Connecticut has long been a net donor state to the federal government, with residents paying out more in federal taxes than the state received back from sources like social security, Medicaid and federal contracts.
That all changed during the COVID-19 pandemic in 2020. A massive influx of federal dollars to support states and residents during the pandemic meant that every state in the country suddenly saw more federal dollars come in than were paid out, according to a new study by the Rockefeller Institute in New York.
“The extent to which the COVID-19 pandemic disrupted the traditional patterns and distributions of Federal expenditures and receipts cannot be overstated,” wrote study authors Laura Schultz and Lynn Holland “The pandemic both reduced Federal revenue owing to the adverse shock to the economy and added an array of emergency spending programs aimed at preventing further economic collapse.”
However, despite the influx of billions from the federal government, Connecticut received less net federal funding per capita than every other state in the country. Connecticut received $4,152 per person from the feds, well below the national average of $8,801, according to the study.
In total, Connecticut residents paid out $52 billion to the federal government during fiscal year 2020 while $67 billion flowed back into the state, a stark change from 2019 when the same study found Connecticut paid out $52 billion and received back $42.6 billion.
But the latest results may not be all that surprising. Connecticut has paid out far more to the federal government than it has received, making Connecticut a so-called “donor state.” The report found Connecticut, on average, paid $2.132 more per person to the federal government than it received since 2015.
While federal COVID dollars bounced Connecticut into positive territory, it wasn’t enough to keep Connecticut from receiving the lowest return of federal funds on a per-person basis.
According to the report, several factors influence how much a state receives back from the federal government, including the percentage of high-income earners, the number of federal workers or government and military facilities in the state and the number of residents on Medicaid, the Supplemental Nutrition Assistance Program, Social Security and Medicare.
Connecticut received more than the national average in federal funds, according to the report, but also paid out more per person to the federal government than the other bottom five states. Connecticut residents paid $14,448 per person to the federal government, $1,538 more than New Jersey.
The study only spans fiscal year 2020 and federal COVID-relief funds were limited to the CARES Act, Paycheck Protection Program, the Healthcare Enhancement Act and the Coronavirus Preparedness & Response Supplemental Appropriations Act.
Those programs amounted to $2.59 trillion in federal spending but does not include COVID relief payments made in 2021 through the American Rescue Plan and other payouts made during that fiscal year, which will likely increase the positive balance for states like Connecticut.
Connecticut is also set to receive an influx of funding for infrastructure projects through the Infrastructure Investment and Jobs Act, but the report concludes by saying the money will only have a “modest impact” on an annual basis because it is spread over five years.
Virginia, Kentucky and Alaska received the largest balance of payments from the federal government during fiscal year 2020, according to the report.