The government in last year's budget announced an $80 billion easing of funding to the states, sparking outrage from Labor and the state premiers.
Mr Hockey on Tuesday told reporters ahead of his second budget that the spending slowdown remained in place in order to balance the books.
"Some of the states are running surpluses - we are not running a surplus," he said.
"Don't shed a tear for the states."
The "bonus payment" spending had been earmarked by Labor and never properly funded in the budget, Mr Hockey said.
However, over the next four years there would six per cent real growth in health and education spending.
The states will benefit from a 5.6 per cent rise in GST receipts in 2015/16, to $57 billion.
NSW will take the lion's share ($17.3 billion), followed by Queensland ($13 billion), Victoria ($12.7 billion), SA ($5.5 billion), NT ($3.3 billion) Tasmania ($2.2 billion), WA ($1.9 billion) and ACT ($1 billion),.
The federal budget set aside $107.7 billion in payments to the states, or a quarter of the total budget, as well as $33.3 billion for infrastructure from 2014 to mid-2019.
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