The Intersection of State and Federal Finances

Federal Spending and
State Budgets
Rebecca Thiess, Associate Manager, Fiscal Federalism Initiative

Barbara Rosewicz, Project Director, Research & Content, State Fiscal Health
Spotlight on Statehouse and Local Reporting
December 2019
Vast Majority of Federal Spending Happens
in the States
Other Spending in
Spending the States
8% 92%
pewtrusts.org/fiscal-federalism
Federal Spending in the States
Distribution of federal spending, FY 2015
Salaries and wages 9%
Retirement
34% Contracts
12%
Grants
18%
Non-retirement
27%
Source: Council of State Governments, Federal Spending in the States; 2015
Nationally, Federal Spending is
Equivalent
to 19% of State Economic Activity
Federal spending relative to gross domestic product by state, federal FY
2015
Source: Council of State Governments, Federal Spending in the States; 2015
Relative Size of Federal Spending Varies Across States
State Examples: Types of Federal Spending Relative to State GDP, FY 2015
35%
29.6% 30.5%
30%
Nonretirement
Retirement
25% Grants
Contracts
20% Salaries and Wages
15%
10%
5%
0%
Virginia Alabama
Federal Defense Dollars Are Distributed Unevenly Across the Country
Per capita spending by state, federal FY 2017
Federal Grants as Share of States’ Budgets
Percentage of state revenue, state FY 1968-2017
Federal Grants Vary as a Share of State Budgets
Percentage of state revenue from federal funds, state FY 2017
Medicaid Accounts for Nearly Two-Thirds of
Federal Grants to States
Distribution by program area, federal FY 2018
Health Care Has Dominated Federal
Spending Choices for More Than a Decade
Percentage change from federal FY 2008-18, adjusted for inflation
Fiscal 50: State Trends and Analysis
Key Indicators of Fiscal Health
Tax Revenue Change in State Employment to Debt and Unfunded Reserves and
Spending Population Ratio Retirement Costs Balances
Tax Revenue Volatility
State Medicaid State Personal Fiscal Balance
Federal Share Spending Income
of State Revenue Population
PewTrusts.org/Fiscal50
50 States: Sources of State Government Revenue
FY 2017
0.8%
7.3%
11.5% Taxes
Federal revenue
47.9% Service charges

Miscellaneous
Local revenue
32.4%
Change in Tax Revenue from Each State’s Peak Quarter,
Adjusted for Inflation
50-state total, Q2 2019
Percent
20
16.0%
15
10
-5
-10 -12.5%
RECESSION
-15
2006200720072008200820092009201020102011201120122012
2006 20132013
20142014
20152015
20162016
20172017
201820182019
2019
Change in Tax Revenue from Each State’s Peak Quarter,
Adjusted for Inflation
Colorado, Ohio and 50-state total, Q2 2019
Percent
40
34.4%
35
30
25
20
15
10
5
0 -6.2%
-5
-10
-15
RECESSION
-20
2006200720072008200820092009201020102011201120122012
2006 20132013
20142014
20152015
20162016
20172017
201820182019
2019
50-state total Colorado Ohio
Real Tax Revenue in 45 States Has Recovered from
Recession
Tax collections in Q2 2019 compared with each state’s peak, adjusted for inflation
WA ME
32.0% 5.9%
MT ND
3.4% 71.2% MN
OR 28.8% NY
40.2% WI 16.9%
ID SD
11.9%
9.2% WY 22.4% MI
-30.5% 4.7% PA
IA 8.0%
NE 12.4% OH
NV 14.0% IL
27.3% IN -6.2%
UT 20.9% 10.5% WV
VA VT 14.4%
14.0% CO 3.4%
CA KS MO KY 5.3%
34.4%
17.7% 0.4% 6.2% NH 6.3%
31.3% NC
5.4% MA 20.6%
AZ OK SC
NM AR
4.4% 1.9%
8.5%
4.3% RI 6.5%
3.7% MS AL GA
1.5% 3.2% 6.9% CT 13.4%
LA
TX -3.9%
17.7%
NJ 5.9%
AK
-83.3% FL DE 17.9%
-6.9%
HI MD 24.7%
26.8%
Below -15% -15% to 0 0 to 15% Above 15%
Days Each State Could Run on Rainy Day Funds
50-state median, FY 2000-19 estimated
Days FY 2019
30 estimated:
RECESSION RECESSION 26.4 days
25
FY 2007:
20 16.6 days
15
10
0
FY FY FY FY FY FY FY FY FY FY
2001 2003 2005 2007 2009 2011 2013 2015 2017 2019
California and 50-state median, FY 2000-18
Days FY 2018:
70 63.8 days
RECESSION RECESSION
60
50
40
FY 2018:
30 23.4 days
20
10
-10
FY FY FY FY FY FY FY FY FY
2002 2004 2006 2008 2010 2012 2014 2016 2018
50-State Median California
Pennsylvania and 50-state median, FY 2000-19 estimated
Days FY 2019
30 estimated:
26.4 days
RECESSION RECESSION
25
20
15
10
FY 2019
5 estimated:
0.3 days
0
-5
FY FY FY FY FY FY FY FY FY FY
2001 2003 2005 2007 2009 2011 2013 2015 2017 2019
50-State Median Pennsylvania
Days Each State Could Run on Only Rainy Day
Funds
FY 2019, estimated
100 +
90
80
70
60
50 E
40
30
20
10
0
IL
KS
NJ
PA
KY
MT
AR
NY
MO
WI*
LA
AZ
FL
HI
MD
RI
NC
DE
MA
MS
VA
TN
OK*
SC
WA
MEDIAN
NE
ME
NH
OH
NV
IN
NM
UT
CO
AL
IA
CT
MN
SD
MI
GA*
OR
VT
CA
ID
WV
TX
ND
AK
WY
*-Data reflect FY 2018 funding levels
Medicaid Runs on Mix of Federal and State Dollars
FY 2017
% %
38.4 61.6
State funds Federal funds
$228.2 billion $366.2 billion
State Medicaid Spending as a Share of
Own-Source Revenue
50-state share, federal fiscal years 2000-17
18%
Stimulus Some States
Increased Federal Adopt Medicaid 17.1%
Share of Funds Expansion
17%
RECESSION RECESSION
16%
15%
14%
13%
12%
2001 2003 2005 2007 2009 2011 2013 2015 2017
State Medicaid Spending as a Share of
Own-Source Revenue
California, Utah, and 50-state share, federal fiscal years 2000-17
25%
Stimulus Some States
Increased Federal Adopt Medicaid
Share of Funds Expansion
20%
15%
10%
5%
RECESSION RECESSION
0%
2001 2003 2005 2007 2009 2011 2013 2015 2017
50-State Share California Utah
Debt and Unfunded Retirement Costs as a Share of
State Personal Income, 2017
Ranked by unfunded pension costs
50%
45% Unfunded pension costs
Unfunded retiree health care costs
40% Debt
35%
30%
25%
20%
15%
10%
5%
0%
-5%
WI
SD
TN
NY
NE
ID
NC
WA
UT
FL
DE
TX
IA
VA
ME
OK
GA
WV
MO
IN
MD
NH
AR
KS
OR
VT
MI
OH
ND
50 STATES
AL
MA
CA
WY
MT
LA
AZ
NV
RI
PA
SC
MN
CT
MS
AK
HI
CO
IL
NM
KY
NJ
Lingering Effects of the Great Recession
-1.7% 0.0%
Local governments
-4.7% State funding in 24 states
per pupil was lower received fewer
in 29 states state dollars
(academic year 2016) (fiscal year 2017)
Non-education
-13.0% workforce is smaller
in at least 35 states
(calendar year 2018)
State support per

student is lower
in 40 states (fiscal year 2018)
Fiscal 50
• Visit Fiscal 50 website to catch up on the latest 50-state trends, and download data to create
your own analysis and charts
Rebecca Thiess
Barbara Rosewicz
pewtrusts.org/fiscal50
Media Contact: Sarah Leiseca

sleiseca@pewtrusts.org
202-540-6369

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The Intersection of State and Federal Finances

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Federal Spending and

Rebecca Thiess, Associate Manager, Fiscal Federalism Initiative

Salaries and wages 9%

Source: Council of State Governments, Federal Spending in the States; 2015

20% Salaries and Wages

47.9% Service charges

Below -15% -15% to 0 0 to 15% Above 15%

State support per

Media Contact: Sarah Leiseca

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