Fact Sheet

Federal Funds Comprise Over One-Third of California’s State Budget, Supporting a Broad Range of Public Services and Systems

Endnotes are available in the PDF version of this Fact Sheet.

Federal dollars support a wide array of public services and systems that touch the lives of all Californians — from Social Security and health care to highway construction and public schools. A large share, but less than a majority, of this federal funding flows through California’s state budget. The current state budget includes nearly $96 billion in federal funds for 2016-17, the fiscal year that began last July 1. This is more than one-third (36 percent) of the total state budget, which also includes more than $170 billion in state funds for the current fiscal year.

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More than 7 in 10 federal dollars that flow through California’s state budget — $69.3 billion in 2016-17 — support health and human services (HHS) for children, seniors, and many other Californians (see chart). Most of these federal dollars, roughly $58 billion, go to Medi-Cal (California’s Medicaid program), which provides health care services to more than 13 million Californians with low incomes. The second-largest share of federal funding for HHS programs — $7.7 billion — goes to the state Department of Social Services. These funds support child welfare services, foster care, the CalWORKs welfare-to-work program, and other services that assist low-income and vulnerable Californians.

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The remaining federal funds that flow through the state budget — an estimated $26.6 billion in 2016-17 — support a broad range of public services and systems. This includes $7.6 billion for K-12 education; $6.6 billion for labor and workforce development programs, primarily for unemployment insurance benefits for jobless Californians; $5.0 billion for higher education (the California State University and the University of California); $4.9 billion for transportation, primarily to improve state and local transportation infrastructure; and $2.5 billion for additional public services and systems, including environmental protection, the state court system, and state corrections.

The outcome of the November 2016 national election portends major cuts to federal funding for key public services. For example, Republicans have vowed to repeal the Affordable Care Act (ACA), which would include rolling back the recent expansion of Medicaid coverage to low-income parents and childless adults. This change alone would reduce annual federal funding for Medi-Cal by more than $15 billion. Other services are also at risk, including some that are funded with federal dollars that flow directly to Californians outside of the state budget — such as federal food assistance provided through the state’s CalFresh program and federal Supplemental Security Income (SSI) payments for low-income seniors and people with disabilities. Republicans are likely to succeed in scaling back federal support in a number of policy areas. If so, state policymakers will face difficult choices about how to fill the resulting funding gaps in order to prevent the erosion of public services and systems that promote economic security and opportunity for millions of Californians.