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According to the Pew Research Center, thanks to an sizable boost
in federal aid during the pandemic, from Medicaid support to
funds to combat COVID-19, federal funds accounted for over 31%
of the Illinois state budget in fiscal year 2021.
Nationally, 37.7% of state’s revenue came from federal dollars,
up from 35.9% the previous year.
“I think we would have seen even a higher share had it not been
for state revenues bouncing back quite so quickly,” said Rebecca
Thiess, a manager for the Fiscal Federalism Initiative at Pew.
Multiple factors helped state tax collections increase by 19.4%
in fiscal 2021 compared to a year earlier. Fueling the spike was
the shift in personal spending from usually untaxed services to
purchases of goods, which are taxable in a majority of states.
From March 2020 to March 2021, the federal government awarded
states more than $800 billion in COVID-19 relief, more than
double the amount of aid it doled out in response to the Great
Recession of 2007-2009.
Thiess said the federal share of state revenue is expected to
remain elevated through fiscal 2024, partly because of the
American Rescue Plan Act.
“We do anticipate that along with other federal funds including
in the Infrastructure Investment and Jobs Act and other
legislation that we will see the increase to continue on a
temporary basis,” Thiess said.
The top three states with the largest share of revenue from
federal funds in fiscal ‘21 were Alaska (57.2%), Louisiana
(53.6%) and Montana (51.5%).
The states with the smallest share included Utah (27%),
California (27.8%) and New Jersey (29.3%).
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