Top 10 States that Benefit the Most From the Federal Government

Source: Thinkstock

Source: Thinkstock

The Federal Government is known for spending money. Over the past few decades, trillion-dollar budgets and debt levels have become the standard on Capitol Hill. Despite political rhetoric that resurfaces around election time, this spending accounts for a significant portion of economic activity in the 50 states. However, the amount and composition of federal spending varies dramatically from state to state.

In fiscal year 2013, the federal government spent $3.1 trillion in the states, equivalent to about one-fifth of all economic activity, according to a new study from the Pew Charitable Trusts. Since fiscal year 2004, federal spending in the states has increased 26% on an inflation-adjusted basis. Furthermore, every spending category increased in real terms, with the exception of grants, which decreased by 5%. The five spending categories are listed below.

  • Retirement benefits payments to individuals include Social Security retirement, survivor, and disability payments; veterans benefits; and other federal retirement and disability payments. Social Security accounts for about three-fourths of these payments.
  • Non-retirement benefits payments to individuals include Medicare benefits, food assistance, unemployment insurance payments, student financial aid, and other assistance payments. Medicare accounts for nearly two- thirds of these payments.
  • Grants include funding to state and local governments for a variety of program areas such as health care, transportation, education, and housing, as well as funding for individuals and other nonfederal entities, such as research grants. Medicaid grants to states account for about half of all federal grants.
  • Contracts for purchases of goods and services, from military and medical equipment to information technology and catering services. Defense purchases account for more than half of federal contracts.
  • Salaries and wages for federal employees. Roughly two-thirds of this spending is for civilians, and one-third is for military personnel.

In order to gauge the importance of federal spending, the Pew Charitable Trusts compared spending to gross domestic product in each state. While this does not directly measure how much total federal spending directly contributes to each state’s economy, it provides a standardized yardstick to compare spending across the nation. Unsurprisingly, the Washington, D.C. area ranks quite high as federal spending in the nation’s capital was equivalent to 42.3% of its GDP, higher than in any of the states.

Let’s take a look at the 10 states benefitting the most from federal spending.

Source: Thinkstock

Source: Thinkstock

10. Hawaii

  • Federal spending relative to GDP: 25.9%
  • Federal spending in dollars: $19.3 billion

Source: Thinkstock

Source: Thinkstock

9. Kentucky

  • Federal spending relative to GDP: 26.4%
  • Federal spending in dollars: $48 billion

Source: iStock

Source: iStock

8. South Carolina

  • Federal spending relative to GDP: 26.8%
  • Federal spending in dollars: $48.8 billion

Source: Thinkstock

Source: Thinkstock

7. Maryland

  • Federal spending relative to GDP: 27.3%
  • Federal spending in dollars: $93 billion

Source: Thinkstock

Source: Thinkstock

6. West Virginia

  • Federal spending relative to GDP: 29.2%
  • Federal spending in dollars: $21.3 billion

Kevin C. Cox/Getty Images

Kevin C. Cox/Getty Images

5. Alabama

  • Federal spending relative to GDP: 29.5%
  • Federal spending in dollars: $56.8 billion

Source: Thinkstock

Source: Thinkstock

4. Maine

  • Federal spending relative to GDP: 29.6%
  • Federal spending in dollars: $16.1 billion

Photo by A. Messerschmidt/Getty Images

A. Messerschmidt/Getty Images

3. New Mexico

  • Federal spending relative to GDP: 30.1%
  • Federal spending in dollars: $27.6 billion

Bruce Bennett/Getty Images

Bruce Bennett/Getty Images

2. Virginia

  • Federal spending relative to GDP: 30.6%
  • Federal spending in dollars: $138 billion

Source: Thinkstock

Source: Thinkstock

1. Mississippi

  • Federal spending relative to GDP: 32.9%
  • Federal spending in dollars: $34.3 billion

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