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This paper looks at whether fiscal decentralization of welfare programs made state governments effective at alleviating poverty. We make use of the National Association of State Budget Officers’ (NASBO) State Expenditure Report which publishes expenditure data in different areas by state and federal government. Using this data, we constructed expenditure ratios to demonstrate the moment when state governments took on more responsibility in funding compared to the federal government. Although we hypothesized fiscal decentralization to worsen poverty growth, we found the fiscal decentralization of Medicaid to reduce poverty rate growth. We believe this negative finding to be the result of the types of additional goods that are being offered to Medicaid beneficiaries beyond what is federally required.

Has the fiscal decentralization of social welfare programs helped effectively reduce poverty across U.S. states?