Report Ranks State 28th in Federal Funds

According to Federal Tax Burdens and Expenditure by State, a report recently published by the Tax Foundation, North Carolina received $1.06 in return for every tax dollar sent to the federal government, ranking the state 28th in the nation for federal funding.

In 1990, North Carolina ranked 37th and received 93 cents for every tax dollar.

In comparison, Connecticut received 62 cents for every dollar of federal taxes in 2000 -- a national low.

New Mexico received $2.03 for every dollar of federal taxes in 2000 -- the highest amount in the nation.

The amount a state receives in federal funding is based on the per capita income of taxpayers and expenditures of the state, said Scott Moody, a senior economist at the Tax Foundation.

"One of the key determinants of that is per capita income," Moody said.

Moody said states that have a higher per capita income pay more in taxes and receive less in funding.

"The per capita tax burden for North Carolina is below the national average," he said.

Money spent on programs, such as Medicare, highway funds and military bases, also determines how much a state receives in government funding.

Moody said money allocated to pay for salaries and wages of military personnel constitutes a large part of a state's expenditure spending.

He also said congressmen have less input in designating how funds are spent than taxpayers think.

"A lot of people think politicians can influence where expenditures go," he said. "That's really not true."

Although North Carolina is facing a $900 million budget deficit, federal funding will not increase to help pay the debt.

"There's a separateness at what goes on at the state level and what goes on at the federal level," Moody said. "It would be really hard for the federal government to go through every state having a budget crisis and boost their federal spending."

Deil Wright, a UNC political science professor, also said the budget deficit in North Carolina will have no effect on the amount of federal money the state receives in the future.

"Whether we have a deficit or surplus is not going to make a hill of beans difference," he said.

According to the Tax Foundation, the federal funding system is beneficial to some states and detrimental to others.

Moody said that the fairness of the system is difficult to judge.

"Whether it is fair or not is harder to judge because it is based on so many components," he said. "Whether you think it's fair or not depends on your belief in the components."

Wright said the system is not in favor of or against taxpayers because North Carolina receives about the same amount of funding it pays in taxes.

"A lot of people have been shortchanged," Wright said. "On balance, we seem to come out pretty much even."

The State & National Editor can be reached at stntdesk@unc.edu.