Fact of the Week: One-Third of State Budgets Comes from Federal Funds


January 15, 2015

States rely heavily on money from the federal government. While taxes make up the majority of state general revenue, federal money makes up roughly 32 percent of that total. In separate reports, the National Priorities Project and the Tax Foundation both used data from the U.S. Census Bureau to come up with these similar findings.  Figures vary by state of course, with Alaska at one end of the spectrum –only 20 percent of its state general revenues coming from the federal government – and Mississippi at the other end, taking in more than 45 percent of its revenue from the government.

federal funds expenditures in the states

How States Spend Federal Dollars. Source: National Association of State Budget Officers, State Expenditure Report, www.nasbo.org

The National Association of State Budget Officers takes a slightly different approach, looking at the sources of money states spend, but arrived at pretty much the same place. They found that federal funds made up roughly 30 percent of state spending overall, again with differences from state to state. According to their latest report, 23 percent of Alaska’s spending comes from federal funds, while 42 percent of Mississippi’s does. They also look at what states spend these fed dollars on, as shown in the graph at the right.

In addition to federal funds that go directly to the states, federal money impacts states’ economies in other ways. NPP’s State Smart lays out, for each state, how much federal money is paid to individuals as direct benefits (things such as SNAP/food stamps, unemployment benefits, Social Security and Medicare benefits, and education assistance like Pell Grants), to vendors who have federal contracts, and to federal employees working in the state as salaries. A related report by the Pew Charitable Trusts found that the feds spent $3.1 trillion in the states during FY 2013.

All of these reports have one thing in common – they show how federal spending makes a big difference to states and the people living within them. With the flurry of activities during states’ busy legislative sessions at the beginning of the year, it’s easy for state advocates to focus their attention locally and away from the federal side of things. But with the federal budget season also upon us, and with federal aid making up such a large part of state resources, it’s critical that we all work to prevent federal cuts that would leave state governments less able to meet their people’s needs.

To make sure we’re all ready for the important work ahead, CHN is hosting a free webinar on Jan. 22 from 1-2:15pm ET. The New Congress and Federal Funding for Needed Services: What You Need to Know will help you understand what’s at risk and what strategies can protect vital programs. You’ll also learn about do-able steps you can take to protect services. I hope you’ll join us to hear from national experts about how and when Congress will take up its new round of critical budget decisions (hint:  it’s soon!) and what you can do about it.

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