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Fact Sheet

Is California a Donor State? Here’s How Much It Pays to the Feds vs. What It Gets Back

California Pays More in Federal Taxes Than It Receives in Federal Funds

March 2025 | By Scott Graves and Nishi Nair

Capitol Building and Blue Sky

California residents and businesses contribute $83 billion more than the state receives in federal spending. Why is there a gap?

On the spending side:

  • States with higher poverty rates, a large population of older adults, major federal facilities (such as military bases), a large volume of federal contracts, and/or a substantial federal employee presence are likely to receive a disproportionate share of federal funds. These factors contribute to relatively higher federal spending in many other states (on a per capita basis) compared to California.

On the revenue side:

  • States, like California, with more wealthy residents and high per capita incomes account for a disproportionate share of federal revenue due to the progressive federal tax system. In fact, California ranks in the top 10 among all states in terms of federal taxes paid on a per capita basis.

These points help to illustrate why the $83 billion gap exists in California. However, with devastating funding cuts on the policy agenda in Washington, DC, it’s worth taking a closer look at where California’s tax contributions could be going.

If Congress adopts the enormous funding reductions proposed, the gap between what Californians pay in federal taxes and what California receives in federal spending would likely grow larger.

This is because Californians would continue to disproportionately contribute to federal revenues — even with an extension of expiring tax cuts — whereas our state would get back even less of those dollars after deep cuts to health care, food assistance, and other vital services took effect (to help pay for the cost of the tax cuts).

As a result, state policymakers would be forced to cut support for Medi-Cal and other essential state programs, since a deep federal funding hole would be nearly impossible to backfill with state dollars.

California contributes much to the nation thanks to the creativity, vitality, and hard work of the nearly 40 million people of diverse backgrounds who call the Golden State their home.

Federal tax dollars — including those paid by Californians — should be used to strengthen vital public services and help all people make ends meet, rather than helping corporations and the wealthy avoid paying their fair share of federal taxes.

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Over the last sixteen years, California’s early care and education (ECE) system has gone through numerous milestones that have been reflected in state funding. California’s families and child care and preschool providers depend on this funding for access to affordable care and wages to sustain their businesses. Looking back at funding trends over time reveals both key wins and setbacks for the ECE field as well as opportunities for state leaders to continue investing in ECE programs.

Key policy and historical moments underscore how the child care system in California has expanded, contracted, and evolved amid changes in funding levels, as reflected in the following themes.

  • The Great Recession resulted in severe cuts to the ECE system. California, like the rest of the nation, experienced an economic downturn at the onset of the Great Recession in 2007. In the aftermath of the economic downturn, state leaders cut annual funding by 30%, eliminating 110,000 child care slots, lowering family income eligibility limits, and cutting payment rates for certain providers.
  • Subsidized slots and provider rates were incrementally restored over time. Beginning in 2013, the cuts made during and after the Great Recession were slowly re-established. Over the next decade, subsidized child care slots were funded at pre-Great Recession levels, provider rates increased, income and income eligibility limits increased, and family fees were reduced. These changes addressed many of the tremendous setbacks prompted by the Great Recession. Child Care Providers United (CCPU) formed in 2019 and supported several improvements for ECE providers, including increased rates, a health care fund, and a retirement fund.
  • The COVID-19 pandemic amplified the importance of child care and resulted in an influx of one-time federal funding. The COVID-19 public health crisis put child care in the national spotlight. Additionally, the federal CARES Act, Coronavirus Response and Relief Supplemental Appropriations Act, and American Rescue Plan Act brought over $5 billion in one-time child care funding to California. These one-time funds were used to boost provider rates, expand subsidized child care slots, and generally support the early care and education sector. 
  • As federal relief dollars have sunsetted, the state has had to backfill those resources in order to sustain progress. The majority of federal relief dollars expired on September 30, 2023, prompting what many deemed the “child care funding cliff.” California managed to avoid the detrimental effects of several aspects of this “cliff” through using state dollars to reform family fees, provide temporary increases to reimbursement rates, and commit to funding 200,000 new subsidized child care slots.

California’s ECE system weathered severe cuts as a result of the Great Recession. Over the past sixteen years — in response to tireless advocacy — state leaders have restored funding to this system, providing additional access for families and more support for providers. In the current fiscal year, dollars for subsidized child care and preschool slots are 50% higher than prior to the Great Recession.

This chart highlights additional key points:

  • Increases in funding on subsidized child care were bolstered by one-time federal pandemic relief dollars. The spike in funding in FY 2021-22 was largely due to pandemic-related support provided by the federal government (as highlighted in the timeline). The state received over $5 billion in one-time federal dollars to support child care during the health crisis. 
  • Recent spending on subsidized child care slots reflects the administration’s commitment to 200,000 new slots by 2027. In 2021-22, the governor committed to adding approximately 200,000 new child care slots by 2026-27. As of 2023-24, approximately 146,000 new slots were funded. Expansion was paused in 2023-24 and the state is still in the process of rolling out all intended new slots.
  • Increases in spending were not even across all ECE programs. Spending for the California State Preschool Program (CSPP) experienced a significant increase due to state leaders’ focus on California preschool programs. This resulted in spending levels higher than the Alternative Payment Program, CalWORKs programs, and General Child Care Program.

While the ECE system in California has experienced an increase in funding, more is needed to fulfill the administration’s intention to foster equitable learning for all children. Total funding for the state’s subsidized child care and development system is at $7.2 billion in the 2024-25 fiscal year. Yet, even with increased funding, resources still fall far short of the billions in additional support necessary to provide fair and just wages to providers and to increase access to ECE programs for families with low and moderate incomes in California.

Kristin Schumacher, a former analyst at the California Budget & Policy Center, now contributes to the organization as a consultant on various research projects.

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Child care and development programs administered by the California Department of Social Services are critical for supporting California’s families with affording child care that meets their needs. Funding for child care programs has increased since the Great Recession. Given this increase, a greater proportion of children eligible for subsidized child care are being served. In 2023,14% of eligible children were enrolled in subsidized child care programs, up from 11% in 2022.

Although state investments in child care have increased enrollment in subsidized programs, the data in this chart highlights a persistent gap between supply and demand. As a result, many families still struggle to find the care they need — underscoring the urgency for state leaders to continue working to expand child care access.

  • Only one in seven children eligible for subsidized care receive services. The gap between the number of children eligible for subsidized care and the number enrolled remains far too large. Given the high cost of child care, this gap means that thousands of families unable to access affordable care struggle even more to make ends meet. 
  • The lack of supply disproportionately impacts families of color. Namely, 55% of Black children and 48% of Latinx children in California are eligible for subsidized child care. Therefore, when there is an inadequate supply of subsidized child care, California’s families of color are disproportionately impacted. 
  • The demand for subsidized child care spans age groups. Namely, only ten percent of school-age children (ages 6-12) eligible for subsidized child care are enrolled. And, only 19 percent of eligible infants, toddlers, and preschool-age children are enrolled. While enrollment varies across age groups, the tremendous need for more subsidized child care slots spans ages zero to twelve.

Throughout the next several years, the administration has committed to adding approximately 77,000 more slots to fulfill his commitment of 200,000 new slots by 2027-28. However, 77,000 is insufficient for addressing the demand for subsidized child care in California, leaving families in impossible situations. Additional state and federal dollars will be necessary to fully meet the child care needs of families with low incomes.

Kristin Schumacher, a former analyst at the California Budget & Policy Center, now contributes to the organization as a consultant on various research projects.

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Federal funds have long supported vital public services in California — from health care and food assistance to child care and higher education. These services are now in jeopardy due to threatened federal budget cuts and policy rollbacks, putting the health and well-being of millions of Californians at risk.

President Trump and congressional Republicans are seeking deep cuts to federal funding to help offset the cost of tax cuts for the wealthy and corporations. The Trump administration has already tried to cut spending through its unconstitutional funding freeze, which faces legal challenges. Additional spending cuts are being planned in the Republican-controlled Congress for adoption as soon as this spring.

As highlighted in the table below, federal funding reductions could target a broad range of public services and systems, with substantial human and financial impacts at the state and local levels. The funding cuts under consideration would:

  • Destabilize California’s state budget. Federal funds make up over one-third of the state budget — totaling $170 billion under current state estimates. Most of these federal dollars support Medi-Cal (California’s Medicaid program), which provides health coverage to more than 14 million Californians. Republican proposals to slash support for Medicaid could reduce annual federal funding for California by $10-$20 billion or more. Cuts of this magnitude would create a massive budget hole that would force state leaders to make painful spending cuts — cuts that would jeopardize Californians’ access to health care through Medi-Cal as well as threaten other state services and systems.
  • Devastate vital services that help vulnerable Californians make ends meet. In addition to the Medicaid program, federal policymakers could target SNAP food assistance (CalFresh in California), cash assistance for older adults and people with disabilities (SSI), housing supports, child care, and other safety net programs that together support millions of Californians. This includes immigrant communities, Californians with disabilities, low-income families with young children, older adults living on fixed incomes, and many more.
  • Undermine K-12 schools and higher education. Public education could face cuts to federal grant programs and/or a shift of federal funds to private schools. The Trump administration has already announced billions of dollars in cuts to research institutions across the country, and higher education “remains particularly vulnerable to the consequences” of the federal funding freeze.
  • Erode critical funding for California’s local jurisdictions. Counties, cities, and special districts rely on federal funding to support the services that they deliver to their residents. Counties, for example, operate health and safety net programs on behalf of the state, with federal funding making up a large share of the funds that counties receive for this purpose. County officials are particularly concerned about Trump’s unconstitutional funding freeze, which they have called “an evolving situation with potentially significant impacts to funding that counties utilize to serve communities.”

One thing is clear: These Republican-proposed cuts would harm millions of Californians, all to bankroll tax cuts for corporations and the wealthy, who are already thriving.

Erik Saucedo contributed to this publication.

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Access to affordable health care, housing, and nutritious food is necessary for all Californians to thrive. But Republican federal budget proposals would pave the way for deep and harmful cuts that would take health coverage, nutrition assistance, and other essentials away from millions of Californians who are already struggling to make ends meet in the face of persistently high inflation and the high cost of living. These cuts would increase poverty and hardship, widen race and ethnic inequities, and make it harder for workers to maintain their jobs in exchange for funding huge tax giveaways for the wealthy. 

This fact sheet shows how many residents in California’s 41st Congressional District, represented by Representative Ken Calvert, benefit from vital programs at risk of being cut. The data illustrate the potentially wide-reaching impact cuts could have in the community.

Health Care

Medi-Cal saves lives. It’s a lifeline that provides free or low-cost health coverage for nearly 15 million Californians — over one-third of the state’s population — including children, pregnant individuals, seniors, and people with disabilities. Cutting Medi-Cal funding would mean taking critical care away from residents in California’s 41st Congressional District who need it the most. Without access to health coverage, Californians will face impossible choices that put their health and economic security at risk while also driving up long-term costs for the state.

Nutrition

CalFresh nutrition assistance helps over 5 million Californians each month, including workers with low-paying jobs, buy the food they need to support their households. It brings billions of federal dollars into the state each year that Californians spend in their communities helping to boost local businesses and jobs. In early 2023, CalFresh kept 1.1 million state residents out of poverty, reducing California’s poverty rate by 3 percentage points, according to the Public Policy Institute of California. Cutting CalFresh funding would increase poverty and hunger, making it harder for residents in California’s 41st Congressional District to maintain their jobs, and hurting local businesses as families spend less on groceries. Cuts could also reduce students’ access to free meals at school, putting additional pressure on family budgets.

Income

Income supports like CalWORKs and SSI help Californians with very low incomes, including people who are blind and individuals with disabilities, pay the rent and buy essentials for their families, like diapers and school supplies. These and other safety net supports lifted 3.2 million Californians out of poverty in early 2023, according to the Public Policy Institute of California. Cutting vital income supports would increase poverty and hardship among residents of CA-41, including low-income families with children, seniors, and disabled children and adults. Cuts would also reduce the spending power of residents in California’s 41st Congressional District hurting local businesses and the local economy.

Housing and Homelessness

Housing is core to dignity, health, and economic stability. Yet, 60% of renters in CA-41 face unaffordable housing costs — the primary driver of housing insecurity and homelessness. In 2023 alone, 4,050 Californians experiencing homelessness engaged with service providers in CA-41. Key programs like the Continuum of Care Program are vital regional initiatives working to end and prevent homelessness in every congressional district. Housing Choice Vouchers — though significantly oversubscribed — help ensure residents can secure, afford, and maintain stable housing. Cutting these programs would mean the families, children, individuals, and seniors who rely on these essential supports would not be able to stay in their homes, increasing the risk of homelessness for many Californians.

Refundable Income Tax Credits

Credits like the Earned Income Tax Credit (EITC) and Child Tax Credit (CTC) are proven tools for improving economic security among Californians with low and moderate incomes, and they’ve been linked to long-term benefits for children, including better health and school achievement. Cutting these credits would take away income that families in CA-41 count on to make ends meet, reducing their spending power and hurting local businesses and the economy.

District Context

Deep cuts to health coverage, nutrition assistance, and other essential supports would harm residents throughout CA-41, making it harder for families and individuals to afford health care and food and increasing poverty and hardship. Instead of making deep cuts to vital services to pay for tax cuts for the wealthy, Congress should instead pass a budget that broadens opportunity, cuts costs for families, and invests in people so that residents in California’s 41st Congressional District can thrive in their communities.

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Access to affordable health care, housing, and nutritious food is necessary for all Californians to thrive. But Republican federal budget proposals would pave the way for deep and harmful cuts that would take health coverage, nutrition assistance, and other essentials away from millions of Californians who are already struggling to make ends meet in the face of persistently high inflation and the high cost of living. These cuts would increase poverty and hardship, widen race and ethnic inequities, and make it harder for workers to maintain their jobs in exchange for funding huge tax giveaways for the wealthy. 

This fact sheet shows how many residents in California’s 22nd Congressional District, represented by Representative David Valadao, benefit from vital programs at risk of being cut. The data illustrate the potentially wide-reaching impact cuts could have in the community.

Health Care

Medi-Cal saves lives. It’s a lifeline that provides free or low-cost health coverage for nearly 15 million Californians — over one-third of the state’s population — including children, pregnant individuals, seniors, and people with disabilities. Cutting Medi-Cal funding would mean taking critical care away from residents in California’s 22nd Congressional District who need it the most. Without access to health coverage, Californians will face impossible choices that put their health and economic security at risk while also driving up long-term costs for the state.

Nutrition

CalFresh nutrition assistance helps over 5 million Californians each month, including workers with low-paying jobs, buy the food they need to support their households. It brings billions of federal dollars into the state each year that Californians spend in their communities helping to boost local businesses and jobs. In early 2023, CalFresh kept 1.1 million state residents out of poverty, reducing California’s poverty rate by 3 percentage points, according to the Public Policy Institute of California. Cutting CalFresh funding would increase poverty and hunger, making it harder for residents in California’s 22nd Congressional District to maintain their jobs, and hurting local businesses as families spend less on groceries. Cuts could also reduce students’ access to free meals at school, putting additional pressure on family budgets.

Income

Income supports like CalWORKs and SSI help Californians with very low incomes, including people who are blind and individuals with disabilities, pay the rent and buy essentials for their families, like diapers and school supplies. These and other safety net supports lifted 3.2 million Californians out of poverty in early 2023, according to the Public Policy Institute of California. Cutting vital income supports would increase poverty and hardship among residents of CA-22, including low-income families with children, seniors, and disabled children and adults. Cuts would also reduce the spending power of residents in California’s 22nd Congressional District hurting local businesses and the local economy.

Housing & Homelessness

Housing is core to dignity, health, and economic stability. Yet, 56% of renters in CA-22 face unaffordable housing costs — the primary driver of housing insecurity and homelessness. In 2023 alone, 6,611 Californians experiencing homelessness engaged with service providers in CA-22. Key programs like the Continuum of Care Program are vital regional initiatives working to end and prevent homelessness in every congressional district. Housing Choice Vouchers — though significantly oversubscribed — help ensure residents can secure, afford, and maintain stable housing. Cutting these programs would mean the families, children, individuals, and seniors who rely on these essential supports would not be able to stay in their homes, increasing the risk of homelessness for many Californians.

Refundable Income Tax Credits

Credits like the Earned Income Tax Credit (EITC) and Child Tax Credit (CTC) are proven tools for improving economic security among Californians with low and moderate incomes, and they’ve been linked to long-term benefits for children, including better health and school achievement. Cutting these credits would take away income that families in CA-22 count on to make ends meet, reducing their spending power and hurting local businesses and the economy.

District Context

Deep cuts to health coverage, nutrition assistance, and other essential supports would harm residents throughout CA-22, making it harder for families and individuals to afford health care and food and increasing poverty and hardship. Instead of making deep cuts to vital services to pay for tax cuts for the wealthy, Congress should instead pass a budget that broadens opportunity, cuts costs for families, and invests in people so that residents in California’s 22nd Congressional District can thrive in their communities.

Federal Policy

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Access to affordable health care, housing, and nutritious food is necessary for all Californians to thrive. But Republican federal budget proposals would pave the way for deep and harmful cuts that would take health coverage, nutrition assistance, and other essentials away from millions of Californians who are already struggling to make ends meet in the face of persistently high inflation and the high cost of living. These cuts would increase poverty and hardship, widen race and ethnic inequities, and make it harder for workers to maintain their jobs in exchange for funding huge tax giveaways for the wealthy.

This fact sheet shows how many residents in California’s 40th Congressional District, represented by Representative Young Kim, benefit from vital programs at risk of being cut. The data illustrate the potentially wide-reaching impact cuts could have in the community.

Health Care

Medi-Cal saves lives. It’s a lifeline that provides free or low-cost health coverage for nearly 15 million Californians — over one-third of the state’s population — including children, pregnant individuals, seniors, and people with disabilities. Cutting Medi-Cal funding would mean taking critical care away from residents in California’s 40th Congressional District who need it the most. Without access to health coverage, Californians will face impossible choices that put their health and economic security at risk while also driving up long-term costs for the state.

Nutrition

CalFresh nutrition assistance helps over 5 million Californians each month, including workers with low-paying jobs, buy the food they need to support their households. It brings billions of federal dollars into the state each year that Californians spend in their communities helping to boost local businesses and jobs. In early 2023, CalFresh kept 1.1 million state residents out of poverty, reducing California’s poverty rate by 3 percentage points, according to the Public Policy Institute of California. Cutting CalFresh funding would increase poverty and hunger, making it harder for residents in California’s 40th Congressional District to maintain their jobs, and hurting local businesses as families spend less on groceries. Cuts could also reduce students’ access to free meals at school, putting additional pressure on family budgets.

Income

Income supports like CalWORKs and SSI help Californians with very low incomes, including people who are blind and individuals with disabilities, pay the rent and buy essentials for their families, like diapers and school supplies. These and other safety net supports lifted 3.2 million Californians out of poverty in early 2023, according to the Public Policy Institute of California. Cutting vital income supports would increase poverty and hardship among residents of CA-40, including low-income families with children, seniors, and disabled children and adults. Cuts would also reduce the spending power of residents in California’s 40th Congressional District hurting local businesses and the local economy.

Housing & Homelessness

Housing is core to dignity, health, and economic stability. Yet, 61% of renters in CA-40 face unaffordable housing costs — the primary driver of housing insecurity and homelessness. In 2023 alone, 5,082 Californians experiencing homelessness engaged with service providers in CA-40. Key programs like the Continuum of Care Program are vital regional initiatives working to end and prevent homelessness in every congressional district. Housing Choice Vouchers — though significantly oversubscribed — help ensure residents can secure, afford, and maintain stable housing. Cutting these programs would mean the families, children, individuals, and seniors who rely on these essential supports would not be able to stay in their homes, increasing the risk of homelessness for many Californians.

Refundable Income Tax Credits

Credits like the Earned Income Tax Credit (EITC) and Child Tax Credit (CTC) are proven tools for improving economic security among Californians with low and moderate incomes, and they’ve been linked to long-term benefits for children, including better health and school achievement. Cutting these credits would take away income that families in CA-40 count on to make ends meet, reducing their spending power and hurting local businesses and the economy.

District Context

Deep cuts to health coverage, nutrition assistance, and other essential supports would harm residents throughout CA-40, making it harder for families and individuals to afford health care and food and increasing poverty and hardship. Instead of making deep cuts to vital services to pay for tax cuts for the wealthy, Congress should instead pass a budget that broadens opportunity, cuts costs for families, and invests in people so that residents in California’s 40th Congressional District can thrive in their communities.

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Every Californian deserves the dignity of a safe, affordable home — an attainable reality in a state as prosperous and resourceful as California. Yet state homelessness and affordable housing investments are approaching critical funding cliffs, with deeper cuts expected in 2025 if one-time allocations are discontinued and federal dollars face cuts under the Trump administration. Ensuring vital housing efforts continue will require sustained funding and new revenue to protect and uplift Californians and communities statewide.  

Noteable state investments in California’s homelessness response and affordable housing production began in 2019. Over the past six years, the combination of flexible federal dollars during the COVID-19 pandemic, strong state revenues, and a growing urgency to address housing costs led to unprecedented state investments in affordable housing and other homelessness solutions — however, continuing this progress hinges on ongoing funding.

Core State Investments to Solve Homelessness Are Temporary

California homelessness-related spending reached a high of $6.8 billion in 2022-23, fueled by the surge in state revenue during the pandemic and flexible federal dollars. However, 2024-25 spending dropped to $2.5 billion, nearly half of which is not guaranteed in the next budget cycle. Although these investments have not fully met the scale needed to end homelessness, they have helped more Californians experiencing homelessness to access stable housing than ever before. These dollars, while designed as temporary, are also now core to California’s homelessness response systems statewide, making the potential loss of funding a significant threat to ongoing progress.

State Affordable Housing Investments Remain Low

Meaningful investments in affordable housing, particularly for individuals and families with the lowest incomes, can help solve the ongoing struggle of more Californians falling into homelessness and facing housing insecurity faster than they can be stably housed. Yet, despite the critical need, the 2024 Budget Act cut over $1 billion for various housing programs, while continuing some modest one-time augmentations. 

Despite the state's unprecedented recent investments in affordable housing, state General Fund dollars comprised less than 20% of funding that supported affordable housing and homeownership attainment between 2019 and 2023. The majority of non-General Fund dollars for affordable housing primarily reflects federal funds and private bonds that are likely threatened with the incoming Trump administration. Potential cuts to federal funding for affordable housing underscore the need for state leaders to amplify and continue efforts, particularly given that all of these investments are still a small share of the sustained funding needed to solve California’s housing shortage.

As California faces projected budget shortfalls and potential federal funding cuts to vital housing and safety net programs under the Trump administration, it’s more urgent than ever to sustain the programs that are building affordable housing and keeping Californians housed. Without robust new revenue streams and continuous funding, these successful efforts face dire cuts that will have devastating consequences for Californians who rely on them and communities across the state.

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