Statement of Principles on States’ Dependence on Federal Funds


This statement of principles highlights the common practice of relying on federal funds to bolster a state’s general revenue for programs, and encourages legislators to evaluate the risk of an unexpected decrease in federal funding and agencies to prepare contingency plans to continue operations.

Statement of Principles on States’ Dependence on Federal Funds

Statement of Principles

States must come to grips with the possibility that federal funding assumed by the state’s budget may decrease or be eliminated as federal budget priorities and tax revenues change.  Without careful planning, states that rely too heavily on federal funds may become unable to maintain necessary levels of service and operations.

In order to continue to provide quality services to its citizens:

  • State legislators and the governor should recognize the amount or value of federal funds received annually, and their impact on overall revenue expectations.
  • The governor and state legislators should assess the risk of a reduction in federal funding levels throughout the budget process, and create or adjust reserves as appropriate.
  • Budget documents should reflect forethought about the possibility of a reduction in federal funds.
  • Agencies that receive federal funds should note the amount or value of funds received in their annual budget recommendations, and include contingency plans in the event that federal funding levels are unexpectedly reduced.