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For States, Trump Budget Represents a Massive Cost Shift

President Trump’s budget would shift massive new costs to states by cutting federal funding for health care, food assistance, and many other areas. States can’t afford to assume these costs without raising taxes significantly so, instead, they’d very likely cut many key investments and public services.

Specifically, the Trump budget slashes:

  • Medicaid. The budget embraces the House Republican bill to repeal the Affordable Care Act (ACA), which the Congressional Budget Office estimates would cut federal Medicaid spending by over $800 billion over ten years by effectively ending the ACA’s Medicaid expansion, converting Medicaid to a per capita cap or block grant, and providing insufficient funding to the states to cover their Medicaid costs.

    Since Medicaid is jointly funded by the federal government and states, states would have to raise their own revenue to offset the lost federal funds or, more likely, curtail Medicaid eligibility and health care services to low-income seniors, children, parents, adults, and people with disabilities. (Here are state-specific estimates of the cost shift under the House Republican health bill.) The budget would also impose hundreds of billions in additional Medicaid cuts over ten years, shifting even more costs to states.

  • SNAP and other low-income programs. The federal government has always paid the full cost of SNAP (formerly food stamp) benefits, which help ensure that low-income families have enough to eat even when a parent is laid off or otherwise can’t keep food on the table. The budget, however, would ultimately transfer 25 percent of SNAP benefit costs to states — a cost shift of $116 billion over ten years. If the 25 percent state contribution were in effect today, Texas would need to find $1.3 billion, which is roughly the state’s share of the annual salary of 64,000 teachers. The budget also includes other SNAP cuts that would reduce, and in some cases eliminate, SNAP for millions of people.

    The budget would also cut other programs that help states fund supports and services for families struggling. It would cut Temporary Assistance for Needy Families (TANF), which helps poor families with children by providing cash assistance, job-seeking assistance, child care, and services to prevent the need for foster care, among other things. States would have to pick up the tab or cut these critical supports to families. The budget also eliminates the Social Services Block Grant, which gives states flexible funding for services such as adult day programs that help seniors live more independently and child care assistance.

  • Other federal grants to states. The budget would shift costs to states for a wide range of other programs and services that the federal government now supports. It would eliminate a number of grants to states and localities in non-defense discretionary (NDD) spending, including home heating assistance to low-income households, grants to improve teacher quality, and funding for after-school programs. And it would eliminate the Community Development Block Grant and Community Services Block Grant, both of which improve conditions in low-income communities, as well as some housing programs. These and other discretionary grants — as well as NDD programs as a whole — already have endured significant cuts due to the 2011 Budget Control Act’s tight annual funding caps and sequestration. The budget would cut overall NDD funding by another $1.6 trillion over ten years; by the tenth year, funding would be 41 percent lower than the 2017 level, adjusted for inflation. Grants to states and localities comprise a sizeable share of NDD spending, so those grants would likely be cut by hundreds of billions of dollars over the next decade, shifting even more costs to states.

States are in no position to assume the massive additional costs that the Trump budget would impose. Many are still recovering from the Great Recession. State funding for higher education per student, for example, is still down 18 percent from before the recession and, in a number of states, K-12 funding per student also is still far below pre-recession levels. Meanwhile, state revenues are currently lower than expected in many states, leaving sizeable gaps in their ability to fund existing services — let alone the billions in additional costs they’d face under the Trump budget.