States That Get The Most Federal Money

In 2010, the federal government took the hundreds of billions of dollars it received in corporate, income and property taxes from each state and respent that money — and then some — on programs in each state. A review of federal data indicates that some states, considering their size and the taxes they paid, received a disproportionate amount of funding relative to the amount they put in each year.

The states that receive the most money from the federal government each year are, generally, the most populous ones. In 2010, eight of the 10 states with the highest population received the most. California, the most populous state in the country, receives the largest share — more than a third of a trillion dollars. However, when accounting for population and the amount states pay in federal taxes, the breakdown looks very different.

This content was originally published on 24/7 Wall St. 

The states that received the most money from the federal government were identified using the most recent data from the U.S. Census Bureau’s Consolidated Federal Funds report, which breaks out how much the federal government spent on various programs, grants and public employee salaries by state. We relied on data from the Internal Revenue Service to calculate the amount that states pay in income tax to the federal government. Based on these reports, 24/7 Wall St. identified the 10 states that received the most money from the federal government, relative to how much they paid in income tax.

Some states, including Alaska and Virginia, received more than $15,000 per person from the federal government, even after subtracting the billions the state spent on income tax. This figure is nearly two-and-a-half times the amount received per person after taxes in states like Nevada, one of the poorest states in the country.

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It would be expected that states that receive more money from the federal government are in greater need. However, most of the 10 states with the highest federal spending per capita had a higher median household income than the United States average. In fact, the first-, third-, fourth- and fifth-wealthiest by this measure all received the most money from the government. Because of their wealth, these states spent the most per capita in income tax, but it is negligible compared to the vast amounts they received.

A review of the data shows that some very large programs, including defense spending, Medicare and Medicaid, Social Security, and farm subsidies, had major effects on how much money each state received, to the extent that individuals get far more per person than in other states. In some cases, it was several programs that affected the total amount the government spent on the state per capita, but in others, it may have been just one program.

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Often that program was defense spending. States like Virginia, Alaska, Maryland and New Mexico received the most money per capita in federal procurement spending, which includes things like Medicaid and NASA, but the majority of which goes to the Department of Defense. To give an idea of the amount of money the federal government poured into military bases and research centers in these states, the government spent approximately $7,300 per person on all programs in Nevada. It also spent approximately $5,000 per person on defense spending alone in Virginia.

Another program that requires a great deal of funding is the direct payments outside of retirement and disability. Within this category is Medicare. A couple of the states that received the most federal funds also received an extraordinarily large amount of money for medical prescription drug coverage under Medicare. More than 25% of all the funds that Connecticut received from the federal government were for drug benefits under Medicare.

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Expenditures on Salaries and Wages is another category in which these states lead the country in spending per capita. This category includes the salaries and wages of defense workers and non-defense workers alike. All five of the top 10 states receiving the most in this category are represented on our list.

24/7 Wall St. identified the states that get the most money from the federal government by taking the figures for federal expenditures in each state from the 2010 Consolidated Federal Funds report and subtracting from it the income taxes retained, net of refunds, by the federal government for each state for the same year. The values obtained were then divided by state population figures for 2010 from the census bureau to arrive at a per capita figure for each state.

These are the states that get the most federal money.

10) North Dakota > Amt. per capita net of income taxes: $10,438 > Population: 672,591 > Pct. of U.S. population: 0.22% > Amt. per capita: $12,930 > Pct. of U.S. funds per person: 0.27%

With the third-smallest population in the U.S., North Dakota’s federal spending per capita was understandably larger than more populous states. North Dakota ranked third in the country for receiving Direct payments other than retirement and disability. What is unusual is the large amount of money that North Dakota farmers received from the federal government — the state ranked second in agricultural assistance in the nation, behind only Texas, which has a population more than 37 times that of North Dakota.

9) Connecticut > Amt. per capita net of income taxes: $10,506 > Population: 3,574,097 > Pct. of U.S. population: 1.16% > Amt. per capita: $15,662 > Pct. of U.S. funds per person: 1.73%

Connecticut received almost 50% more government funding per capita than the national average. In 2010, Connecticut was awarded $11.1 billion in military procurement contracts, giving the state the fourth-highest per capita federal defense expenditure — $3,351.88. The Constitution State ranked first for the amount of spending for direct payments other than retirement and disability on a per capita basis. A significant chunk of this amount — almost 60% — was spent solely on medical prescription drug coverage. At $14.1 billion, the amount of federal government expenditures on prescription drugs in Connecticut was more than any other state and over $5 billion more than Florida, the state receiving the second-most federal funds in this category. Connecticut also ranked fifth in per capita federal funding from procurement spending.

8) West Virginia > Amt. per capita net of income taxes: $10,568 > Population: 1,852,994 > Pct. of U.S. population: 0.6% > Amt. per capita: $11,609 > Pct. of U.S. funds per person: 0.67%

West Virginia is the only state in the top 10 where federal spending on defense was not a significant contributor to the total amount of money this state received. In fact, West Virginia ranked 48th for federal defense spending — $609 per capita. A large portion of federal spending in West Virginia, almost 16%, was for Medicare benefits, slightly more than the national rate of 15.6%. West Virginia ranked first in the country for the percentage of people using this benefit at nearly 20%. West Virginians also received more federal spending per capita on retirement and disability benefits — which includes Social Security payments, federal retirement and disability benefits, and veterans benefits — than any other state.

7) Alabama > Amt. per capita net of income taxes: $10,656 > Population: 4,779,736 > Pct. of U.S. population: 1.55% > Amt. per capita: $11,820 > Pct. of U.S. funds per person: 1.75%

Alabama comes in second for the amount of spending per capita — $3,761 — on retirement and disability. The Cotton State also ranks seventh for procurement spending per capita, 78% of which was defense spending, and large parts of which also included the Department of Health and Human Services and the Department of Agriculture. Most of this procurement spending falls under the section of Department of Defense spending. Aside from Virginia and Kentucky, Alabama is the only state on this list that is in the bottom half of states for the amount of grant spending per capita. Grant spending encompasses a vast number of federal agencies and departments within each state.

6) Kentucky > Amt. per capita net of income taxes: $12,129 > Population: 4,339,367 > Pct. of U.S. population: 1.41% > Amt. per capita: $13,198 > Pct. of U.S. funds per person: 1.77%

The federal government gave Kentucky more than $7,000 per person on direct payments, which included retirement and disability benefits, unemployment benefits and student assistance — all large programs. Medicare benefits accounted for nearly 57% of such payments. This was  partially due to the high amount of government money going toward prescription drug coverage in the state — $5.46 billion in 2010. Kentucky received almost $1.5 billion more for prescription drug coverage than California, a state with almost nine times its population.

5) New Mexico > Amt. per capita net of income taxes: $12,399 > Population: 2,059,179 > Pct. of U.S. population: 0.67% > Amt. per capita: $13,578 > Pct. of U.S. funds per person: 0.87%

New Mexico received the third-highest procurement spending per capita in the U.S. at $3,641.68. A significant component of this spending was under the category of non-defense agency spending for the Department of Energy. New Mexico received more federal funding from the Department of Energy than any other state, with an amount of $4.8 billion. This is due to the three nuclear weapons facilities located within the state. New Mexico also ranks seventh for the grant expenditures it received per capita. More than 60% of these grants were from the Department of Health and Human Services. Some 22.53% of the population was on Medicaid — the fourth highest percentage in the nation — which is funded through this department.

4) Hawaii > Amt. per capita net of income taxes: $13,709 > Population: 1,360,301 > Pct. of U.S. population: 0.44% > Amt. per capita: $15,331 > Pct. of U.S. funds per person: 0.65%

The Hawaiian Islands have 11 military bases,contributing to the country’s highest per capita federal expenditure from the Department of Defense in 2010. Along with a large number of military personnel on the government payroll, Hawaii also had the highest federal salaries and wages. Some 77% of the salaries and wages paid are for active military personnel. The state had the 10th highest federal procurement spending per capita, at $2,017.80. Since 2006, federal expenditure on salaries and wages in Hawaii has more than doubled.

3) Maryland > Amt. per capita net of income taxes: $13,723 > Population: 5,773,552 > Pct. of U.S. population: 1.87% > Amt. per capita: $16,673 > Pct. of U.S. funds per person: 2.98%

Maryland had the fifth-highest federal spending per capita from the Defense Department — the state has 11 military bases. In addition, the state received more spending per capita in nonmilitary programs than any other. The state’s proximity to the capital is likely a major factor in this. The state received more than 5% of the total U.S. procurement expenditure, and ranked second in per capita procurement spending — $4,593.79 — nearly three times the national average. Of the 50 states, Maryland has the second-lowest percentage of people living below the poverty line.

2) Virginia > Amt. per capita net of income taxes: $14,201 > Population: 8,001,024 > Pct. of U.S. population: 2.59% > Amt. per capita: $17,008 > Pct. of U.S. funds per person: 4.21%

Virginia received more than $136 billion in federal funds in 2010. This state received more than 12% of the total Department of Defense procurement spending — the second-highest proportion in the country, behind California. The state received the highest per capita procurement funding and the third-highest per capita federal expenditures for salaries and wages. The state’s proximity to the capital is a factor in the high government expenditures. Despite receiving the second-most federal funds per capita, Virginia was very low in terms of the grant funding it received.

1) Alaska > Amt. per capita net of income taxes: $15,197 > Population: 710,231 > Pct. of U.S. population: 0.23% > Amt. per capita: $17,762 > Pct. of U.S. funds per person: .39%

No state in the U.S. received more money per person from the federal government than Alaska. One contributing factor is that the state had the second-highest figure for defense spending in 2010, at $7,337.59 per capita. The federal government also allocated a great deal toward wages and salaries in Alaska — $5,709.52 per capita. This was more than any state other than Hawaii, which spent $5,805.78 per person, and twice the next-closest state within the contiguous U.S. — Virginia — at $2,638.68.