Most & Least Federally Dependent States

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 second stimulus package passed in December didn’t include any direct assistance to states, the government still faces questions about whether its initial distribution was truly equitable and efficient, and whether any future aid will be as well.

For years, Americans have looked at federal assistance programs with growing scrutiny, and 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

Note: With the exception of “Total Score,” all of the columns in the table above depict the relative rank of that state, where a rank of 1 represents the most dependent for that metric category.

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:

1. Should federal resources be allocated to states according to how much they pay in federal taxes, or should some states subsidize others?
2. Which programs should be a state/local responsibility, and which should be a federal responsibility?
3. What is the fairest way to redistribute federal resources back to the states?
4. 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 2018.

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 2019 and 2020.

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