The 10 Least Efficient U.S. States for 2025

America’s least populous states are also its most inefficient, but the Byzantine bureaucracies of the Northeast aren’t far behind. In the spirit of the moment, NationalBusinessCapital.com evaluated the recent performance of state governments in its inaugural report on state efficiency. The report found Alaska and Wyoming, both sparsely populated but strategically important states heavily dependent on federal funding, to be the least efficient going into 2025. Sixty percent of the bottom performers, however, are located in the Northeast, including both lightly populated states like Vermont and Maine and wealthy, densely populated states like New York and Massachusetts. These states generally ran lower surpluses and spent more on their educational and Medicaid bureaucracies, with varying results. The new administration has made cutting “government waste” a priority, anointing the Department of Government Efficiency (DOGE) led by CEOs Elon Musk and Vivek Ramaswamy to slice $500 billion from the federal budget. While all states have unique challenges and expenses related to their geography, infrastructure, and demographics, red states largely lived up to their reputation for frugality–again to varying effect–with states like Utah, Florida, Iowa, Texas, and Idaho standing out as the five most efficient states. These states had no more than two deficits between 2008 and 2022, relatively low reliance on federal funding, and more efficient spending on education and Medicaid administration.

Key Findings

• Red States Are Generally More Efficient: Though there are notable exceptions, states that went red in 2024 (including swing states that have typically leaned blue in recent elections) performed better overall, with an average score of 46.6 out of 100 to blue states’ 57.7. While the 10 most efficient states, save Virginia (7th), went red in 2024, the 10 least efficient states were somewhat more mixed, with red states Arkansas (41st), Wyoming (49th), and Alaska (50th) joining seven blue states at the bottom. Red states ran an average of three deficits between 2008 and 2022, and blue states an average of 6.3.
• Red States Are Slightly More Dependent On Federal Aid: One important caveat to the previous finding is that red states, overall, were slightly more dependent on federal funding for their revenue. On average, red states got 30% of their funding from federal sources, while blue states got 27%. Alaska, which gets 39% of its revenue from federal sources, is the most dependent. North Dakota, at 19%, was the least.
• Population Density Helps Efficiency, But Only Up To A Point: The two least efficient states in the nation, Alaska and Wyoming, are also the least dense, but densely populated states like Massachusetts, New York, and Connecticut often fail to achieve economies of scale on per capita spending.
• Only Two States Ran A Deficit In 2022: While some states are facing long-term budgeting issues, all but two states (Wyoming and Alaska) raised more revenue than they spent in 2022.

THE 10 LEAST EFFICIENT U.S. STATES 2025

1. Alaska

Score (out of 100): 77.8 While access to its vast resources may justify it, occupying the Last Frontier is a costly endeavor. The rugged, frigid environment is expansive, making the efficiencies that come with greater population density elusive in most of the state. No state is more dependent on federal financing (39%, 1st), and its Medicaid administration (5th) and education spending (7th) are some of the least efficient in the nation. Alaska also ran the country’s largest deficit in 2022 (revenue covered 80% of spending, 1st), its fifth since 2008 (14th, tied). One notable area of efficiency: despite its geographic size and number of isolated communities, Alaska pulls off the impressive feat of having a relatively low number of local governments (24.82 per 100,000, 29th).

2. Wyoming

Score: 77.2 America’s second most inefficient state is its least populous. Like Alaska, Wyoming has a challenging environment characterized by cold, mountainous terrain. So, it shouldn’t be surprising that it shares some of the same efficiency issues. Indeed, Wyoming also ran a deficit in 2022 (revenue covered 93% of spending, 2nd), the fourth since 2008 (17th, tied). The Equality State also has the second-highest Medicaid administration costs at 8% and relatively high education spending (12th). And unlike Alaska, Wyoming is teeming with local governments (140.57 per 100,000, 3rd). Wyoming can, however, boast about the maintenance of its roadways, having only the 39th roughest roads, which is not bad given the complexity of its terrain.

3. Vermont

Score: 73.5 Coming in third, we have another sparsely populated, mountainous state, albeit significantly smaller geographically. The Green Mountain State has the dubious distinction of having the most expensive Medicaid administration in the U.S. (8.2%, 1st) and some of the highest education spending per pupil ($24,608, 3rd). It also packs a surprisingly large number of local governments into less than 10,000 square miles (88.81 per 100,000, 7th). While Vermont is highly dependent on federal financing (37.7% of revenue, 3rd), it has managed to balance its budget for all but three years since 2008 (23rd, tied). And, in keeping with our recent report that found Vermont to be the overall best state for car owners, its highway funds do appear to be well spent (49th worst).

4. Maine

Score: 70.6 Maine is the last of the cold, remote, and lightly populated states to make the bottom 10, and while it generally fares better than the preceding entries, it suffers from some of the same issues. That includes high education costs ($17,885 per pupil, 13th). While Maine is a bit more self-sufficient than the preceding states, it still depends on the federal government for just under 31% of its revenue (17th) for its close-to-break-even budget (5th). Unlike Vermont and Wyoming, however, Maine can’t boast about its highway infrastructure (14th worst). The Pine Tree State’s self-reported UI payment accuracy ranks relatively well at least (39th).

5. Washington

Score: 69.0 Washington is one of two outliers among the least efficient states, being neither particularly dense nor sparsely populated. It cut its budget margins pretty close in 2022, with its revenue covering 102% of its spending (3rd). At 5.9% of total Medicaid spending, it also spends more on administering the program than most other states (9th). And it may be a bumpy ride from Seattle to Spokane (5th). Despite its inefficiencies, the Evergreen State is relatively self-sufficient, with only 24% of its revenue coming from the federal government (39th).

6. Connecticut

Score: 68.6 As the fourth most densely populated state, the coastal corridor state of Connecticut presents quite a different profile. Despite being among the richest states in America, the Constitution State has struggled to balance its budget in recent years, with a whopping 11 deficits between 2008 and 2022 (3rd, tied). It also has the fourth most expensive education system in the nation ($24,453 per student) and struggles to maintain its highway infrastructure (2nd). That said, Connecticut is fairly self-sufficient when it comes to revenue, with only around 23% of its revenue coming from the federal government (41st), and, in stark contrast to its fellow New England states of Maine and Vermont, it doesn’t have too much redundancy in its local governments (17.42 per 100,000, 35th)

7. New York

Score: 65.8 The Empire State has long been burdened with a reputation for having an expensive bureaucracy. And while New Yorkers can point to the complexity of managing the infrastructure of the biggest and densest city in the nation as a cause, its reputation seems at least somewhat deserved. New York spends more on education per student than any other state ($29,873, 1st), an expense that fails to put it at the top of most measures of educational efficacy. It also has run more deficits than most other states in recent years (11, 3rd, tied) and has one of the highest self-reported rates of inaccurate UI payments (4th). There is one area where New York may be wrongly maligned. Unlike its New England neighbors, most of the Empire State’s substantial Medicaid spending actually goes towards benefits rather than administration (2.3%, 45th).

8. Massachusetts

Score: 65.5 (8th) New York’s eastern neighbor shares some similar characteristics when it comes to inefficiency, particularly its tendency to run deficits (11, 3rd, tied). Massachusetts is also a big spender when it comes to education ($21,906 per student, 5th), though, unlike New York, the Bay State can more easily claim that its money is well-spent; Massachusetts has some of the best educational outcomes in the country. The same can’t be said of its Medicaid efficiency (5.1% of funding is spent on administration, 14th). Despite the age of its many historic towns, Massachusetts has a very reasonable number of local governments relative to its population (12.24 per 100,000, 40th).

9. Arkansas

Score: 63.7 Far from snow-laden mountains and the crowded cities of the Northeast is the Natural State, the sole Southern member of our 10 least efficient states. The relatively poor Arkansas is heavily dependent on the federal government for its revenue (37%, 5th), and its inefficiencies include a Medicaid program with high administrative costs (5.8%, 10th), as well as a higher-than-average number of local governments (50.95 per 100,000, 16th). Arkansas does, however, tend to run a balanced budget (3 deficits between 2008 and 2022, 23rd, tied). It also spends lightly on education ($12,159 per student, 39th), albeit with mixed results.

10. Rhode Island

Score: 62.8 The Ocean State joins its New England neighbors Connecticut and Massachusetts as the most efficient of the least efficient states. Like the rest of New England, Rhode Island is a big spender on education ($19,962 per pupil, 8th) with a bloated Medicaid administration (6.4%, 6th). It also has, by its own criteria, the highest rate of improper UI payments in the nation. On the other hand, Rhode Island did end the 2022 year with the second-highest budget surplus in the Northeast (117%, 38th). It also has a low number of local governments (11.68, 42nd), which you would hope would be true of America’s geographically smallest state.

THE 10 MOST EFFICIENT U.S. STATES 2025

41. Arizona

Score (out of 100): 37.8 Frugal Arizona spends less on Medicaid administration than any other state (1.4%, 50th) and doesn’t weigh the desert down with unnecessary local governments (9.08 per 100,000, 44th). It also doesn’t spend much on education ($10,315, 48th), although the state’s generally poor educational outcomes suggest it may not be much to boast about.

42. Oklahoma

Score: 35.9 Oklahomans are thrifty spenders when it comes to both Medicaid administration (42nd) and education spending (47th), even if they’re fairly dependent on federal revenue (32%, 15th).

43. Georgia

Score: 34.9 Georgia is less dependent on the federal government than many Southern states (23.4% of revenue, 40th) and managed to end 2022 well in the green (118.6% of spending covered, 41st). While its scores in most other metrics are unremarkable, the Peach State ranked no higher than 23rd in any of them.

44. Virginia

Score: 33.5 The Old Dominion is the only blue state to land among the 10 most efficient. Despite its proximity to D.C., Virginia doesn’t get much of its revenue from the federal government (21%, 49th) and ran only one deficit between 2008 and 2022 (40th, tied). Its roadways could use some care, however (18th).

45. Tennessee

Score: 32.9 Tennessee’s efficient budgeting, including education (44th), resulted in only one deficit between 2008 and 2022 (40th, tied) and a healthy surplus for 2022 (118.7%, 42nd). One area of weakness: its expensive Medicaid bureaucracy (7.2% of funds, 3rd).

46. Idaho

Score: 31.4 Idaho spends the second least on education in any state ($9,670, 49th), though, as is the case with Arizona, its educational outcomes leave a lot of room for improvement. It had only one deficit between 2008 and 2022 (40th, tied).

47. Texas

Score: 30.8 The Lone Star State managed to put up respectable numbers in almost all of our metrics, notably its 2022 surplus (123.3%, 34th) and lack of deficits (1, 40th, tied) even if its expansive highway network appears to be getting harder to maintain (7th).

48. Iowa

Score: 30.6 Iowa can offer a pretty smooth ride through the cornfields (50th in highway roughness) and can do so while only spending 2.2% of its Medicaid budget on administration (47th). On the other hand, it does have quite a few local governments for its size (56.97 per 100,000, 13th).

49. Florida

Score: 24.3 The Sunshine State’s reputation for efficiency appears to be more than just hype. Florida spends just 1.9% of its Medicaid funds on administration (49th) and squeezes out pretty strong educational outcomes despite lean spending ($11,076 per student, 45th). The third more populous state is also lean on local governments, with just 8.62 per 100,000 residents (46th). Unemployment insurance errors, however, remain an issue (5th).

50. Utah

Score: 20.6 Safely in first place is the Beehive State. Utah runs a tight ship, garnering solid educational outcomes on just $9,552 per student (50th) and ending with the largest 2022 surplus of any state (136% of spending, 50th). Sealing the deal, Utah gets only 21.8% of its revenue from the federal government (48th).

COMPLETE RANKING OF ALL 50 STATES

Methodology

To create our rankings, we collected metrics related to efficiency for each of the 50 states. We then ranked each of the states within each metric. Each metric was then assigned a weight. Scores within each metric were then aggregated and normalized to give each state an overall score between 0 and 100. States receiving the highest scores out of 100 were ranked the least efficient. The eight metrics we chose, along with their weights, were:

• UI Improper Payment Rates (5%): This metric represents self-reported improper disbursements of unemployment insurance payments. As each state uses different metrics to characterize a payment as improper, this metric was weighted more lightly as it reflects each state’s subjective evaluation of its processes. Data is for the 3-year period from July 1, 2020, through June 30, 2023, and was sourced from the Department of Labor.
• Local Governments Per 100,000 People (10%): This metric represents the number of local governments in each state for every 100,000 residents. While population densities and geographic size vary greatly from state to state and impact the efficiency of local governments, each local government is replicating services that–in many cases–could potentially be offered by another nearby entity. States with fewer local governments relative to their population were ranked as more efficient. Data is for 2022 and was sourced from the U.S. Census.
• Medicaid Administration Costs As % Of Medicaid Spending (15%): Medicaid spending accounts for a substantial portion of state budgets. This metric represents the percentage of each state’s total Medicaid spending that goes toward the administration of the program. States that spent less on administration were ranked as more efficient. Data is for 2023 and was sourced from the Medicaid and CHIP Payment and Access Commission.
• Education Spending Per Head (15%): Education spending also makes up a significant portion of state budgets. As education spending per pupil does not have a significant correlation with high school graduation rates, reading, or math scores, states that spent less per student were ranked as more efficient. However, be advised that this metric is not a measure of educational quality or outcomes. Some low-spending states like Utah had strong educational outcomes, as did some high-spending states like Massachusetts. Likewise, Alaska has a high per-pupil spending rate and relatively poor educational outcomes, as does Arizona, which spends relatively little. Data is for 2022 and was sourced from the National Center for Education Statistics and the Census Bureau’s Public-Elementary-Secondary Education Finance Data.
• Federal Funding As % Of Total Revenue (12.5%): This metric represents how dependent the state’s budget is upon federal funding. States less reliant on federal funding were ranked as more efficient. Data is from the Census Bureau’s 2022 Annual Survey of State and Local Government Finances.
• Annual Revenue vs. Expenses (15%): This metric represents how much of each state’s 2022 expenditures were covered by its revenue. A result higher than 1 indicates a positive ending balance, while a result less than 1 indicates a deficit for that year. States with a larger surplus were ranked as more efficient. Data is from the Pew Charitable Trust.
• Number of Deficits (15%): This metric is the number of times each state ran a budget deficit from 2008 to 2022. States with fewer deficits were ranked as more efficient. Data is from the Pew Charitable Trust.
• Highway Condition (12.5%): Highway and road spending make up around 7% of the average state budget. This metric represents the percentage of road miles reported to the Federal Highway Administration as either greater than 170 on the International Roughness Index (IRI) or 2.5 or less on the Present Serviceability Rating (PSR) scale. States with a small percentage of reported miles meeting this criteria were ranked as more efficient. Data is for 2022.