Weekly Fiscal Facts are provided to Wisconsin Newspaper Association members by the Wisconsin Policy Forum, the state’s leading resource for nonpartisan state and local government research and civic education. The Wisconsin Policy Forum logo can be downloaded here.
Wisconsin consistently receives fewer federal funds per capita than most other states. But federal spending cuts could have far-ranging impacts here in every corner of our state, where federal funds play a critical role for seniors, veterans, students, the disabled, and low-income families.
President Donald Trump and Republican members of Congress are seeking sweeping reductions in federal spending. Some cuts have been advanced by the Trump administration unilaterally, such as workforce cuts at veterans’ hospitals or funding cuts for major research institutions including the University of Wisconsin-Madison. Additional – and potentially far larger — cuts could come from pending legislation, including some version of a bill that passed the U.S. House in May.
A recent Forum report found that in federal fiscal year 2022, Wisconsin received an estimated $86.46 billion in federal outlays, or roughly $14,700 per person, according to the Rockefeller Institute of Government. While this lags the national average of $16,606 per person, it remains an enormous sum, equaling nearly one quarter of the combined personal incomes of all the state’s residents. Meanwhile, Wisconsin residents and businesses paid just over $71 billion in federal taxes in the same period.
As in most states, Wisconsin residents receive more in federal payments per capita than they pay in taxes. Wisconsin ranked 33rd among states for this ratio in 2022. Looking at federal spending alone, Wisconsin ranked 41st among the states in 2022. This is one factor that could mitigate at least somewhat the impact of potential federal cuts in our state.
A recent Forum analysis breaks federal expenditures into five categories. The largest by far in Wisconsin, at $56.2 billion, is in direct payments through entitlement programs such as Social Security or Medicare. The second-largest category is grants paid to states, local governments, school districts, and other entities – the largest of which is Medicaid, state government’s single largest source of federal funding.
However, Wisconsin’s singular approach to its Medicaid programs could trigger unusual impacts from the legislation. For example, the House bill includes a work requirement for childless Medicaid enrollees who are of working age and are not disabled. Among the 10 states that have not expanded Medicaid, Wisconsin is the only one that currently covers any childless adults without qualifying disabilities, meaning the impact here would be greater than in other non-expansion states.
In addition, Congress thus far has not moved to extend soon-to-expire tax credits that ensure that people with incomes up to 150% of the federal poverty level can obtain some health plans through ACA marketplaces without paying a premium. Those provisions are particularly important for Wisconsin, and their expiration could make it harder for Wisconsinites between 100% and 150% of the poverty level to purchase coverage through the ACA exchanges.
Although Wisconsin lags other states in receiving federal aid, as one of the poorest large cities in the United States, Milwaukee and many of its residents directly or indirectly benefit from federal aid through Medicaid, FoodShare, and education programs. Large cuts to these programs could have an outsized impact on Wisconsin’s largest city.
It also is worth noting that — as the House bill’s proposed tax cuts outweigh its spending decreases — the bill would increase projected federal deficits by trillions of dollars over the next decade.
This information is provided to Wisconsin Newspaper Association members as a service of the Wisconsin Policy Forum, the state’s leading resource for nonpartisan state and local government research and civic education. Learn more at wispolicyforum.org.
