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Fact check: How have changes in federal welfare policies affected state-level welfare spending in recent years?
Executive Summary
Federal welfare policy changes enacted and proposed in 2025 have shifted substantial costs and program responsibilities from the federal government to states, particularly through major revisions to SNAP and Medicaid that include cost-sharing, work reporting, and reduced federal matching for expansion populations; analysts project widespread state budget pressure and potential coverage and benefit reductions [1] [2] [3] [4]. Independent audits and surveys show states were already reallocating welfare dollars toward non-cash services and health priorities, meaning the new federal shifts will force difficult trade-offs — cutting other services, raising state revenues, narrowing eligibility, or altering program design [5] [6].
1. The claim: Federal policy changes are pushing costs to states and reshaping welfare responsibility — and the evidence is emphatic
Federal actions in 2025 rewrote the fiscal relationship between Washington and the states for core safety-net programs. Multiple analyses state that the reconciliation law and related measures will reduce federal outlays by over a trillion dollars across programs and specifically shift SNAP costs and impose new Medicaid work requirements and lower enhanced FMAPs, creating direct fiscal exposure for states [1] [2] [3] [4]. State-level advocates and officials characterize these changes as a structural rebalancing of responsibility that could force states to either absorb higher operating costs, cut other budget lines, or restrict eligibility and benefit levels — outcomes highlighted as likely by state-focused reporting and national think-tank modeling [7] [2] [8]. The converging sources present a consistent claim: federal retrenchment equals state-level budgetary strain [1] [7] [4].
2. SNAP’s makeover: How benefit rules and fiscal shifts threaten state budgets and access
Reporting and policy analysis describe the 2025 SNAP reforms as transformative, with the new law altering eligibility rules, work requirements, and funding flows in ways that will force administrative and fiscal burdens onto states. Journalistic and policy pieces argue that the result will be increased state costs for benefits and administration, and that states facing these obligations may respond by tightening access or reallocating funds from education, health, or other social services [1] [7] [2]. Coverage emphasizes that states with larger SNAP caseloads and higher poverty rates will be disproportionately affected and that the federal-to-state cost shift raises the prospect of uneven access across states, as some may choose to absorb costs while others cut or limit programs [2] [7]. The pattern described is a nationwide policy change with distinctly local fiscal consequences [1].
3. Medicaid: Work requirements, FMAP reductions and the risk of coverage losses
Health-policy analyses detail how 2025 changes to Medicaid could reduce federal spending substantially and introduce work or reporting requirements for expansion populations, producing both program complexity and fiscal shortfalls for states. Researchers estimate the policies could lower federal outlays by hundreds of billions and create the conditions for millions to lose coverage, while states would face the brunt of replacement spending or uncompensated care costs [3] [4] [8]. The Urban Institute and KFF modeling point to likely trade-offs: states that retain coverage will shoulder higher costs or reconfigure benefits; those that balk may see higher uninsured rates and increased pressure on hospital and public health systems. The evidence links federal retrenchment directly to likely state budgetary shortfalls and public health impacts [3] [4].
4. TANF trends and the broader pattern: States already shifting spending toward services over cash assistance
A Government Accountability Office audit and state survey data show a longer-term shift within state welfare spending: between FY2015 and FY2022, states increased spending on TANF non-assistance services as a share of total TANF spending while reducing direct assistance shares, signaling a policy choice toward services that may not buffer households from immediate needs [5]. Concurrent Medicaid budget surveys indicate states were prioritizing behavioral health, long-term supports, and equity initiatives even as pandemic-era federal cushions receded, leaving limited fiscal flexibility should federal burden increase [6]. Taken together, these data establish that states entered 2025 with constrained flexibility and a tilt toward service spending, magnifying the fiscal stress imposed by federal policy shifts [5] [6].
5. The practical choices for states: Raise revenue, cut programs, or redesign benefits — and the political consequences
The combined analyses frame a narrow set of responses for states facing newly shifted costs: raise taxes or fees, redirect spending from education or infrastructure, reduce program access or benefits, or pursue administrative redesigns to maintain services with fewer dollars [2] [4] [6]. Each response carries trade-offs: revenue increases are politically fraught; cuts create immediate hardships and may yield long-term social costs; redesigns require administrative capacity and may still leave coverage gaps. The sources consistently warn that responses will vary by state capacity and politics, creating a patchwork of welfare coverage and services across the country and likely sparking intergovernmental conflicts about responsibility and outcomes [7] [2] [4].