Washington Spending Has Huge Impacts on State Finances

By Daniella Ignacio

What happens in Washington doesn’t just stay in Washington. It has a major impact on the states around the country as well.

In a session with NPF Paul Miller fellows, Barb Rosewicz, the director of the Pew Charitable Trusts’ Fiscal 50 project, and her colleague Rebecca Thiess, the associate manager of Pew’s Fiscal Federalism Initiative, spoke about the importance of federal dollars to states, as well as current trends in state dollars.

“We’re a nation of states, so when you talk about the federal budget, there are repercussions at the state level for many things – particularly money issues,” said Rosewicz. “The 50-state story is the national story.”

Using Pew’s data and analysis resources, Thiess explained that the distribution of spending is relative to state economies and falls into different categories, such as grants, retirement, non-retirement, salaries and wages and contracts for goods and services.

States have different mixtures of federal funding depending on their needs, demographics and policies. Therefore, federal grants vary as a share of state budgets.

“The data raise intriguing questions for reporters and researchers to say, ‘Why could that be going on?’ ” Rosewicz said. “A lot of times, people don’t look at what’s going on in that data.”

But there could be surprising stories hidden there. For example, Rosewicz looked at “a tale of two oil states” – Alaska and North Dakota – that both sell oil for the same amount of money. However, North Dakota, where fracking led to an oil boom after the Great Recession, has far higher tax revenue now than before the downturn while Alaska’s tax revenue is far lower.

According to Rosewicz, if the U.S. enters another recession, it’s going to start at the state level, and journalists need to be resourceful and prepared to look at states individually, as well as to watch Washington.

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