As Congress considers a variety of changes to social safety net programs, the nation may be on the precipice of significant cost shifts to the states.
The House and Senate are working furiously on a budget reconciliation package expected to reduce funding for many federal programs to fund other administration priorities. As part of the reconciliation process, there have been proposals to cut federal funding to states for social service programs including Medicaid, Temporary Assistance for Needy Families (TANF), the Supplemental Nutrition Assistance Program (SNAP) and the Social Services Block Grant (SSBG). Together, these proposed changes could place significant new budget pressure on states to make up the difference in funding.
Engage With Congress
Committee markups are expected to begin in the coming days. Now is the time to reach out to your congressional delegations to share your perspective on what these proposals will mean for your constituents.
States that don’t absorb the increased costs in one or more of these programs might have to limit eligibility, reduce benefits and/or raise revenues. And beyond the implications for Medicaid, SNAP or TANF, there could also be downstream impacts on programs, including the Special Supplemental Nutrition Program for Women, Infants and Children (WIC) and the national public school lunch and breakfast programs, that allow for categorical eligibility—a process that automatically allows recipients of one or more public benefit programs to be eligible for other social service programs. Additionally, two programs being considered for cuts—TANF and SSBG—allow states to transfer a percentage of those funds to the Child Care and Development Block Grant, meaning there may also be trickle-down impacts on state child care subsidy programs. NCSL, along with other state and local groups, has voiced concern to Congress about shifting costs to the states.
The Latest on Medicaid
For months, changes to Medicaid have been part of a larger basket of options to help pay for Trump administration policy priorities. With formal committee deliberations about to begin, the House Energy and Commerce Committee, which has jurisdiction over Medicaid, is zeroing in on several proposals. While the list is fluid, it appears that Medicaid work requirements, a per capita cap on the expansion population and more frequent Medicaid eligibility checks are currently at the top of the list.
The committee is under pressure to find $880 billion in reductions to programs within its jurisdiction—and Medicaid accounts for 93% of the funding available to the committee, according to the Congressional Budget Office. Whether this is the final number or something closer to $500 billion, as committee Chair Brett Guthrie has suggested, remains to be seen. But the implications for states cannot be understated.
What Does a Per Capita Cap on Medicaid Expansion Look Like for States?
- The federal government currently pays 90% of the expansion population—20 million people who received health coverage through Medicaid expansion and whose incomes are below 138% of the federal poverty level.
- Under a capped system, the federal government’s share would be set at a fixed amount per person and would decrease over time, resulting in a possible cost shift of $246 billion to states over 10 years. according to modeling by KFF.
- Increases in state costs would vary, ranging from 4% to 20% depending on the size of a state’s expansion population, per KFF’s report. This could mean $8 billion in increased state costs for Kentucky, Louisiana, Michigan, New Jersey and North Carolina, and $10 billion or more for Arizona, California, Illinois and Pennsylvania.
- Without a floor for the federal share, the federal match for the expansion population will eventually drop below the state’s traditional Medicaid matching rate, as would be the case by 2034 in Arkansas, Washington, D.C., Kentucky, New Mexico and West Virginia, with another nine states not far behind.
- Twelve states have “trigger” laws that would automatically end their expansion programs if the federal share drops below 90%. Based on analysis by Georgetown University, over 3.6 million people in these 12 states could lose their Medicaid coverage.
What We Know About Work Requirements/Community Engagement Requirements
- It is unclear who would be subject to the work requirements, what activities would qualify as work or how many hours of work would be required.
- In modeling released this week, the Commonwealth Fund estimated that at least 4.6 million people could lose their Medicaid coverage in 2026 if work requirements are imposed, with reductions in federal funding to states starting at $33 billion in the first year and ballooning to at least $362 billion over 10 years.
- Downstream impacts could result in at least $43 billion in lost economic activity, the loss of over 300,000 jobs and a reduction of over $3 billion in state and local tax revenue, according to Commonwealth’s analysis.
- Based on a 2023 work requirement proposal, the Congressional Budget Office estimated that 1.5 million enrollees would lose eligibility, resulting in federal savings of $109 billion between 2023 and 2033—but would “have a negligible effect on employment status or hours worked by people who would be subject to the work requirements.”
- 92% of adults under 65 on Medicaid are currently working, are not working due to disability, are attending school or have caregiving responsibilities, according to a KFF analysis.
- State administrative costs may increase significantly as states invest in the technology, outreach, education and staffing needed to administer work requirements. In 2019, the Government Accountability Office collected estimates of the cost of implementing work requirements from five states. Costs ranged from $6 million in New Hampshire to $271 million in Kentucky.
- All states that expanded Medicaid would be affected by mandatory work requirements; those that did not expand Medicaid would not be affected by the requirements. (See Table 2 in Commonwealth’s analysis for a state-by-state breakdown.)
- Outside of a federal mandate, states have the option to pursue work requirements by submitting a Section 1115 waiver request.
Increased Frequency of Medicaid Eligibility Checks
- Current federal regulations require states to redetermine eligibility at least once a year. Guthrie and other members of Congress are suggesting that more frequent checks—every six months or quarterly—could result in $170 billion in savings over 10 years.
SNAP
What Could a $230B Change in SNAP Funding Mean for States?
Of the various proposals to alter the Supplemental Nutrition Assistance Program, one that would likely have the largest impact on states is a cost share proposal that would require states to contribute to the cost of the SNAP benefit beginning in fiscal year 2028. Currently, the food benefit is fully paid for by the federal government and administrative costs are split with the states. The most recent proposal would tie a state’s error payment rate to the amount the state would be required to contribute—states with higher error rates would pay a higher percentage than states with lower error rates. In 2023, state error rates ranged from 3.42% to 60.37%, including 28 states with error rates over 10%, according to the USDA.
The error rate measures the accuracy of each state’s eligibility and benefit determinations—the percentage of SNAP funds that were paid to ineligible households or were overpayments or underpayments. Details regarding the percentage that each state would pay have not yet been released. This plan comes on the heels of a separate proposal to shift 22.5% of costs to states over 10 years at a cost to states of $23.65 billion, according to modeling from the Center for Budget and Policy Priorities. For Florida, Illinois, New York, Pennsylvania and Texas, this would mean more than $1 billion during the 10-year period, with Georgia and Ohio not far behind at over $800 million each. California could be on the hook for more than $3 billion.
To help grasp the impact of proposals to reduce the federal share of SNAP funding, the Center on Budget and Policy Priorities modeled a 10% cost shift in terms of other state budget priorities. If a 10% cost shift had been in place last year:
- Pennsylvania would have had to pay close to $427 million to avoid an interruption in food benefits to families—about 1.5 times what the state spends on its entire community college system or about twice what it spends annually on environmental protection programs.
- Iowa would have paid almost $53 million—roughly equivalent to what the state spends annually on its agricultural department and on efforts to help people access addiction treatment, combined.
- Kansas would have about $41 million, the equivalent of salary costs for about 725 of its public school teachers, more than double the state’s annual spending on its Office of Veterans Services and nearly all of what it spends on its state Bureau of Investigation.
Beyond the immediate budget implications for states, a Commonwealth Fund analysis looked at the broader impacts on state economies of significant reductions in federal SNAP funding. Lost jobs, lower GDP and reductions in state and local tax revenues beginning in the first year of implementation were all documented as possible outcomes: 143,000 lost jobs across the country and $1.8 billion in reduced state and local tax revenues in the first year. Every state would be affected.
Other SNAP proposals under serious consideration, according to a House Republican budget document released earlier in the year, include:
- Repeal of the increase to the Thrifty Food Plan: TFP is the basis for determining SNAP benefits and is based on the weekly cost of buying healthy food. TFP had not been updated in 15 years. When it was updated in 2021—15 years after its previous update—the SNAP benefit increased by 21%, or an additional $1.20 per person per day. Estimated federal savings from the TFP rollback: $274 billion over 10 years.
- Imposition of expanded SNAP work requirements: Increasing the current upper age limit to 56 from 54 that able-bodied adults without dependents are required to work and requiring adults with children age 7 and older to work. In 2023, the CBO estimated that the cost savings from a similar proposal (upper age limit was 64) would save the federal government $40 billion to $50 billion over 2024 to 2033 and result in 3 million to 3.5 million fewer people receiving SNAP benefits.
- End of broad-based categorical eligibility: This is an important state flexibility that reduces the administrative burden for states. Estimated federal savings: $10 billion over 10 years.
The context for all of this is the current budget reconciliation process. The House Agriculture Committee has been tasked with finding $230 billion in reductions over 10 years to programs within its purview—and SNAP makes up the bulk of available funding, $1 trillion of the committee’s $1.3 trillion jurisdiction. The Senate Agriculture Committee has been charged with finding $1 billion in cuts within its purview. Specific state impacts will depend on decisions made by these committees.
SNAP is the nation’s largest nutrition assistance program, providing nutrition support to more than 40 million low-income people—over 12% of the U.S. population—and operating in all 50 states, Washington, D.C., Guam and the U.S. Virgin Islands, according to the USDA, which administers the program. (Puerto Rico, American Samoa and the Northern Mariana Islands are funded differently and receive a fixed amount of federal food assistance in the form of a block grant.)
Temporary Assistance for Needy Families
The TANF block grant provides states with funding to operate programs that help low-income families with children achieve economic self-sufficiency. The total funding level for the grant has been set at $16.5 billion since 1996, and the amount states receive is based on states’ historical spending from the mid-1990s. The grant also includes a maintenance-of-effort provision for states.
States have significant flexibility over how TANF funds are used and may spend them in a variety of ways. In fiscal year 2022, the most common uses of TANF funding were basic assistance, child care, preschool and administration. States may also transfer up to 10% of their TANF funds to SSBG and up to 30% to CCDBG. TANF spending by state in FY 2023 is available on the HHS website; the figures combine both federal TANF funds and state maintenance-of-effort funds.
Congress is considering several changes to TANF as part of budget reconciliation:
- Cutting 10% of federal TANF funding for states.
- Eliminating the TANF contingency fund, which provides funding to states that are economically needy. Because TANF is not a countercyclical program, the contingency fund was established to provide additional support to families during economic downturns.
- Preventing the Department of Health and Human Services from waiving penalties for states that do not meet TANF work requirements. State compliance with requirements and prohibitions on TANF funding are enforced through penalties, which can result in a reduction of the state’s TANF block grant. Current law allows waivers on penalties for states that do not meet work requirements if a state can establish a reasonable cause for not meeting the requirement.
Whether individually or together, these proposed changes would ultimately reduce funding to states for low-income families and reduce state flexibility on the administration of the TANF program.
Social Services Block Grant
The SSBG is a flexible grant to states and territories that supports the goals of achieving economic self-sufficiency; preventing or remedying neglect, abuse or the exploitation of children and adults; preventing or reducing inappropriate institutionalization; and securing referrals for institutional care, where appropriate. States may spend SSBG funds on a variety of social service programs, including child care, child welfare, case management services, and protective services for adults. Congress is proposing eliminating SSBG entirely.
SSBG is funded at $1.6 billion. In FY 2022, 20 million individuals, 45% of them children, received services supported by SSBG funding, with the highest share of spending going toward child welfare and child protective services, counseling and support services, and adult protective services that help prevent and remedy abuse, neglect and exploitation of the elderly and disabled adults. States also have the option to transfer up to 10% of their TANF funds to SSBG. In FY 2021, states transferred $1.14 billion from TANF to SSBG.
State SSBG allocations for FY 2024 are available on the HHS website, and state profiles with detailed information on state SSBG spending in FY 2022 are available in the annual SSBG report. Eliminating SSBG would cause states to lose their entire SSBG allocation and, in turn, all the services the funds pay for. The Center for Law and Social Policy estimates that cuts to TANF, combined with the elimination of SSBG, would risk nearly 40,000 children losing access to child care.
The flexibility of SSBG allows each state to address its unique circumstances by spending federal funding on services that are most needed. The elimination of SSBG would shift the cost of programs supported by this funding onto states, most of which are already facing tight budgets for social services programs.
Lauren Kallins is a senior legislative director and Emily Katz is an associate legislative director in NCSL’s State-Federal Affairs Division.
Additional Resources
Medicaid
SNAP
TANF