What is State Aid?

State aid is a broad term that encompasses a variety of different types of government funding. Because the United States is set up as a republic, state aid in the U.S. refers to money spent by individual states toward specific causes, but is sometimes incorrectly referred to as federal government spending. In other countries, especially those that are not set up as a republic with independent states, state aid may also refer to aid given by the central government of the country. In this capacity, the term state is used because a country is also called a nation-state.

Although the countries in Europe were not born as republics, the creation of the European Union has joined the countries of Europe together in a quasi-republic. Although each country provides its own national security and aid, the European Union has specific rules regarding aid. Any state aid that inhibits competition in the marketplace is prohibited except in the case of achieving common objectives or correcting market failures.

Different types of aid vary based on which state is being referenced. Many states in the U.S. offer financial aid, also called state-funded education grants, for students attending college or graduate school. State financial aid awards are mostly dependent on the need of the student and require that the student and student’s family are residents of the state for at least one year prior to entry into an education program. Additionally, some states have educational aid programs based on academic achievement. A student must maintain a minimum grade point average or she will not be eligible to receive the aid.

Another common type of state aid is the money used for transportation products. In the U.S., cities and counties are responsible for building and maintaining most of the roads. State aid for transportation, which is given to municipalities and counties, is included in the yearly budget for many states. The money, which supplements what the counties and cities have in their budget, is used for construction, upgrading and maintenance of bridges and roads.

State funding for public schools is also a common type of state aid. Although individual school districts make their own rules and are funded by property taxes, many school districts depend on a certain amount of aid from their state to operate above the bare minimums. Programs for special education, bilingual education and special arts are example of the types of programs that may be funded by the state.