A Project of State Budget Solutions

States receiving money from the federal government

is unsurprising, but what is shocking
is the states increased reliance on
money from Washington, D.C. in the
past decade. This analysis of the
latest data from the U.S. Census
Bureau shows that, between Fiscal
Years (FY) 2001 and 2012, the
percentage of general revenue
dollars coming from the federal
government significantly increased
in 41 states.

Growing Federal Dependency

In all, states received $5.27 trillion
from the federal government since
the start of the 21st century. Since
2001, 34 states saw over 30 percent
of all their collected general revenue
come from the federal government.

The stimulus bill created a federal
funding spike from 2009-2011, but
the long-term trend of increased
dependency on the federal
government did not subside
following the recession. This overall
increase comes despite a change in
the data shared by the Census
Bureau that results in a lower,
though more accurate,
determination of how much federal
revenue is given to states each year.

No. 1 May 10, 2014
Increased Federal Aid to States is a Long Term Trend
By Bob Williams and Joe Luppino-Esposito

Table 1
Percent of General Revenue from Federal Government by State
Fiscal Year 2012
Rank State Percent Rank State Percent
11 Alabama 36.5% 6 Montana 38.5%
50 Alaska 20.0% 22 Nebraska 34.3%
8 Arizona 38.0% 44 Nevada 25.5%
21 Arkansas 34.5% 34 New Hampshire 29.0%
40 California 27.2% 42 New Jersey 26.3%
35 Colorado 28.9% 9 New Mexico 36.6%
46 Connecticut 23.6% 28 New York 32.8%
45 Delaware 24.5% 26 North Carolina 33.2%
30 Florida 32.1% 49 North Dakota 20.5%
7 Georgia 38.1% 17 Ohio 34.9%
47 Hawaii 23.6% 15 Oklahoma 35.5%
16 Idaho 34.9% 12 Oregon 36.1%
43 Illinois 25.7% 32 Pennsylvania 30.6%
27 Indiana 33.0% 23 Rhode Island 34.0%
25 Iowa 33.3% 29 South Carolina 32.5%
41 Kansas 27.0% 4 South Dakota 40.9%
14 Kentucky 35.7% 3 Tennessee 41.0%
2 Louisiana 44.0% 20 Texas 34.5%
10 Maine 36.5% 31 Utah 31.6%
33 Maryland 30.3% 18 Vermont 34.8%
36 Massachusetts 28.8% 48 Virginia 23.5%
24 Michigan 33.7% 37 Washington 28.6%
39 Minnesota 28.1% 19 West Virginia 34.7%
1 Mississippi 45.4% 38 Wisconsin 28.2%
5 Missouri 39.4% 13 Wyoming 36.0%
Source: U.S. Department of Commerce: Census Bureau and Federalism in Action
(State Budget Solutions)


Page 2
No. 1 May 10, 2014
A states traditional political affiliation does not
appear to impact response to the promise of funds
from D.C. Both typically red and blue states have
increased levels of support that are higher than a
decade ago.

California accepted the most federal revenue over
the period--$639 billion, though the state also had
the highest total general
revenue. In terms of
percent of general fund
revenue, Mississippi was
the only state to have
more than half of its
revenue come from the
federal government. The
state surpassed the 50
percent mark in both
2007 and 2010.

Table 1 shows the extent
of dependency by state
in FY 2012 (the most
recent year of available
data). The top three
states include:
Mississippi (45.5
percent), Louisiana (44
percent), and Tennessee
(42 percent). The bottom
three states include:
Alaska (20 percent),
North Dakota (20.5
percent), and Virginia (23.5 percent).

Solutions to Reduce Federal Dependency

Growing reliance on federal funding in state budgets
is a dangerous trend. It threatens the financial
stability of all 50 states, as well as the federal
government. As federal debt skyrockets, Congress
must look for ways to reduce spending.

In the many states that count on the federal
government for over one-third of their general
revenue, every congressional spending reduction
proposal puts the state at risk of a serious financial
shortfall.
States must recognize that this funding arrangement
also harms fiscal federalism. Federal funding usually
comes with strings
attached, and that means
less chance for local
control. When states
cannot stand firmly on
their own financial
footing, they will lose the
ability to make the best,
locally-based,
independent decisions
for their residents.

States need to act as
independent and
sovereign entities, which
they are under the U.S.
Constitution. In order to
prepare for the next
federal budget crisis,
officials need to identify
all the federal funds
coming into their state
and the cost of the
mandates attached to
the funding.

States need to take a risk assessment similar to that
done by the state of Utah, and each state legislature
can and should develop a prioritized plan of action to
act responsibly for their constituents.




Growing Federal Dependency

In all, states received $5.27
trillion from the federal
government since the start of
the 21st century. Since 2001,
34 states saw over 30 percent
of all their collected general
revenue come from the federal
government.
U.S. Census Bureau

Page 3
No. 1 May 10, 2014
Methodology

For years 2001 to 2011, based on the Annual Survey
of State Government Finances from the U.S. Census
Bureau, State Budget Solutions calculated federal aid
to a state by dividing Intergovernmental Revenue
into General Revenue. General Revenue includes
all tax revenue but excludes utility revenue, liquor
store revenue, and investment income from state
pension funds.
1


For 2012 figures, the Census Bureau included more
details regarding Intergovernmental Revenue,

1
http://www.census.gov/govs/state/

showing the split between federal and local revenue.
In most states, local revenue comprises less than 5
percent of the Intergovernmental Revenue. The
exceptions are: California (5.71); Nevada (7.29); New
Hampshire (9.53); New York (13.16); South Carolina
(5.93); Virginia (5.17); and Wyoming (9.31).

This attributes to the large swing in their federal
revenue levels from 2011 to 2012. The change can
also be seen in the 2001 versus 2012 comparison,
which shows a decreased percentage of federal
support in New Hampshire, New York, South
Carolina, and Wyoming.


Bob Williams is the President at State Budget Solutions. He may be reached at bobwilliams@statebudgetsolutions.org.
Joe Luppino-Esposito is author, editor, and counsel at State Budget Solutions. He may be reached at joe@statebudgetsolutions.org.

State Budget Solutions (SBS) is a non-partisan, non-profit, national public policy organization with the mission to change the way state
and local governments do business.

SBS produces studies, articles, reports and compelling narrative about the critical issues that affect state and local budgets, including
pension reform, health care and education. SBS engages state leaders, journalists and others on positive reforms aimed at improving the
functionality of government.

SBS works to make its vision of empowered citizens a reality but promoting policies that provide workable solutions for local people to
make local decisions through the project Federalism In Action.

Contributions to State Budget Solutions are tax deductible to the extent allowed by law.

Director of Communications, Brian Jodice, can be reached at brian@phillipstutts.com.

2014 State Budget Solutions. Material from this document may be copied and distributed with proper citation.

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