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Connecting the Dots: Federal Funding, State
Budgets, and Policymaking
Rebecca Thiess, Associate Manager
The Pew Charitable Trusts
NCSL Fiscal Leaders Seminar
December 2018
pewtrusts.org/fiscal-federalism
Importance of Federal-State Connection
• Federal spending spread out across the country
• Federal grants to states key part of state revenues
• Federal and state tax codes connected
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Categories of Federal Spending
Grants
Retirement Benefits
Non-Retirement Benefits
Contracts
Salaries and Wages
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Relative Size of Federal Spending Varies Across StatesState Examples: Types of Federal Spending Relative to State GDP, FY2015
0%
5%
10%
15%
20%
25%
30%
35%
Virginia Alabama
Nonretirement
Retirement
Grants
Contracts
Salaries and Wages
29.6% 30.5%
pewtrusts.org/fiscal-federalism
Relative Size of Federal Spending Varies Across StatesState Examples: Federal Spending Relative to State GDP, FY2015
33% 32%
19%
14% 13%
0%
5%
10%
15%
20%
25%
30%
35%
New Mexico Mississippi United States Wyoming North Dakota
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Federal Defense Dollars Are Distributed Unevenly Across the Country Per capita spending by state, federal FY 2015
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Federal Grants as Share of States’ BudgetsPercentage of state revenue, state FY 1967-2016
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Federal Grants Vary as a Share of State BudgetsPercentage of state revenue from federal funds, state FY 2016
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Trends in Federal Grants to States Vary by Program AreaPercentage change from federal fiscal year 2008-17, adjusted for inflation
71%
87%
6%-7%
-11% -15%
40%
72%
-3%
-20%
0%
20%
40%
60%
80%
100%
Medicaid Otherhealth
Incomesecurity Transportation
EducationEverything
else
Total grants HealthNonhealth
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State and Federal Tax Connections
• States with income taxes link to the federal tax code
• States incorporate deductions, exclusions, and credits into their state tax codes
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Current Debates
Tax Reform
Defense spending
Increases in budget caps
Health Care