Ever wonder how dependent your state is on federal dollars?
Well, don’t worry. A recent analysis by MoneyGeek sheds some light on the matter.
Most states in the United States benefit from some federal government funding — but some do so more than others, as MoneyGeek discovered.
MoneyGeek developed a federal dependency score and ranked states accordingly. The score was based on returns on taxes sent to the federal government and the percentage of each state’s revenue provided by the federal government in 2022. These scores were then converted on the basis of 100.
To help understand some factors that might contribute to these scores, MoneyGeek also made note of each state’s majority political affiliation and per capita GDP.
The states that ranked highest in terms of their dependency on federal funding were New Mexico, West Virginia, Mississippi, Alaska, and Kentucky.
The most federally dependent state in the U.S. was New Mexico. The state had a federal dependency score of 100, with the return on each tax dollar being $3.69 and their federal funding as a percentage of state revenue was 32.06%.
Coming in second was West Virginia, with a federal dependency score of 89.5. The return on tax dollars for the state was $3.09 and their federal funding as a percentage of state revenue was 34.07%.
Mississippi rounded off the top three with a federal dependency score of 75.0. The state’s return on tax dollars was $2.60 and their federal funding as a percentage of state revenue was 32.41%.
Fourth place was Alaska, which obtained a federal dependency score of 73.0. The return on tax dollars for the state was $2.41 and their federal funding as a percentage of state revenue was 33.90%.
Finally, ranking fifth was the state of Kentucky, with a federal dependency score of 57.8. The return on tax dollars (dollars received per dollar of federal taxes) for the state was $1.89 and their federal funding as a percentage of state revenue was 32.20%.
On the other end of the spectrum, the states that were found least dependent on federal aid were New Jersey (no.51), Washington (no.50), Illinois (no.49), California (no.48), and Utah (no.47).
Texas came in somewhere around the mid-bottom, ranking 35th on MoneyGeek’s list with a score of 12.6 with a return of $0.83 per dollar.
One of the key findings of MoneyGeek’s analysis was that seven of the 10 states most dependent on federal support were Republican-leaning.
Kathy Fallon, a human services practice area director at Public Consulting Group, suggested that these results may be due to the tax rates in these states.
“A really conservative state might choose to tax itself at a lower rate, which means by default, they can give fewer state-funded services,” explained Fallon, per MoneyGeek.
On the other hand, the economic health of the state may have more to do with the ranking than political leaning.
“If red states pay less in taxes than they receive in benefits, that’s because they are generally poorer and program rules are progressive — not because they are ‘takers’ while blue states are ‘donors’ in any value-laden sense,” Mark Shepard, assistant professor at the Harvard Kennedy School of Government and faculty research fellow at the National Bureau of Economic Research, told MoneyGeek.
MoneyGeek’s analysis showed that overall, the states with higher per capita GDP were less dependent on federal dollars.
