In addition to the large share of state appropriations that come from federal funds—around 33%, or $68 billion, of appropriations in the 2016-17 budget—the federal government uses conditional federal grants to deputize state and local governments to perform tasks beyond the authority of the federal government. Unlike federal funds accounted for in the state budget, this money goes directly from the federal government to local governments, with no real opportunity for oversight by, or accountability to, the state legislature.
As states have begun to push back on the conditions attached to federal grants, even rejecting some grants on policy grounds, the federal government increasingly looks to strike deals directly with local governments, thus subverting the policy decisions made by state legislatures. Federal funds sent directly from the federal government to political subdivisions of the state have all of the problems associated with federal funds in the state budget—such as less financial stability and diminished state and local autonomy over policymaking—as well as their own set of problems, related to a lack of transparency in how these funds are authorized for receipt within the state. While we can at least refer to the percentage of the state budget attributable to federal funds, there is no reliable repository of data on federal funds given directly to local governments.