States That Depend Most and Least on Federal Funding

US map with Ben Franklin printed on it.
esfera / Shutterstock.com

When we talk about the federal budgets, we often focus on the big-ticket items like military spending or whether Social Security will last.

It’s easy to forget that federal funds play a big role in state budgets. Indeed, states — and the people who live in them — receive money from the federal government to help balance state government budgets.

WalletHub recently completed a study looking at which states are most and least dependent on federal funds. It weighed three factors, including each state’s:

  • return on taxes paid to the federal government.
  • share of federal jobs.
  • federal funding as a share of state revenue.

The study ranks states for their residents’ dependence on federal funds and the state government’s dependence. You’ll see those ratings reflected in each state’s total dependency score from WalletHub, shown for each state. Lower scores were given to the less-dependent states.

The following states are the ones most and least dependent on federal funds.

No. 5 most-dependent state: Alabama

Skyline of Birmingham at Railroad Park in Birmingham, Ala.
Sean Pavone / Shutterstock.com

Dependency score: 71.65

Alabama’s residents rely to a fairly large degree on the Supplemental Nutrition Assistance Program (SNAP). About 804,000 Alabama residents, about 17% of the population, relies on benefits from the federal aid program, also known as food stamps. This is above the national average of 13%.

Nearly half (45%) of Alabama recipients are working families, compared with about 44% nationally. A deeper look: Median income in Alabama (after inflation) was just 0.1% above the poverty level in 2017.

No. 4 most-dependent: West Virginia

Dee Browning / Shutterstock.com

Dependency score: 72.34

West Virginia has suffered economically for some time. Some counties are seeing a recovery, but improvements have been largely concentrated in a few limited areas. About 53% of workers are unemployed or have stopped looking for work.

Among the reasons, says John Deskins, director of West Virginia University’s Bureau of Business and Economic Research, are “the nationwide drug epidemic and increased necessity of higher education,” both issues that have hit the West Virginia workforce hard.

No. 3 most-dependent: Kentucky

f11photo / Shutterstock.com

Dependency score: 78.76

About 1 in 7 Kentuckians (15%) qualify for SNAP benefits, compared with about 1 in 8 (13%), nationally.

After the state reinstated work (or volunteer) requirements for SNAP benefits in late 2018, some 10,000 low-income people lost the federal food assistance, according to an Associated Press story, at LOCAL 12, WKRC-TV.

No. 2 most-dependent: Mississippi

Mississippi State University
Logan Kirkland/Mississippi State University / Money Talks News

Dependency score: 81.46

Mississippi’s state government is more reliant on federal funding than any other, WalletHub says. In fact, in 2016, 43.4% of the state’s general revenue was from federal aid.

That’s a big chunk of the state’s budget dependent on federal funds.

No. 1 most-dependent: New Mexico

Santa Fe New Mexico
Jimack / Shutterstock.com

Dependency score: 85.81

About 1 in 5 people (22%) in New Mexico use SNAP benefits. That’s high, compared with about 1 in 8 (13%) nationally.

In addition to this high rate of food insecurity, the state also relies heavily on federal funding for state operations, with about 41.2% of New Mexico’s general revenues flowing from Washington, D.C., according to Tax Foundation.

These facts contribute to making New Mexico the most federally-dependent state.

No. 5 most-independent: Illinois

Chicago, Illinois
f11photo / Shutterstock.com

Dependency score: 19.92

GDP growth in Illinois trails the national growth rate. A Federal Bureau of Economic Analysis report says Illinois’ growth is in the middle of the pack, faster than some neighboring states and slower than others’.

And yet, Illinois doesn’t rely as heavily as many states on the federal government. Federal funds make up a comparatively small 28.8% of the state’s general revenue. One reason may be Illinois’ high effective property tax rate: At 2.03%, it is the second-highest in the U.S., behind only New Jersey. The state’s overall tax burden on citizens is high, too, at 13.18% of income.

No. 4 most-independent: Utah

Salt Lake City, Utah
f11photo / Shutterstock.com

Dependency score: 18.56

Only 1 in 15 (7%) of Utah’s residents need SNAP food assistance. And a relatively small share of residents — 9.7% — live under the poverty line, according to SNAP’s data.

These low numbers mean less reliance on federal dollars to help Utah residents get by. Besides that, the state’s government gets just 25.7% of its general revenues from federal sources, according to the Tax Foundation.

No. 3 most-independent: New Jersey

Newark, New Jersey at night
mandritoiu / Shutterstock.com

Total dependency score: 17.67

New Jersey’s unemployment rate is nearly the lowest in 20 years and salaries there are climbing, according to NJSpotlight, a local news source. Solid indicators like these may help keep the economy growing and help residents avoid the need to turn to federal assistance.

For now, at least, New Jersey doesn’t rely heavily on federal government aid, which makes up just 28.4% of the state’s general revenues.

No. 2 most-independent: Delaware

Downtown Wilmington, Delaware
Jon Bilous / Shutterstock.com

Total dependency score: 14.44

Only 27.2% of Delaware’s general revenues come from the federal government, Tax Foundation data shows.

Also, Delaware has been singled out as one of the best states for people with low incomes due to its relatively low taxes. Delaware’s total tax burden as a percentage of income is 5.24%, compared with 14.59% in Washington state, where the total tax burden is highest as a percentage of residents’ income.

No. 1 most independent: Kansas

fletchjr / Shutterstock.com

Total dependency score: 10.70

Kansas doesn’t use much money from the federal government. Just 1 in 12 (8%) of residents require SNAP benefits. Additionally, only 23% of the state’s general revenues come from the federal government.

U.S. News & World Report ranks Kansas 39th of the 50 states for fiscal stability and puts Kansas at No. 42 for its economy. Kansas get high marks, though, coming in at No. 16, for quality of life in the U.S. News rankings.

Is your state on this list? Share your thoughts about states and the money they get from the federal government in a comment below or at our Facebook page.

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