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US State and Local Government Spending History



Currently, state governments in the United States spend about 8.5 percent of GDP on programs and local governments spend about 10 percent of GDP on programs.

A Century of State and Local Spending

State and local spending increased steadily right through the 20th century except in the emergency of World War II.

Chart 2.101: State and Local Spending in 20th Century

At the start of the 20th century, state government spending stood at about 0.6 percent of GDP. It expanded briskly in the 1920s, reaching 1.6 percent of GDP in 1929. State spending exploded to 3.7 percent of GDP in 1933 before declining slowly to a low of 3.2 percent in 1951 after World War II.

At the start of the 20th century, local government spending stood at about 4.1 percent of GDP. It expanded briskly in the 1920s, reaching 6.6 percent of GDP in 1927. Local spending exploded to 10.7 percent of GDP in 1932 before declining to a low of 3.2 percent in 1944 in the middle of World War II.

In the post World War II era, state and local spending increased steadily for decades, reaching a peak after the Crash of 2008, when state spending reached 9.7 percent of GDP in 2010 and local spending reached 11.4 percent of GDP in 2009. Spending has since decreased, with state spending down to an estimated 8.7 percent GDP in 2015 and local spending to 9.6 percent GDP in 2015.

Recent State and Local Spending

State and local spending has increased modestly in recent years.

Chart 2.102: Recent State and Local Spending

In 1990 state government spending stood at 6.62 percent of GDP and local government spending stood at 9.6 percent. By 2005 state spending had grown to 8.15 percent and local spending had grown to 9.9 percent. But the Crash of 2008 put great pressure on state spending, increasing it to 9.75 percent in 2010. Local spending peaked at 11.4 percent in 2009. In the aftermath of the Great Recession state and local spending has declined as a percent of GDP. In 2015, state spending is estimated to be 8.7 percent GDP and local spending is estimated to be 9.7 percent GDP.


Trends in the Biggest State Spending Programs

The four biggest state government programs are health care, education, pensions, and welfare.

Chart 2.103: Four biggest state spending programs

Back at the beginning of the 20th century, the four biggest state spending programs were: health care at 0.14 percent of GDP; education at 0.07 percent of GDP; police and fire at 0.04 percent of GDP; and welfare at 0.03 percent of GDP. Pensions only cracked 0.01 percent of GDP in 1922.

Chart Key:
- welfare
- pensions
- education
- health care

But in the Great Depression welfare became the biggest state program. In 1940, welfare was 1.04 percent of GDP; transportation was 0.8 percent of GDP; education was 0.4 percent of GDP; and health care was 0.3 percent of GDP. Pensions were way back at 0.05 percent of GDP.

After a dip in spending during World War II in which welfare spending dropped to 0.33 percent in 1944, spending resumed its growth. In 1960, transportation was the biggest program at 1.1 percent of GDP; welfare next at 0.9 percent of GDP; education at 0.63 percent of GDP; health care at 0.35 percent of GDP. State pensions had climbed to 0.13 percent of GDP.

Chart 2.104: Recent four biggest state programs

By 1985 education had become the biggest state program at 1.23 percent of GDP. Then came welfare at 1.17 percent of GDP; health care at 1.06 percent of GDP; transportation at 0.7 percent of GDP. Pensions had climbed to 0.4 percent of GDP.

By 2000, health care had passed education as the largest state program at 2.1 percent of GDP; education was 1.4 percent of GDP; pensions were 0.82 percent of GDP; welfare was 0.72 percent of GDP. Transportation was 0.7 percent of GDP.

In 2010 in the heart of the Great Recession health care was the biggest state program at 2.9 percent of GDP; education came in at 1.7 percent of GDP; welfare was 1.45 percent of GDP; pensions was 1.2 percent of GDP. Transportation was 0.72 percent of GDP. In 2015 it is estimated that state health care will cost 3.1 percent GDP, education 1.6 percent GDP, pensions 1.3 percent GDP, welfare 0.73 percent GDP. Transportation (not shown) is estimated at 0.61 percent GDP.

Chart 2.105: Share of biggest state programs

When shown as a share of overall state spending, the rankings of the major programs show a decadal fluctuation. At the beginning of the 20th century health care was the largest program, followed by education and welfare.

By 1940 just before World War II welfare had become the largest program, followed by education and then health care. But by the first decade of the 21st century, health care had again become the largest state program, followed by education, employee pensions, and welfare.

Trends in the Biggest Local Government Programs

Ever since the beginning of the 20th century, education has been the biggest local government program.

Chart 2.106: Biggest Local Spending Programs

In 1900, at the beginning of the 20th century, education was the biggest local government program at 1.0 percent of GDP. Transportation cost 0.73 percent of GDP, general government 0.49 percent of GDP; police and fire cost 0.4 percent of GDP.

Chart Key:
- health care
- transportation
- protection
- education

In 1920, after World War I, education was the biggest local government program at 1.4 percent of GDP. Transportation cost 0.9 percent of GDP; police and fire cost 0.36 percent of GDP; general government 0.26 percent of GDP.

In 1940, just before World War II, education was the biggest local government program at 2.2 percent of GDP. Transportation cost 1.2 percent of GDP, welfare cost 0.84 percent of GDP; police and fire cost 0.6 percent of GDP; general government 0.4 percent of GDP.

In 1960, education was the biggest local government program at 2.8 percent of GDP. Transportation cost 0.85 percent of GDP, welfare cost 0.56 percent of GDP; police and fire cost 0.52 percent of GDP.

Chart 2.107: Recent Biggest Local Programs

In 1980, education was the biggest local government program at 3.4 percent of GDP. Transportation cost 0.77 percent of GDP, welfare cost 0.63 percent of GDP; police and fire cost 0.68 percent of GDP.

In 2000, education was the biggest local government program at 3.8 percent of GDP. Transportation cost 0.76 percent of GDP, police and fire cost 0.88 percent of GDP; health care cost 0.68 percent of GDP.

In 2010, education was the biggest local government program at 4.1 percent of GDP. Police and fire cost 1.05 percent of GDP; Transportation cost 0.92 percent of GDP; health care cost 0.90 percent of GDP. In 2015 it is estimated that local education cost 3.7 percent GDP, police and fire 0.92 percent GDP, transportation 0.94 percent GDP, and health care 0.83 percent GDP.

Chart 2.108: Share of Biggest Local Programs

At the beginning of the 20th century education was the largest local government program, followed by transportation, police and fire protection, and health care.

By 1940 just before World War II education remained the largest program, followed by transportation, protection, and health care.

In 1980 and thereafter education remained the largest program, but protection had become the second largest program, followed by transportation and health care.

State-by-State Comparison of State and Local Spending

States shuffle the deck from decade to decade

Chart 2.111: State and Local Spending Comparison in 1960


The bubble chart above shows total state and local spending in 1960 for each state in dollars per capita compared against the Gross State Product (GSP) in dollars per capita. The chart shows a correlation between state and local spending and GSP. Notable outliers are Nevada on the high spending side and Wyoming on the low spending side.

Chart 2.112: State and Local Spending Comparison in 1985


The bubble chart above shows total state and local spending in 1985 for each state in dollars per capita compared against the Gross State Product (GSP) in dollars per capita. The states are all in a bunch, except Alaska which is in the middle of its North Slope oil boom.

Chart 2.113: State and Local Spending Comparison in 2013


The bubble chart above shows total state and local spending in 2013 for each state in dollars per capita compared against the Gross State Product (GSP) in dollars per capita. Alaska has the highest GDP per capita and the highest spending, but Wyoming and New York are close behind, and North Dakota is showing its fracking oil boom.

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Spending Data Sources

Spending data is from official government sources.

Gross Domestic Product data comes from US Bureau of Economic Analysis and measuringworth.com.

Detailed table of spending data sources here.

Federal spending data begins in 1792.

State and local spending data begins in 1890.

State and local spending data for individual states begins in 1957.

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Next Data Update

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Data Source

Source: CBO Long-Term Budget Outlook .

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The Feds Borrow More Than The "Deficit"

People naturally assume that the annual Deficit is the total that the Federal government borrows each year. Actually this is not so. The Deficit is simply the difference between Federal Outlays and Federal Receipts. Usually, the Feds borrow a lot more than the official Deficit.

Like below, in $ billion:

YearGross
Debt
Debt
Increase
Federal
Deficit
Other
Borrow
2000562924-236259
20057905551318232
20101352916531294359
20111476412351300-64
20121605112871087200
201316719669680-11
2014177951075485590
201518120326438-113
2016195371417587830

We have provided the difference between the Debt increase and the Deficit for each year under "Other Borrowings" on the Spending Details page. To Recap:

Other Borrowings = (Increase in Federal Debt) - (Official Deficit)

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