Federal Aid Dependency

Federal Aid Dependency

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Mississippi has been called the “moocher state” because it takes in more federal aid than it sends back to Washington, D.C. in taxes. The non-partisan Tax Foundation ranked Mississippi as the state most dependent on federal funds as a percentage of its revenues, with Louisiana second.

 

Federal Aid 2019

 

 

In the state’s fiscal 2020 budget which goes into effect on July 1st, 44.5 percent of revenue will come from federal sources. In the past four budget cycles, that percentage has been largely constant at 44.37 percent.

Only 27.26 percent of the 2020 budget will originate from the state general fund (state taxes such as income and sales) and 25.32 percent sourced from other funds, such as user fees. All of that spending adds up to $21 billion.

The primary driver behind that is social welfare spending. Medicaid ($4.94 billion in federal matching funds) represented 52.63 percent of those funds and social welfare totaled 68.57 percent of all federal funds appropriated for the state.

There’s no denying that Mississippi is dependent on the rest of the nation to pay its bills. The problem with that is multifold. It allows the federal government to have an inordinate say in how the state spends its money (since all federal money comes with unfunded mandates and other conditions) and weakens local autonomy.

This addiction to federal money also ensures that any path to correct the nation’s present disastrous financial trajectory ($22 trillion in debt and climbing) will hit Mississippi first and hardest.

The only way to fix this state of affairs is to break the cycle of dependency and that requires expanding Mississippi’s economy to provide opportunity to many waiting for a chance on the sidelines.

Too many policymakers in this state think that massive, taxpayer-funded subsidies to industry are the only way to build the state’s economy.

 

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