The State of Federalism in America I

by J. Scott Moody on July 26, 2009, 11:48 pm

in Economics,Philosophy,Politics

Recently the U.S. Census Bureau released their annual Consolidated Federal Funds Report for federal fiscal year 2008 which tracks federal spending by state and county (all years are FFY unless otherwise noted). Between 2007 and 2008, federal spending grew 9.3 percent to $2.7 billion from $2.5 billion.

However, the growth in spending varies by state. The highest growth state was Kentucky where federal spending grew a whopping 45.5 percent to $52 billion from $36 billion. Other high growth states include Texas at 22.3 percent and Connecticut at 20.1 percent. On the flip side, the slowest growth state was Ohio where federal spending fell by 13.9 percent to $91 billion from $105 billion. Other slow growth states include Minnesota (-4.6 percent) and Mississippi (-1.7 percent).

Yet, the bigger question is: “what does this all this mean to the state of federalism in America?” One way to look at this question is to compare federal spending with state and local spending. In state fiscal year 2006, (state fiscal years vary slightly from federal fiscal years) total state and local own source revenue was $1.7 billion. In other words, own source revenue is all the taxes, fees and charges states levy on their citizens to fund state and local government. The federal government spent $2.4 billion.

As such, on average, the federal government is a bigger player in state economies than even their own state and local governments. Yet, in my experience, this important report gets scant attention by state and local policymakers. And it is a big report as well with the pdf version going out to 116 pages of very small print. The underlying data can all be downloaded and the zipped files are 4.55 mb . . . lots and lots of data to be mined. Oh, and this is for just one year–the data goes back to 1993 on-line.

Overall, these are very bad signs for federalism in America and deserve more attention. Therefore, this posting will be the first of several postings examining the five components of federal spending–retirement and disability, other direct spending, grants to state and local governments, procurement and salaries and wages. Hopefully this taste of the data will lead more people to question why the federal government is playing such a large and diverse role in state affairs.

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