Federal Funding in the States Up During Recession

States have been getting more federal dollars over the past decade, especially since the Great Recession began and funds from the American Recovery and Reinvestment Act started flowing.
A new Council of State Governments report finds state spending from federal funding has increased from 26 percent in the 2008 fiscal year to 35 percent in 2010—a huge upswing in a short amount of time. The report, Federal Funding in the States, includes both national and regional analysis.
The Recovery Act, also known as the stimulus, boosted state spending from federal funds significantly, according to the National Association of State Budget Officers. From fiscal years 2000 to 2007, the annual mean percentage of state spending from federal funds was 27 percent. In the 2008 fiscal year, just before stimulus funds started flowing, federal funds represented 26.3 percent of state spending. By the 2009 fiscal year, federal funds accounted for 29.5 percent of total state expenditures. An estimated 34.7 percent of state spending came from federal funds in 2010.

States spent $41.2 billion in federal stimulus funds in the 2009 fiscal year and an estimated $114.2 billion in the 2010 fiscal year. Those funds provided a cushion so states didn’t have to make even more drastic spending cuts, especially in the areas of health care and education. Nationally, federal domestic spending hit $3.3 trillion in the 2010 fiscal year, an increase of 2.4 percent over the previous year and equal to $10,612 per person living in the U.S.

NOTE ON GRAPH: Inflation adjusted in 2010 dollars using the U.S. Bureau of Labor Statistics Consumer Price Index. Per capita calculations are based on American Community Survey estimates for years 2001-09 and Census 2010 data.
Although overall federal domestic spending has increased, the amount each state received per capita varied significantly. In 2010, per capita federal spending ranged from a low of $7,321 in Nevada and $8,367 in Minnesota to a high of $17,762 in Alaska and $17,008 in Virginia. Federal spending per capita in Puerto Rico was $5,668 in 2010.  In total dollars, Wyoming at $6.2 billion and Vermont  at $7.4 billion received the fewest dollars, while Texas at $225.7 billion and California at $338 billion received the most.

Where the Money Goes

Analysis of data from the U.S. Census Bureau’s Consolidated Federal Funds report and CSG’sBook of the States, Medicare, Medicaid and Social Security made up 47.4 percent of the total domestic federal funding, or about $1.6 trillion in 2010. Social Security made up $743.2 billion of that total. The primary categories for federal domestic spending are direct payments for individuals for retirement and disability at 28 percent, other direct payments at 25 percent, expenditures or obligations for grants at 21 percent, procurement contracts at 16 percent, and salaries and wages at 10 percent. 
CSG Resources
Other Resources

Also in this issue: