Federal Spending

Overview

Federal Spending in the Northeast-Midwest

The Northeast-Midwest Institute and the Northeast-Midwest Congressional and Senate Coalitions have tracked and analyzed federal spending and taxation patterns since their founding in the mid-1970s. Most states in the Northeast and Midwest contribute more in taxes to the federal government than they receive back in federal spending, which means the Northeast-Midwest region subsidizes federal spending in the rest of the country. The factors driving the Northeast-Midwest's low return on federal tax dollar vary within the region. In the Northeast as a whole, higher than average per-capita taxation yields a low return on dollar despite relatively high levels of federal spending. In the Midwest, the low return on federal tax dollar stems from relatively low levels of federal spending.

Factors that Influence Federal Spending

The consistency of federal spending, taxation, and return on dollar trends over time points to the stubborn nature of what determines the federal balance of payments for a state or region. An elected official has limited control over the flow of federal funds into and out of a state, and little opportunity to spur dramatic changes from one year to the next. Factors that influence federal spending and taxation patterns include the following:

• Demographics – a state's share of residents aged 65 or older and under 18 helps determine spending levels for many federal programs designed to assist the elderly and children.
• Economic well-being – high poverty rates and low income levels in a state increase the likelihood of federal spending on assistance programs, while high incomes reduce the likelihood of such federal spending and increase the federal tax burden.
• Industry mix – a concentration of defense industries boosts federal procurement dollars, and a concentration of farming increases federal expenditures for agricultural assistance.
• Federal facilities – the location of federal facilities determines state-by-state federal spending on employee benefits, wages, and salaries, among other items.
• Emergency situations – targeted federal spending helps offset the impact of unexpected and adverse developments, including natural disasters and human catastrophes.
  

Reports and Tables

While quick and dramatic changes to the regional flow of federal funds are unlikely, the Northeast-Midwest Institute looks for opportunities to improve federal spending and taxation patterns for the region over time. The Northeast-Midwest Institute regularly publishes reports about state and regional imbalances in federal spending. In addition, the Institute works with the Northeast-Midwest Congressional and Senate Coalitions to inform and educate policymakers about the impact that federal legislation and programs have on spending patterns. Attention is paid to federal funding formulas and to federal spending on important regional issues.

• Northeast-Midwest Guide to Federal Formula Grant Programs (large pdf file)
  The grants guide provides basic information and useful data about each of the 50 largest federal formula grant programs to state and local governments. (To see a list of the programs featured in the grants guide, click here.) In addition, the guide provides separate reports and data about how each of the 18 Northeast-Midwest states fares for 158 federal formula grant programs. After downloading, use the grants guide table of contents to locate programs or states of interest.
• Regional Analysis of the President's Fiscal 2004 Budget
• Military Base Closings: A Regional Analysis of Past Actions
• Defense Spending in the Northeast and Midwest: Fiscal 2000
• Annual Tables for Flow of Federal Funds to the States
  (The tables with tax burden data will be updated upon release of 2006 tax burden data.)
  • Understanding the Flow of Federal Funds Data
  • Distribution of Federal Spending by Category: Fiscal 2006
  • Per-Capita Federal Spending by Category: Fiscal 2006
  • Per-Capita Federal Spending as a Percent of U.S. Per-Capita Level: Fiscal 2006
  • Defense Department and Other Spending Levels: Fiscal 2006
  • Per Capita Tax Burden and Rate of Return on the Federal Tax Dollar: Fiscal 2005
  • Rank Per Capita Spending & Tax Burden, Return on Fed Tax $ Fiscal 2005
• Other Federal Spending Tables
  • Fiscal 2006 Appropriations Update
  • Fiscal 2005 Appropriations Update
  • Fiscal 2004 Appropriations Update
  • R&D Expenditures by Sector as a Percentage of Total R&D, 2000
  • State Percentages of U.S. R&D Expenditures by Sector, 2000
  • State Percentages of U.S. Federally Funded R&D Expenditures by Sector, 2000
    
• Low-Income Home Energy Assistance Program (LIHEAP)
  • Chart: Diminished Purchasing Power of LIHEAP Appropriations
  • Chart: Level of Appropriations Needed to Equal LIHEAP's 1982 Level
    
  • LIHEAP Requests, Authorizations, and Appropriations, FY 1982–FY 2000

Activities

Federal Spending Data

The Northeast-Midwest Congressional Coalition and Institute in 2004 and 2006 have asked the White House Office of Management and Budget to work with the Census Bureau in order to provide useful federal-spending data on the full range of federal funds by state, down to the agency and program levels. The letters note that it is important that any actions taken to change the current system continue to provide users with data on all types of federal spending, loans, and insurance. 

State Budget Outlook and Medicaid Briefing

According to the National Governors Association and the National Association of State Budget Offices, states are confronting the most dire fiscal situation since World War II. States face falling tax revenues and rising budget shortfalls that are estimated to total nearly $50 billion this fiscal year. Many states have exhausted cost-saving measures such as budget cuts and drawing down on rainy-day funds to help make up for budget shortfalls. As states try to close their budget gaps, many are turning to reducing Medicaid expenditures.

Additional Resources

Consolidated Federal Funds Report, U.S. Census Bureau, Governments Division, http://www.census.gov/govs/www/cffr.html: Offers annual reports and data on federal spending traceable to the states.

For more information, contact
Matt Kane, Policy Analyst

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