How does North Dakota compare on welfare spending?

Every year, the U.S. Census Bureau publishes the Annual Survey of State and Local Government Finances. This is the country’s only source for state and local spending data, allowing a detailed state-by-state comparison. The survey also divides spending into categories, making it possible to analyze which public services states prioritize.

Overall, public welfare — which constitutes numerous means-tested programs, including Medicaid — is the largest expenditure for most states. However, the level at which states prioritize assistance programs over other public services, such as roads and police, differs.

So, how does North Dakota compare?

According to newly released data from the U.S. Census Bureau, while North Dakota spends a slightly lower share of total spending on welfare compared to the U.S average, it ranks above average on per capita spending. Moreover, welfare is the fastest-growing expenditure among the state’s major spending categories.

Welfare as a share of total spending

Nationally, 24 percent of all direct general expenditure — which includes spending on roads, schools, housing, police, among other things — went to public welfare. North Dakota, however, spent 18 percent on welfare. Spending on Elementary and Secondary Education took the largest share — 20 percent.

Figure 1: Share of Direct General Expenditure by Category, U.S. vs North Dakota, 2023

Adjusting for poverty

Adjusting for poverty, North Dakota is an above-average state, ranking 18th highest among the 50 states. Including federal funds, in 2023, North Dakota spent the equivalent of $29,000 on public welfare per person in poverty, also outspending the median state.

Figure 2: Spending on public Welfare per Person in Poverty, 2023

Spending growth: welfare vs. other public services

Between 1990 and 2023, welfare spending grew 272 percent in North Dakota. Public welfare was surpassed by corrections, which grew 350 percent. However, corrections only constitute about 1 percent of all spending. Among the four largest spending categories, public welfare grew the fastest, followed by higher education.

Figure 3: Percent Change in Direct General Expenditure by Category, 1990=100

Why this matters

As the U.S. contends with an aging population and rising medical prices, growing welfare spending is likely to continue putting pressure on state budgets. Therefore, states must continually assess the health and strength of their budgets to ensure long-term sustainability, particularly in light of enacted (and potential) federal spending cuts.

North Dakota, as I previously wrote, is relatively less reliant on federal money than most states. Yet it still faces risks to long-term budget sustainability, with growing welfare spending chief among them.