Fiscal year 2003 formula  calculations used population estimates for 1998 through 2000 derived from  the 2000 census. Most of Population Difference Between 1999 and 2000 Resulted from Correction of Errors That Occurred During 1990s

The difference between the 2000 census count and the 1999 postcensal  population estimate was 3.2 percent, which is large compared with the 1  percent average annual growth rate estimated over the preceding decade. Every state’s population growth was underestimated and needed  correction, but the correction amounts varied widely. Correcting Errors in Population Estimates Accounted for Three- Quarters of the Difference Between 1999 to 2000

The 2000 census count of 281.4 million people as reported by the Census  Bureau exceeded the 1999 postcensal population estimate by 8.7 million  people, or 3.2 percent. The District of Columbia and Nevada had  the largest percentage corrections in their population estimates, 10.2  percent and 7.5 percent, respectively. Twenty-eight states had a lower- than-average percentage difference, and 23 states had a greater-than- average percentage difference (see fig. 2000 Census Correction of Population Estimates Redistributes an Estimated $380 Million Among States for Four Formula Grant Programs

The correction to the population estimates generally redistributes federal  funding for the four programs we analyzed from the states with the  smallest corrections to those having the largest. Most of the change in funding is concentrated in  states with larger populations. A number of high-income states, including  California and New York, are largely unaffected by the correction in their  populations because their matching rates for the Medicaid, Foster Care,  and Adoption Assistance programs cannot decrease below the minimum  50 percent matching rate. While the redistribution of funding in the four  programs began to occur in fiscal year 2002, almost all of it occurs in fiscal  year 2003, when the 2000 census data are used to determine federal  matching rates in the three open-ended entitlement programs. We estimate that the funding for the 28 states that  had below-average corrections in their populations decreases by a total of  $380.3 million. Conversely, funding for the 23 states that had above- average corrections in their populations increases by an estimated $388.8  million (see table 4). Medicaid Accounts for Most of the Change in Program Funding

Most of the change in funding resulting from the corrections in population  estimates is the result of changes in Medicaid funding. Agency Comments

We provided the Department of Commerce a draft of this report for  comment. Analysis of Funding Changes for Foster Care and Adoption Assistance for Fiscal Year 2003

The effects on the funding for Foster Care and Adoption Assistance are  similar to the effects on the Medicaid programs because these programs  use the same matching rates. Social Services Block Grant

The fiscal year 2002 formula allocations for the SSBG are based on the  April 1, 2000, decennial census population counts.
Why GAO Did This Study

In fiscal year 2000, about $283 billion in federal grant money was distributed to state and local governments by formula, about half of it through four formula grant programs--Medicaid, Foster Care Title IV-E, Adoption Assistance, and the Social Services Block Grant (SSBG). States receive money based in part on factors such as annual population estimates derived from the previous decennial census, which is conducted by the Department of Commerce, Bureau of the Census. GAO was asked to measure the effect that using the 2000 census data has on redistributing funding for federal formula grant programs. To do this, GAO analyzed the change in the U.S. and state populations between 1999 and 2000 that was the result of correcting prior population estimates and estimated for the four programs the extent of any redistribution of federal funding among states.

What GAO Found

The 2000 census count of 281.4 million people exceeded the 1999 population estimate by 8.7 million people, or 3.2 percent. Three-quarters of this 1-year population increase, 6.8 million people, was the result of correcting errors in population estimates over the preceding decade; the remaining portion of the increase, 1.9 million people, was the result of population growth from 1999 to 2000. Every state's population had been underestimated during the 1990s, but the extent varied, from the smallest correction in West Virginia--0.3 percent--to the largest in the District of Columbia--10.2 percent. Twenty-eight states had a correction below the national average of 2.5 percent, and 23 states had a correction above the national average. Correcting population estimates for the 2000 census redistributes among states about $380 million in federal grant funding for Medicaid, Foster Care, Adoption Assistance, and SSBG. Funding for the 28 states that had below-average corrections to their populations decreases by an estimated $380.3 million; funding for the 23 states that had above-average corrections increases by an estimated $388.8 million. Most of the change in funding is concentrated in states with larger populations. However, changes in funding are smaller in several large states because the matching rates for Medicaid, Foster Care, and Adoption Assistance are limited by statute--matching rates cannot fall below 50 percent. Some higher-income states would receive matching rates below 50 percent if not for this limitation. Most of the shift in funding occurs in fiscal year 2003 when federal matching rates for the Medicaid, Foster Care, and Adoption Assistance programs are based on population estimates derived from the 2000 census. A small portion of the shift occurred in fiscal year 2002 because that is when the SSBG began using the 2000 census counts. The Department of Commerce provided technical comments on a draft of this report.