The Federal Government Spent Record Amounts of Money on Children Last Year. It Probably Won’t Last.

The federal government spent unprecedented amounts of money on children in 2020, but those expenditures are likely to fall back to—or below—their pre-pandemic levels within the next decade when various Covid-19 relief measures expire, according to new analysis from the Urban Institute.

“Federal expenditures per child were significantly higher in 2020 than in 2019 and prior years, reflecting federal relief efforts in response to the pandemic,” says the latest edition of Kids’ Share, released Wednesday by the left-leaning think tank. “By 2024, under laws as of May 2021, federal expenditures are projected to fall back to below the 2020 level, as the temporary spending increases end.”

The annual report, now in its 15th edition, examines the amount of money that the federal government has spent on children from 1960 through 2020, and also predicts spending levels through the next decade “assuming no changes to current law.” The report doesn’t incorporate private spending, recommend specific allocations of public resources or “judge the success” of current expenditures, instead aiming to provide “program-by-program estimates of government support for children and analyses of how these investments have changed over time.”

Tracking that spending is a complex process spread across multiple agencies that includes programs and provisions that most people don’t initially think of as being related to children, said Heather Hahn, a senior fellow at the Urban Institute and one of the report’s six co-authors.

“Education, health care, social services are the things you think of, but actually, tax provisions are the largest category of spending on children,” she said. “We don’t think about taxes as a children’s program, but these are things like the child tax credit, the earned-income tax credit or other tax credits that are either only available to people with children, or you get more of them if you have children. The bottom line is that we have to really rely on many different sources to figure all of that out.”

Even in 2020, which represented an “unprecedented increase” in per-child expenditures, tax programs loomed large, researchers found. The federal government spent $7,810 per child, up from $6,775 in 2019. The vast majority of that spending—$6,264—came in the form of program and tax credit outlays, with the remaining chunk ($1,546) in tax reductions. 

Those expenditures are expected to increase further this year— to nearly $11,000 per child—and then drop off sharply. By 2031, nearly all categories of children’s spending are “expected to fall to near or below pre-pandemic levels,” the report said. 

Children’s health spending—primarily Medicaid and the Children’s Health Insurance Program, or CHIP—is the lone exception. Expenditures on children’s health care are projected to rise by $26 billion, or 19%, over the next decade. But that increase is not an intentional investment, according to the data.

“Expenditures are going up because the cost of health care is going up. It's not because we're deciding to invest more in health care or in children,” Hahn said. “And that’s a long-term trend.”

Every other federal spending category—including K-12 education, nutrition and income security programs, social services and housing—will likely increase this year and then deflate over time, all returning close to pre-pandemic levels by 2024.

States and Localities Spending Less on Children

It’s unclear how per-child spending will fluctuate in the future when incorporating state and local expenditures, the report noted. Excluding federal tax reductions, total public spending per child totaled roughly $15,100 in 2018. Roughly two-thirds, or $9,990, came from state and local dollars. But researchers don’t yet have data for state and local spending from more recent years, Hahn said.

“We know from other things that states’ experiences during the pandemic have varied a lot, so it’s hard to say what will happen,” she said. “We’ll be waiting to see.”

But generally, she noted, state and local governments tend to spend less on children during recessions as they grapple with decreased tax revenue and smaller budgets. For example, state and local expenditures fell from 2009 to 2011 during the Great Recession, but were shored up by increased federal spending. When that safety net expired in 2012, “total public spending per child fell as sharp reductions in federal funding were only partly offset by a small increase in state and local spending,” the report said.

There are some signs that state and local spending followed similar patterns in 2020 “as most states experienced at least temporary budget shortfalls during the pandemic-related recession,” the report said. But the overall effect on children’s expenditures may differ, especially in the wake of “the unprecedented level of total federal spending that boosted household incomes.”

Despite record spending on children in 2020, the total share of the federal budget allocated to children declined to 7.4%, down from roughly 9% in 2019. That’s largely due to increased overall spending in response to Covid-19, the report said—but the percentage is projected to trend further downward over the next decade, hovering around 7.2% in 2031 under current laws.

Some of those declines could be averted by congressional action on certain versions of the Biden administration’s Build Back Better reconciliation plan, which include funding for universal preschool and a one-year extension of the child tax credit. Because of that uncertainty, and the unprecedented nature of federal spending in general over the past two years, the report is meant as a snapshot in time, Hahn said.

“We had been predicting that spending on children would continue to decline, and then we have this very unique year where all federal spending skyrocketed temporarily. It is useful to see what did happen to spending on children during the pandemic,” she said. “Because we do this annually and we have this database and this process in place, we’re able to quickly say that spending on children is in the process of spiking and will then, it seems, continue on its long-term trend of decline.”