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Trump’s megabill is creating a budget nightmare for states

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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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Congress

‘I’ve been taking a ton of risk’: Inside Jim Himes’ mission to save a key spy authority

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Jim Himes wants to reauthorize a controversial surveillance law. He knows it comes with big risks.

The top Democrat on the House Intelligence Committee has been seeking a bipartisan deal to extend Section 702 of the Foreign Intelligence Surveillance Act while Republicans are busy fighting among themselves over how to prevent the government spy power from expiring April 30.

Fearing a lapse would be an existential crisis, he’s been empowered by House Minority Leader Hakeem Jeffries to share his perspective with fellow Democrats who are skeptical of reauthorizing Section 702 without guardrails to protect Americans from being targeted by the Trump administration. And despite his own preferences for modifying the spy authority, he’s facing criticism from progressives in his district for being open to a clean extension.

Himes has also been talking to the White House — but often finds himself out of the loop of negotiations with House Republican leaders, who are more focused on trying to squeeze a deal through their ultrathin margins than find common ground with Democrats.

“There’s been a shit ton of outreach to me” on this issue, Himes, of Connecticut, said in a lengthy interview in his Capitol Hill office Thursday. “None of it has been, ‘Come to this room to negotiate this deal today.’”

Himes is reflected in a mirror during an POLITICO in his office on Capitol Hill in Washington, on April 23, 2026.

The stakes are high for Himes as he navigates the difficult politics around a surveillance law viewed with deep suspicion by many progressives and conservatives. And in attempting to broker cross-party consensus around the spy law, he has embarked on a potentially thankless mission.

He’s challenging Republicans’ appetite for bipartisan dealmaking in the Trump era — and so far, he’s being largely ignored by the GOP leaders. He’s also testing whether Democrats would attach their names to any legislation that gives even the appearance of emboldening an administration they view as corrupt — and it’s getting more difficult by the day.

“I’ve been taking a ton of risk, I’ve been doing a ton of explanations,” Himes said later Thursday.

If he succeeds in stitching together some fractured coalition to extend Section 702 with meaningful guardrails, he will have pulled off a feat of political compromise rarely seen these days. But if he is unable to help land a deal and must instead back a clean extension in the interest of protecting national security, he will undoubtedly take fresh heat from progressives, perhaps in the form of a credible primary challenger.

One long-shot candidate looking to unseat Himes in the Democratic primary based on the incumbent’s FISA stance — Joseph Perez-Caputo, a local activist — has been leading constituent protests against the lawmaker back home.

“We’ve kind of watched in abject horror,” Perez-Caputo said in an interview of Himes’ scramble to land a Section 702 agreement.

A new letter from half a dozen groups in Connecticut, shared first with Blue Light News, is calling on Himes to step down as the Intelligence Committee’s ranking member, saying he has “betrayed” obligations to his constituents and the Constitution — including by “actively lobbying other Democrats and Republicans to support the administration’s FISA agenda.”

CIA Director John Ratcliffe, left, shakes hands with Himes during a House Select Intelligence Committee hearing in Washington to assess worldwide threats, March 19, 2026.

Himes is cognizant of the dynamics, recalling that he got his “head blown off” by frustrated participants during a demonstration in his district last month, adding, “there’s an immense amount of misinformation out there that needs to be addressed.”

Ultimately, Himes says, he’s driven in this fight by a sense of duty. Over the course of the Thursday interview, he insisted — repeatedly — that he prefers extending the spy authority with policy changes, like seeking judicial review for searches under the program, to continuing on with the status quo.

Rather, Himes explained, his perch on the Intelligence panel uniquely positions him to understand the scope and stakes of a Section 702 expiration. And if it were to come down to a choice between passing a clean extension or letting the program expire, a lapse would be a nonstarter.

“Three months from now, if FISA 702 is dark and there’s a bomb in Grand Central, there will be very little doubt in my mind … that that occurred because we shut down our most important counterintelligence,” Himes said.

“So I don’t blame them,” he added of those members who would prefer the program lapse than support a clean extension. “But I just see with some granularity — actually, more granularity than pretty much anybody around here — what the risks are that we face.”

Despite Himes’ entreaties, many House Democrats remain skeptical. Rep. Stephen Lynch of Massachusetts said in an interview Thursday he will vote against a reauthorization for the first time in his 25-year tenure in the House if the legislation does not institute new guardrails on warrantless government surveillance.

Personal items are seen in Himes' office on Capitol Hill in Washington, April 23, 2026.

Congressional Progressive Caucus Chair Rep. Greg Casar (D-Texas) said he respects Himes and appreciates that he has attended caucus meetings to share his perspective on the issue. But, he said in an interview, the decision was an easy one: “We should unify now to say, ‘No, Trump does not use power responsibly.’”

Himes said his senior role on the House Intelligence Committee means he’s inclined to never trust any administration — and he “particularly” doesn’t trust this one. But he emphasized he has not, in his role on the panel, ever been presented with any evidence that President Donald Trump or senior White House officials have sought to interfere with Americans’ privacy.

“In the last 14 months,” he said, “there has not been a single example of their attempt to abuse this database. I am conscious of something that is hard to get people to understand, which is, there is no program that is more overseen than this one. None.”

Rep. Gregory Meeks of New York, the top Democrat on the Foreign Affairs Committee who is also privy to classified information not shared with the majority of his colleagues, had a similar point of view.

“I don’t want it to be on my conscience that something happens that we could have stopped,” Meeks said in an interview. “That’s the responsibility that Jim has and the burden at times of being the ranking member, and the former chair, of Intel.”

Some Republicans downplayed Himes’ role in the FISA talks as GOP leaders go down a partisan path. House Intelligence Chair Rick Crawford questioned how much Himes is backchanneling with Republicans, while noting he considers the ranking member a friend.

“We try to be considerate of him and his concerns, and I think he extends me that courtesy as well,” the Arkansas Republican said in an interview Thursday. “So we have a good working relationship. And I think that’s helpful.”

Himes arrives for an interview with POLITICO in his office on Capitol Hill in Washington, April 23, 2026.

As the April 30 deadline to extend the FISA spy authority draws nearer, Himes is continuing to make the rounds with colleagues of both parties but also think strategically about what could pass the House, and how.

He and the senior House Judiciary Democrat, Rep. Jamie Raskin of Maryland, have been workshopping possible backup plans with policy changes that could attract more Democratic support in case Republicans fail to pass their partisan bill.

He’s now also interested in finding a set of reforms that could get the support of a two-thirds majority of the House so that the legislation could advance under an expedited floor procedure known as a suspension, which doesn’t first require clearing a party-line “rule” vote.

Himes said there was a “real opportunity” to pass a bill under suspension last week, when Speaker Mike Johnson instead attempted, unsuccessfully, to pass an 18-month extension bill through the regular order process in the middle of the night. But Johnson’s failure, Himes continued, only emboldened Democrats to stand back and watch the GOP flounder.

Calling himself an “emissary” during that overnight vote, Himes was frank: “A bunch of members at two in the morning, watching the speaker fall flat on his face, does not help me.”

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Mike Johnson tries again to extend contested spy law

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House GOP leaders on Thursday unveiled the text of a new three-year extension of a key spy law, as Speaker Mike Johnson tried to overcome ultra-conservative resistance and pass it next week.

The proposed reauthorization of the so-called Section 702 law includes some new oversight and penalties for abuses of the spy authority but stops short of warrant requirements sought by GOP hard-liners.

Conservatives have pushed back on extending Section 702, which allows warrantless surveillance of foreigners, because of concerns about U.S. citizens being caught up in the program.

The faction that’s been opposing an extension has not yet signed off on the latest plan. GOP leaders plan to continue talks into the weekend.

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House GOP leaders scramble to sell Senate’s slimmed-down budget with promises of ‘Reconciliation 3.0’

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House Republican leaders want a floor vote next week on the Senate’s budget resolution, the first step in writing an immigration enforcement bill and passing it by President Donald Trump’s June 1 deadline.

“It has to be clean because it has to be quick,” Speaker Mike Johnson said Thursday, indicating that conservatives could not make major changes to the other chamber’s blueprint at this time.

But Johnson and others still have to lock in support from conservatives who are threatening to vote against it if it doesn’t encompass more top GOP policy priorities, and it is proving to be a delicate balancing act.

House Majority Leader Steve Scalise (La.) met Thursday morning with Budget Chair Jodey Arrington (Texas) and leaders of key House GOP factions, according to four people granted anonymity to share details of private meetings — an effort to quell concerns among some conservatives about the narrow scope of the current plan. Arrington and other senior Republicans have been pushing to expand the party-line bill currently under discussion.

Johnson, Scalise and others in GOP leadership are promising that as soon as Republicans pass a bill funding immigration enforcement and some border patrol activities, they will get to work on another measure through the filibuster-skirting budget reconciliation process.

“We’re going to move right to reconciliation, what will now be 3.0,” Johnson said, referring both to the current plan and the tax and spending megabill Republicans passed last summer. “We’re going to do it as quickly as possible.”

Some of the ideas that circulated during the closed-door leadership meeting Thursday included opening up the possibility for more tax policy changes, addressing the Trump administration’s request for $350 billion for the Pentagon, additional funding for the Iran war and spending cuts across social programs in another package.

Arrington, who is among those wishing to expand the upcoming reconciliation effort, is seeking steep spending reductions to social programs and hopes to revisit Obamacare spending — including cost-sharing reductions, which would reduce out-of-pocket health costs.

Leadership of the Republican Study Committee, meanwhile, is demanding that any third reconciliation bill be fully paid for. There has been limited angst over “pay-fors” for the current party-line pursuit because the measure is an attempt to fund the immigration enforcement agencies and circumvent regular appropriations negotiations, which have been stuck for months.

But many Republicans are doubtful their party will be able to pass another party-line bill ahead of the midterms and see the immigration funding bill as their last bite at the apple. Some of them, including Rep. Warren Davidson of Ohio, are threatening to vote against the Senate budget resolution that would unlock the reconciliation process for the immigration funding measure unless it can incorporate more items from the hard-liners’ wishlist.

GOP leaders are now scrambling to stave off defections. Adoption of identical budget resolutions in both chambers will unlock the ability for lawmakers to write and pass a bill through reconciliation that would send tens of billions of dollars to immigration enforcement operations run through the Department of Homeland Security, which has been shuttered since February.

Republicans are on a very tight schedule to send this bill to Trump’s desk and pave the way for ending the record-setting DHS shutdown, given White House demands.

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