Most & Least Federally Dependent States in 2024 (2024)

States receive federal aid for many reasons, from providing relief during natural disasters and health crises to funding improvements in education, transportation, infrastructure, healthcare and more. Some states receive much larger aid packages than others, but it’s not just the dollar amount that matters. It’s important to contextualize the money flowing in by comparing it to things like what percentage of the state’s revenue it makes up and how much the federal government gets back through its taxes on the state’s residents.

In order to find out exactly how big the difference in federal dependence is from state to state, WalletHub compared the 50 states in terms of 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.

Main Findings

Most Federally Dependent States

Notes: *No. 1 = Most Dependent
With the exception of “Total Score,” the columns in the table above depict the relative rank of a state, where a rank of 1 represents the most dependent for that metric.

In-Depth Look at the Most Federally Dependent States

Alaska

Alaska is the most federally dependent state, as over 57% of the state’s revenue comes from federal funding. Some reasons why Alaska gets a lot of federal dollars include the difficulty of maintaining infrastructure in a big state with harsh weather and a small population, plus Alaska’s richness in natural resources, its vulnerability to disasters and its defensive importance.

Alaska also has a lot of federal jobs – in fact, nearly 5% of the state’s workforce is employed by the federal government. For context, the share for most states is only between 1% and 3%.

Finally, Alaska has a very good return on the taxes that its residents pay to the federal government. For every $1 that residents pay in taxes, the state receives $2.47 in federal funding, over double their investment.

New Mexico

New Mexico is the second-most federally dependent state, in large part because it receives a huge amount of federal funding compared to the taxes that residents pay. For every $1 paid in taxes, New Mexico gets $3.26 in federal funding. Around half of the other states get less than $1 in federal funding for every tax dollar.

Federal funding makes up a large share of New Mexico’s revenue as well, at around 47%, and more than 3.5% of the Land of Enchantment’s workforce is employed by the federal government. Both of these rates are among the highest in the country, proving that New Mexico’s economy owes a lot to the federal government.

Kentucky

Kentucky ranks third when it comes to dependence on the federal government, with federal funding making up over 46% of the state’s revenue. Kentucky residents also get $3.45 in federal funding for every $1 they pay in taxes, which is a pretty great deal for them.

Kentucky doesn’t have quite as many federal jobs as other states, though. Around 1.8% of the state’s residents are employed by the federal government, which puts Kentucky around the middle of the 50 states for that particular metric.

Red vs. Blue States

Correlation Analysis

Ask The Experts

For further clarity on the problems contributing to federal-funding disparities, we talked to a panel of economics and public policy experts. Click on the experts’ profiles to read their bios and responses to the following key questions:

1. Should federal resources be allocated to states according to how much they pay in federal taxes or should some states subsidize others?
2. What programs should be a state/local responsibility and what should be a federal responsibility?
3. What is the fairest way to redistribute federal resources back to the states?
4. What more can the current administration do to help reduce the impact of revenue shortfall in state budgets during this economic climate?

Methodology

In order to determine the most and least federally dependent states, WalletHub compared the 50 states across two key dimensions, “State Residents’ Dependency” and “State Government’s Dependency.”

We evaluated those dimensions using three relevant metrics, which are listed below with their corresponding weights. Each metric was graded on a 100-point scale, with a score of 100 representing the highest level of federal dependency.

We then determined each state’s weighted average across all metrics to calculate its overall score and used the resulting scores to rank-order the states.

State Residents’ Dependency – Total Points: 50

• Return on Taxes Paid to the Federal Government: Triple Weight (~37.50 Points)
  Note: This metric was calculated by dividing federal funding in U.S. dollars by IRS collections in U.S. dollars.
• Share of Federal Jobs: Full Weight (~12.50 Points)

State Government’s Dependency – Total Points: 50

• Federal Funding as a Share of State Revenue: Full Weight (~50.00 Points)
  Note: This metric reflects the proportion of state revenue that comes from the federal government in the form of intergovernmental aid in 2021.

The following metrics were included in the infographic above for context only. They represent subsets of federal funding and are reflected in the first two metrics.

• “Federal Contracts” divided by “IRS Collections”
• “Grants” divided by “IRS Collections”
• “Direct Payments + Other Financial Assistance” divided by “IRS Collections”

Sources: Data used to create this ranking were collected as of February 21, 2024 from the Internal Revenue Service, U.S. Census Bureau, USAspending.gov and Bureau of Labor Statistics. Unless noted otherwise, the statistics underlying this report are from 2022 and 2023.

Supporting Video Files:

• YouTube (for web embedding)
• Raw video files (for editing into clips)

Was this article helpful?

Important Disclosures