While 2016 will surely bring a lot of debate about North Carolina’s budget, a look at an analysis from a leading watchdog group is a reminder that the state relies heavily on federal funds – though less so than some of its neighbors.
According to a release from the Washington, D.C.-based Tax Foundation, among states that rely on government funds for their revenues, North Carolina sits right in the middle at 25th based on the percentage of the state’s revenue that is made up of federal funds.
In 2013, the most recent year available, 32.5 percent of the state’s revenue was made up of federal funds. North Carolina received $15.4 billion in federal aid money in 2013, while local governments in the state received $2.2 billion, bringing a total of $17.7 billion to the state in federal aid money.
Most of the revenue comes from federal aid programs. with the largest source being Medicaid, the report says.
The funding “includes federal Medicaid payments, education funding assistance, support for infrastructure projects, housing grants, and more,” the report said. “Federal grants-in-aid to state and local governments have reached $600 billion per year, with Medicaid by far the largest and most rapidly growing component. How much states receive in federal aid, and how reliant they are on such assistance, can vary widely.”
NC ninth in South
Among states in the Southeast, North Carolina performs strong, only coming in behind Florida, South Carolina and Virginia, which were ranked 28, 30 and 47 respectively.
The South represents five of the top 10 states on the list, with Mississippi taking the first slot with 42.9 of its revenue coming from the federal government.
Louisiana took the second spot with 41.9 percent of its revenue coming from the federal government while 39.5 percent of Tennessee’s revenue came from Washington, landing it in third.
Nationwide, the federal government contributed 30 percent of state revenues through grants and programs like Medicaid.
Funds are mostly from federal aid programs
The state General Fund is fed through taxes such as the income tax and sales taxes, but a significant amount of funding comes from other sources.
States drawing the most federal money are often states with larger low-income populations and “modest tax collections,” though there are exceptions.
Low-income populations draw more federal housing, Medicaid and governmental assistance aid than higher-income segments of the population.
Two such exceptions are North Dakota and Alaska, which are listed as numbers 49 and 50.
Both states take smaller percentages of federal funds, with North Dakota at 19 percent of its revenue and Alaska at 22.4 percent.
“These states tend to have higher per capita tax collections and populations with lesser reliance on federal assistance,” the report said. “Notably, although North Dakota and Alaska impose relatively modest taxes on residents, they are resource-rich states which export much of their tax burdens through severance taxes and thus experience some of the highest tax collections per capita in the nation.”