How Federal Funding Flows to State Governments by Policy Area
FY 2026
Federal dollars are the second-largest source of funding for state governments, historically ranging from about a quarter to a third of total state revenue.
In fiscal year 2026, Medicaid—which provides medical coverage for eligible children, adults, people with disabilities, and older Americans—accounted for 69.9% of total federal grants to states and was the largest source of federal funding in all but one state.
Other funds were divided into five other broad policy areas. Grants such as the Temporary Assistance for Needy Families and the National School Lunch Program that focus on income security for individuals and families in need made up 10.9% of total federal dollars to states, making them the second-largest source of federal funding in 38 states. Transportation funding followed, comprising 7.4% of total federal grants (and serving as the second-largest source in 10 states). Education (4.7%), other health (4.3%), and everything else (2.7%) made up smaller shares.
This interactive visualization breaks down the distribution of federal grants to state governments by policy area. Although these grants are key to state budgeting, factors such as funding fluctuations, limitations on uses for federal resources, and complex grant application processes and reporting requirements can present challenges for state fiscal planning.
