In addition to the discretionary-ministerial determination, most states distinguish between governmental and proprietary functions. The state also waive sovereign immunity for propriety functions, but do not apply the same limits on recovery and defenses to proprietary functions. This is the major difference between state tort claims acts and the FTCA. These definitions vary greatly amongst the states, with some states holding that almost all state activities as governmental functions and others finding that a substantial group is proprietary.

A governmental function includes services that only the government does, such as restaurant inspection, animal control, health and safety permits and licenses, sanitation, vital statistics, and related functions. A proprietary function is one that a private entity can perform, and is not uniquely for the benefit of the general public. The discretionary function defense applies to discretionary governmental functions, but not for proprietary (or ministerial) functions. There are many grey areas where states reach difference results, such as whether the design of highways is governmental or proprietary.

Perhaps the most important difference in the two classes is that the government has broad latitude to use cost benefit analysis for discretionary actions, but not for proprietary functions. For example, if highway design in governmental, the state might choose to not provide guard rails because their cost outweighs the savings in accident prevention. If this is a proprietary function, the standard will be set by the reasonable highway design, which might include guardrails despite their costs.

Many states do not consider personal medical services, such as prenatal care clinics and general indigent medical care clinics, to be governmental functions and apply ordinary medical malpractice law to them, although some states do include these under governmental immunity. However, if the medical service is related to protecting the public, rather than just helping the individual, it will be governmental. Thus, treatment and testing for tuberculosis would be a governmental function.