Honolulu city skyline
Honolulu city skyline

by Hannah Oh – On June 11, Carl Graham, director of the Coalition for Self-Government in the West, told an audience at Americans for Tax Reform that the financial future of the western United States is being jeopardized by federal ownership over large swaths of land.

With over 50% of the land in this region controlled by the federal government, western states (California, Oregon, Washington, Nevada, Idaho, Utah, Arizona, Montana, Wyoming, Colorado, New Mexico, Alaska, and Hawaii) face a serious financial risk.

The federal government’s ownership of this vast area has caused states to become increasingly dependent on federal funding, since states are unable to tax federal land or develop it for their own economic purposes.

In effect, these states have become beholden to the federal government to take care of basic state functions, such as education and road maintenance, through federal subsidies and grants.

Graham explained that because federal funds to states are allocated through discretionary funding, they are likely to be squeezed between mandatory entitlement spending and national debt service in the next several years.

Federal funding for states will inevitably decrease and Graham says that it is up to states to prepare themselves for the worst-case scenario. With one-third of state budgets provided by the federal government, he argues that states ought to consider ways to reduce that dependence and mitigate the financial risks involved.

Graham proposes two ways that states can take action. First, state governments can create plans to regain control of certain federal lands–specifically, “multiple use” lands.

These lands are often poorly managed and states are cut off from a massive stream of revenue, in terms of both taxation and state economic development projects. It has been estimated that nearly $26.5 billion in annual gross regional product and $5 billion in tax revenue could be gained from opening up of federal lands.

Graham also adds that state and local officials are more likely to respond to residents, have greater accountability, and are better equipped with the knowledge and skills to maximize land use potential. Without reasserting state and local control, he maintains that it is impossible for states to attain any sense of economic independence.

The second way states can protect themselves against future federal funding cuts is to conduct a risk assessment so state and local officials can see the quantifiable impacts of such cuts and make decisions to better prepare themselves.

According to Graham, states can plan ahead by taking a moment to consider what would happen if federal funds started to disappear: Who would be hurt? Which programs are most at risk? Which are least at risk? From there, state leaders can begin to prioritize the positions and programs that are essential to the state, and identify those that can be made more efficient or eliminated altogether.

To date, Utah is the only state to do anything close to this type of audit. Graham urges other states to follow in Utah’s footsteps. At best, states will be able to prevent a ruinous financial downfall in times of a disaster. At worst, states have a detailed assessment of their past spending plans and programs that will help them increase long-term budget efficiency.

“You prepare for earthquakes, you prepare for fire; states need to prepare for the day when 33 percent of their budget is at risk,” Graham asserted at the end of his talk. He warns that without a clear plan for what lies ahead, states, especially those in the west, are bound to bear all of the risks associated with federal funding and the various strings attached. It is up to state leaders, then, to recognize this impending issue and to take steps that ensure their state’s financial future.

Submitted by State Budget Solutions

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