Study Shows State Is One of Least Dependent on Federal Government
By Hank Russell
With the amount of money that New York State spends, one would think that the state would have its hands out asking the federal government for more money. But a study found that is not the case.
A recent study by WalletHub has found that New York ranks 38th as one of the most federally dependent states in the nation overall. New Jersey was the least dependent on the federal government, while Alaska was the most dependent.
To assess how federal dependence varies across the country, WalletHub compared all 50 states using three key metrics: the return on federal taxes paid, the share of federal jobs, and federal funding as a percentage of state revenue.
New York residents do not seem to be as dependent on the federal government, ranking 45th ahead of California, Illinois, Delaware, New Jersey and Massachusetts, based on WalletHub data. The state whose residents were most dependent on the federal government was New Mexico.
When it comes to the state government’s dependency on the federal government, New York is in the middle — 24th in the nation. Hawaii’s state government is the least dependent, according to WalletHub, while Louisiana’s is the most dependent.
The study also found that New York received the fewest government grants behind California, but had the highest Gross Domestic Product.
What is interesting about where New York stands when it comes to dependency on government funds is that, for more than a year, Governor Kathy Hochul and President Donald Trump have been in a battle over federal funding. This includes the president’s cuts to the state’s Medicaid and SNAP programs; the freezing of funds for the Gateway Tunnel Project; and the other energy and infrastructure projects. Comptroller Tom DiNapoli said, as a result, the budget will face a $27.5 billion budget gap over the next five years.
Because of the cuts by the federal government, DiNapoli said, there will be “lost funding and increased costs to the state,” and they “could deal a devastating blow to hundreds of thousands of New Yorkers with the loss of health coverage, nutritional assistance, safety net protections and more. As negotiations commence, policymakers need to proceed with caution as they work on balancing the budget, improving affordability and maintaining vital services for New Yorkers.”
Hochul has also demanded that the federal government pay the state more than $13.5 billion in lost revenue from his “illegal” tariffs. “These senseless and illegal tariffs were just a tax on New York consumers, small businesses and farmers — and that’s why I’m demanding a full refund,” Hochul said.
When asked if states should receive a certain amount of federal resources based on how much they pay to the federal government, and whether other states should subsidize each other, Lucy Dadyan, Ph.D., of the Urban Institute and The Brookings Institution, said it might result in inequality and economic instability.
“Strictly allocating federal resources based on tax contributions would direct more funding to wealthier states while neglecting the needs of less affluent regions, exacerbating inequalities and undermining the federal government’s role in maintaining nationwide economic stability,” Dadayan said.
“The current model of wealthier states subsidizing poorer ones through federal grants and aid programs helps ensure that all residents, regardless of their state’s wealth, have access to essential public services,” she continued. “However, this needs-based approach may sometimes lead to inefficiencies, reduce incentives for fiscal responsibility, and create dependency on federal funds.”
“Regardless of whether the distribution of federal funds is fair or not, living in one of the most federally dependent states can be beneficial for residents,” WalletHub analyst Chip Lupo added. “For every dollar residents of the top states pay in taxes, they get several dollars back in federal funding, which often leads to higher-quality infrastructure, education, public health and more.”