What Makes a Donor State?

“Ask an Analyst: What makes a donor state?” USAFacts

States contribute to the federal budget primarily through residents’ federal taxes and through business taxes on local industries. In return, states expect federal support via programs such as Medicaid and the Children’s Health Insurance Program (or CHIP), transportation and education funding, and contracts and grants to local businesses and nonprofits, plus direct monetary support to residents.   

Data analysts Chris and Darcy wanted to know: Which states send more to the federal government than they get back? In other words, what are the donor states? And which states get more than they send?   

To understand federal revenue from states, they started, naturally, with the IRS. Turns out 38% of that revenue came from the four most populous states: California (15.9% of the total), Texas (8.2%), New York (7.6%), and Florida (6.4%). Per person, Massachusetts sent the most ($21,933), followed by Nebraska ($21,922). 

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.

The Results?

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.

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.