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states most dependent federal government

Though it may not always be apparent to the average citizen, the federal government is responsible for many of the everyday conveniences that help the country operate. Even some state programs are ultimately paid for by federal government money through intergovernmental aid. SmartAsset wanted to see which states are ultimately most reliant on the federal government for their operations, so we crunched the numbers to find out.

To do this, we compared all 50 states across a number of metrics, including federal share of 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, check out the Data and Methodology section below.

Key Findings

  • Southern financial comfort. Seven of the top 10 states in our study are situated in the South: West Virginia, Alabama, Mississippi, Louisiana, Kentucky, South Carolina and Tennessee.
  • Federal workers earn more. In every state, the median earnings for a federal worker are at least 1.25 times more than the median income for a private, for-profit worker.

1. New Mexico

New Mexico ranks as the state most dependent on the federal government. Money from the federal government makes up 42.74% of the state’s government revenue, and federal funding is 1.63 times the amount collected in income tax. Those figures rank fourth- and third-highest, respectively, in our study. New Mexico also places third for the ratio of median earnings for federal workers to median earnings for private, for-profit workers, at 2.09.

2. West Virginia

West Virginia finishes in the top 10 for three categories. It comes in fourth-highest for its ratio of federal funding to income taxes paid (1.50), eighth-highest for its percentage of workers employed by the federal government (3.69%) and sixth-highest for the ratio of median earnings for federal workers to median earnings for private, for-profit workers in the state (1.97).

3. Alabama

Alabama’s highest ranking is for the ratio of federal government workers earnings to private workers, where it comes in fourth with a ratio of 2.09. Alabama also places 10th-highest for its ratio of federal funding to income tax, at 0.88, and 11th-highest for its percentage of workers employed by the federal government, at 3.10%

4. Mississippi

Mississippi places third in the study for its high share of state government revenue made up of federal funds, at 43.22%. It also places second for the ratio of federal funding to income taxes paid, 1.86. Mississippi ranks 12th-highest for its percentage of workers employed by the federal government, at 3.02%.

5. Montana

Montana places second in the category measuring the percentage of government revenue made up of federal money, 44.50%. It also finishes in the top ten for two other metrics — ninth for ratio of federal government funding to income taxes paid (0.93) and seventh for the percentage of workers employed by the federal government, at 3.91%.

6. Louisiana

The Bayou State ranks first overall in terms of federal money as a percentage of government revenue, at 46.70%. Louisiana also comes in seventh for the ratio of federal funding to income taxes paid, at 1.15. It finishes within the top 20 for the earnings ratio metric, at 1.69, which compares median earnings for a federal government worker in the state to median earnings for a private, for-profit worker in the state.

7. Alaska

Alaska ranks in the top six for three categories: sixth for ratio of federal funding to income taxes paid (1.19), fifth for federal share of state government revenue (42.41%) and third for the percentage of workers employed by the federal government (7.06%). The state ranks low in the study, at 42nd, for the income ratio between federal and other workers (1.51).

8. Kentucky

Kentucky has the fifth-highest ratio of federal funding to income taxes paid on this list, at 1.20. The federal government makes up 40.86% of the state’s government revenue, which is the eighth-highest rate for this metric in the study.

9. South Carolina

South Carolina does not finish in the top 10 for any single metric, but it does rank in the top 20 for three: the 11th-highest ratio of earnings for federal workers to private workers, at 1.78; the 16th-highest ratio for federal funding to income taxes paid, at 0.71 and the 18th-highest rate for federal share of state government revenue, at 35.19%.

10. Tennessee

Tennessee, the final state in the top 10, places ninth for two metrics: the percentage of government revenue made up of federal funds (39.12%) and the median income ratio between federal workers and private workers (1.87). It also places in the top 25 for its percentage of workers employed by the federal government, at 2.28%.

Data and Methodology

To find the states that rely the most on the federal government, SmartAsset compared all 50 states across the following 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 2018 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 2018 1-year American Community Survey and the IRS. Tax data is for 2017.
  • 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 2018 1-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. Bureau’s 2018 1-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.

Tips for Managing Your Money

  • Consider expert advice. No matter where you live, a financial advisor might be a good idea. Finding the right financial advisor who fits your needs doesn’t have to be hard. SmartAsset’s free tool matches you with financial advisors in your area in five minutes. If you’re ready to be matched with local advisors that will help you achieve your financial goals, get started now.
  • Wondering how much you pay in income taxes? Consider using SmartAsset’s free tool.
  • Reassess your budget if possible. A budget can help make sure you have all the money you need for whatever comes your way. Use our comprehensive budget calculator to review and revise yours as needed.

Questions about our study? Contact press@smartasset.com

Photo credit: ©iStock.com/MarianVejcik

Ben Geier, CEPF® Ben Geier is an experienced financial writer currently serving as a retirement and investing expert at SmartAsset. His work has appeared on Fortune, Mic.com and CNNMoney. Ben is a graduate of Northwestern University and a part-time student at the City University of New York Graduate Center. He is a member of the Society for Advancing Business Editing and Writing and a Certified Educator in Personal Finance (CEPF®). When he isn’t helping people understand their finances, Ben likes watching hockey, listening to music and experimenting in the kitchen. Originally from Alexandria, VA, he now lives in Brooklyn with his wife.
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