The federal-state relationship is in the spotlight because of enormous fiscal challenges facing all levels of government. Tight budgets and slow economic growth are leading to discussions about appropriate levels of public spending and how costs should be allocated among different levels of government. Federal and state policy makers require solid data and analysis to engage in a meaningful debate and truly understand how their tax and spending policies affect other levels of government.
Why the Federal-State Relationship Matters
State and federal budgets and their economies are inseparably linked. Federal government grants make up an average of $1 out of every $3 in state revenues. Several of the largest state programs, such as Medicaid and education, are supported by these funds. Almost three-fourths of states tie their income tax calculations to the federal income tax. And many state economies are heavily reliant on federal activities within their borders. As a result, almost any federal policy change, from changing tax rules to military spending, will have an effect on the states.
Why Federal Deficit Reduction Matters to the States
Over the coming years, the federal government is expected to consider changes to tax and spending policies to address the federal deficit. These measures will undoubtedly impact the flow of federal funds to states and their revenues, and have a significant effect on state budgets. At the same time, states are facing a long recovery from the Great Recession and have less capacity than in the past to respond to changes in federal tax and spending policies. The resulting fiscal and economic impact on the states will affect the nation’s overall economic well-being.
How We Conduct Our Work
- Research. We conduct original, non-partisan research and partner with other organizations to examine the connections between federal and state governments, with a focus on budget, tax, and regulatory policies. A particular emphasis will be on how federal deficit reduction proposals and actions will impact states.
- Convene. We bring together federal and state decision makers to promote consideration of the fiscal and economic health of states when federal policy makers propose and evaluate various deficit reduction options.
- Inform. We give federal and state policy makers the data they need to enhance understanding of this multi-faceted relationship and make informed decisions in key policy areas where federal and state governments intersect.
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The LATEST from the Project
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October 11, 2011
Ten Charts Essential to Understanding the Federal Debt
Ten charts that illustrate how the choices made over the last 10 years contributed to our nation’s debt.
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July 1, 2011
The Debt Ceiling Debate
This brief examines how a potential default by the federal government could present serious challenges to states and cities. more
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- Report
- Fiscal Federalism Initiative
The Costs and Benefits of Housing Tax Subsidies
Research has attributed many economic and social costs and benefits to housing. This study assesses one very targeted component of this complex issue—the fiscal costs and benefits of the housing subsidies that currently exist in the U.S. income tax system and the impact of several alternatives. more
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June 1, 2011
The U.S. Debt Limit: Frequently Asked Questions
The debt limit (also called the debt ceiling) is established in law and limits the amount of debt that the federal government can issue. This 2011 Q&A addresses questions about the U.S. Debt Limit. more
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- Analysis
- Fiscal Federalism Initiative
Fiscal Facts: The Great Debt Shift
A new fiscal fact sheet by Pew examines major legislative policies and other drivers of federal debt over the last decade to explain the difference between 2001 projections and the reality today. more
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- Report
- Fiscal Federalism Initiative
Methodology for Distributing a VAT
This paper examines the methodology for distributional analysis of a VAT and presents a revised methodology that would improve the analysis.
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- Report
- Fiscal Federalism Initiative
Addendum: No Silver Bullet: Paths for Reducing the Federal Debt
In September 2010, the Pew Fiscal Analysis Initiative released No Silver Bullet: Paths for Reducing the Federal Debt, which analyzed the implications of rising federal debt and modeled different remedies for reducing it to 60 percent of gross domestic product (GDP) in fiscal years 2025 or 2035. Since then, the Congressional Budget Office (CBO) has updated its 10-year projections to reflect the most recent economic data as well as the cost of new legislation enacted after August 2010.
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- Report
- Fiscal Federalism Initiative
December 2010 Addendum: A Year or More: The High Cost of Long-Term Unemployment
As of December 2010, 30 percent of the 14 million Americans who were unemployed had been jobless for a year or more, according to data produced by the U.S. Department of Labor’s Bureau of Labor Statistics. That percentage is the highest since World War II, and it translates into more than 4.2 million people, roughly equivalent to the total population of Kentucky
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- Fiscal Federalism Initiative
August 2010 Addendum: A Year or More: The High Cost of Long-Term Unemployment
Pew’s Fiscal Analysis Initiative has released new statistics showing that as of August 2010, 4.4 million people—roughly the population of Louisiana—had been out of work for a year or more; an increase of nearly 30 percent since December 2009. In an update to the April 2010 report, A Year or More: The High Cost of Long-Term Unemployment, researchers also found that federal spending on unemployment benefits will total $160 billion in fiscal year 2010.
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- Report
- Fiscal Federalism Initiative
April 2010 Addendum: A Year or More: The High Cost of Long-Term Unemployment
In April 2010, the Pew Fiscal Analysis Initiative released A Year or More: The High Cost of Long-Term Unemployment, which found that in December 2009, 23 percent of the 14.7 million unemployed Americans—3.4 million people, roughly the population of Connecticut—had been out of work for a year or longer. The 23 percent rate was the highest since World War II.
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