While Wisconsin consistently receives fewer federal funds per capita than most other states, the reach of federal dollars throughout our state remains vast — meaning that federal spending cuts could still have far-ranging impacts here.
In every corner of our state, federal funds play a critical role for seniors, veterans, students, the disabled, and low-income families, a new Wisconsin Policy Forum report finds. In particular, some proposed health care cuts could have a greater effect on state residents here than elsewhere, due to our state’s unique approach to provide health coverage to low-income residents.
At the same time, two of the largest federal programs – Social Security and Medicare – have not yet been targeted for cuts and overall federal spending in the state may still be rising as federal deficits continue. Many of the efforts to slash spending on smaller programs have been stymied in the court system so far, though the ultimate legal outcomes remain uncertain.
“Overall, this burst of budget cuts has provoked intense debate and raised fundamental questions about the role and size of the federal government,” the report finds.
At the time of this report’s release, President Donald Trump and Republican members of Congress sought sweeping reductions in federal spending. Some cuts were 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 potential cuts could come from pending legislation, including a bill that passed the U.S. House in May that would cut health care coverage and food benefits for the poor.
One factor that could mitigate at least somewhat the impact of potential federal cuts is that
Wisconsin relies less on federal funding overall than most states. Reasons for this include the state’s below-average poverty rate and lack of very large military bases.
Understanding the scope
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, but Wisconsin ranked 33rd among states for this ratio in 2022. Looking at federal spending alone, according to Rockefeller, Wisconsin ranked 41st among the states in 2022.
The 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. That totals $9,545 per Wisconsin resident, slightly more than the U.S. average of $9,493. That greater amount may reflect in part our state’s aging demographics.
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. Smaller categories of federal spending in Wisconsin for 2022 included COVID-19 relief, which since has been phased out, followed by federal contracts, and wages to federal workers.
Medicaid proposals loom large for Wisconsin
Recent Forum research outlined the unique approach our state has taken to Medicaid, by partially expanding the program’s eligibility but declining to follow 40 other states in fully expanding coverage for it under the Affordable Care Act. If some Medicaid changes being discussed by federal policymakers ultimately become law – such as those that limit incentive payments for expanding Medicaid – the state would be eligible for fewer federal payments in the future.
Another potential impact is the bill’s 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, where Medicaid covers individuals making up to 100% of the poverty level. Expiration of these credits could make it harder for low-income workers between 100% and 150% of the poverty level to purchase coverage through the ACA exchanges.
The House bill would also reduce the share of food benefits through the Supplemental Nutrition Assistance Program (formerly known as food stamps, now called FoodShare in Wisconsin) that are paid by the federal government, which could lead to higher costs for states.
Milwaukee could see bigger impact
Although Wisconsin lags other states in receiving federal aid, some parts of the state rely on it much more heavily. 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.
The report also notes 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. The array of proposed tax cuts and changes, and its impact on Wisconsin, may require its own future discussion.
Click here to view the full report, which was sponsored by the League of Wisconsin Municipalities.
The Wisconsin Policy Forum is the state’s leading source of nonpartisan, independent research on state and local public policy. As a nonprofit, our research is supported by members including hundreds of corporations, nonprofits, local governments, school districts, and individuals. Visit to learn more.
