Only 11 states depended on the federal government for more than one-third of their total revenues in 2001. By 2012, 24 states found themselves in this situation.
State-by-state data from the U.S. Census Bureau, compiled by the State Budget Solutions nonprofit, illustrates the trend of increasing state dependence on federal financial assistance.
Forty-one of the 50 states have become more dependent on the federal government since 2001 — with federal dollars accounting for an increasing share of their total revenues.
This trend of increased state dependency on Washington reduces state and local control, while threatening the states’ long-run autonomy.
The reason is that with federal patronage comes federal leverage. The original Obamacare plan, for example, was to force states to expand Medicaid by threatening them with loss of all federal matching Medicaid funds if they refused.
Although that particular scheme was struck down by the Supreme Court, state governments hate to turn down revenue, and federal dollars have strings attached that force states either to operate as Washington prefers or lose the money.
This problem is exacerbated by the federal government’s control of the currency and ability to borrow virtually unlimited amounts of money.