Ask an Analyst: What makes a donor state?
Go behind the scenes with our team as we find and make sense of the numbers.
I sometimes think of my personal relationship with the government as somewhat transactional, similar to the way I might think of my relationship with a business. I pay the government some amount of money each year through taxes, and in return I expect the government to provide certain services and programs to the people, as outlined in the Constitution.
In 1776 terms, those were intangible things like “domestic Tranquility” and “the Blessings of Liberty to ourselves and our Posterity.” Uh, sure. To phrase it less Founding Father-ly, we might say things like police departments and a court system, schools and universities, some version of public welfare, you name it. The way our system works, if I am unsatisfied with the balance of how the government is spending my tax contributions, I can vote for different political representatives to, well, represent my interests (or otherwise get involved politically).
Given my direct investment, it’s no surprise that political issues can feel deeply personal. I worked hard to earn my income (these articles don’t write themselves!) and entrusted a much larger entity to spend some of it for my safety, health, and prosperity. I want to know I’m getting my money’s worth.
The same sort of framework can be applied to the relationship between states and the federal government. A state contributes to the federal budget not only through its residents’ federal taxes, but through business taxes on local industries and a few other smaller sources including estate, excise, and gift taxes. In return, a state expects support from the federal government not only in the form of direct monetary support to its people, but also for health programs like Medicaid and CHIP, transportation and education funding, and contracts and grants to local businesses and nonprofits.
This is the basis of a concept that drives a political conversation: which states are “donor” states, i.e. are sending more to the federal government than they receive? And which are receiving more than they send? We get questions on this often, which tells us that people care; in the same way they might want to know if their taxes are going towards their priorities, they want to know whether their state is getting a fair shake, as well.
A quick aside to say that there’s plenty of room for political opinion in this question (what is a fair shake, anyway?), and we’ll steer away from telling you how federal transfers to states and individuals should be distributed. But, with a little exploration and number crunching (and a key contribution from my colleague/savior Darcy!), we can get to a satisfying answer for how that money is exchanging hands.
First: Sources
We begin where we begin any sort of government data exploration: looking for sources. This question goes in two directions, looking at both all revenue going from the states to the federal government and then all federal spending that we can allocate to specific states.
If only there were a government service agency dedicated to internal revenue.
Right! The Internal Revenue Service, or IRS! They make the first step pretty simple by tallying all tax revenue from businesses, individuals, estates, etc. and even sorting them by state for us. Note: This isn’t all federal revenue (emphasis on “internal”), but what it excludes are things like tariffs and interest earned by the Federal Reserve system, which aren’t really attributable to specific states anyway.
From this source, we can see that in fiscal year 2024, 38% of revenue from the states came from the nation’s four most populous states: California (15.9% of the total), Texas (8.2%), New York (7.6%), and Florida (6.4%). On a per-person basis, Massachusetts sent the most revenue at $21,933 per person, followed by Nebraska at $21,922.
Massachusetts sent the most per person to the federal government in FY 2024.
Attributable per-capita revenue collected by the federal government by state
The other direction is a little more complicated. There are a ton of different ways the federal government spends on states and the individuals living there, from Social Security and food stamps to Pell Grants to loans and contracts with local companies. Thankfully, the Treasury Department also maintains a magnificent database at USASpending.gov that tracks all “federal awards,” as they call them — basically payments of any kind — filterable by the awarding agency, recipient, amount, and, crucially, location. (Seriously, when you’re ready for a rabbit hole, check this source out.)
Perfect — this will let us grab all the federal spending attributable to specific states, while excluding spending on things like foreign affairs and interest on the debt. Then we can take the difference between those values and the federal revenue values and we’ll have our answer.
If only it were so simple.
What’s up with North Dakota?
In sorting through how to tackle this question, I’ve leaned on the support of Darcy, a senior analyst on our team whose work focuses on data quality and methodology. Darcy raised a major flag with the data from the USASpending source — after controlling for population, North Dakota was sticking out like a sore thumb with way more per-person federal spending than any other state.
Here’s how that problematic distribution looked:
Darcy rightly noted that that looks pretty out there — so out there, in fact, that it feels nearly impossible without some sort of clear explanation. With such a relatively small population, North Dakota and other small states can sometimes leap to the top of a list after adjusting the metric for population. But this looks too outlandish. If the federal government was spending over $100,000 on every North Dakotan and less than $40,000 on everyone else, I would expect, I don’t know, South Dakotans to have something to say about that.
The one thing that stuck out to us most about North Dakota spending was the amount going to Medicare. In a state that totaled $82 billion in federal spending in fiscal year 2023, a remarkable $75 billion was attributed to the Centers for Medicare and Medicaid Services (CMS). That was a pretty strong sign that we were missing something at the source.
Let's get administrative: What are MACs?
Our digging revealed an administrative quirk: CMS uses a network of private, regional insurers called Medicare Administrative Contractors (MACs) to process claims, make payments, handle reimbursement services, and more. In the USASpending data, Medicare spending was attributed to the MACs and, by extension, the states where the MACs were located. Services in Medicare Jurisdiction F — which includes Alaska, Arizona, Idaho, Montana, North Dakota, Oregon, South Dakota, Utah, Washington, and Wyoming — was contracted to Noridian Healthcare Solutions, which is based in, sure enough, Fargo, North Dakota. Checking back on USASpending.gov, the top contracts in the state of North Dakota were issued to Noridian.
This was skewing our spending data.
Once we’d identified the issue, we were off to the races to develop a workaround — Darcy used USASpending’s filters to filter out Medicare spending and located an alternate source from the Bureau of Economic Analysis that would give us Medicare transfer receipts by state. With that bit of patchwork, we had what we felt was a sufficient picture of both revenue and federal spending by state.
A satisfying result
Using the latest data from fiscal year 2024, this approach got us our answer — there were 19 “donor” states that sent more to the federal government than they got back, led by California, New York, and Texas. On a per-person basis, Nebraska and Minnesota had the highest net contributions to the federal budget.
The other 31 were taking more in than they were contributing, with none more than Virginia’s $89 billion. New Mexico and Alaska had the highest per-person differences among the states receiving more.
And right around the middle, there was North Dakota, having received a relatively minimal $1 billion more from the federal government than it sent to it.
Nineteen states sent more to the federal government than they received in FY 2024.
Balance of funds between residents and the federal government, FY 2024
There may be a lot to glean from this data, or it may be little more than fodder to make political cases one way or another. But underneath these top-line numbers are trillions of dollars exchanging hands, and the data available to us can be helpful in developing a perspective on how we feel about that spending.
