Feds Bailing Out States

For the first time in history, federal money has surpassed sales and income tax collections as the largest source of revenue for state governments, USA Today reports. And the shift is just beginning, with tax collections continuing to sink while the bulk of federal stimulus aid is just starting to arrive. As Indiana State Sen. Jim Buck points out, "This money isn't manna from heaven. It comes with a price." He worries that the federal money will leave states under greater federal control and burden future generations with debt. The federal government plans to provide about $300 billion in extra aid to state and local governments over the next two years, mostly for health care, education and transportation projects. State and local governments spend about $2 trillion a year, and the federal government is now paying about 23 percent of those costs.