15 States Most Dependent on the Federal Government

The Lincoln Memorial and Washington Monument in Washington D.C
Some states inherently need more support from the federal government. | iStock.com/Sean Pavone

Americans strive to be self-sufficient, but there are many factors at play. It’s not simply a calculation of who has the most money or best skill set — though that plays a part. Resources aren’t always distributed equally. And even if you look at which states are the richest or poorest, you’re not getting a complete picture. Each state has a certain amount of natural competition with its counterparts to attract businesses and investment dollars or to attract college students.

However, some states carry unique burdens while others have advantages. Due to these differences, states depend on support from the federal government to vastly different degrees.WalletHub has released its annual study, looking at federal dependency and digging into data to find out which states are the most dependent on Uncle Sam, and the methodology is complex.

Let’s take a quick look at the 15 states most dependent on the federal government.

15. Vermont

Montpelier, Vermont Skyline
Vermont’s state taxes aren’t enough to fill the coffers, so Uncle Sam helps. | SeanPavonePhoto/Getty Images
  • The state still needs help despite taxes

Vermont is one of the worst states for property taxes and has some of the highest estate taxes in the country, but it is still one of the states most dependent on the federal government. The sparse population and lack of big cities mean the state needs the federal government to help pick up the slack.

Next: A border state that can’t face its challenges alone.

14. Maine

Lubec, Maine is seen from the water.
Lubec, Maine | Don Emmert/AFP/Getty Images
  • Three challenges put Maine on the list

Maine is yet another border state in a unique geographic area. The border with Canada requires lots of spending to maintain, and Maine’s numerous waterways, ports, and islands also require infrastructure spending. Maine doesn’t have a huge population either, meaning its tax base is relatively small. And a small tax base plus infrastructure challenges, among other things, add up to increased federal spending.

Next: This state is getting better, but it still needs federal money.

13. Tennessee

Beale Street in Memphis, Tennessee
Beale Street in Memphis, Tennessee | iStock.com
  • The state is getting better, but it still needs help

Tennessee needed more help from the feds in the past as it ranked No. 8 the last time WalletHub did its evaluations. But the same issues persist and it is one of the states most dependent on the federal government.

Like many of its neighboring states, Tennessee is rife with economic burdens. There are a few large cities and population centers, not to mention some large universities. But despite those large tax bases, the state still requires help from Washington. Globalization has seen many jobs evaporate or relocate, and recent economic downturns hit the state hard.

Next: A large Western state is a case study for its cousins.

12. Oregon

Portland, Oregon
Oregon gets federal money for the same reasons as other western states. | Png-Studio/iStock/Getty Images
  • The national lands require a lot of federal money

We’ll encounter a few big western states further down the list, and the reasons Oregon is one of the states most dependent on the federal government are the same as the rest. Many of them are border states or have large coastlines, plus the federal government controls huge amounts of land out west. All of those require significant federal spending, which explains Oregon’s appearance on our list

Next: The lingering effects of the economic downturn still hurt.

11. Indiana

Indianapolis skyline at sunset
Indianapolis skyline at sunset | iStock.com/RudyBalasko
  • The economy is still recovering from 2008

Like many other Midwest states, Indiana has experienced a tough go of it economically in recent years. It’s a part of the Rust Belt, and many of the state’s jobs have been outsourced or replaced with automation. A prime example? The Carrier manufacturing jobs President Trump promised to save that still disappeared. Those and many other manufacturing jobs that supported many communities are simply gone. The tax base has shrunk as a result, and opportunities have dried up.

Next: The state that gives a lot and gets a lot in return.

10. Louisiana

Dusk falls over Bourbon Street in the French Quarter of New Orleans, 11 July 2006, almost one year after Hurricane Katrina devastated the city. For tourists strolling through the French Quarter it's easy to forget that Hurricane Katrina ravaged New Orleans a year ago. The beignets are fresh, trinkets and designer clothes are artfully arranged in shop windows, and hurricanes are spinning in the bars on Bourbon Street. But while the music, food and good times have come back, the crowds have not and the city is struggling to make ends meet while its main industry remains crippled. With more than 10 million visitors a year, tourism was once a 5.5 billion dollar industry in New Orleans, accounting for 40 percent of the city's tax revenues and employing 85,000 people. (Photo by Robyn Beck/AFP/Getty Images)
New Orleans | Robyn Beck/AFP/Getty Images
  • Louisiana is prone to disasters like hurricanes, which cost the federal governemnt a lot.

States along the Gulf Coast are susceptible to many things others don’t have to deal with. For example, Louisiana provides the federal government with substantial tax revenue from the offshore oil-drilling industry. But it’s also susceptible to disasters, such as Hurricane Katrina. Plus, the state has a lot of infrastructure to maintain. On top of that, Louisiana has the third-highest poverty rate in the country. The federal government helps anyway it can, including handing out big tax refunds to residents.

Next: We are westward bound once again.

9. Montana

grassy hill in Missoula, Montana
Missoula, Montana | iStock.com/Andy Kemmis
  • The lack of big cities means the feds need to get involved

As we mentioned when discussing Oregon, Western states get a tough shake from the federal government. Montana is one of those states, but it doesn’t have the advantages of a relatively high population or major cities that some others do. In fact, the state’s largest city is Billings, Montana, with a population of a little more than 100,000.

Montana sits on the Canadian border, requiring federal funding to remain secure. It’s also home to some of the country’s most incredible national parks, such as Glacier National Park and part of Yellowstone. There are huge amounts of federally controlled land and a handful of large Native American reservations that take in federal dollars.

Next: Three reasons Uncle Sam cuts some big checks for this state.

8. Alaska

trans-alaska pipeline
Alaska’s oil industry is one reason it gets lots of federal money. | Photo by Barry Williams/Getty Images
  • The government has reasons to keep the state up and running

We know Alaskans receive a stipend to live there each year. The Permanent Fund is a state program, but Alaska is one of the states most dependent on the federal government for several reasons. It’s one of the largest oil-producing states, it had many national parks, and it has a long international border that needs to be protected.

Next: National parks are one reason why the feds send money.

7. Arizona

View of Phoenix Arizona
Arizona | iStock.com
  • A few factors why Arizona is dependent on the federal government

We mentioned Western states have large amounts of federal land. Arizona is no exception. It’s home to national parks, such as the Grand Canyon, and a large chunk of our border with Mexico. Those require a lot of federal backing. It’s also home to many Native American reservations, including the nation’s largest: the Navajo Nation.

Next: It needs the feds’ help to deal with economic struggles.

6. South Carolina

Captiol building in Columbia, South Carolina
Columbia, South Carolina | iStock.com/Sean Pavone
  • Economic struggles make it dependent on the federal governmen

South Carolina suffers from many of the same issues as other states on this list. Particularly, it has a sizable coastline, economic struggles, and a few military bases. And, like other states with the same factors, these require help from the federal government. Also, like many other states, the economic situation isn’t great. Things have improved since the Great Recession, but the growth rate still isn’t where policymakers would like it to be.

Next: No wonder the federal government sends help.

5. West Virginia

view of the city, mountains, and water in Charleston, West Virginia
Charleston, West Virginia | Joe Raedle/Getty Images
  • Poor and unhappy residents need the government’s help

West Virginia is the unhappiest state in America, and there’s at least one reason for it. The state has one of the lowest GDP’s per capita in the U.S. (No. 48 per the WalletHub study), and it needs all the federal help it can get.

Due to its relatively low population, there are not many tax dollars flowing to Washington, D.C., from West Virginia. For that reason, West Virginia gets more back than it puts in. Many people work in dangerous, low-wage jobs, such as mining, and the state’s economy has been slow to adapt.

Next: The government spends to help battle dismal living conditions.

4. Alabama

scene of downtown Huntsville, Alabama
Huntsville, Alabama | iStock.com
  • Living conditions are really bad in Alabama, so the feds have to help ou

You know living conditions are dismal when the United Nations visits and says the poverty is as bad as in any third world country. That’s why Alabama is one of the states most dependent on the federal government.

It’s home to five military bases and a major port in Mobile. It’s also ranked high in terms of its population of the economically disadvantaged, with some reports pegging it as high as the fourth-poorest in the nation. With so many people in lower income brackets, many are not able to pay much — if any — in taxes and tend to get government assistance. You can also add in immigration and environmental issues that have substantial costs.

Next: Let’s spin the record again.

3. Mississippi

aireal view of Jackson, Mississippi
Jackson, Mississippi | iStock.com/Sean Pavone
  • It needs the help since it has the lowest GDP per capita

Along with its Gulf Coast neighbors, Mississippi is heavily dependent on the federal government. The state suffers from some serious socioeconomic issues and has the lowest GDP per capita of any state in the U.S. There are a few things that capture federal funding, including several military bases. But the major issue appears to be the lack of jobs and opportunity suffered by the state’s residents.

Next: This is considered an improvement.

2. Kentucky

A worker harvests tobacco in Kentucky.
A worker harvests tobacco in Kentucky. | Luke Sharrett/Getty Images
  • Lots of personal federal assistance

Kentucky isn’t one of the five states most dependent on the federal government, at least not in terms of grants on government contracts. Residents get a lot of federal assistance in other ways, but many of the state’s residents still lag behind, and the state has a high poverty rate. That leads to high levels of government assistance to those in need.

Next: The new No. 1 is an old No. 1.

1. New Mexico

A street sign in Santa Fe, New Mexico
Santa Fe, New Mexico | iStock.com
  • Federal contracts are crucial

New Mexico topped the list in 2015 and then slipped to No. 3, but it’s back on top (or is that on the bottom?) again. No state relies more on federal money than New Mexico. The next two states taking the most from the feds, Maryland and Virginia, border Washington, D.C., and house several federal entities.

New Mexico shares a lot of the same issues with its neighbor Arizona. Specifically, it’s a border state with immigration issues and lots of federal lands. There are also some major science and military installations, including the White Sands Test Facility and Los Alamos National Laboratory, requiring substantial federal funding. Large portions of the state are also designated as Native American reservations, placing an even greater amount of federal dollars in New Mexico’s jurisdiction.

Additional reporting by Jason Rossi. 

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