Federal aid helps states fund essential programs and services such as education, health care, transportation infrastructure and welfare. This government assistance ensures that fundamental services maintain a certain standard across the country, regardless of a state’s economic status.

A WalletHub study ranked which states depended on federal funding the most based on three key metrics: “The return on taxes paid to the federal government, the share of federal jobs, and federal funding as a share of state revenue.”

Most federally dependent states:

  1. Alaska.
  2. New Mexico.
  3. Kentucky.
  4. West Virginia.
  5. Mississippi.

Least federally dependent states:

  1. New Jersey.
  2. California.
  3. Kansas.
  4. Utah.
  5. Illinois.

“Regardless of whether the distribution of federal funds is fair or not, living in one of the most federally dependent states can be beneficial for residents,” WalletHub analyst Cassandra Happe said, per the study. “For every dollar residents of the top states pay in taxes, they get several dollars back in federal funding, which often leads to higher-quality infrastructure, education, public health and more.”

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Why are some states more dependent than others?

In fiscal year 2024, the U.S. government spent $2.68 trillion on Americans’ welfare, up nine percent from the previous fiscal year, according to the U.S. Treasury Fiscal Data.

Top five most-funded categories:

  1. Social Security: $593 billion.
  2. Health: $369 billion.
  3. National defense: $363 billion.
  4. Net interest: $350 billion.
  5. Medicare: $324 billion.

Generally, states with weaker economies or lower tax bases are more in need of economic strength. A combination of economic, demographic, political and geographical factors contribute to the varying degrees of dependency on federal funding among states.

When it comes to distributing fairly back to states, Jack Corbett, a professor of urban and public affairs at Portland State University, said he would encourage a “standard of service” model, per WalletHub:

“The federal government establishes a standard of service and then allocates resources to secure that. States or localities needing more resources to attain the standard (always assuming a proportional effort) would get them before supporting a higher quality or standard somewhere else,” he said. “This would not bar a place from making an extra effort on its own to secure a higher standard, simply ensuring the constitutional injunction to ‘promote the general Welfare’ would be honored.”

Brian J. Cook, a professor emeritus at Virginia Tech, told WalletHub that there is no “fairest” way.

“There are very few universal principles in democratic governance, and there are many philosophical schools regarding distributive justice. As a practical matter, distributive and redistributive policies will be determined on an issue-by-issue basis as the result of what we might call ‘normal’ politics, and sometimes, we can hope, because legislators and executives are sincerely concerned with finding what is in the public interest,” Cook said.