The ink is not even dry on the far-reaching domestic policy law that President Trump will sign on Friday, and already state governments are bracing for impact as Washington shifts much of the burden for health care, food assistance and other programs onto them.
Gov. JB Pritzker, Democrat of Illinois, and legislative leaders might hold a special session to deal with the new law, even though the recently passed state budget already includes $100 million cover shortfalls in federal funding.
Another Democrat, Gov. Katie Hobbs of Arizona, has warned that even her state’s $1.6 billion emergency fund will be insufficient to weather what’s coming, because “even if we cut every single thing in the state, we don’t have the money to backfill all these cuts.”
Even before the bill’s final passage, state capitals were contending with a slowing economy and federal spending cuts implemented by the Department of Government Efficiency run by Elon Musk. Now they will be expected to administer complex new work requirements for Medicaid and food aid; rework some state health insurance exchanges under the Affordable Care Act; and decide how much they can do to keep their citizens insured and fed once they start losing federal assistance.
“What’s happening in Washington, D.C., is undermining everything we’ve been working on.” said Gov. Laura Kelly of Kansas, a Democrat.
State budgets have been generally strong in recent years as a result of billions in Covid-19 relief money, economic growth and a record-breaking stock market that has generated more taxes than anticipated. A robust jobs report on Thursday looked rosier that expected, in large part because gains in state and local government employment last month obscured stagnant job growth in the private sector.
Many states, both red and blue, have also enthusiastically cut taxes for residents and businesses. In the face of deep federal cuts, some states will probably be inclined to pause those reductions rather than reverse them, said Jared Walczak, the vice president of state projects at the Tax Foundation, a nonprofit tax policy group that generally favors lower taxes.
But in recent weeks, states have been balancing budgets that are fraught with uncertainties. Most state governments’ fiscal years began on Tuesday, but governors and legislators have had to keep an eye on specific provisions in the federal bill that could have outsize effects, such as a $50 billion fund for rural hospitals to offset the impact of Medicaid cuts (which was ultimately included) and the sale of millions of acres of public lands (which was not).
Now that the fine print in the president’s package is coming into focus, Carl Davis, the research director at the Institute on Taxation and Economic Policy, a left-leaning research group, said that states would have three main options for dealing with the new law.
“They can scale back their investments in health and food assistance that are directly affected by the federal legislation,” he said. “They could shuffle money around to preserve health insurance — ‘Hey, we don’t want 600,000 North Carolinians to lose health insurance, but we’re going to take money away from education to do it.’”
“Or,” he said, “we can see tax increases.”
Some states will use “a mix of all three,” Mr. Davis added.
Once signed, Mr. Trump’s law includes nearly $1 trillion in cuts to Medicaid by 2034, scaling back the program that pays for the health care of roughly 78 million adults and children. It also sharply curtails federal spending on the Supplemental Nutrition Assistance Program, or SNAP, which provides monthly food assistance payments to about 42 million families.
A new requirement that Medicaid enrollees prove they are employed every six months also leaves states with the difficult task of building out software systems to track eligibility by the end of 2026. Experts said states could face software glitches that may cause delays in enrollment or leave eligible children and parents without health care.
In addition, states that run their own exchanges to sell subsidized health insurance through the Affordable Care Act will have to institute additional paperwork burdens for recipients. And states are also required to administer new SNAP work requirements.
In Georgia, which expanded Medicaid in 2023 to low-income people who could prove their employment, only 3 percent of uninsured Georgians with qualified incomes were enrolled in the program, which cost nearly $92 million, according to the nonprofit Georgia Budget and Policy Institute.
For the 40 states that expanded Medicaid to lower-income workers under the Affordable Care Act, the fate of that extra coverage has loomed particularly large.
Many states, especially those that expanded Medicaid, impose taxes on medical providers to leverage a larger federal contribution; the federal government reimburses hospitals and other providers for that tax payment, enabling the state to give much of the tax back. The new law reduces the rate at which certain states can tax providers, a big blow that will hit beginning in 2028.
Among the states that could lose more than 7.5 percent of their total federal Medicaid funding are Arizona, New Hampshire, Nevada, Iowa, Vermont, Michigan and Oregon, according to a New York Times analysis.
Still, response to the new law from governors has largely broken down on party lines.
In a statement posted on social media, Iowa’s Republican governor, Kim Reynolds, said that “public assistance should be a hand up, not a lifestyle.”
“By requiring able-bodied adults to work, volunteer, or train as a condition of receiving benefits, the bill reinforces the dignity of work,” she said.
Andy Beshear, the Democratic governor of Kentucky, predicted that the law would “devastate rural America” and that “our economy will suffer.” He called it “the worst piece of legislation I’ve seen in my lifetime.”
Elisabeth Shepard, a spokeswoman for Gov. Tina Kotek of Oregon, another Democrat, said that “just the provider assessment cuts alone” would cut more than $10 billion over 10 years from the state’s Medicaid program.
As a result, she said, “the governor is directing state agencies to urgently evaluate impacts of the federal budget to Oregon.”
In California, state officials said the bill would most likely cause 3.4 million people to lose health insurance and at least 735,000 people to lose food benefits.
Rural parts of the state are expected to be hardest hit. Hospitals are scarce in the less populous parts of California, and a loss of federal funding could cause some of them to close or pare back staffing. State officials project that about 217,000 Californians will lose jobs because of funding cuts, most of them in the health care system and some of them in food distribution.
During a news conference last week, Gov. Gavin Newsom, Democrat of California, highlighted several financially distressed hospitals in Republican districts that now face even greater risk.
“They’re gutting an already vulnerable system,” he said.
It should be noted, said Mr. Walczak of the Tax Foundation, that even after January 2027, when the biggest changes kick in, states will be able to apply for extensions of up to two years to implement the Medicaid work requirements. That may limit how much states will need to scramble to address these issues immediately.
At least one Democratic governor sounded less pessimistic. In an interview with a local television station this week, Gov. Josh Green of Hawaii, who is also a medical doctor, said he did not anticipate any hospitals closing, partly because of his own appeals to Dr. Mehmet Oz, the administrator of the Centers for Medicare and Medicaid Services, about rural health care.
“People should know we’re going to be OK,” Governor Green said. “We won’t need a special session, and I won’t have to adjust anything else right now, not the tax breaks that we’ve given to people who are struggling.”
Some Republican governors adopted a more wait-and-see posture, neither optimistic nor gloomy.
“It’s clear I’ve supported this legislation,” Gov. Bill Lee of Tennessee said. “America needs that. But we will look at the outcome of it when it’s finally done and determine how it impacts Tennesseans, and then the state will decide what response it has to make sure our people are taken care of.”
On Wednesday, after Vice President JD Vance cast the tiebreaking vote in the Senate, Gov. Jim Pillen of Nebraska praised the measure on social media for “supporting families, growing agriculture, extending tax cuts, preserving federal safety net programs, and strengthening our military and critical national security operations.”
On the same day, a clinic in southwest Nebraska announced that it would be closing after 30 years.
“Unfortunately, the current financial environment, driven by anticipated federal budget cuts to Medicaid, has made it impossible for us to continue operating all of our services, many of which have faced significant financial challenges for years,” said Troy Bruntz, the chief executive of Community Hospital in Curtis, a town of around 800 people, more than three hours west of Lincoln.
Laurel Rosenhall contributed reporting from Sacramento.
David W. Chen reports on state legislatures, state level policymaking and the political forces behind them.
Pooja Salhotra covers breaking news across the United States.
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