Congress uses census data to allocate funds under various federal grant programs to state governments. Many state-funded grant programs also rely on census data. Because the annual population estimates use the decennial census counts as a base, if a community's population is undercounted in the decennial census, these funds get misallocated for an entire decade.
Eighteen of the largest federal grant programs rely (at least in part) on census data to apportion funds. The federal govenment provided over $255 billion in funding to states for fiscal year 2004 for these 18 programs (the largest being Medicaid).
Although each program's funding formula is complex (and in most cases unique), we can use a simple calculation to get a rough idea of per capita funding nationwide.
The U.S. Census Monitoring Board estimates that Census 2000 undercounted the actual U.S. population by over three million individuals (an undercount rate of 1.18 percent).
Indiana's population was undercounted by an estimated 47,183 people (an undercount rate of 0.77 percent). Almost 40 percent of the undercounted Hoosiers are estimated to be under the age of 18, resulting in an undercount rate for that age group of 1.15 percent.
Certain portions of the state have higher undercount rates. As an example, the estimated undercount for Marion County (the only county for which data were readily available) was 8,437—yielding an undercount rate of 0.97 percent.
According to a report by the U.S. Census Monitoring Board, eight major programs accounted for $145 billion in federal spending (FY 2001), representing 87 percent of the funding allocated using census data:
Thirty-one states and the District of Columbia were estimated to see reduced funding in the neighborhood of $4.1 billion between 2002 and 2012 because of the undercount, while other relatively well-counted states (including Indiana) received slightly higher levels of federal funding as a result. However, it is not a zero-sum game and nationwide, the impact of the undercount on these eight programs was a net loss of over $478 million in funding to states during this time period.
Earlier, we mentioned that Marion County had a higher undercount rate than Indiana as a whole. Assuming the state allocates the federal funds it receives based on population counts, Marion County lost an estimated $13 million in federal funding between 2002 and 2012 because it was undercounted—an amount that was shifted to more well-counted areas of the state.
Of course, federal funding is just part of the picture. Many state agencies distribute funds to local areas based on local population counts: