It’s simple, straightforward, and deucedly politically difficult given the timidity and/or self-serving political power seeking of too many politicians to carry out. The lede and second paragraph laid out the problem:

As the Department of Government Efficiency and the One Big Beautiful Bill Act make painfully clear, any entity relying on federal funds for fiscal stability had best reconsider its future.
Recently released US Census Bureau data on federal funds flowing to states reveal that in 2023 the average state relied on federal sources for 37% of its revenue—nearly double the 1990 average. Some states were far more dependent, like Arizona (49%), Alaska (45%), Wyoming (46%), and Louisiana, which counted on federal support for more than half its budget. States have…made themselves vulnerable to the ideological proclivities of presidential administrations.

And this:

More pernicious are the ways federal agency ideologues hold those funds hostage to their agendas. …
A massive amount of federal spending isn’t even going to projects most people care about. It funds the priorities of federal agency bureaucrats.

The solution is to identify the total amount of Federal fund transfers to each State in 2026 (or 2027, but no later). Call that baseline year Year Zero. In Year 1, make a single, no strings attached block grant to each State in the amount of 90% of Year Zero. In each subsequent year, reduce the size of the block grant by an additional 10% of the Year Zero amount. In 10 years, there will be no more Federal funds transferred to a State, and all the States will be free of Federal strings on their own spending and taxing imperatives.

This would have the additional benefit for the citizens of each State in that State government spending and taxing would be subjected to greater citizen visibility and discipline.

The only time States need Federal funds transferred is during a State- or region-wide emergency, and those funds should be readily available—as they are currently, and potentially the more so with the cessation of unnecessary transfers done currently on a just because and it’s always done basis.