%Children:

All outlays nocategorizedbelow

Interest on thdebt

Deense

Social SecurMedicare, anMedicaid (nochild)

Children

Revenues

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Kids Share 201236

Figure 11 Components o Expenditures on Children, 19602011

Source: The Urban Institute, 2012. Authors estimates based on the Budget of the U.S.

Government Fiscal Year 2013and past years.

PercentageofGDP

Dependentexemption

Tax reductions

Reundable tax

credits

Discretionaryspendingprograms

Mandatoryspendingprograms

35%

30%

25%

15%

20%

0%

10%

5%

1960 20001970 20101980 1990

Fostercare Head Start

Foodstamps

Medicaid,Education or theDisadvantaged

SSI

Section 8: Low-IncomeHousing Assistance

Special Education;EITC CCDBG SCHIP ARRA

Child tax credit; childcare entitlement to states

We turn now to examine trends in the dierent types o expenditures on children over the

past hal-century, looking comprehensively at total expenditures, including the dependent

exemption and other tax breaks or amilies with children.

rends in Expenditures on Children, 1960-2011

As new programs and initiatives were introduced over the 1960s and early 70s, ederal

spending on children increased. With the adoption o Medicaid (1965), ood stamps (1964),

and SSI (1972), there was a rise in spending on entitlements and other mandatory programs

(that is, programs where the unding level is set directly in the authorizing legislation). Tis

same period saw increased spending on discretionary programs (programs subject to annual

appropriations actions), with the introduction o itle I/Education or the Disadvantaged

(1965), Head Start (1966), and Section 8/Low-Income Housing Assistance (1974), as shown

in gure 11.

Discretionary spending on children has, ater an initial rise, remained relatively at (as a

percentage o GDP) rom the mid-1970s through 2008. Te one exception to this general

trend is the recent increase