July | August 2017

States More Reliant on Federal Dollars

During and after the recession, states became much more reliant on the federal government to fund programs, primarily due to an influx of money from the American Recovery and Reinvestment Act, while simultaneously experiencing faltering tax collections. The percentage of state revenues coming from the federal government has dropped slightly since hitting a peak in 2010, but as the slow economic recovery continues, the overall trend remains the same—an increasing portion of state revenues and expenditures comes from the federal government.
Federal grants to states in 2011 made up more than a third—34.7 percent—of state government general revenue, down slightly from 35.5 percent in 2010, but up from 30.4 percent in 2009. In 2011, the largest and fastest growing category of direct revenue from the federal government was public welfare, which includes Medicaid. This category alone totaled $332.6 billion or 58 percent of grants to states and grew 5.3 percent from 2010 to 2011, the most recent data available. For comparison, federal education grant spending to states totaled $104.6 billion in 2011 and decreased 0.9 percent over 2010.