Federal dollars allocated to the state can often feel like free money, but there is no such thing as a free lunch. Something cannot come from nothing. In Fiscal Year 2025 — the last year with available data — the federal government accounted for 37.2% of the state’s total budget. This adds up to over $5 billion in funding. During the height of the COVID-19 pandemic, the federal government provided a full 44.5% of the state budget, making it the single largest revenue source.
The problem with relying on federal dollars is two-fold: First, the money is not “free,” as it is ultimately paid for by Idaho's citizens through federal taxes. Second, the money always comes with strings attached, giving the federal government powerful leverage over our state’s affairs. Not only is this bad for Idaho, but it is also something that the Founders of this country never anticipated. States are now forced to adopt the federal government’s position on a whole host of issues or risk losing the federal funds that now make up a huge portion of the state budget.
That’s why the Idaho Freedom Foundation (IFF) has consistently taken a principled stand against accepting federal tax dollars wherever possible. The most insidious aspect of federal money is that it usually runs out. When it does, the agencies that relied on federal funds always come to the state asking the Legislature to pick up the slack and continue to fund these programs — all at the expense of the Idaho taxpayer. This is precisely how so-called “one-time funds” provided to the state through ARPA and other COVID-19 relief bills transform from single expenditures of federal dollars into continuous expenditures of state tax dollars.
The Legislature even acknowledged this when appropriating ARPA funds. The Idaho State Code proclaims that “state agencies receiving ARPA funds shall plan for the reduction of these federal funds to avoid creating obligations that are shifted to the general fund after the federal funds are depleted” (§ 67-3533(2)(b)) and “ARPA funds should be used to maintain a long-term, structurally balanced budget such that ongoing revenue should exceed ongoing expenses” (§ 67-3533(2)(c)).
Yet we still face a roughly $100 million budget deficit this coming legislative session. This is in no small part due to the mismanagement of COVID-19 relief funds and the out-of-control spending it facilitated.
This is why the IFF has made ending reliance on federal funds a key part of our agenda for this year. Ending dependence on federal funds will not only make the state more fiscally sustainable by forcing legislators to confront government spending, but it will also ultimately make Idaho freer. When Idaho is no longer forced to adhere to federal government standards to unlock federal dollars, it will be free to pursue conservative policies.
