State lawmakers across the country are facing a fiscal puzzle of historic proportions after the passage of a sweeping federal bill that slashes funding for health care and food assistance programs. The legislation, signed into law by President Donald Trump earlier this year, has sparked heated debate and deep concern at every level of government, from local human services offices to the nation’s largest legislative summit in Boston.
“Number one was tax cuts. Number two, what the hell is going on in Washington?” Oklahoma state Sen. John Haste told his colleagues at the National Conference of State Legislatures summit, which drew a record 1,600 lawmakers last week, according to Stateline. For Oklahoma, the immediate answer was a double-edged sword: another round of state tax cuts, but also a looming $209 million reduction in federal Medicaid funds and $30 million in new administrative costs just to keep up with eligibility checks. Haste summed up the dilemma: “All of those things added together come up to a really big number. We don’t know exactly what that is.”
The new federal law, sometimes referred to as the “Big Beautiful Bill” or, less charitably, the “Big Not So Beautiful Bill,” is already reshaping state budgets and priorities. In Oregon, the Department of Human Services projected a nearly $3 billion loss in federal Supplemental Nutrition Assistance Program (SNAP) funding over the next few years. “The new federal budget will cut almost $3 billion in federal funding over the next few years. And that shifts unsustainable costs to Oregon and ultimately, that will mean less food on the table for families,” explained Claire Seguin, ODHS self-sufficiency programs director, in a statement reported by KATU News.
Oregon’s plight is emblematic of a broader national challenge. Nearly 800,000 Oregonians—about 20% of the state’s population—relied on SNAP last year. Now, as the federal government shifts 75% of SNAP administrative costs onto the states and ties some funding to error rates in benefit distribution, states like Oregon with higher-than-average error rates are facing even deeper cuts. The United States Department of Agriculture pegged Oregon’s SNAP payment error rate at 14% in fiscal year 2024, well above the national average of 11%. Thirteen percent of those errors were overpayments.
Technicalities aside, the real-world impact is clear: less food for families in need, and a scramble by state officials to cover the shortfall. “We’re aware of the issues with Oregon’s error rate. However, that said, it’s still extremely concerning the fact that the federal government, Trump, in particular, is cutting SNAP benefits which will eliminate food access for a lot of Oregonians,” Rep. Travis Nelson (D-Portland) told KATU. On the other side of the aisle, Republican House Minority Leader Christine Drazan placed the blame squarely on state leadership: “Losing federal funding for SNAP benefits is a direct result of the governor’s failure to lead and hold state agencies accountable. Oregon’s administrative rate of error for overpaying or underpaying SNAP benefits is 14%, one of the highest in the nation. In contrast, Washington’s is 6%. Oregon families are hurting due to careless Democrat leadership, not because of federal policies requiring accountability.”
These partisan divisions are playing out in legislatures nationwide. Nevada state Sen. Fabian Doñate, a Democrat, highlighted the impossible choices states now face: “Do you cut the pregnant mom or the person that makes above 180% of the federal poverty level who’s under 50, or do you cut diapers for seniors?” he asked during a Medicaid panel discussion in Boston. With many states constitutionally required to balance their budgets, the pressure to slash services is mounting.
The law’s reach is vast. Forty states and Washington, D.C., which expanded Medicaid, must now verify eligibility for enrollees at least twice a year by the end of 2026. The federal government allocated $200 million to help implement these changes, but experts and state officials are skeptical it will be enough. “Regardless of how you feel about these provisions—whether these are opportunities or challenges, fantastic or awful—regardless, it’s going to be a heavy lift for states,” said Lauren Kallins, senior legislative director for state-federal affairs at the NCSL. She noted that states must quickly ramp up outreach efforts and invest in new technology to comply with the mandates.
Some states, like Utah, are better positioned to weather the storm. Jonathan Ball, Utah’s legislative fiscal analyst, told attendees that the state’s deep reserves and robust economy could absorb some of the one-time administrative and technical costs. “It’s a little bit maybe scarier, but it’s not a new sort of problem. I think you all have the tools, we feel like we have the tools to fix it,” Ball said. Yet, even he acknowledged the uncertainty ahead: “The uncertainty about what happens in the future is huge.”
Financial analyst Geoffrey Buswick of S&P Global Ratings echoed that most states currently have strong credit ratings and budgetary cushions. “The states are in a very, very strong position—about the strongest we’ve ever seen,” he said. But not everyone is convinced. Maryland state Sen. Karen Lewis Young questioned the optimism, pointing out that reserves can only be tapped for one-time expenses, not to replace ongoing federal dollars. “If you’re losing a pretty large share of your federal match, who do you cut?” she asked Stateline.
Hawaii’s Senate President Ronald Kouchi warned that even with over $1 billion in state reserves, the gap left by federal cuts is simply too large to fill, especially as the state deals with disaster funding and a slowdown in tourism. “There is no current financial ability for the state to meet the needs of everyone who is currently being impacted,” Kouchi said. “Who’s going to be blamed when people are left out, when people are hungry and they lose out on educational opportunities?” he asked, urging lawmakers to communicate the origins of the cuts to their constituents.
West Virginia House Speaker Roger Hanshaw, a Republican, likened the situation to an earlier era of federal health reform: “I look at this bill as Obamacare 2.0: We have to pass this bill so we can find out what’s in it,” he told Stateline. “We have no idea yet how we’re going to respond. I don’t want to speak for any other state … but I would speculate that’s true for nearly every other state.”
New Mexico, flush with oil and gas revenues, has created a Medicaid Trust Fund to blunt the impact, but state Rep. Meredith Dixon said the full effects remain murky. “We are not protected by any stretch. So we are going to have to look at how we cover those costs. … We’re still digging into everything.”
As the dust settles, one thing is clear: the new federal law has upended the delicate balance of state budgets, thrusting lawmakers into a high-stakes debate over how to protect the most vulnerable while complying with costly new mandates. With the clock ticking toward 2026—and the threat of even more federal cuts on the horizon—states are bracing for a period of intense fiscal and political reckoning.