Which States Rely the Most on Federal Aid?

Which States Rely the Most on Federal Aid?

Taxes are perhaps the most apparent source of state revenue, as they constitute the vast majority of each state’s general fund budget.

But state governments also receive a notable amount of assistance from the federal government.  In fiscal year (FY) 2016, roughly 33 percent of all state revenues consisted of federal grants-in-aid.

Federal aid is allocated to states for a variety of purposes, primarily to supplement state funding for programs or projects deemed to be of national interest.

States that rely the most on federal aid:             States that rely the least on federal aid:

Mississippi         43.3%                                           Virginia              21.1%

Louisiana           42.7%                                           Hawaii               22.7%

New Mexico        41.2%                                          Kansas              23.0%

Arizona              41.2%                                           North Dakota     23.8%

Kentucky           40.9%                                           Utah                  25.7%

States that rely heavily on federal grants-in-aid tend to have sizeable low income populations and relatively lower tax revenues.

On the other hand, states with relatively lower reliance on federal aid tend to collect more in taxes and have smaller low-income populations, although some exceptions exist.

Notably, although North Dakota and Alaska impose relatively modest taxes on residents, both are resource-rich states that export much of their tax burdens through severance taxes.

SOURCE:  Tax Foundation