New research indicates 2011 will be the first year that federal aid becomes the largest component of state revenues. Already 27 states, including Louisiana, rely on federal aid as their primary source of funding, but the report’s author describes this year’s level as a critical breaking point.
“It sends a profound message,” says Sven Larson, a research fellow with the Wyoming Liberty Group. “There is a growing consensus among the states that dependency on the federal government is tolerable, even desirable.”
While state revenues have declined during the Great Recession, debt-financed federal aid has risen. Nationwide it now stands at more than one third of total state revenues, with greater state conformity over the level of federal aid dependence.
In 2010, Oklahoma and Louisiana were the most dependent, with federal aid comprising 50 percent or more of their revenue. Ten other states were more than 40 percent dependent, compared to only one state in 2005 – Louisiana at 45 percent. (Click here for a ranking of state financial dependency.)