Which states receive more than they send to the federal government? See map.
This story was updated with new information.
Last month, President Donald Trump signed an executive order aimed at reforming and overhauling the Federal Emergency Management Agency (FEMA). He had suggested abolishing the agency, partly because of its response to Hurricane Helene. The federal government should instead send funding to governors to manage their own response to disasters, Trump said.
FEMA, which provides emergency personnel, supplies and equipment to help areas begin to recover from natural disasters, is one of many federally funded programs that provide a lifeline to state and local governments in times of crisis.
Similar to FEMA, federally funded programs like Medicare, the Supplemental Nutrition Assistance Program (SNAP), Children's Health Insurance Program (CHIP) and others provide social assistance like food aid and health care to millions of Americans.
In fiscal year 2023, the federal government provided $1.1 trillion to state and local governments, according to the Office of Management and Budget. How much do states receive in federal spending compared to what their residents and businesses pay through taxes? A recent report from the Rockefeller Institute of Government provides answers.
According to the report, 13 states send more money to the federal government than they receive. The difference in federal expenditures distributed to states and money paid to the federal government by individuals and businesses in the form of taxes is called the balance of payments. The report includes preliminary estimates of federal revenue and spending data for fiscal year 2022.
The report categorizes federal spending distributed to states by the following areas:
- Direct payments to residents – such as social security payments, retirement, education, food aid and other public assistance programs.
- Federal grants, such as Medicaid funding, transportation, infrastructure and more.
- Contract and procurement spending.
- Wages paid to federal employees.
The federal government collects revenue from businesses and residents in the form of personal income taxes, social security and Medicare taxes, corporate income taxes and excise taxes.
Researchers use federal revenue and spending data to better understand the gaps in each state’s balance of payments with the Federal government. Policymakers use this information to see if their current and proposed funding allocations are fair, appropriate and will achieve policy goals, the report stated.
States with the lowest and highest balance of payments
As of 2022, New Mexico had the highest balance of payments, receiving more federal funds than what its businesses and residents paid in taxes to the federal government. This is influenced by several factors, the report states. New Mexico has high levels of Federal spending because of large military facilities as well as a high concentration of government contractors in the region. At the same time, New Mexico has lower income levels, so a relatively smaller amount of tax revenue is sent to the federal government.
"Payments to individuals under the Social Security and Medicare programs are disproportionately concentrated in states with the largest elderly populations," according to the report. As of 2022, nearly 20% of New Mexico's population is 65 years or above – a higher rate than the national average of 17%, according to Census Bureau. Additionally, New Mexico had the third-highest poverty rate in the country.
According to the report, the federal system tends to concentrate grants and funding to states with the highest poverty rates among their residents. This takes the shape of grants for Medicaid, Supplemental Nutrition Assistance Program (SNAP) and other social welfare programs.
A large concentration of an aging population that relies on social security payments along with a large concentration of resident living in poverty gives insight into why New Mexico had the highest balance of payments.
The report found that Maryland and Virginia have a large balance of payments per capita.
According to data from the Census Bureau, Maryland and Virginia are both relatively high-income states. They also have a large concentration of federal workers, District of Columbia-area agencies and government contractors. Wages paid to federal employees and contractors living in the state make up a portion of federal spending in these states.
Maryland and Virginia have a high concentration of defense contracting sectors and military bases in the area. Despite a large tax revenue funneling into the federal government from these states - Maryland and Virginia have a high balance of payments.
A state with a negative balance of payments sends more money to the federal government than it receives. Massachusetts had the lowest balance of payment per capita, according to the report. This figure excludes spending related to COVID-19 relief. New Jersey and Washington followed with a balance of payments in the negative.
Massachusetts and Washington are among the states paying the highest federal taxes per capita. These states tend to have high per capita incomes.