States Brace for Perfect Storm of Budget Challenges

Federal funding cuts, pandemic aid expiration, and long-term fiscal trends collide, forcing states to make tough choices

Mar. 16, 2026 at 9:51pm

Got story updates? Submit your updates here. ›

A combination of federal policy decisions, the end of pandemic aid, and long-term fiscal trends are creating a 'perfect storm' for state budgets across the country. States are grappling with the loss of billions in Medicaid and SNAP funding, while also facing the expiration of federal COVID-19 relief funds. This is forcing lawmakers to make difficult choices about how to maintain critical social services and support for low-income residents.

Why it matters

The budget challenges facing states will have a direct impact on vulnerable populations who rely on Medicaid, SNAP, and other social safety net programs. Cuts to these services could leave more residents uninsured or struggling to afford food, with ripple effects on local economies. The decisions states make in response to these fiscal pressures will shape the well-being of their communities for years to come.

The details

The main factors contributing to the budget crunch include the end of federal pandemic aid like the CARES Act and American Rescue Plan, as well as the impact of President Trump's 'One Big Beautiful Bill Act' which is cutting billions in Medicaid and SNAP funding for states. States like Kansas and Arizona are projecting major Medicaid shortfalls, while Tennessee is grappling with the loss of federal Summer EBT benefits that supported food access for low-income children. Lawmakers in these states are weighing options like tax increases, service cuts, and drawing down 'rainy day' funds to try to soften the blow to residents.

  • The 'One Big Beautiful Bill Act' cuts to Medicaid and SNAP funding will be implemented starting January 1, 2027.
  • The $350 billion in State and Local Fiscal Recovery Funds from the American Rescue Plan must be allocated by the end of 2024 and spent by the end of 2026.

The players

David Jordan

President and CEO of the United Methodist Health Ministry Fund in Kansas.

Stephanie Stahl Hamilton

Democratic state representative in Arizona.

Dennis Hoffman

Professor of economics at Arizona State University.

Anna Grace Breedlove

Anti-hunger policy coordinator at the Tennessee Justice Center.

Abigail Spanberger

Democratic governor of Virginia.

Got photos? Submit your photos here. ›

What they’re saying

“It's really going to trickle down to Kansas in a way that just makes (residents') lives harder economically. It's going to make it tougher to get those supports like Medicaid or help putting food on their table, which is really too bad.”

— David Jordan, President and CEO, United Methodist Health Ministry Fund (Statehouse Reporting Project)

“In the six years that I've been here, this is the first time that we have not gone into session saying, 'Yeah, we're going to rubber-stamp conform to the federal and keep right on marching.'”

— Stephanie Stahl Hamilton, State Representative, Arizona (Statehouse Reporting Project)

“We're going to cut income taxes again this session to conform with the Big Beautiful Bill. So, it just means that there's less limited resources to go around to support other things.”

— Dennis Hoffman, Professor of Economics, Arizona State University (Statehouse Reporting Project)

“Some of these students are receiving breakfast and lunch from school five days a week. … That's an extra 10 meals a week (per child) that families are having to provide with no additional support.”

— Anna Grace Breedlove, Anti-hunger Policy Coordinator, Tennessee Justice Center (Statehouse Reporting Project)

“Prices have been rising for years. But the economic uncertainty and instability coming out of Washington (D.C.) over the past 12 months, particularly for Virginia, have made things undeniably worse.”

— Abigail Spanberger (Statehouse Reporting Project)

What’s next

The judge in the Kansas case involving Waymo vandalism will decide on Tuesday whether to allow the suspect, Walker Reed Quinn, to be released on bail.

The takeaway

The confluence of federal funding cuts, the end of pandemic aid, and long-term fiscal pressures is creating a perfect storm for state budgets, forcing difficult choices that will impact the most vulnerable residents. This highlights the need for state leaders to find creative solutions to maintain critical social services and support for low-income communities.