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Federal Aid: Revising Poverty Statistics Affects Fairness of Allocation Formulas

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Report Type Reports and Testimonies
Report Date May 20, 1994
Report No. HEHS-94-165
Subject
Summary:

Concerns have been raised in Congress that revising counts of people in poverty by adjusting the official poverty line for geographic differences in the cost of living could significantly alter the allocation of federal aid to state and local governments. This report presents GAO's views on how such a revision could affect the fairness of the distribution of federal formula grants if such an adjustment were made. GAO concludes that adjusting poverty counts to reflect differences in the cost of living, if proven feasible, would bolster the federal government's ability to target federal aid to places with the greatest needs. GAO also believes that such a change should not be implemented in federal allocation formulas without first assessing the impact of the change on the fairness with which federal funding is allocated to states and localities. In a formula lacking an indicator of states' own funding capabilities, such a change by itself could increase inequities. In formulas that already adequately reflect states' funding capabilities, such a change would improve fairness.

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