States Increasingly Reliant on Federal Dollars

April 1, 2014

States have received federal money for years, but they have become increasingly reliant on federal funds over the last decade, say Bob Williams, president, and Joe Luppino-Esposito, editor, of State Budget Solutions.

Between 2001 and 2012, 41 states saw an increase in the percentage of their general revenue dollars that came from the federal government.

  • Since 2000, the states have received $5.27 trillion from the federal government.
  • Since 2001, 34 states have seen more than 30 percent of their general revenue come from the federal government.
  • States saw an increase in federal funding in 2009-2011 due to the stimulus bill, but the trend of increased federal dollars has continued.

Moreover, the Census Bureau has changed the way that they get their spending data, resulting in more accurate -- and lower -- determinations of federal funds. Even with this relatively lower number, the amount of federal funding to the states has increased.

  • California received $639 billion over the 2002-2012 period, the highest amount of revenue dollars.
  • However, more than half of Mississippi's general fund revenue came from the federal government in both 2007 and 2010.

This trend is a dangerous one. With federal debt skyrocketing, Congress needs to cut federal spending. With so many states relying on federal funds for more than one third of their revenue, all of these states risk a financial shortfall from federal spending reductions. These states need to act responsibly, examine their individual funding arrangements and develop a plan to reduce their dependency.

Source: Bob Williams and Joe Luppino-Esposito, "Increased Federal Aid to States Is a Long Term Trend," State Budget Solutions, March 26, 2014.

 

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