While federal aid to the states does not completely determine the structure and shape of the bureaucracy in any particular state, it certainly does have an impact on the particular departments or agencies that are created (and funded), and on the funding levels of those departments.

So, what does the federal government spend its money on? Or, more appropriately, what does it wish the states and local governments to spend money on? In fiscal year 2003, more than half (57.3 percent) of the $385.7 billion in federal aid went toward health and human services, for things like Temporary Assistance for Needy Families (TANF), Head Start, and foster care and adoption assistance.

Also, a little more than one-tenth of federal aid went to transportation (10.1 percent), to support programs like the highway trust fund and aviation. Another tenth went to housing and urban development (10.2 percent) to pay for such programs as community planning, public housing and more.

The federal government spent another 7.6 percent of its state aid in 2003 on education, a decrease of $3.5 billion from fiscal year 2002. These expenditures covered programs in special education, rehabilitative services, vocational and adult education, and a whole range of other programs.

Most of these expenditures flow through state-level departments and agencies, requiring the maintenance of sizable operations and numerous employees and directly influencing overall state and local expenditure in specific areas. In many cases, states and localities are not eligible for federal funds unless they supply matching funds or commit to supporting particular programs in other ways.

In fiscal year 2004 a little over one-third (35 percent) of Texas state revenues came from the federal government for a total of $21.9 billion. Given the size of these federal funds and the fact that they are distributed by specific federal agencies for use in particular areas, there can be no doubt that they shape what the Texas bureaucracy does and its overall structure. A quick glance at the major areas of expenditure in the Texas budget shows some parallels to the major categories of federal aid to the states and localities. Perhaps most noticeably the health and human services category (the largest area of federal aid to the states) is also the top area of expenditure in the Texas budget.

Education also represents a major area of federal aid to the states, and no doubt contributes to its second place rank in the list of major areas of Texas state government expenditures. Transportation also receives a major portion of Texas public expenditures (almost 9 percent), close to the proportion of federal aid to the states dedicated to transportation.

The chapter's tables Federal Aid to State and Local Government and Expenditures of the State of Texas by Function can be used to compare the amounts of federal money sent to the states, and how Texas spends its money, overall.