President Donald Trump’s landmark legislation is driving a giant hole in governors’ budgets in a midterm year.
By slashing health care and food assistance for low-income Americans, Republicans in Washington are passing tremendous costs onto the states, leaving local leaders from both parties grasping for ways to make up for billions in lost federal dollars. The cuts are already threatening to endanger governors’ education, public safety and disaster relief funds.
And this is all happening as up to 20 state leaders face reelection in 2026, forcing them to figure out how to message the fallout as their parties battle for control over the House next year.
“We don’t put these budgets together that have a lot of fluff and rainy day funds that are easily accessible,” said Democratic Kansas Gov. Laura Kelly, who chairs the Democratic Governors Association. “All of us are trying to figure out how to mitigate the damage that will be done to our constituents.”
Kelly, whose term ends next year, said governors across the country are now in “a world of hurt and concern.”
In deep blue New York, Democratic Gov. Kathy Hochul is contending with an $11 billion budget hole as she faces reelection next year, possibly against Trump acolyte Rep. Elise Stefanik. Some 2,500 miles away in Arizona, Democratic Gov. Katie Hobbs is warning the state can’t even begin to cover the losses from the federal legislation passed earlier this month. And in Nevada, Republican Gov. Joe Lombardo has to try to persuade his voters of the merits of his party’s tax cuts geared toward the working class as he runs for reelection, even though he too has warned against slashing Medicaid.
It all amounts to a serious financial problem that’s even more acute for governors up for reelection next year. Many will have to decide between politically unpopular tax hikes or further changes to Medicaid that could kick more people off the program. State leaders have begun crunching numbers as they try to account for the looming funding gap.
Kelly’s fellow Democratic governors are shackled with the same budget constrictions as Republicans — and similarly will face fallout. But despite the impending headache, the party sees political upside. Democrats intend to slam Republicans in the midterms over their cuts to Medicaid and food assistance in order to pay for tax cuts that largely benefit the wealthy. That message will be a centerpiece of the minority party’s midterm strategy, and they’re anticipating voters will blame the GOP when they lose Medicaid coverage or experience the closure of a local hospital.
In a twist that stands to advantage Democratic governors, many of the GOP-backed cuts won’t take effect until after next year’s elections — a provision Republicans instituted to armor itself.
“While the legislation is terrible, it is good ammo for governors in battleground states,” said Matt Grodsky, a Democratic consultant in Arizona. “In Arizona we know this will increase costs on families, utility rates will go up, for some families taxes will go up, and even if you’re not on Medicaid chances are your older relatives are.”
Illinois Gov. JB Pritzker, a frequent Trump critic, will focus his campaign messaging on the president. “It’s the federal government and MAGA Republicans that are at fault for your food assistance, your rural hospitals closing or you getting kicked off Medicaid,” said a person close to Pritzker’s reelection campaign, hinting at the Democratic governor’s strategy for maneuvering around state budget concerns.
Last week, Pritzker featured the owner of Billie’s coffee shop in Chicago talking about the local business affect of the president’s trade policies, as a way to localize Trump’s actions and influence swing voters. “Packaging bags, the costs have increased,” the owner Gina says in the video. “Those are things that I feel like President Trump has created. We have cut as much as we can at this point. We need some stability, and that’s not what we’ve seen so far.”
Republicans are confident they can beat back the attacks by claiming they are effectively combating waste, fraud and abuse in welfare programs, while pointing to the bill’s popular provisions like eliminating taxes on tips or overtime.
Yet House Speaker Mike Johnson has privately conceded that the deeper Medicaid cuts pushed by the Senate will force House Republicans to lose their slim majority next year. Publicly, Johnson has struck a more optimistic tone, repeatedly telling reporters that he has “no concerns” about the bill costing Republicans’ seats.
Republicans know the megabill could end up hurting them. That’s particularly relevant in Arizona, where Hobbs might face a challenge from Republican Rep. Andy Biggs, who voted for the legislation. “I can imagine voters will be reminded on an hourly basis that any cuts will be laid at the feet of Congress and President Trump,” GOP strategist Barrett Marson said.
Should Hobbs — facing one of the most competitive gubernatorial races next year — successfully channel backlash to the megabill to help her win reelection, she will have other problems to deal with.
An estimated 360,000 Arizonans stand to lose their Medicaid coverage. And experts have identified five rural hospitals on the brink of closure due to reduced revenue from Medicaid patients. The federal government shifting Supplemental Nutrition Assistance Program administration costs onto states could mean that Arizona will strain to continue feeding the 1 in 8 residents who rely on it to buy groceries.
The federal clawbacks are so significant that governors are warning they are entirely unable to make up the difference. “It’s billions of dollars that we don’t have,” Hobbs said as the Senate passed the bill. “Even if we cut every single thing in the state, we don’t have the money to backfill all these cuts.”
By design, the bulk of the Medicaid and SNAP changes won’t take effect until after the midterms, a legislative maneuver intended to shield Republicans from immediate electoral consequences that could also give governors more time to reconfigure state funding formulas. But state appropriators say they are already mapping out how to account for the steep federal losses, and may need to start moving around funds in next year’s budgets.
“Do we fund food for hungry families, or do we fund our community colleges?’” said Arizona State Rep. Oscar De Los Santos, the Democratic minority leader. “Do we fund food for hungry families, or do we pay public school teachers? That is the position that Trump and the Republicans have put us in.”
Public polling shows the funding bill is widely unpopular. One recent Quinnipiac survey found 55 percent opposed the law compared to 29 percent in support.
The Republican governors who publicly supported the bill now have an especially difficult situation. GOP-led states with large populations of low-income Americans rely the most on federal assistance and lack the tax base or political willpower to support any revenue increases.
Repercussions from the megabill are unlikely to have any electoral bearing on the deep red states with upcoming gubernatorial elections. But it could pose problems for Lombardo.
In February, Lombardo urged Congress not to slash Medicaid funding to avoid “serious consequences” for vulnerable populations and the health care infrastructure – a rare break for a GOP governor against Trump and Congressional Republicans.
But when the bill was ultimately passed, Lombardo praised its no-tax-on-tips provision that influenced by Nevada and its thriving tourism economy, and said that while his administration assesses the bill “Nevadans should be excited about the potential impacts of tax cuts, investments in small businesses and American manufacturing, and efforts to secure the border.”
Democrats who control the Nevada state legislature, however, believe that the legislation will create more harm than good, and when people start to lose their health insurance they will blame Lombardo for not speaking out more against the law.
“It’s just too early to tell how bad it is, but from what we know so far, it is going to be a life and death situation for many folks,” said Fabian Doñate, a Nevada state senator.
In New York, state officials are warning the funding cuts will lead to job losses. A projected 63,000 jobs will be eliminated, nearly half from the health care sector.
Democratic strategists believe that’s a compelling argument for Hochul to make ahead of her campaign for a second full term next year, when she faces potential GOP challenges from Stefanik and Rep. Mike Lawler.
“Don’t just focus on the cost of it, talk about what people aren’t going to be able to do going forward,” said Basil Smikle, the former executive director of the New York State Democratic Party. “Talk about what they’ll lose. Kids aren’t going to a doctor, your child is losing SNAP benefits. That’s the way you talk about it — not so much as a spending issue, but frame it as a right you used to have but no longer have.”
Yet Democratic state lawmakers in Albany worry there are limits to that strategy. New York’s budget next year was already estimated to have a $7.5 billion gap to fill. That hole is expected to grow to $11 billion as a result of the federal cuts.
“Governmentally this is an atomic bomb,” Democratic state Sen. James Skoufis said. “It’s nothing but bad news. It’s a massive gaping hole in New York’s budget and I imagine most state budgets around the country.”
New York has one of the costliest Medicaid programs in the country. About 44 percent of the state’s residents are enrolled in Medicaid or have state-sponsored coverage. Some Democrats fret the cuts will lead to hospital closures and impact other big-spending areas of the budget like school aid.
“You can blame the federal government all you want, but it’s the state that’s going to be making the cuts to the hospitals and the nursing homes and the health centers and the schools,” Assemblymember Amy Paulin said. “It’s everywhere.”
Shia Kapos contributed to this report.
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