The U.S. government spends defense dollars in every state through purchases of military equipment, wages for service members and civilians, pension payments, health care services, and grants to states. But the size and mix of those investments vary substantially across the states, so changes in defense spending will affect them differently, and the impacts will depend on which programs and operations are increased or cut. This analysis of defense spending in the states takes a comprehensive look beyond contracts and salaries to include retirement payments, nonretirement benefits, and grants.
In fiscal year 2017—the most recent year for which data is available—the federal government spent a total of $483 billion on defense in the states and the District of Columbia, or $1,484 per capita. On a state-by-state basis, per capita defense spending ranged from $488 in Michigan to $6,275 in Virginia. The District of Columbia received the highest amount in the country at $9,033 per person.
Defense spending is distributed over five major categories: contracts, salaries and wages, retirement benefits, nonretirement benefits, and grants. (See below for more information on each.) Because each state’s level and mix of defense spending is unique, the effect of a federal budget change will vary by state.
Notes: Defense spending is defined as Department of Defense expenditures on salaries and wages for military personnel as well as retirement and nonretirement benefits (e.g., military pensions and health care services, respectively) and obligations for contracts for purchases of goods and services, such as weapons systems and information technology consulting, and grants to state and local governments.
Sources: Pew’s calculations using data from the U.S. Department of Commerce, Bureau of Economic Analysis, Annual State Personal Income and Employment, “Personal Current Transfer Receipts (SA35),” accessed March 2019; USASpending.gov, accessed March 2019; U.S. Department of Defense, Office of Economic Adjustment, “Defense Spending by State, Fiscal Year 2017” (2019); U.S. Census Bureau, “Annual Estimates of the Resident Population for the United States” (March 2019); U.S. Department of Defense, Office of the Actuary, “Statistical Report on the Military Retirement System, Fiscal Year 2017” (2019)
Contracts for purchases of goods and services, such as military equipment, information technology, and operations and maintenance programs, accounted for 56 percent of all spending in the states. This was the largest category in 33 states and the District of Columbia, and for five—Connecticut, Massachusetts, Minnesota, Missouri, and New Hampshire—it made up at least 70 percent of their federal defense dollars.
Salaries and wages for active-duty military, civilian, reserve, and National Guard personnel accounted for 28 percent of total spending. For 15 states, this category was the largest. Hawaii received the greatest proportion of its defense funds—64 percent—in the form of salaries and wages.
Retirement benefits, which are payments to individuals for military pensions, accounted for 12 percent of spending in the states. More than a third of the total went to California, Florida, Texas, and Virginia.
Nonretirement benefits, which are payments for health care provided through the military’s Tricare Management Program, accounted for 3 percent of spending. More than one-fifth of the total went to Florida and Texas.
Grants, which include funding to state and local governments for programs such as National Guard activities, medical research and development, and basic and applied scientific research, accounted for 1 percent of spending. Among all states, Wyoming received the largest proportion of its funds from grants at 11 percent.
The impact on states of federal changes to defense spending depends on the mix of funding each state receives. See below for the distribution of defense spending in the states by category.
Anne Stauffer is a director, Rebecca Thiess is an associate manager, and Laura Pontari is an associate with The Pew Charitable Trusts’ fiscal federalism initiative.