More than 80 benefit programs provide cash and noncash aid that is directed primarily to persons with limited income. These benefit programs cost approximately $583 billion in FY2004, a record high. This sum was up $34 billion (6.2%) from the previous peak of FY2003, and it equaled 5% of the gross domestic product (GDP). Federal funds provided 73.2% of the total. Higher medical spending accounted for $26 billion of the net increase in FY2004, and 55 cents out of every dollar spent on persons with limited income went for medical benefits. Federal low-income spending represented 18.6% of the federal budget, with 9% attributed to medical assistance. See Table 1 for an FY2002-FY2004 summary. After adjustment for price inflation, 2004 spending on persons with limited income was up by approximately $21.5 billion (3.8%) from that of 2003, the previous peak. Real spending increases (2004 dollars) were dominated by medical assistance (up $19 billion). Other increases were in food benefits, $3.3 billion; cash aid, $2.4 billion; and housing, $0.6 billion. Spending in real terms dropped in the following areas: education benefits, by $2.3 billion; jobs and training, by $0.9 billion; services, by $0.6 billion; and energy aid by $0.2 billion. Spending for "human capital" programs (those providing education and employment and training activities) accounted for 6.2% of all dollars spent on persons with limited income (compared with 19.2% for cash assistance and 55.3% for medical aid). This report consists of a catalog of 84 need-based programs. For each program, the report provides the funding formula, eligibility requirements, and benefit levels. At the end of the report, Tables 14-21 provide expenditure data (federal and state/local) and recipient data for FY2002-FY2004, program by program. One program is new to this series of reports: the D.C. School Choice Incentive Program. In addition, two programs have been dropped because of the difficulty of obtaining reliable current data: General Assistance (Medical Component) and General Assistance (Nonmedical Component); spending for these programs was only from state and local sources, rather than federal. Most of these programs base eligibility on individual, household, or family income, but some use group or area income tests (see Table 7 ), and a few offer help on the basis of presumed "need." Most provide income "transfers." That is, they transfer income in the form of cash, goods, or services to persons who make no payment and render no service in return. However, in the case of the job and training programs and some educational benefits, recipients must work or study for wages, training allowances, stipends, grants, or loans. Further, the TANF block grant program requires adults to commence work (defined by the state) after a period of enrollment, the Food Stamp program imposes work and training requirements, and public housing programs require recipients to engage in "self-sufficiency" activities or to perform community service. Finally, the Earned Income Tax Credit (EITC) is available only to workers. This report excludes income maintenance programs that are not income-tested, including social insurance and many veterans' benefits, and all but two tax-transfer programs. Thus, it excludes Social Security cash benefits, unemployment compensation, and Medicare. Outlays for the Old-Age, Survivors, and Disability Insurance programs (Social Security cash benefit programs) in FY2004 totaled $502 billion, financed primarily from payroll tax collections. The report also excludes payments, even though financed with general revenues, that may be regarded as "deferred compensation," such as veterans' housing benefits and medical care for veterans with a service-connected disability. The report includes two tax-transfer programs, the EITC for low-income workers with children and the child tax credit. The EITC reduces the taxes of working families with gross income below specified limits and makes direct payments ("refunds") to those whose income is below the tax threshold or whose tax liability is smaller than their credit. Before the 2001 tax law, the child tax credit was refundable only to some taxpayers with three or more children, but it now is refundable (up to certain limits) for those with earnings above $10,000. This report treats the direct payment component of these credits, but not the reduction in tax liability, as a welfare expenditure. Other tax benefits are excluded from the report because they are not refundable (make no direct payments). Further, in most cases they impose no income test for eligibility. Examples of these other tax benefits are the deductibility of mortgage interest and property taxes on owner-occupied homes (equivalent to outlays of $61.4 billion and $18.7 billion, respectively, in 2004). These tax transfers increase families' disposable income by reducing their tax liability, and are known as "tax expenditures." (The standard deduction and personal exemption in the income tax code also decrease families' taxable income.) Total expenditures on cash and noncash programs for low-income persons multiplied many times between 1968 and 2004 ( Table 2 ). Even after allowance for price inflation, spending more than sextupled, rising 557% during the 36 years, a period when the U.S. population rose by an estimated 46%. Measured in constant 2004 dollars, the annual rate of growth in spending over the whole period was 5.4%. However, the growth pattern was uneven. Real spending almost tripled in the first 10 years, declined in some years (1979, 1982, 1996, and 1997), and in the last seven years rose at an annual rate of 3.7%. Total per capita spending for low-income programs grew in real terms (constant FY2004 dollars) from $422 in FY1968 to a peak of $1,986 in FY2004. Figure 1 shows the course of expenditures for income-tested benefits from FY1975-FY2004. The upper line shows total real spending (federal and state-local spending); the bottom line shows state-local spending alone; the space between represents federal spending. Throughout this period federal expenditures accounted for more than 70% of the total. The federal share rose above 76% in 1978-1980, then began a general decline. In the 1995-2004 decade it averaged 71.9%, reaching a peak of 73.7% in FY2003 and dropping slightly to 73.2% in FY2004. Tables 3, 4, and 5 present 1968-2004 spending on low-income programs in constant 2004 dollars, by form of benefit; Table 3 displays federal spending; Table 4 , corresponding state-local data; and Table 5 , total low-income spending amounts. Measured in constant 2004 dollars, federal spending for income-tested benefits climbed from $63 billion in FY1968 to $427 billion in FY2004, an increase of 580%. State-local spending (constant dollars) rose from $26 billion to $156 billion during the same period, an increase of 502%. Total spending on means-tested programs increased from $89 billion to $583 billion in these years, an increase of 557%. Cash aid was the leading form of federal means-tested assistance until 1980, when it was overtaken by medical benefits. Two years later, in 1982, federal spending declined for all forms of aid except subsidized housing, in which case outlays reflected earlier commitments, and education benefits. However, beginning in 1983, real federal spending for low-income programs climbed steadily before declining in FY1996 and FY1997. Federal spending set successive new record highs during FY1998-FY2004. State-local spending rose in all years after 1979, except for 1993, 1996, and 2003. Since 1979, medical spending has accounted for more than 50 cents of every low-income program dollar spent by state-local governments. In 1989, the share climbed to 60%; in 1997 it exceeded 70%, and starting in 2002, spending on medical benefits has topped 80% of all state-local spending on means-tested programs. Medical assistance has accounted for a much smaller—but growing—share of federal expenditures for low-income programs: about 25% until the mid-1980s, above 30% in the 1990s, and an average of 43% from 2000-2003, with an increase to nearly 46% in 2004. As a component of the federal budget, spending on means-tested programs for persons with limited income averaged 13% from 1975-1979, dropped to 12% in the 1980s, and since 1994 has equaled or exceeded 17% each year. In 2001 it rose above 18%, and in 2004 was 18.6%. The earned income tax credit has become the nation's largest program of income-tested cash benefits for families with children. In FY2004, the U.S. Treasury paid out $34 billion in refundable earned income tax credits (chiefly for earners with children) and $9 billion in child tax credits. The total was almost 25% larger than federal SSI payments for the aged, blind, and disabled ($35 billion), and was more than five and a half times as much as cash assistance from federal TANF dollars ($6.5 billion). (TANF expenditures for work activities, child care, and other services exceeded TANF cash aid.) The dramatic change since 1978 in the composition of total spending for income-tested benefits is shown in Figure 2 and in Table 6 . In FY1978, spending for cash relief and medical aid was nearly equal. Each accounted for 29% of total welfare spending covered by this report. Thereafter, spending for medical benefits rapidly overtook cash aid, reaching 50% in FY1999 and topping 55% in 2004.