It's time for California to update its 'donor state' status, new data shows

Nicole Nixon and David Lightman, The Sacramento Bee on Sep 17, 2025

By clicking submit, I authorize Arcamax and its affiliates to: (1) use, sell, and share my information for marketing purposes, including cross-context behavioral advertising, as described in our Privacy Policy , (2) add to information that I provide with other information like interests inferred from web page views, or data lawfully obtained from data brokers, such as past purchase or location data, or publicly available data, (3) contact me or enable others to contact me by email or other means with offers for different types of goods and services, and (4) retain my information while I am engaging with marketing messages that I receive and for a reasonable amount of time thereafter. I understand I can opt out at any time through an email that I receive, or by clicking here

Gov. Gavin Newsom and other California defenders often argue that the Golden State subsidizes other states – particularly Republican-run ones – by sending more tax dollars to the federal government than it gets back.

“Californians pay (President Donald) Trump’s bills,” Newsom’s office declared in June, citing reports that California residents and businesses paid $83 billion more in federal taxes in 2022 than what the state got back via dollars for health care, schools and other services.

But in a shift from the norm, California’s “donor state” status has changed, according to new data.

In its latest analysis of the cashflow between states and the federal government, the Rockefeller Institute of Government found California got $13.4 billion more in federal funds than what residents and businesses paid in tax receipts in 2023, the most recent year data was available.

One reason for the shift is that high-earning Californians earned less and therefore paid less in taxes in 2023 compared to the year before. It’s the same reason the state saw a dramatic budgetary swing from a $100 billion surplus to a $32 billion deficit over roughly the same period.

Covid-19 funds also played a big role: if not for pandemic aid, California would have been a donor state to the tune of $16.8 billion in 2023.

“Using numbers that include Covid data kind of conceal some of the nuance of California’s financial contributions,” said Nishi Nair, a research associate with the California Budget & Policy Center. “This funding is eventually going to go away, but California is going to continue to pay a similar share in federal taxes every year.”

The analysis also revised the $83 billion figure in Newsom’s arsenal of statistics, showing that California actually “donated” $48 billion in federal taxes in 2022 – still the highest of any state that year.

How Trump factors in

The tax and spending bill Trump recently signed will likely widen California’s donor state status in the future, Nair said.

“We’re seeing major cuts to Medi-Cal, so that means less money for the state to spend than it generally receives from the federal government to support these federal programs like Medi-Cal and Cal Fresh,” she said.

Trump has long been wary of California spending and has increasingly used federal funding as political leverage during his second term.

The president has cut millions in aid for flood prevention and threatened to withhold LA wildfire aid unless the state adopted voter ID laws. Transportation Sec. Sean Duffy pulled $4 billion that would help the state’s long-delayed high-speed rail project.

And the administration, alleging campus antisemitism, froze hundreds of millions in research grants to UCLA and wants the university to pay a $1.2 billion fine and implement other changes to free the funding.

Does ‘donor state’ status matter?

“States and counties with more wealthy taxpayers are not ‘donors,’ the taxpayers themselves are,” said Andrew Wilford, director of the National Taxpayers Union’s interstate commerce initiative, in an issue brief for the conservative organization.

“The federal government is under no obligation to ameliorate through the federal income tax code,” he said.

The whole idea of weighing how much money goes out of California and how much comes in is not even worthwhile, said Scott Graves, budget director at the California Budget & Policy Center.

“We are part of a federal system in which presumably Congress and the president act for the good of the nation, and some states have much larger needs than others,” he said.

Federal spending has a huge reach, affecting almost every aspect of life, so it’s hard to say with any ease the imbalance should be corrected. And there are local considerations–sparely populated Western states may need more road repairs. States closer to Washington, D.C., have more federal workers.

“We don’t want people to look at the government from the vending machine perspective, that if I put in a quarter in I should get something back of equal value,” Graves said.

____