federalism
: the distribution of power in an organization (such as a government) between a central authority and the constituent units.
Powers Not Delegated
Since America’s founding, the relationship between the federal government and the states has been an issue of much contention. While this project does not attempt to dive into legal or historical debates on the topic, it’s clear the founding fathers had a federalist vision. As the Bill of Rights famously states, “The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people.”
The founding fathers understood that government would be more accountable, efficient, and responsive when it is closer to the people. But as time as passed, the federal government has centralized more and more decision-making in Washington D.C., shifting further and further away from the nation’s founding principles.
Today, the federal government spends more than $1.2 trillion per year on state aid across more than 1,200 grant programs. And of those numerous programs, fewer than 100 account for nearly 95% of the funds granted annually, with the biggest being Medicaid.
The State of Federalism in Missouri
Over the past decade, Missouri has become increasingly reliant on federal funds, which has contributed to a rapidly growing state budget while also significantly reducing state spending flexibility. Today, approximately $0.40 of every dollar spent by Missouri’s government comes from the federal government.
The federal government primarily exercises its power over state policy through what are called grants-in-aid. These grants are transfers of money from the federal government to state or local governments to fund specific projects or programs. Upon accepting the federal funds, which are not loans and do not have to be repaid, state or local governments agree to spend the funds according to guidelines established by the federal government.
About the Data
For this report’s analysis of Missouri, I compiled 12 years of state spending data from the Governor’s Executive Budgets, encompassing fiscal years 2011 to 2022. Each of the state’s 16 executive departments are broken into divisions as they are separated in the executive budget, to allow for as much comparison as possible. The spending for each division is then broken into General Revenue, Federal, and Other funds. General Revenue is the state’s own-source revenue fund, comprised predominantly of sales and income taxes, which can be spent, for the most part, as Missouri’s legislature sees fit. The federal funds are various federal grants-in-aid that correspond to different programs. And finally, other funds are revenues that are dedicated either by statute or Missouri constitution to a specific source. For example, Missouri’s gas tax is categorized as an “other” fund because it is required to be deposited into the state road fund, from which money funds can only be spent on state road projects.
The data in this report covers FY 2011 (July 1, 2010 to June 30, 2011) through FY 2022 (July 1,2021 – June 30, 2022), during which period several large legislative and reorganizational changes occurred, which complicates a full causal analysis. Thus, the analysis here focuses on uncovering patterns and trends that could serve as the starting point for deeper investigation going forward.
Unless otherwise noted, all data used in this report has been adjusted for inflation.
About the Author
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Elias Tsapelas earned his Master of Arts in Economics from the University of Missouri in 2016. Before joining the Show-Me Institute he worked for the State of Missouri’s Department of Economic Development and Office of Administration, Division of Budget & Planning. His research interests include economic development, health policy, and budget-related issues.
