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Republican Debt-Ceiling-and-Cuts Bill Would Cost States and Local Communities $1.3 Trillion

House Republicans’ debt-ceiling-and-cuts bill would decimate funding that states, localities, tribal nations, and U.S. Territories rely on to provide vital services like schools, transit, and aid to families in crisis. The bill would impose up to $1.3 trillion in state program cuts over ten years, which would leave states and localities with significantly less revenue, leading to an array of problems like more crowded classrooms, deteriorating water facilities, less affordable child care, and millions of people losing access to housing, substance use treatment, and food.

The bill requires huge, unspecified cuts to the part of the federal budget that Congress appropriates each year, of which aid to states, localities, tribal governments, and territories makes up a significant share. Slashing that aid — as the bill would likely require — would deeply harm the communities that rely on it to pay for a wide range of services and programs. Even worse, the bill also cuts separate funding that states and localities use to provide health care and food assistance, severely limits states’ flexibility in how they provide cash assistance to families in poverty, and cuts states’ revenue by effectively giving it away to tax cheats.

Focusing only on the bill’s cuts to appropriated programs, an estimated $34 billion would be lost to states, localities, tribal nations, and U.S. Territories in 2024 alone if all appropriated programs are cut by the same percentage. That cut would reach $537 billion over the next ten years.

If Congress were to protect funding for defense and veterans’ health care — as many House Republicans have suggested — the cuts needed to abide by the bill’s sharp overall cuts would be even more massive for state and local programs. They’d amount to an estimated $84 billion in 2024 and a staggering $1.3 trillion over the next decade (a 59 percent cut in 2033).

State and local governments would be forced to slash funding for programs that people and communities rely upon every day. The harms done would include more crowded classrooms, even fewer families able to afford child care, new parents lacking the help they need to feed their babies properly, malfunctioning water facilities, and less in funding for homelessness services and substance use treatment.

No state would be spared. High-population states like California and New York would see very large dollar cuts of up to $170.9 billion and $144.7 billion, respectively. Less populous and more rural states, meanwhile, would feel deep pain relative to the size of their budgets. For example, the cut of up to $8.3 billion in federal funding for West Virginia over ten years is roughly 1.5 times the size of the entire state budget in fiscal year 2024.

Estimated Cuts in Discretionary Federal Aid Under McCarthy Bill  
($ millions)
 Estimated cuts in FY24Estimated cuts over 10 years
 if applied to total discretionary spendingif defense and veteran's health held harmlessif applied to total discretionary spendingif defense and veteran's health held harmless
District of Columbia-215-532-3,399-8,539
New Hampshire-144-355-2,271-5,706
New Jersey-1,065-2,630-16,813-42,236
New Mexico-190-469-3,001-7,540
New York-3,647-9,011-57,604-144,707
North Carolina-798-1,972-12,608-31,672
North Dakota-90-221-1,414-3,552
Rhode Island-157-387-2,474-6,216
South Carolina-399-985-6,296-15,817
South Dakota-84-208-1,329-3,340
West Virginia-210-518-3,310-8,316
American Samoa-26-63-405-1,018
Northern Mariana Islands-20-48-310-779
Puerto Rico-635-1,570-10,034-25,207
Freely Associated States-2-6-38-96
Virgin Islands-263-650-4,157-10,443
Tribal nations-295-728-4,653-11,690

Note: "Cut" refers to reductions below the Congressional Budget Office baseline, which generally adjusts for inflation after 2023. "Held harmless" means allowing it to grow with the baseline.

Source: CBPP calculations based on legislative text of "Limit, Save, Grow Act of 2023" and data from the Congressional Budget Office and the Office of Management and Budget.

The harm from these service cuts comes in addition to the millions of people from whom the bill would take away health coverage, food, and cash assistance if they don’t meet onerous work requirements:

Work requirements have proven costly failures in all these programs. Numerous studies have found that SNAP work requirements like those already in place for many people aged 18-49 don’t improve employment or earnings — they just cut people off from the food assistance they need to buy groceries. TANF’s work requirements don’t lift families above the poverty line, and they leave families with the most significant needs without any cash assistance to meet their basic needs. Meanwhile, Arkansas already tried Medicaid work requirements: a federal court halted them following massive coverage losses due largely to the requirements’ administrative burden and red tape.

And, in yet another hit to states’ residents and budgets, the House Republican bill would enable tax cheaters to get away with not paying roughly $191 billion over ten years in federal taxes that they owe by rescinding billions in additional funding the IRS received to rebuild its diminished enforcement capabilities. When tax filers, especially very wealthy ones, underreport their income to the federal government, that reduces state tax collections as well — with state residents ultimately footing the bill through reduced services or increased state-level taxes.

Communities nationwide depend on federal aid to build and support basic public infrastructure and to help every resident access what they need for their and their family’s health, well-being, and success. By slashing this aid, the House Republican bill would badly harm our communities, and that’s a bad deal for all of us.

Whitney Tucker
Directora de Investigación en Política Fiscal Estatal