Thou Doth Rely Too Much
A case for reducing Tennessee’s dependence on federal dollars
Lately, there has been a lot of talk among state leaders about how much we rely on federal funding to meet our state budget obligations. In this year’s state budget, a whopping 39% of total revenue comes from the federal government. That puts us on the high end of states.
Some might say that this is a good thing. Why not let the feds cover a significant portion of our budget? But as I recently wrote, there’s no such thing as a free lunch. With all that federal money comes massive strings in the form of mandatory spending and policy decision that should ultimately be made by our state leaders rather than politicians and bureaucrats in Washington.
We Don’t Need No Education (Dollars). As state leaders wise up to this, they are trying to figure out just what those strings are. This week, a task force appointed by Lt. Gov. Randy McNally and Speaker Cameron Sexton is meeting to begin a deep dive into what powers and decisions we as a state give up in exchange for federal education dollars. This is one of the primary areas that we have ceded control to Washington in exchange for cold hard cash.
And as talks about eliminating the U.S. Department of Education heat up, it’s important to know what will change if that happens. If we can reduce our reliance on federal dollars to fund education—and we may have to if the department goes away—we can surely return decision making back to the states, and more importantly to the kitchen table, allowing parents to decide what’s best for their children. Kudos to state legislators for recognizing this and starting the conversation in earnest.
A Healthy Example. To see the risks involved in federal control over state decisions, look no further than the One Big Beautiful Bill that just passed Congress. The law limits how much states can collect in “provider taxes” to fund their Medicaid expansion programs. When the feds lured states into expanding Medicaid, one way they did so was to let states tax hospitals to cover their share of the expansion costs. Going forward, states that expanded their Medicaid programs won’t be able to generate as much revenue from these provider taxes, and thus will have to rely on other revenue—say from average taxpayers—to make up the difference. Beacon warned that this might happen when Tennessee was debating expanding Medicaid, and we were called the “boy who cried wolf.” Who’s crying now?
Blue Bailouts. Generally speaking, red states actually rely more on federal funding as a percentage of their budgets than do blue states. That’s simply because blue states tax more, skewing the percentage of their budgets made up of federal funds. Red states tend to tax less and have smaller budgets, and therefore every federal dollar makes up a greater percentage of their overall budget. The Left has a field day with this fact, even though they gloss over the reason for it. But it does invite a very serious concern.
If blue states continue tax and spend themselves into oblivion, chances are that they will at some point go hat in hand to Congress asking for the federal government to bail them out to prevent them from going bankrupt. Right now, they can say, “Look at all the money you are giving these red states; they’re getting more than we are, so you should give us our fair share.”
The last thing we need is for the federal government to reward blue states’ horrible tax-and-spend policies with additional federal funding. And one way to avoid that is for red states to stop riding the gravy train themselves. In doing so, they will return power back to where it belongs: into the hands of the states and the people who live there.