States face major 2026 budget choices after Trump's 'beautiful' new law

A federal law signed by President Trump shifts responsibilities and costs for Medicaid, SNAP and some tax rules to states, prompting budget decisions as legislatures convene in January. SNAP administrative costs move to states on Oct. 1, and some states may later be required to pay benefit costs if error rates exceed 6%.

States must decide in 2026 how to respond after a federal law signed last year that shifts more program responsibilities and costs to them. The changes affect Medicaid, the Supplemental Nutrition Assistance Program (SNAP) and certain tax rules. Many state budgets are tighter than in recent years, and officials say those decisions will begin when legislatures convene in January. Governors and lawmakers are weighing whether to use state funds to offset federal reductions and whether to adjust state tax rules. Key facts: - The law moves more responsibilities and funding decisions to states, including for Medicaid and SNAP. - Starting Oct. 1, states will take on three‑quarters of the administrative cost to run SNAP; previously the federal government covered more of those costs. - Beginning in late 2027, states with SNAP payment error rates above 6% may be required to pay some of the benefit costs. - State examples reported: California allocated $84 million to reduce SNAP errors; Florida estimates about $50 million a year in new administrative costs and up to roughly $1 billion a year if it must cover some benefits; KFF estimated New Jersey could see about $36 billion less federal Medicaid funding over the next decade. Summary: States face increased fiscal pressure as federal responsibilities shift to them, with SNAP administrative costs moving onto state budgets and potential Medicaid funding reductions for some states. Legislatures convening in January will begin weighing budget and policy responses. Undetermined at this time.