Census Matters: Census Shapes Funding for Local Economies

Census Matters is a Project On Government Oversight (POGO) series that tracks the distribution of census-guided federal funding to individual states and that details how the decennial census influences the allocation of those funds across the United States.

In our previous Census Matters report, POGO tracked how 371 federal assistance programs geographically distributed funds to states in fiscal year 2023. Those funds provide significant resources to many communities. In this report, POGO examines how census accuracy impacts critical federal funding for businesses, economic development, and employment across the U.S., as a census undercount or overcount can influence the availability of funding for starting new businesses, creating jobs, and supporting local economies.

Read our census work

Ensuring an Accurate 2030 Census

In our analysis, POGO reviewed more than 100 federal census-guided programs that impacted the economy and separated them into three categories based on their function: Business, Economic Development, and Employment. POGO classified programs under the Business category if the federal program provides loans to businesses or is intended to support the development and expansion of businesses or small businesses, or to drive the local economy. Programs under the Economic Development category are programs that aim to improve a region’s economy, increase job supply, or create businesses. And finally, programs that fall under Employment aim to create jobs or provide resources to aid in employment.

Many people may not realize how influential the census is in determining how much federal money gets allocated to different geographic regions across the country. Depending on the program, it may use census data such as location, population, and income to determine state eligibility and distribution. Urban, rural, underserved, and other communities often rely on federal funds to foster economic growth, overcome barriers associated with starting businesses, increase employment, and more. Some census-guided programs regularly provide funding through state agencies, banks, nonprofit organizations, or other intermediary entities. And a very few programs distribute funds directly to eligible individuals; individuals typically do not receive or borrow money directly from the federal government even though the money originates from the federal programs.

Inaccurate census counts can lead to a surplus or deficit of federal spending. This spending can impact the quality of life for individuals and communities. Starting and sustaining businesses could have an impact on the local and overall economy by increasing job supply and capital. Not only that, but when money is being circulated within a region or area, it could also help increase local tax revenues that are eventually reinvested back into communities. And when there is economic development, it could potentially attract new businesses to start in that region. The impact of the census is not always easily measurable or clear, but it is important that we highlight the role census data has in federal spending allocation because it impacts more than 300 federal programs and has overarching effects.

Census data is used in several ways to determine eligibility and funding distribution. Depending on the program, it may use data such as location, population, household income, and age. If a state or geographic location has an undercount, it could mean fewer dollars, thereby fewer resources. And an overcount could result in a state receiving more federal funds than its population warrants. For programs with fixed appropriations, this may proportionately reduce the share available to other states.

How the Decennial Census Affects Businesses

Many of the programs under the Business, Economic Development, or Employment categories seek to support geographic areas and communities that the authorizing federal agencies have determined to be underserved or struggling economically. Examples include those areas with lower median income, higher poverty rates, a lack of housing resources, or low labor force participation. Yet oftentimes, these same areas and communities are harder for the census to accurately count.

A census miscount can have a compounding effect on economic challenges in an area. It can impact whether an area meets the criteria to be designated “distressed” or “underserved.” This in turn can impact whether a program serving that area could get federal funding approved, since those designations may be used as eligibility requirements or scoring criteria.

While every program could be unique in how they use data to determine an area’s classification, Business, Economic Development, and Employment programs all rely on some of the same underlying population data to determine eligibility. For example, the Workforce Innovation and Opportunity Act (WIOA) Adult program uses a formula based on unemployment data from the Bureau of Labor Statistics and poverty data from the American Community Survey, which uses decennial census data, to determine funding allocations.¹ If an area had an undercount of its population, then the unemployment rate could look lower, and the area could appear to be less in need of economic support from the program. Additionally, Business programs that administer loans may rely on income and poverty data to identify “distressed” areas that qualify for the grants. Once again, an undercount of the population could make a key indicator such as area median income appear higher since the income data for the area was incomplete. This in turn could make the area and businesses appear less in need of the federal funds provided by these programs.

Spending Distribution of Census-Guided Business, Economic Development, and Employment Programs

Of the 371 census-guided federal assistance programs operating in fiscal year 2023 that POGO identified, 77 were census-guided programs that fell under the Business, Economic Development, or Employment categories. These programs accounted for $74.59 billion in funds disbursed to all 50 states and Washington, DC, representing 3.33% of the total census-guided funding in FY 2023.

The largest program on this list is 7(a) Loan Guarantees with $24.29 billion, which is administered by the Small Business Administration and provides financial support to create or sustain small businesses.² For this program, states with a larger population tend to receive more funding. For example, California received the most with $3.17 billion, Texas received $2.51 billion, Florida received $1.90 billion, and New York received $1.09 billion. It is important to keep in mind that populations fluctuate, and so do spending patterns. However, this seems to be the general trend.

The next four largest programs after 7(a) Loan Guarantees are Temporary Assistance for Needy Families (also known as TANF) with approximately $16.99 billion, 504 Certified Development Loans with $5.21 billion, Rehabilitation Services Vocational Rehabilitation Grants to States with $3.31 billion, and Unemployment Insurance with $3.09 billion. It should be noted that the benefits paid out through Unemployment Insurance generally come from state taxes, with some exceptions; the federal dollars that are census-guided cover the administrative costs of the program.³

If we compare how much census-guided federal funding the fifty states and Washington, DC, received for the three categories, we find that larger states received more federal funding and smaller states have greater variation (this is consistent with the findings in our other reports as well). The five states that received the highest funding from these programs were California at $11.16 billion, New York at $5.97 billion, Texas at $5.02 billion, Florida at $4.73 billion, and Illinois at $2.83 billion. The five states that received the lowest funding were Vermont at $271.24 million, New Hampshire at $266.46 million, North Dakota at $234.96 million, Delaware at $200.72 million, and Wyoming at $190.48 million.

While there is a clear correlation between state population size and the funding levels from these programs, it would be incorrect to assume an exact linear relationship between population and funding. This is because a wide range of factors also impact the awarding of funds from these various programs, such as demographic differences, income levels, the number of loan or award applicants, and more.

Many factors that determine the amount of funding available rely on census data, which is why getting an accurate count is critical to ensuring that states and communities get the amount they’re entitled to. Getting an accurate count requires extensive and careful preparation.

Community Efforts in Anticipation of the Next Decennial Census

Census miscounts (depending on the severity) can result in states and communities losing significant federal funding across many programs. Communities, especially those that are historically underserved, could experience financial shortfalls and make it more challenging to maximize federal dollars. To ensure that communities that need resources are at least maximizing their chances to get these resources, it is critical to prevent barriers for people to participate in the census.

Preparation for a decennial census can begin before the previous census has even been conducted. For instance, the early planning phase for the 2030 census began in 2019. Currently, we are in the second half of census preparation, specifically the Development and Integration Phase, where the Census Bureau continues doing research, collects data from two different test sites, and refines its operational design.⁴ During this phase, advocates can take part in a public education campaign to promote participation and psychological safety, can form Complete Count Commissions to raise general awareness and encourage residents to respond to the census, and can increase state collaboration with and participation in census partnership programs. Also, states can invest in 1) efforts to avoid a significant miscount by partnering with city leaders, or 2) accounting for census efforts in the state budget.⁵

Tribal, local, and state governments may also prepare for and participate in census partnership programs like the Local Update of Census Addresses (LUCA) operations. LUCA is an opportunity for tribal, state, and local governments to review and update the Census Bureau’s address list for their geographic area prior to the 2030 census, which may improve the completeness and accuracy of the count. They can verify the accuracy of address lists and make any corrections or identify any missing information, including address additions, deletions, conversions, and spatial updates. LUCA stands out as one of the few opportunities for tribal, local, and state governments to directly improve census accuracy in their jurisdictions on a standardized, nationwide timeline.⁶