Increased dependence on federal funding is eroding states’ rights

Increased dependence on federal funding is eroding states’ rights

This issue distinctly hits close to home here in the Commonwealth of Virginia where the Republican-controlled House of Delegates is locked in a battle with the unfortunately elected Governor Terry McAuliffe. At issue is whether Virginia should expand Medicaid, under the banner of Obamacare, and accept billions in initial federal funding to pay for the expansion. Of course, in a few short years, the federal funding dries up leaving the burden for this expansion squarely on the backs of Virginia taxpayers. The arguments against expanding Medicaid are entirely understandable and straightforward. Virginia does not need to be saddled with ballooning social programs and we don’t need to cede state control of the budget and social services over to Uncle Sam. How this battle shakes out remains to be seen with both sides vowing to get their way.

Unfortunately, dependence on federal dollars has been increasing in the past decade at a fairly alarming rate. The Washington Examiner put together a chart of the numbers, compiled by the US Census Bureau, and what it reveals is a steady erosion of state sovereignty. Here’s a summary of the findings:

Only 11 states depended on the federal government for more than one-third of their total revenues in 2001. By 2012, 24 states found themselves in this situation.

State-by-state data from the U.S. Census Bureau, compiled by the State Budget Solutions nonprofit, illustrates the trend of increasing state dependence on federal financial assistance.

Forty-one of the 50 states have become more dependent on the federal government since 2001 — with federal dollars accounting for an increasing share of their total revenues.

This trend of increased state dependency on Washington reduces state and local control, while threatening the states’ long-run autonomy.

About half of all states let the federal government essentially control more than one-third of their state budget. That is almost the equivalent of another branch of state government with a hand on the purse strings.

Some of this dependence is mandated which is unavoidable by the states. For example, Medicaid itself is a mandated government program of which there is a minimum level each state must meet. Virginia squeaks by the federal minimums and is ranked 48th in per capita Medicaid spending. That statistic makes Democrats squeal with indignation but it is one of the reasons Virginia’s economy has propelled the state’s number one business ranking. Taxes are relatively low and and social program spending is kept at a reasonable level.

When states begin to cede this much authority over to the federal government, there is a loss of control that occurs at the state level. It is beyond evident that big government expansionists use this tool as a bargaining chip to leverage the states. A state won’t comply with a federal program? Fine. Congress may decide to cut funding for state highway projects next time around. No governor or state legislature is willing to be left holding the bag by cutting services or raising taxes to make up for lost federal funding so they go along with the demands more often than not.

The Bible says that the borrower is slave to the lender. That principle is clear between states and the federal government which is why the battle in Virginia to keep federal dollars out of the state budget is so critically important. Once the camel’s nose is under the tent, it will expect a seat at the budget negotiation table.



Nate is founder of the blog He is a software developer by day.


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