Federal changes enacted this year and new executive grant oversight were a principal focus for State Policy Network witnesses who told the Utah Federalism Commission on Nov. 20 that the changes reframe fiscal risk for states.

Jennifer Butler, senior policy advisor at the State Policy Network’s Center for Practical Federalism, highlighted an executive order (Improving Oversight of Federal Grantmaking) that allows federal agencies to pause or review new discretionary grants and to insert termination-for-convenience clauses that could cancel grants midstream. "That introduces an entirely new level of risk," Butler told the commission, noting states could hire staff and sign contracts assuming multi-year federal support and then be left exposed.

Butler also summarized provisions of the omnibus (referred to at the hearing as OB3) that directly increase states’ exposure. Under the law, states with higher SNAP error rates will be required to pay a share of benefit costs starting in fiscal 2028; the federal administrative match for SNAP will shift from 50% to 25% beginning in FY2026. Butler cited an estimate that Utah could face an incremental administrative cost of about $14.8 million in 2025 from the new 75/25 split.

Medicaid changes in OB3 were presented as another significant source of risk. Butler said the finalized law limits some state financing tools (provider taxes and state-directed payments), and Utah’s own HHS had produced memos estimating worst-case impacts in the hundreds of millions annually if broader match reductions had been applied; the final law narrowed the exposure but still creates new constraints on state financing choices.

Rural Health Transformation Fund: Butler also flagged a new $50 billion Rural Health Transformation Fund, distributed over five years starting FY2026; approved state plans split half of that allocation equally across states (Utah’s minimum is roughly $100 million per year for five years if the plan is approved), and the other half is formula-based. Butler urged states to treat the money as a strategic one-time investment rather than a basis for long-term recurring obligations.

Why it matters: Federal administrative and structural changes mean states must now monitor error rates and program administration more closely, understand where short-term federal funding creates long-term obligations, and be cautious about hiring or capital projects tied to time-limited federal dollars.

Next steps: Commission members asked staff to continue tracking federal guidance letters and to identify letters that may cross into state jurisdiction. The committee requested comments on the guidance-letter tracker by Dec. 4 for a Dec. 9 Legislative Management briefing.

Quoted speakers are drawn from the Nov. 20 Federalism Commission meeting (testimony by Jennifer Butler and Steve Johnson of State Policy Network).