Even Amidst Change in Washington, Alabama Must Limit Dependence on the Federal Government
Op-Ed by Justin Bogie, Alabama Policy Institute
March 10, 2025

With the start of President Donald Trump’s second term in office, there has been a fundamental shift in Washington. On his first day in office, President Trump officially created the Department of Government Efficiency (DOGE) through an executive order. Since its creation, DOGE has set out to reign in government spending, waste, and reduce the overall size of the federal government. And to be clear, this is a much needed initiative. The federal debt is currently more than $36.5 billion. Spending has been on an unsustainable path for nearly two decades. If Washington does not get its fiscal house in order, all Americans will pay the price. State governments, including Alabama, should take notice: the flow of federal dollars to state’s could soon shrink. On January 27, 2025, a memorandum from the Office of Management and Budget directed federal agencies to suspend all grant payments to state and local governments. While the policy was rescinded, that does not mean that similar policy shifts will not follow. As DOGE continues its work, it remains a real possibility that federal grants could be on the chopping block. This should be of particular interest to Alabama lawmakers. 

Alabama is consistently ranked as one of the most federally dependent states in the nation. According to data from USASpending.gov, Alabama received over $66 billion in federal funding last year. This includes over $36 billion in direct payments to Alabamians, $17.3 billion in contracts awarded within the state, and nearly $13 billion in grant awards to state agencies.

In 2024 alone, grant awards accounted for nearly 32% of all of Alabama’s state government revenues. The Alabama Medicaid agency received more than $6.4 billion from the federal government, with the state Department of Transportation and Department of Education each receiving more than $1.2 billion in federal grants. One problem with being so heavily reliant on the federal government is that state funding may shift based on the priorities of one presidential administration to another. Moreover though, there is a perception that federal dollars are free money. They are not. Each dollar that the federal government sends back to state and local governments in the form of direct payments, grants, etc., represents taxpayer dollars that hard-working Alabamians have paid to the Treasury. Federal money also always comes with strings attached. There are several recent examples of this. 

In 2024, the U.S. Department of Education announced updates to the Title IX code, which is civil rights era legislation that prohibits sex-based education discrimination. Amongst the changes were the addition of gender identity and sexual orientation as classes of federally protected groups. In 2023, the Alabama Legislature enacted a law that prohibits college athletes from competing on sports teams that do not align with their biological sex. Shortly after the federal Title IX changes were filed, Alabama and several other states filed suit against the Biden administration challenging the new rules. As Attorney General Marshall said, “This is an example of how the federal government can control activity at the state level through the use of purse strings.” He continued, “Because the only vehicle for these changes to take place is if, in fact, you are receiving federal funding. Absent that, it is clear the federal government has no authority to be able to dictate these policies at the state level.” Alabama’s Legislature, duly elected to reflect the principles and values of the state’s citizens, has already taken action to ensure that men and women compete based on their biological sex. Yet depending on which party controls the White House, Alabama could have to go along with a policy that most citizens disagree with to keep the federal dollars flowing.

Medicaid policy is another area in which the Biden administration consistently tried to limit the ability of states to administer the program as they best see fit, specifically around work requirements. Under the first Trump administration, at least six states had work requirement provisions approved as part of their Medicaid programs. Alabama had a Medicaid work requirement waiver pending when President Biden was elected in November 2020. After Biden’s inauguration the Centers for Medicaid and Medicare Services rescinded all Medicaid work requirement waivers. Alabama voluntarily withdrew its waiver application shortly after Biden became president, knowing that it would be rejected.  Requiring able-bodied people who are receiving Medicaid benefits to at a minimum be attempting to find employment is a reasonable policy. Yet because of the threat of losing federal funding by doing so, every state had been unwilling or unable to put such requirements in place. In 2025, for every dollar that Alabama puts into its state Medicaid program, the federal government provides a match of 72.8%. Because states rely so heavily on federal funding for Medicaid programs, federal bureaucrats can exert their will into policy decisions, regardless of whether those decisions align with the beliefs of citizens governed by them. Regarding Medicaid specifically, there is also a real possibility that federal funding could soon be reduced. On February 25, 2025, the U.S. House of Representatives adopted a budget resolution that directs the House Energy and Commerce Committee to reduce federal spending by $880 billion over the next decade. Most if not all those cuts are likely to come from the Medicaid program, which the committee has authority over. 

As federal spending has increased dramatically over the last several decades, the federal government has taken a larger role in setting policy agendas at the state and local level. Now because of DOGE and other efforts, change is on the horizon. Alabama lawmakers must seize this opportunity and decrease the state’s dependence on Washington. 

FOR MORE INFORMATION CONTACT: Justin Bogie | Alabama Policy Institute justin@alabamapolicy.org