As feds slash funding, Montana begins to wrestle with impact

Jordan Hansen, Daily Montanan, 10/23/25

Large scale federal changes to funding, both through the reconciliation bill passed this summer and other actions President Donald Trump’s administration has taken, will have significant impacts on Montana, state agencies reported.

Legislators heard the report from the state’s legislative support divisions, as well as agency staff during an eight-hour meeting on Wednesday in Helena. Food assistance and government-funded healthcare will see changes and the state could see less tax revenue through new rules in that area.

The Legislative Fiscal Division’s report, “Federal Budget Impacts to State,” is 45 pages long and specifically gets into what federal grants have changed. A report this summer estimated a nearly $160 million hit to the state’s budget.

About 44.5% of the House Bill 2 budget comes from the federal government, the report states. That bill included certain “triggers” that would bring the finance committee together with interim committees and interim budget committees.

“We’ve well established that those triggers have happened in (the federal reconciliation bill),” Amy Carlson, with Legislative Fiscal, told legislators on Wednesday.”… I think that we as a state are going to be having this conversation about how the federal government changes in funding affect Montana’s budget, and how you all feel about that, and what changes you may or may not want to do as a result of that.”

Marcia Howard, the executive director of Federal Funds Information for States, also gave the legislators an overview of federal changes. Her organization helps states analyze the impact of federal changes on their budget. 

She said the president’s administration has made it clear where their priorities lie.

“To cut taxes, to cut mandatory programs, to cut discretionary grants, to shrink the federal footprint generally, to make the federal government smaller and to vastly expand executive branch power,” Howard said. “And there are a lot of tools available to do these things, and the administration has used all of them to some degree.”

She said those changes have not been as “transparent” as they would be “in a normal year.” Howard added that many grant programs have been restructured, and that timelines have been shortened if they get reopened. Some actions the Trump administration has taken to stop grant programs may or may not be legal, she added.

“It may be that by the time all of this runs its course, the clock has just run out, that it becomes irrelevant whether it was legal or illegal, because it was two or three or four years ago, and the funds just never made their way to the recipients,” Howard said.

Susie Hedalen, the state’s superintendent of public instruction, said federal funds only make up 13.7% of a school district’s budget in the state and told legislators they “were not too worried” about potential federal education cuts. The federal Department of Education has been marked for shutdown by the Trump administration.

There was also concern funding could dip for the Montana State Library, the Montana Arts Council and the Montana Historical Society. They have small budgets to begin with and federal money makes up a huge percentage of their funding, representatives for those organizations noted.

Legislators and the presenters discussed what they could do to cover food assistance programs during the federal shutdown. House Bill 924, asking the Governor’s Office to use certain funds, or even taking a loan against another pot of state money were all discussed as potential pathways for food assistance funding.

“The Legislative Fiscal Division memo today shows an estimated biennial revenue loss from the individual income tax provisions of around 230 million each biennium,” Rose Bender, with the Montana Budget and Policy Center, said during a public comment. “Moving forward, we think there is additional risk of revenue loss within this budget window from changes not listed in that memo, and on top of that, lost tax revenue, these tax cuts come while our state is being required to cover additional pieces of the SNAP and Medicaid programs.”

New rules on Supplemental Nutritional Assistance Programs ask states to contribute more and ties what’s called an “error rate” to that money. Montana’s error rate, which includes both overallotting and underallotting money for food, is between  7% and 8%, the report noted.

“There are less federal dollars coming in for SNAP administration, more state funds required as we move forward in SNAP, there is that state responsibility tied to the error rate in SNAP, right,” said Josh Platt, with Legislative Fiscal. “And so that work has already started at the agency level to work on getting that error rate down.”

Other changes discussed included coal and oil leases — new rules will have companies paying less, so less tax revenue — and transportation funding.

Two large state transportation projects, Nine Pipes along Highway 93 and another in East Missoula, were impacted in the cuts. Department of Transportation head Chris Dorrington said Nine Pipes would likely be reduced in scale and that he “didn’t see” the East Missoula project coming back.

The justice system is also seeing cuts, Walker Hopkins, with Legislative Fiscal, added.

“What we’ve been able to identify so far is areas that would be hit in terms of federal funding is our assistance and services for victims of domestic violence, dating violence and sexual assault,” Hopkins said.