Utah has a ‘heavy dependence’ on federal funds, state auditor finds

SALT LAKE CITY — Federal funds accounted for more than a quarter of Utah’s expenses in the last fiscal year, according to an annual audit, which recommends that lawmakers reconsider such reliance on money from a starkly divided and often dysfunctional Congress.

Utah — like many states — has increasingly relied on federal funds following a series of aid packages passed by Congress since the beginning of the COVID-19 pandemic. Of the nearly $34 billion spent by the state in the fiscal year ending on June 30, 2023, $9 billion, or 26.5%, came from the feds, according to a compliance audit released Monday by the state auditor.

Utah’s state budget has grown dramatically in recent years, and State Auditor John Dougall cautioned the state still has a “heavy dependence” on federal funds which are subject to the whims of a Congress that regularly finds itself on the brink of a shutdown due to infighting over the budget and spending.

Congress’ latest shutdown threat was averted over the weekend after lawmakers passed a $1.2 trillion spending package, but that spending was long overdue and came six months into the current budget year after lawmakers passed several short-term spending bills to keep the government from shutting down.

That spending package could threaten the speakership of House Speaker Mike Johnson, R-Louisiana, who was himself elected last fall after several chaotic weeks following the ouster of former Speaker Kevin McCarthy. The former Republican leader was forced out of the job after working with Democrats to avert a government shutdown — a move that prompted backlash from a cadre of hard-right Republicans who wanted more spending cuts.

The Utah Legislature recently approved a $29.4 billion budget for fiscal year 2025, of which $8.2 billion comes from the federal government, compared to $3.1 billion from the state’s general fund and $7.3 billion from the income tax fund. Next year’s budget includes a nearly $170 million tax cut that is the result of a decrease in the state income tax rate from 4.65% to 4.55%.

Much of the federal funds Utah has received in recent years were the results of pandemic aid, passed through the CARES Act during the Trump administration; and the American Rescue Plan Act, passed in the early days of President Joe Biden’s tenure. That’s in addition to regular funding provided from the U.S. government to cover the Children’s Health Insurance Program and similar programs.

Surrogates for the Biden administration — including second gentleman Doug Emhoff — visited Salt Lake City on Friday to highlight investments the U.S. has made in city and county governments and announce an additional $39 million in partially forgivable loans to identify and replace lead pipes in Salt Lake City.

State auditors reported several “significant deficiencies” in the state’s financial reports and internal controls over federal programs. For the Special Supplemental Nutrition Program for Women, Infants and Children, otherwise known as WIC, the audit states the Utah Department of Health and Human Services “did not verify the third-party service organizations expenditure details to ensure that benefit payments made were in compliance with the allowable costs and allowable activities requirements before reimbursement. As a result, inaccurate, incomplete, or false payments may be paid without detection.”

The report recommends the department “establish a system of reviewing” such expenses to ensure compliance with federal regulations.

Auditors noted the “department recognizes the need to review food benefit expenditure information received from the WIC third-party host processing vendor.”