President Donald Trump’s big bill to cut taxes and reduce federal spending on some social safety net programs could have large implications for states, but for many it’s too late to do much about it this year. Tuesday marks the start of a new budget year in 46 states. Though some legislatures are still working, most already have adjourned and finalized their spending plans without knowing whether federal funding will be cut and, if so, by how much. “The ebb and flow of rumors and reality have created great uncertainty and some anxiety in state governments,” said David Adkins, executive director of The Council of State Governments. Several states have taken preemptive steps, setting aside money in reserves or tasking committees to monitor the impact of federal funding reductions. Others are tentatively planning to return in special sessions this year to account for potential funding cuts to joint federal-state programs such as Medicaid and the Supplemental Nutrition Assistance Program, or SNAP. Others will have to wait until their legislatures are back in session next year. What’s at stake for states? “If there are significant cuts, states wouldn’t be able to fully absorb those,” said Brian Sigritz, director of state fiscal studies at the National Association of State Budget Officers. Nationally, the Medicaid health care program for lower-income residents accounts for 30% of total state expenditures, according to the health policy research organization KFF. That makes it the costliest program in many states, ahead of even K-12 education. The bulk of Medicaid money comes from the federal government, meaning any changes in federal policy can create big ripples for states. Legislation pending in Congress would affect Medicaid in several ways. New work requirements are expected to reduce enrollment by millions of people, while other proposed changes also could reduce federal payments to states. Until now the federal government also has covered the full cost of SNAP benefits and half the administrative costs. Trump’s bill would shift more of those costs to states, leaving them to either divert money from other purposes or trim back their food assistance programs. The Medicaid and SNAP changes are just the latest in a series of Trump policies affecting state finances, including the rollback of grants for transportation and high-speed internet projects and attempts to withhold federal funds from sanctuary jurisdictions that limit cooperation with federal immigration authorities. Some legislatures are stocking up on savings A surge in federal aid and state tax revenue during the coronavirus pandemic led to booming budgets and historic cash surpluses in many states. As revenues slow and those surpluses get spent, some states now are trying to guard against federal funding reductions. New Mexico enacted a law this year creating a Medicaid trust fund gradually stocked with up to $2 billion that can be tapped to prop up the program if federal funding cuts would otherwise cause a reduction in coverage or benefits. Hawaii lawmakers, in crafting the state’s budget, left an extra $200 million in the general fund as a contingency against federal funding uncertainty. They plan to return for a special session. And Vermont’s budget sets aside up to $110 million in case federal funding is cut. That includes $50 million that can be spent while the Legislature is not in session and up to $60 million that could be appropriated in the future to address federal funding shortfalls. Though not necessarily tied to federal cuts, […]