Billions of dollars are at stake each year for individual states when lawmakers in Washington D.C. negotiate the following year’s federal budget. For 2023, President Biden is calling for a 7% increase in federal spending as part of his $5.8 trillion budget proposal. While this money will ultimately play a major role in how states fund themselves, some states are more reliant on federal dollars than others. For example, Wyoming gets over 56% of its revenue from federal sources, but only 27% of Hawaii’s revenue comes from the federal faucet. With this in mind, SmartAsset took a closer look at individual states to determine which ones are most dependent on the federal government.
To do this, we analyzed and compared data across the following metrics: federal share of state government revenue, ratio of federal funding to income taxes paid, percentage of workers employed by the federal government and ratio of median earnings for federal workers to median earnings for private workers. For details on our data sources and how we put all the information together to create our final rankings, read the Data and Methodology section below.
This is SmartAsset’s third annual study on the states most dependent on the federal government. Check out the 2021 version here.
Key Findings
- Red states dominate the top 10. Eight of the 10 states most dependent on the federal government traditionally vote Republican. New Mexico (No. 2) is the only state in the top 10 to vote for the Democratic candidate in any of the last six presidential elections. Maine (No. 8), which splits its delegates, has voted for both Democrats and Republicans in the recent elections.
- On average, federal funding makes up about 39% of state revenues. However, this figure varies by a margin of more than 29 percentage points. The federal share of state government revenue is highest in Wyoming, at 56.43%, and lowest in Hawaii, at 27.13%.
- Connecticut ranks as the state least reliant on the federal government. Less than 32% of the revenue collected by the Connecticut state government comes from the federal government. That’s the eighth-smallest percentage across all 50 states. Connecticut also has the third-lowest percentage of workers employed by the federal government (1.47%) and fourth-lowest ratio of federal funding to income taxes paid (0.38).
1. West Virginia
No state is more dependent on the federal government than West Virginia, which gets 45.16% of its revenue from federal sources (the 10th-most). West Virginia receives 2.36-times more revenue from the federal government than its residents pay in income taxes, the third-highest ratio across our study. Meanwhile, 4.08% of workers in the state are employed by the federal government (the seventh-most), earning nearly double (1.99) what private, for-profit workers earn on average.
2. New Mexico
New Mexico has the fifth-largest percentage of workers employed by the federal government (6.06%). The ratio of federal funding to income taxes paid is 1.87, the fourth-highest for this metric. Meanwhile, the federal government supplies the state with 41.80% of its revenue.
3. Mississippi
For every $1 paid in income tax in Mississippi, the state takes in $2.53 in federal funding. That’s the second-largest ratio of federal funding to income taxes paid in our study. Meanwhile, 47.31% of state revenues come from federal funding, which is the seventh-highest percentage of all 50 states. Additionally, Mississippi has the 11th-largest percentage of workers employed by the federal government (3.23%).
4. Alabama
Federal workers in Alabama earn just over double the median earnings of private, for-profit workers ($67,948 vs. $33,242). Alabama also has the 10th-highest percentage of workers employed by the federal government (3.33%) as well as the 10th-largest ratio between federal funding to income taxes paid (1.25).
5. Alaska
Alaska has the fourth-largest federal share of state government revenue, as more than half of its revenue (50.83%) comes from federal sources. Nearly 7% of the state’s workforce is employed by the federal government, the fourth-most across our study. Meanwhile, the state has the sixth-largest ratio of federal funding to income taxes paid (1.62).
6. Idaho
Federal employees in Idaho earn 1.89-times as much as private, for-profit workers on average ($60,549 vs. $32,109). That’s the sixth-largest difference across our study. Idaho also has the 17th-highest percentage of workers employed by the federal government (2.75%). Additionally, federal dollars account for 41.08% of state revenue, the 18th-most among the 50 states.
7. Louisiana (Tie)
Only one other state - namely, Wyoming - relies on the federal government for more of its revenue than Louisiana, which relies on the federal government for 52.27% of its money. The Pelican State also receives $1.60 in federal funding for every $1 it pays in income taxes, the seventh-most across our study.
7. Maine (Tie)
While only 2.31% of the workforce in Maine works for the federal government, these workers have 1.74-times the median earnings of private, for-profit workers. That’s the 11th-largest earnings gap in our study. Maine also has the 12th-largest federal funding to income taxes paid ratio (1.19). Finally, federal funding makes up 43.27% of the revenue the state government collects (the 14th-most).
9. Wyoming
No state relies more on funding from the federal government than Wyoming, where 56.43% of the state’s revenue comes from Washington D.C. Wyoming also has the ninth-largest difference between federal dollars received and income taxes paid. For every $1 dollar in income tax that’s paid in Wyoming, the state receives $1.36 in federal funding. Federal workers also comprise 3.37% of the workforce in Wyoming, the ninth-highest percentage in our study.
10. Montana
Montana rounds out our list of the 10 states most dependent on the federal government. With the eighth-highest percentage of workers employed by the federal government (3.54%), federal funding also makes up 46.58% of Montana's total revenue. Meanwhile, the state receives $1.04 in federal funding for every $1 paid in income tax (the 17th-most).
Data and Methodology
To find the states that rely most on the federal government, SmartAsset compared all 50 states across the following four metrics:
- Federal share of state government revenue. This is the percentage of the state government’s revenue that comes from intergovernmental aid. Data comes from the U.S. Census Bureau’s 2020 Annual Survey of State Government Finances.
- Ratio of federal funding to income taxes paid. This is intergovernmental aid received by states divided by the net amount of income taxes paid by the state. Data comes from the U.S. Census Bureau’s 2020 Annual Survey of State Government Finances and the IRS. Tax data is for 2019.
- Percentage of workers employed by the federal government. This is the percentage of the state’s overall workforce that is employed by the federal government. Data comes from the U.S. Census Bureau’s 2020 5-year American Community Survey.
- Ratio of federal wage to private sector wage. This is median earnings for a federal government worker in each state divided by median earnings for a private, for-profit worker in each state. Data comes from the U.S. Census Bureau’s 2020 5-year American Community Survey.
First, we ranked each state in each metric. Then we found each state’s average ranking, assigning each metric a full weight. We used this average ranking to create our final score. The state with the highest average ranking received a score of 100. The state with the lowest average ranking received a score of 0.
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