US State and Local Government Spending History
In 2024 state governments in the United States are expected
to spend
8.4
percent of GDP on programs and local governments spend about
8.8
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 9.05 percent
GDP and local spending to 9.7 percent GDP in 2016.
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 the last reported year for states,
2021, state spending was
9.7 percent GDP.
In the last reported year for local governments,
2021, local spending was
9.2 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
2021, the last reporting year, state health care cost
3.7
percent GDP, education cost
1.5
percent GDP, pensions cost
1.3
percent GDP, and welfare cost
1.2
percent GDP. Transportation (not shown) cost
0.6 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.
And the four biggest programs took nearly 80 percent of state spending.
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
2021, the last reporting year, local education cost
3.4
percent GDP, police and fire cost
0.9
percent GDP, transportation cost
0.8
percent GDP, and health care cost
0.9
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 2020
The bubble chart above shows total state and local spending in 2020 for each state
in dollars per capita
compared against the Gross State Product (GSP) in dollars per capita.
Alaska has the highest spending, but New York and Wyoming are close
behind.