John S Kiernan, Managing Editor

Jun 15, 2020

Federal assistance to states has come into the spotlight recently during the coronavirus pandemic, where some states have received far more money per case than others. For example, in the initial $150 billion given to states from the stimulus package, which was allocated by population, New York got less than $24,000 per positive case while Alaska received over $3.3 million. While the government has shelled out around $750 billion total to states during this crisis, it faces questions about whether the distribution has been truly equitable and efficient.

For years, Americans have looked at federal assistance programs with growing scrutiny, and under the current administration, the number of people dependent on government assistance was decreasing prior to the coronavirus crisis. Regardless of overall trends, though, it is clear that some states receive a far higher return on their federal income-tax contributions than others.

In order to find out exactly how big the difference in federal dependence is from state to state, WalletHub compared the 50 states in terms of three key metrics. Read on for our findings, commentary from a panel of experts, and a detailed explanation of our methodology.

Main Findings

Most Federally Dependent States

Rank (1 = Most Dependent) State Total Score ‘State Residents’ Dependency’ Rank ‘State Government’s Dependency’ Rank 1 New Mexico 85.80 1 5 2 Kentucky 78.18 3 7 3 Mississippi 77.02 6 4 4 West Virginia 73.86 5 9 5 Montana 70.78 14 2 6 Alaska 68.61 7 8 7 South Carolina 67.58 4 16 8 Indiana 64.37 8 11 9 Arizona 62.71 13 6 10 Wyoming 62.26 24 1 11 Alabama 58.89 9 14 12 Louisiana 54.89 31 3 13 Maine 52.11 10 21 14 North Dakota 51.63 2 44 15 Tennessee 47.73 22 10 16 Pennsylvania 46.54 17 18 17 Missouri 44.29 26 12 18 Oklahoma 42.17 19 23 19 Maryland 41.82 15 31 20 South Dakota 40.39 23 17 21 Arkansas 39.46 41 13 22 Vermont 39.42 20 30 23 Georgia 35.18 35 20 24 New York 35.04 46 15 25 Oregon 34.89 27 27 26 Idaho 34.33 21 35 27 Michigan 34.06 29 25 28 North Carolina 33.89 32 24 29 Rhode Island 33.79 39 22 30 New Hampshire 32.42 34 26 31 Nevada 31.70 36 29 32 Ohio 31.32 45 19 33 Wisconsin 31.24 16 43 34 Texas 29.90 42 28 35 Florida 29.89 28 33 36 Connecticut 28.04 18 42 37 Colorado 27.64 40 32 38 Hawaii 25.49 11 50 39 Nebraska 25.32 43 34 40 Virginia 24.99 12 49 41 California 24.42 44 36 42 Washington 24.32 37 37 43 Minnesota 21.99 25 45 44 Massachusetts 19.16 47 38 45 Illinois 18.53 48 39 46 Utah 17.83 33 46 47 Iowa 16.53 30 47 48 Delaware 14.91 50 40 49 New Jersey 14.52 49 41 50 Kansas 12.73 38 48





Red vs. Blue States

Correlation Analysis

Ask The Experts

For further clarity on the problems contributing to federal-funding disparities, we talked to a panel of economics and public policy experts. Click on the experts’ profiles to read their bios and responses to the following key questions:

Should federal resources be allocated to states according to how much they pay in federal taxes or should some states subsidize others? What programs should be a state/local responsibility and what should be a federal responsibility? What is the fairest way to redistribute federal resources back to the states? What more can the current administration do to help reduce the impact of revenue shortfall in state budgets during this economic downturn?

Methodology

In order to determine the most and least federally dependent states, WalletHub compared the 50 states across two key dimensions, “State Residents’ Dependency” and “State Government’s Dependency.”

We evaluated those dimensions using three relevant metrics, which are listed below with their corresponding weights. Each metric was graded on a 100-point scale, with a score of 100 representing the highest level of federal dependency.

We then determined each state’s weighted average across all metrics to calculate its overall score and used the resulting scores to rank-order the states.

State Residents’ Dependency – Total Points: 50

Return on Taxes Paid to the Federal Government: Triple Weight (~37.50 Points)

Note: This metric was calculated by dividing federal funding in U.S. dollars by IRS collections in U.S. dollars.

Share of Federal Jobs: Full Weight (~12.50 Points)

State Government’s Dependency – Total Points: 50

Federal Funding as a Share of State Revenue: Full Weight (~50.00 Points)

Note: This metric reflects the proportion of state revenue that comes from the federal government in the form of intergovernmental aid in 2017.

The following metrics were included in the infographic above for context only. They represent subsets of federal funding and are reflected in the first two metrics.

“Federal Contracts” divided by “IRS Collections”

“Grants” divided by “IRS Collections”

“Other Financial Assistance” divided by “IRS Collections”

Sources: Data used to create this ranking were collected from the Internal Revenue Service, U.S. Census Bureau, USAspending.gov and Bureau of Labor Statistics. Unless noted otherwise, the statistics underlying this report are from 2018 and 2019.

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