Taxes are perhaps the most apparent source of state revenue, as they constitute the vast majority of each state’s general fund budget. But state governments also receive a notable amount of assistance from the federal government. In fiscal year (FY) 2016, roughly 33 percent of all state revenues consisted of federal grants-in-aid.
Federal aid is allocated to states for a variety of purposes, primarily to supplement state funding for programs or projects deemed to be of national interest.
States that rely the most on federal aid:
- New Mexico
- North Dakota
States that rely heavily on federal grants-in-aid tend to have sizable low-income populations and relatively lower tax revenues.
On the other hand, states with relatively lower reliance on federal aid tend to collect more in taxes and have smaller low-income populations, although some exceptions exist.
Notably, although North Dakota and Alaska impose relatively modest taxes on residents, both are resource-rich states that export much of their tax burdens through severance taxes, yet their reliance on federal aid differs greatly.Read more: Which States Rely the Most on Federal Aid?
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Judy Vorndran can be reached at firstname.lastname@example.org or 720.227.0093. Follow Judy on LinkedIn.
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