About Alabama — Alabama Benefits From Federal Spending Patterns

The Census Bureau recently reported that spending by the federal government in 2005 totaled more than $7,500 per American. Alabama ranked ninth among the 50 states, receiving more than $9,200 in federal spending per resident. No other state in the Southeast had a higher figure. The $1,700 “surplus” in federal spending per capita added $7.5 billion to Alabama’s economy that year.

Alabama’s advantage is concentrated in direct payments to individuals and in purchases of goods and services, which together are the largest and fastest-growing parts of federal spending.

Direct payments to individuals accounted for 53 percent of federal spending. Three of every four dollars spent in this category went to Social Security and Medicare payments.

Food stamps, farms
Other large payment programs include veterans’ benefits, unemployment compensation, food stamps, housing assistance, farm payments and the Earned Income Tax Credit. Alabama ranked fifth among all states in federal direct payments per resident, receiving 23 percent more than the U.S. average from this source.

Purchases of goods and services accounted for 17 percent of federal spending. This is the fastest-growing category of federal spending, with significant amounts for defense and homeland security activities. Alabama ranked sixth in federal purchases per capita and received 53 percent more than the U.S. average from this source.

Wages and salaries made up only 10 percent of federal spending. Alabama ranked 18th in federal employee compensation per capita and was only slightly above the national average in this category.

Medicaid in Alabama
Grants to state and local governments comprised the remaining 21 percent of federal spending. Medicaid, the health care program for low-income families and individuals, is by far the largest of these programs, which also include assistance for education, transportation and other purposes.

Alabama also ranked 18th among the states in this category. The willingness of the federal government to match whatever a state is willing to spend for Medicaid is a key problem for our state. This allows wealthy states to afford generous Medicaid programs, while those with large poverty populations cannot. A recent study showed that New York receives two times as much as Alabama in federal Medicaid funding per poor person.

EDITOR’S NOTE: Jim Williams is executive director for the nonprofit, nonpartisan Public Affairs Research Council of Alabama.