It’s been said that federal money is like a drug: once you have a taste for it, you want more. When that happens, the drug dealer has power over the user.
For decades, the federal government has hooked the states on federal taxpayer money. The number of federal aid programs for state and local government grew from 327 in 1965 to 1,122 in 2010. Sixty-five percent of that growth has occurred since 2000. Today, the federal government spends over $650 billion on these programs.
The lion’s share of these programs is not state and federal partnerships like the federal highway system. Transportation programs only account for about 10 percent of the total – the third biggest chunk. The biggest portion is health and welfare programs (accounting for 55 percent), and the second largest is education (20 percent).
Some states, however, are more prone to this addiction than others. Arizona, for instance, is practically a ward of the federal government. Arizona’s federal aid as a share of total state expenditures in 2011 was at least 30% according to the most recent Census Bureau data. This puts Arizona in the top ten of all states. Some of this is certainly a function of demographics, poverty rates, and the presence of federal and Indian land. But some of it is self-inflicted.
“Free” federal money is quite an enticement for some policymakers. For instance, federal matching funds have been part of the rationale Governor Brewer’s office has put forward for expanding Arizona’s Medicaid program. Yet the federal government often pulls its share of the funding stream at a later date, leaving state taxpayer’s on the hook for a program they may not have supported in the absence of the federal subsidy.
States can avoid much of this dependency on the federal government – and the strings that always come with federal money – by simply refusing to expand state programs for the purpose of getting federal matching funds. And federal policymakers looking for ways to balance the U.S. government’s budget can look to state and local funding as part of any budget-cutting package. Such a move would not only encourage more prudent decision-making by state policymakers but it would also help restore federalism like the U.S. Constitution’s authors envisioned.
Census Bureau – State Government Finances 2011
State Budget Solutions – Federal Aid to State Budgets Rise . . . But is the End Near?
Cato Institute – Federal Aid-to-State Programs Top 1,100
Reason – Get States off the Federal Dole
Goldwater Institute - Arizona's Struggle for Sovereignty: The Consequences of Federal Mandates