Following the Money: Where Are the $4.85 Trillion in State and Local Funds Being Spent?

When we think about government spending and where fraud may be prevalent, we tend to focus on the federal fisc. However, state and local governments spend trillions of dollars each year in service of their citizens.

In FY 2021, total state spending reached $2.65 trillion (including DC), up from $2.28 trillion in fiscal 2020 – an increase of 16.2 percent! Additionally, local governments within those states spent another estimated $2.2 trillion for a total of $4.85 trillion in spending in the states for FY2021.

As you might expect, much of that increase is due to increased spending to combat and recover from the COVID-19 pandemic. There was an increase of about 5.1 percent in state spending of their own funds, but a whopping 35.7 percent increase in spending of federal funds by the states.

The Coronavirus Aid, Relief, and Economic Security (CARES) Act, passed in 2020, and the subsequent American Rescue Plan Act of 2021 (ARPA), signed into law in March of 2021, infused the states with money to spend on COVID-19 relief through the Coronavirus State and Local Fiscal Recovery Fund (CSLFRF).

The funds allocated to the states through this legislation were spent in a variety of ways, including COVID-19 vaccination, testing, and other response costs; prevention in congregate settings; mental health services; household assistance; unemployment insurance; public health programs; housing assistance; emergency management; economic relief; aid to local governments; and broadband and other technology upgrades.

However, Medicaid is still one of the largest state-funded program, accounting for 27.2% of state expenditures – an 11.5% increase from FY2020. Due to funding from the CARES Act and ARPA, state expenditures of federal funds increased 15.9%, while the states’ own spending increased 3.3%.

As we mentioned our post last year, at least 30 states and the District of Columbia have passed their own state False Claims Acts to recover money lost to fraud. Of these laws, 7 only cover Medicaid. Of the state False Claims Acts that cover all state government spending, the U.S. Department of Health and Human Services judges only 12 to be as strong as the Federal False Claims Act.

However, there is strong support for strengthening existing and passing new state False Claims Acts. For instance, in June, the Colorado’s Governor Jared Polis signed the Colorado False Claims Act into law – expanding the scope of the previous False Claims Act to cover fraud beyond Medicaid.

Strong False Claims enforcement at all levels, and whistleblowers who bring fraud to light, are integral to protecting the trillions of dollars in taxpayer dollars spent each year on vital state and local government programs.

Written by Jacklyn DeMar of Taxpayers Against Fraud. Edited by James King of Taxpayers Against Fraud. Fact checked by Julia-Jeane Lighten of Taxpayers Against Fraud.