State budgets have been flush with cash over the past few years thanks to a strong post-pandemic recovery and loads of federal pandemic-era aid. But state finances could soon be strained as tax collections flatten and Congress considers a budget plan that would cut federal funding to states. Pew’s Liz Farmer and Peter Muller explain how the “big, beautiful bill” could potentially affect state coffers:
Funding changes to programs in which the state and federal government have a cost-sharing partnership, however, could swiftly alter a state’s spending plans and potentially force decisions that would reverberate through its budget. For example, cuts to federal Medicaid funding or food assistance would force states to decide to make significant changes to current service levels or consider how to backfill at least some of that lost funding with their own revenue.
Louisiana uses the refundable portion of the state Earned Income Tax Credit to count as a Maintenance of Effort (MOE) requirement to draw down federal Temporary Assistance for Needy Families (TANF) block grant. If the EITC is repealed, as it would under House Bill 642, Louisiana would need to come up with more than $19 million elsewhere in the budget to draw down TANF funds.
State budgets will also be impacted by a potential trade war and tariff-induced recession:
The downstream economic repercussions of federal policy changes are probably the hardest to assess, and any potential outcomes will depend on each state’s industrial composition. For example, a potential trade fight with China, Canada, or Mexico could be felt more sharply in import/export states such as Michigan or Louisiana, according to a December 2024 Fitch Ratings analysis.
In 2024, Louisiana was the only state in the nation where federal funds made up more than half the overall state budget.
Black lawmakers fiercely protest anti-DEI bill
The Louisiana House advanced a bill on Monday that would dismantle diversity, equity and inclusion (DEI) programs and policies at state agencies and higher education institutions. The Times-Picayune | Baton Rouge Advocate’s Tyler Bridges reports that the bill drew fierce rebuke from Black lawmakers:
“This bill is about race, that’s all,” Rep. Ed Larvadain, D-Alexandria, said several minutes later about Chenevert’s House Bill 685. Rep. Vanessa Lafleur, D-New Orleans, said the bill was about fear. “Let’s embrace what unites us, not what divides us,” said Rep. Delisha Boyd, D-New Orleans. After the House passed the bill, 57-32, it was unclear whether the racial debate that roiled the chamber would spill over and affect other legislative business in the coming days.
Medicaid cuts could cripple health care in rural Louisiana
A congressional budget proposal, which aims to cut $880 billion largely from Medicaid, could eviscerate health-care access in rural Louisiana. The move would be especially problematic for new moms and their babies. Mark Richardson of Public News Service reports:
Ryan Cross, vice president of government affairs and advocacy for the Franciscan Missionaries of Our Lady Health System, said Medicaid covers one in four people in rural areas and program cuts could remove thousands of people from health care rolls across the state. … Cross added maternity care is expensive and cuts to Medicaid could harm rural providers, putting the health of mothers and babies at risk.
House tax plan by the numbers
A tax-cut package moving through Congress would disproportionately benefit high-income households. That’s the conclusion of a recent analysis by Congress’ Joint Committee on Taxation. Carl Davis of the Institute on Taxation and Economic Policy breaks down the numbers:
The JCT analysis makes clear that the House tax plan would be regressive, meaning it would offer larger tax cuts as a share of income to high-income taxpayers than to either middle-class or working-class families. It also makes clear that most of the tax cuts would go to families with above-average incomes. … While working-class families (defined here loosely as the bottom 40 percent of earners) could expect an average tax cut of $361 in 2027, the nation’s highest-income families (defined as the top 0.1 percent) would receive an average tax cut of at least $255,670 in that year.
Number of the Day
60% – Percentage share of Americans who say stricter environmental laws and regulations are worth the cost. This includes more than 50% of Louisianans. (Source: Pew Research Center)