Wyoming is overexposed to impacts of a changing federal budget

With a federal government shutdown upon us and even more importantly, ballooning national debt jeopardizing the solvency of Social Security and Medicare in less than 10 years and other basic government functions, states must start preparing for changes in federal support.

This is especially true in a state like Wyoming, where over 49 percent of the state budget is derived from federal tax dollars. For context, the national average is about 30 percent, and regionally, it’s higher than in other mountain states: Idaho derives 35.9 percent of its budget from the federal government; Washington, 34.4 percent; and Montana, 42.7 percent.

The State Policy Network (SPN), which ranks states by their readiness to handle federal government cuts in its annual Federalism Scorecard, labels Wyoming as “vulnerable” to federal funding shifts. Its number 23 position among the states in its just released 2025 issue is the same as last year as state legislators did not make changes to improve its ability to navigate shifting national spending priorities.

The reason this is so important is that deferring spending on roads or other building projects is one thing, said Steven Johnson, a fellow at SPN’s Center for Practical Federalism, but “what do we do if 60 percent of funding for a veterans’ home comes from the federal government? Would the state kick 60 percent of the people out?”

He recommends that state agencies and other government entities create contingency plans for funding reductions at different levels. He also said the state legislature should start overseeing federal grants like in Oregon. And he suggested a 2025 law in Tennessee requiring state agencies to seek approval from the governor and alert the Joint Committee on Ways and Means prior to accepting federal aid. These reforms would help everyone in the government be more informed about state spending and prepared to manage changes to it, he said.

Wyoming legislators don’t have to look far for other strong ideas to increase the state’s readiness for fiscal shock. Back in 2011, our southern neighbor started passing a series of “Financial Ready Utah” laws that have since made it a model for other states to follow and ranked in second place by SPN in its 2025 Federalism Scorecard.

Utah requires state agencies to disclose all federal receipts, what percentage of the budget federal funds represent and what they would do if there was a reduction of various percentages. Its Federal Funds Procedures Act requires state agencies to submit a summary of a federal funds request to the governor for approval or rejection before the state is required to participate in a program.

And earlier this year the Utah state legislature passed Federalism Amendments, which create a commission to study federalism issues and monitor federal legislation for its potential to infringe on state sovereignty. Among its other provisions, it orders the development of a nonpartisan continuing education program for state and local employees on federalism issues.

Rep. Ken Ivory, its sponsor, said all state leaders “should know their roles and power” and that Utah has decided to take fiscal contingency planning to the next level by raising the issue nationally. He plans to work with governance groups across the country in the coming years in order to promote the importance that every state must be prepared. “This is structure, not politics,” he added, emphasizing that “Financial Ready Utah” laws have received wide bipartisan support in the state legislature.

Given the precarious state of the national budget, which spends more on interest payments for debt than on our national defense and Medicare, he said state leaders should feel a heightened sense of urgency.

And as John F. Cogan of the Hoover Institution wrote in his 2024 study,  The Budgetary Impact of the Abandonment of Federalism, “All the increase in federal spending as a percentage of GDP since the 1950s, and the budget deficits it has created, is due to rapidly growing spending on activities that Congress originally regarded as state and local.”

This means Congress could withdraw that non-Constitutionally mandated funding and require states to pay for items that were long under their purview for most of the country’s history.

For all these reasons Wyoming legislators should follow Utah’s lead in enacting reforms that prepare Wyoming to manage effectively through a federal government shutdown or aid and grant withdrawals so that our schools, roads and most vulnerable are protected.