Why wouldn't they just determine the percentage based on the percent contribution from each state?

The Feds are who? State Senators and Reps, if I am not mistaken. Where am I?

Because some states get more back than they contribute, and if that changed they'd be in real trouble. And while I may be pissed off at some of those states 'round election time, I don't particularly want them to collapse.
But from a particular state government's perspective, the number of feds from that state is pretty small.

Representative Republic... not a Democracy.

wealth is a great motivator, perhaps the threat of only receiving in direct proportion to what you produce would be good incentive to clean up their acts.