STUDY: Alabama ranked among states most dependent on the federal government

United States Capitol (Photo: Eric B. Walker)
United States Capitol (Photo: Eric B. Walker)

The U.S. government is basically keeping the state of Alabama afloat, according to a new study researching which states are the most reliant on federal dollars to pay their bills.

Personal finance site WalletHub has released an in-depth analysis of the Most and Least Federally Dependent States of 2016, and Alabama came in as the 3rd most dependent state in the country.

The analysis ranked Mississippi as the most federally dependent state, followed by New Mexico, with Louisiana and Tennessee rounding out the top five. Delaware is ranked as the least federally dependent state in the country.

Alabama also ranks 4th in most federal contracts received and 3rd in highest other financial assistance (per dollars in federal taxes paid).

In order to create their ranking, WalletHub determined how dependent state residents and state governments were on the federal government.

State residents’ dependency was determined by analyzing the amount of tax returns residents received from the federal government and how many federal jobs the state employed. State government’s dependency was ranked based on what percent of state revenue came from federal funding.

Alabama ranked 5th in State Residents’ Dependency and 9th in State Government’s Dependency. Typically between 35 and 40 percent of Alabama’s budget is funded by the federal government.

WalletHub’s analysis on federal dependency comes as the tax deadline draws near. The site did a related study that determined what states have the highest and lowest tax rates. Alabama has the 13th lowest tax rates in the country.

Liberal economists have argued that Alabama’s relatively low tax structure is being made possible by federal dollars propping up the state’s economy. Conservative economists make the opposite assertion, arguing that lower taxes and less regulation will lead to more economic growth, which will spur the state toward being less dependent on the federal government to meet its obligations.

See WalletHub’s full list on their site.