Look Up In the Sky — It’s a Bird! It’s a Plane! It’s Federal Spending in Wisconsin!

Wednesday, February 9, 2011 at 6:00 PM by

For years, Wisconsin has ranked near the bottom among the states in per capita federal spending. That changed in fiscal year 2009, when federal spending in Wisconsin increased by more than 50 percent, and Wisconsin’s ranking skyrocketed to an astounding 21st place nationally. However, with Recovery Act dollars drying up, and with a new Governor who has shown reluctance to take advantage of federal dollars, it is possible that 2009 represents a short-term blip in the flow of federal dollars coming into our state.

This post touches on some of the highlights of recent federal spending trends in Wisconsin, but for a more complete treatment, check out the article in WCCF’s WisKids Journal.

Traditionally, Wisconsin has ranked low in terms of federal spending. For each of the fiscal years 2005 through 2008, Wisconsin ranked either 47th or 48th in per capita federal spending. In 2008, per capita federal spending in Wisconsin was $1,910 below the national average, as shown in Figure 1. That changed in 2009, when federal spending in Wisconsin was $441 per person above the national average, ranking us 21st among the states.

A state has only a moderate amount of influence on federal spending within its borders. Nearly half of federal spending in Wisconsin is made up of Social Security payments to individuals and Medicare benefits, neither of which are easily influenced by state policymakers. We do have some capacity to increase our share of grants and aid, especially those dollars that come to Wisconsin through the Medicaid program, but the extent to which Wisconsin will do so in the current climate of increased caution regarding federal dollars is an open question.
In 2009, overall federal spending increased as a result of the Recovery Act, and federal spending in Wisconsin shot up dramatically. Between 2008 and 2009, federal spending in the states grew from $2.79 trillion to $3.24 trillion, a 16.0 percent increase. The increase was much more dramatic in Wisconsin, where per capita federal spending increased an astonishing 52.7 percent in 2009 — rising from $40.1 billion in 2008 to $61.3 billion in 2009, as shown in Figure 2.
It isn’t completely clear to us why Wisconsin enjoyed such a dramatic increase in federal funding in 2009, but some of the general reasons are apparent:
  • Spending in Wisconsin for federal grants and aid increased by $10.8 billion, thanks mostly to the Recovery Act, but also to policy changes Wisconsin made that increased the state’s share of federal Medicaid spending.
  • Procurement funding grew by $5.0 billion, thanks in large part to big defense contracts, including a $3 billion Army contract awarded to Oshkosh Corporation in 2009 and contracts awarded to other businesses like Marinette Marine.
  • Other direct payments grew by $3.9 billion.

The question of whether Wisconsin will retain its improved ranking in federal funds remains to be answered. Governor Walker has shown much less interest than his predecessor in obtaining federal funds for our state, particularly if a long-term state commitment and some state or local matching funding is required.  During a period of anti-Washington rhetoric and renewed concern about the federal deficit, shunning federal dollars might occasionally be good politics, especially for a candidate focused on a Republican primary election.

On the other hand, for a politician who is in office and concerned about job creation, it makes a lot of sense to fight for federal funding that will flow through the state economy, increase consumer spending, and directly or indirectly create jobs within the state. Over the next few years we will see how Governor Walker and other Republican governors balance those considerations.

Tamarine Cornelius

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