Criticism: New budget changes failed to meet the goal of federal funds that were weakened by financial recession.

States which receive additional funding===> enjoyed budget surplus last year

Counter: All states whose funding increased === > had greater than 20% decline in economic output.

Conclusion: Federal govt. did not fail to distribute funds

Assumption: 1. Recession caused greater than 20% decline in economic o/p in states.

2. States who enjoyed budget surplus last year are the ones that showed a greater than 20% decline in economic o/p.

(A) Rather than being determined by budget surplus or deficit, the amount of funding a state needs depends on whether it has a major city or not.

The amount of funding has no relevance here. The argument talks about additional funding. Also, a major city or not is not a concern.

(B) The number of states that have received an increase in funding represents a significant proportion of all the states in the country.

The criticism is made by states. The argument does not talk about funds at the national level.

(C) The committee's assessment of states' financial needs has been deemed biased by the local media.

"Biased by local media" .. This fails the argument... This is not an assumption

(D) The assessment committee did not identify many states with greater than 20% decline in economic output other than those with major cities and budget surpluses in the last year.

This shows that the additional funding was provided to those states that have greater than 20% decline in economic output..Assumption 2 is correct.

(E) States with budget deficits typically had more decline in economic output than did states with major cities and budget surpluses.

budget surplus is in talks here... Budget deficit is out of the question..!!!

Assumption 2 connects the criticism and the counter statement.

Answer: D