States Most Dependent on the Federal Government

Whether you love it or hate it, much of our government relies on federal dollars to keep things running. Federal spending is just a part of the natural order of things. After all, your tax dollars have to go somewhere. But where is all that money going? The answer may surprise you.

Not all states are getting an equal amount when it comes to government funding nor even an even percentage. Some states are receiving a higher percentage in federal funding than others, and they may not be the states you are thinking of.

As the highest office of the government proposes an increase in federal funding as part of a $5.8 trillion budget proposal, we have taken it upon us to look at the numbers from last year to come up with a list of the states, most dependent on government funding. And states like California didn’t even make the list!

Rankings from Smartasset were based on three major factors: the number of federal employees, the percentage of government revenue and the ratio of federal funding to income taxes paid. The states on this list need funding more than anyone. And with that said, let’s take a look at the states most dependent on the federal government…

Coming in at number 15 on the list is South Dakota. The federal share of state revenue there is 50.93%, which means that over half of the state government’s revenue comes from intergovernmental aid. That is easily the highest amount on the list and actually the highest percentage out of all 50 states.

On top of that, the ratio of federal funding to income taxes paid is 1.04. This is among the states with the highest ratio, equal to the state of Montana, which you will see in a bit. Meanwhile, the percentage of workers employed by the federal government is moderately high at 3.14%.

Vermont also has one the largest percentages of state revenue coming from the federal government. Their federal share of state revenue is 43.55%. While not as high as South Dakota, it’s still just a bit under half dependent on the federal government. It fares worse when it comes to the ratio of federal funding.

As for the ratio of federal funding to income taxes paid by its residents, the state has one of the highest ratios on this list at 1.53. On the bright side, it’s percentage of workers employed by the federal government is much lower than South Dakota at 2.27%, making it less dependent in that regard.

Arizona’s federal share of state revenue is lower that South Dakota but higher than Vermont. Its federal share of state revenue is 47.44%, so almost half of the state’s revenue is coming from federal aid, which is why, in part, it ranks so high for being dependent on the federal government.

As for the ratio of federal funding to income taxes paid, that number is at 0.88. This number comes from the intergovernmental aid received by the state, divided by the amount in taxes paid by the state, which means the state is still giving more than it’s getting back. Lastly, the percentage of workers employed by the federal government is 2.54%.

Rhode Island has only a slightly higher federal share of state revenue compared to Vermont. Its percentage as of 2022 was 43.72%. Additionally, the state had a slightly higher percentage of workers hired by the federal government at 2.36% versus Vermont’s 2.37%.

That being said, it’s ratio of federal funding to income taxes paid is much lower at 1.02. That means it is getting around a 50% less portion of federal funding compared to the taxes being paid by the state. Coming in at number 12 on the list, it nonetheless, makes it in the top 15 most dependent state.

Delaware just misses the top 10 of states most dependent on the federal government. It’s ratio of federal funding to income taxes paid is higher than Rhode Islands and its percentage of workers employed by the federal government is higher as well, but it fares better when it comes to its federal share of revenue.

About 38.79% of Delaware’s revenue comes from federal aid, which is fairly average in terms of federal share of state revenue. It’s ratio of federal funding compared to taxes paid is 1.20, which is moderately high. Lastly, the percentage of workers employed by the federal government is 2.42%.

Coming in at the number 10 spot, is the state of Montana. It has the eighth highest percentage of workers employed by the federal government, out of all 50 states, at 3.54%. With such a fairly large percentage of workers being employed by the federal government, it’s clear how dependent they are.

The state also receives plenty of intergovernmental aid with a 46.58% federal share of state revenue, meaning Montana is getting plenty of federal funding compared to all 50 states. And on top of that, it’s getting more in federal funding compared to the amount they are paying in taxes with a $1.04 ratio, equal to that of South Dakota.

Wyoming comes in at number nine. The state easily has the highest percentage of revenue coming straight from the federal government. The state’s federal share of revenue is at 56.43%, higher than all 50 states. As for the other metrics, it did poorly as well.

It’s ratio of taxes received versus the amount paid was also on the higher side. Thestate ranked ninth in that regard, receiving $1.36 for every dollar paid in taxes. The number of federal employees is high too, at 3.37%, which is the ninth highest percentage.

Main ranks on the lower end of this list when it comes to federal funding, which makes up 43.7% of revenue in the state. However, it’s still the 14^th highest out of all 50 states. Where it fares even worse is when it comes to lack of dependence is from its funding-to-tax ratio and its number of federal employees.

Around 2.31% of Maine’s workers are employees of the federal government, which isn’t terrible in and of itself but the fact is that they are getting paid much better than the average private worker, making nearly 1.74 times as much! Additionally, the state ranked 12^th when it came to its federal funding to income taxes paid ratio (1.19)

Tying with Maine for seventh place on the list of most dependent states is Louisiana. The state of Louisiana ranks as the second most reliant on the federal government, when it comes to funding, receiving the second-most in federal aid, next only to Wyoming.

Louisiana’s federal share of revenue is a whopping 52.27%. And while the percentage of federal workers is only 2.13%, the federal funding to income tax ratio is 1.60, making it one of the highest on this list. That means that taxpayers are receiving $1.60 back in federal funding for every dollar they pay.

Federal employees in Idaho are bringing in much more dough than their neighbors working for private businesses, an average of 1.89 times as much. That’s one of the largest gaps in the country in SmartAsset’s study – the sixth largest. And it only gets worse from there.

Idaho also has one of the highest percentage of workers employed by the federal government at 2.75%. And as for federal funding, the state has the 18^th highest amount out of all 50 states. Federal funding accounts for about 41.08% of the state’s revenue, showing the state is definitely dependent on the federal government.

Coming in at the number five spot is Alaska. What makes Alaska ranks so high? Alaska is yet another state that ranks high when it comes to federal funding with over half of its revenue coming from the federal government. It receives an astounding 50.83% in revenue from the federal government.

On top of that, Alaska has the fourth highest percentage of workers that are dependent on the federal government at 6.83%. And on this list, it ranks the highest out of 15. Add to that, the fact that its taxpayers are getting pack $1.62 for every dollar paid in taxes, and its clear that Alaska is not so independent.

Coming in a number four is Alabama. The southern state of Alabama is fairly dependent on government work. The state has the 10^th highest percentage of workers employed by the federal government at 3.33%. Its workers earn almost twice as much as those working for private businesses in the state.

Other areas where it shows a lack of independence is when it comes to federal funding. Taxpayers are getting $1.25 for every single dollar paid in taxes, which is the 10^th largest ratio of all 50 states. About 41.20% of the states revenue comes from the federal government, which isn’t as high as some on this list but it is higher than Idaho.

Mississippi ranks number three out of states most dependent on the federal government. For every dollar they pay in taxes, they are getting more back in federal funding - about $2.53. It’s ratio of federal funding to income taxes paid is the highest on this list and the second-highest out of all 50 states.

And in addition to that, 47.31% of the state’s revenue comes from federal funding, which is the seventh highest out of all 50 states. Lastly, the percentage of federal government workers in the state is 3.23%, which is the 11^th highest in the country.

New Mexico rises slightly higher than Alabama with its 41.80% of revenue coming from the federal government. It also receives a 1.87 ratio of federal funding to income taxes. But its government funding isn’t its only reason for coming in at second place as you probably could have guessed.

New Mexico has the fifth largest percentage of workers who are employed by the federal government. While not as high a percentage as Alaska, New Mexico’s population is larger, which means that there are more federal employees in New Mexico, regardless.

So, the moment you’ve been waiting for has arrived. West Virginia ranks at the number one state most dependent on the federal government in more ways than one. Around 4.08% of workers are working for the federal government instead of private businesses, which is on the higher side of this list – and the seventh highest percentage out of the entire country.

West Virginia gets around 45.16% of its revenue from the federal government which rounds up to about half. In that regard, its 10^th highest out of all 50 states. Finally, the ratio of federal funding to income taxes is one of the highest as well, at 2.36, meaning they get $2.36 for every dollar they pay in taxes.