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Federal Funds

The federal government’s deteriorating fiscal condition makes reductions in federal funds to state and local governments inevitable and imminent. Utah, a leader in the “Financial Ready” movement, has been developing contingency plans for scenarios in which 5% and 25% of federal funds to the state are suddenly cut off, in order to prepare itself for such reductions. Given these concerns, unaccounted-for federal funds to political subdivisions put Texas in a precarious financial situation.
“The common misconception that federal-aid is free is not true. Federal policies crowd out the ability for state lawmakers to enact legislation that affects Texans.”
— Vance Ginn, Ph.D.

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Vance Ginn, Ph.D.

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Recommendations

  • Prepare for the next federal budget crisis by identifying and measuring the cost of the mandates attached to federal funds.
  • Evaluate the economic and fiscal impacts of a rising share of federal funds when writing the budget; minimize any increase in federal aid or reduce it.

Talking points for liberty fighters

  • Federal funds constitute approximately 33%, or $72 billion, of the 2018-19 budget.
  • Rising federal-aid funding for transportation and other state-level projects suggest legislators should consider ways to return more state dollars to fund projects without strings attached.
  • From 2000 to 2015, the federal funds share of the budget averaged 33.7% in the Lone Star State, ranking Texas as having the 15th highest federal share nationwide.
  • In spite of the work of transparency advocates, to date there remains no reliable estimation quantifying the extent of feder- al fund appropriations to political subdivisions of the state of Texas, either in total or as a percentage of total appropriations by political subdivisions.