Georgia finished in early April, but around the country, a number of state legislatures are concluding their sessions about now. They may not know it yet, but these could have been the happiest days this generation of state legislators will ever know.
While the headlines are mostly about the federal budget deficit, the number of states with healthy budget surpluses has been growing in recent years. Georgia’s surplus is an impressive $11 billion, with an additional $5.4 billion in its rainy day fund.
When they announce surpluses, governors like to credit their tightfisted leadership with the chaos in Washington as the reason for their good fortune. The truth is that the feds have been taking care of a lot of things that have made these surpluses possible.
A realization of the cumulative impact of all the changes envisioned by the Trump administration and the Republican Congress does not seem to have settled in on the nation’s state capitals yet. Several states, including Georgia, passed tax cuts of one kind or another this year. School voucher bills were popular in state legislatures, placing new long-term obligations on state budgets at a time when Congress seems poised to shift a massive amount of the costs for food stamps and the Medicaid expansion to the states.
The budget bill currently before Congress not only changes the financial balance to the disadvantage of the states, it sets the stage for a future in which the states are more subordinate to the federal government.
Under the provisions of the bill, the 14 states that have allowed undocumented immigrants on their Medicaid programs would face a cut in their federal allowance if they don’t remove them. The bill also includes a provision for a national school voucher program, upstaging and potentially muddying the water for all those voucher bills passed in different states this year.
As sweeping as the impact of this bill is likely to be, it’s only one of the ways in which federal-state relations are changing.
There was a relatively small example of what’s ahead last week when David Richardson, the acting head of the Federal Emergency Management Agency (FEMA), doubled down on the agency’s decision not to extend the cost match for recovery expenses from Hurricane Helene. I said “relatively”: the decision will probably cost North Carolina, which has just enacted a $524 million bill for recovery expenses from the storm, an additional $200 million.
In a column published in USA Today, North Carolina Gov. Josh Stein argues that FEMA needs to reduce red tape and focus on delivering aid more efficiently, but still does a lot of things better than the states could do.
“We’ve got to fix what’s wrong with FEMA, but we literally cannot afford to throw out what’s right,” Stein writes.
The problem is that Stein is talking about using federal money better and more efficiently during disasters, while the administration is bent on turning over nearly all the responsibility for disaster relief to the states. In 2024, Georgia received about $615 million in FEMA funds, primarily for recovery from Hurricane Helene and Tropical Storm Debby.
Similar reductions are in progress or envisioned for federal assistance in education, environmental programs and workforce development. The question that looms for state governments isn’t only whether they can take on a greater share of the costs of these programs — remember those surpluses — but whether they will. States that have underfunded programs when they have access to federal money don’t like to spend more when they don’t. It’s safe to predict that disparities between states in measures like maternal mortality, poverty, and environmental degradation are going to increase as each state confronts its new responsibilities.
When legislators around the country come back for their sessions next year, they will face some hard choices, no matter what precise form the budget bill takes. For individuals, some of the most onerous parts of the budget plan are being postponed until after the midterm elections, but the legislators won’t have that luxury. The happy days of growing surpluses are looking like a thing of the past.
I always appreciate your insight and foresight! We are in a tailspin in California and we still send an enormous amount of money to DC to give out to other states.