These States Are the Most Dependent on the Federal Government – Is Yours One of Them?

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While taxes make up the majority of each state’s general funding budget and are the most obvious source of state revenue, state governments also receive sizeable amounts of assistance from the federal government. 

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The New York City-based financial tech company SmartAsset released the results of its third annual States Most Dependent on the Federal Government study, putting state financial health into context by analyzing and ranking all 50 states according to their dependence on the federal government.

To find the states in the U.S. that were most dependent on the federal government in 2022, SmartAsset used the following metrics: federal share of state government revenue, the ratio of federal funding to income taxes paid, the percentage of workers employed by the federal government and the ratio of median earnings for federal workers to median earnings for private workers.

According to the study, federal funding accounts for approximately 39% of state revenues, with the highest in Wyoming (56.43%) and the lowest in Hawaii (27.13%). Here are the top five (and bottom five) states most dependent on the federal government.

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1. West Virginia

West Virginia ranks as the state the most dependent on the federal government. Its federal share of state revenue is the tenth most at 45.16%, but its revenue from federal funding to income taxes paid is the third highest at a ratio of 2.36 and it has 4.08% of its workers employed by the federal government. Its federal government employees earn nearly double (1.99) of what private, for-profit workers earn on average.

2. New Mexico

The southern Rocky Mountain state of New Mexico is the second most reliant on the federal government mainly due to its fifth-highest percentage of workers employed by the federal government, at 6.06%. It has a high federal share of state revenue (50.83%) and an average ratio of federal funding to income taxes paid (1.62).

3. Mississippi

Mississippi receives 2.53-times more revenue from the federal government than its residents pay in income taxes, the second-highest ratio across the study. Its federal share of state revenue is a healthy 47.31% and its percentage of workers employed by the federal government is a higher than average 3.23%.

4. Alabama

The Yellowhammer State has the tenth-highest percentage of workers employed by the federal government (3.33%) and the tenth-highest ratio between federal funding and income taxes paid (1.25). 41.20% of its revenue comes from federal sources. 

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5. Alaska

Another state with a high percentage of federal government employees (6.83%), Alaska has an average ratio of federal funding to income taxes (1.62) but a high federal share of state revenue (50.83%).

According to SmartAsset’s data, the state that relies on the federal government the least is Connecticut (50). The southernmost New England-area state has the third-lowest percentage of federal government workers (1.47%) and the fourth-lowest ratio of federal funding to income taxes paid (0.38). The other states that make up the bottom five in their reliance on the federal government are New Jersey (49) federal share of state revenue: 28.56%, ratio of federal funding to income taxes paid: 0.35, percent of workers employed by the federal government: 1.71%), Massachusetts (48; 33.28%, 0.41, 1.61%), Minnesota (47; 31.49%, 0.58, 1.45%) and Wisconsin (46; 31.88%, 0.64, 1.33%).

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To find out how dependent your state is you can see the full report here.

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About the Author

David Nadelle is a freelance editor and writer based in Ottawa, Canada. After working in the energy industry for 18 years, he decided to change careers in 2016 and concentrate full-time on all aspects of writing. He recently completed a technical communication diploma and holds previous university degrees in journalism, sociology and criminology. David has covered a wide variety of financial and lifestyle topics for numerous publications and has experience copywriting for the retail industry.

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