An Alabama lawmaker who leads a state budget committee said President Trump’s tax cut and spending bill means Alabama will have to tighten programs that hundreds of thousands of families depend on for health care and food.
Rep. Rex Reynolds, R-Huntsville, chairman of the House Ways and Means General Fund committee, said the changes made by what Trump dubbed the “big, beautiful bill” were needed.
“Unfortunately, I think it was a very necessary piece of legislation at the federal level to make some much needed corrections,” Reynolds said.
“Take for instance Medicaid. It was simply an unsustainable program the way that program was growing.”
‘Very few healthy men on Medicaid’
Alabama’s budget for next year allocates more than $1 billion from the state General Fund to Medicaid, one-third of the total spending from the General Fund.
Overall, Alabama’s Medicaid program will cost about $10 billion next year, with federal dollars covering about 70%.
Reynolds said he would support an audit by a third party to review who receives Medicaid benefits in Alabama.
“It may be a good time to really pull back the covers and look at who is on Medicaid,” Reynolds said. “We know that about 52% of our Medicaid recipients are children. We have a lot of people on Medicaid that have disabilities and cannot work.
“But I suggest there may be some on there that don’t need to be on Medicaid.”
“We’ve just really got to do our due diligence to ensure that we are providing Medicaid only to those that need it,” Reynolds said.
Trump’s 900-page bill, passed by Republican majorities in Congress over united opposition from Democrats, cuts federal spending for Medicaid and for the Supplemental Nutrition Assistance Program, or SNAP.
The savings are intended to offset the extension of tax cuts from Trump’s first term, new tax breaks for individuals and businesses, and increased spending on defense, immigration enforcement, and border security.
Alabama Arise, which advocates for policies that benefit people in poverty, says Trump’s bill will hurt hundreds of thousands of Alabamians who depend on SNAP and Medicaid, including for temporary setbacks such as a job loss.
The Congressional Budget Office estimated that the changes in the bill would result in almost 12 million people nationally losing their health insurance coverage by 2034.
The CBO said the bill would cut federal spending on healthcare by about $1 trillion over a decade.
Sen. Greg Albritton, R-Atmore, who chairs the General Fund committee in the Senate, said Trump’s bill will have more impact on states that expanded their Medicaid programs under President Obama’s Affordable Care Act than it will on Alabama, one of 10 states that did not expand.
“The overall picture, I believe, is Alabama is going to be in fairly good shape,” Albritton said. “The doom and gloom I don’t think is going to hit the fan.”
Medicaid expansion would have added hundreds of thousands of working people to the rolls.
Still, Alabama’s unexpanded Medicaid program is large, serving an average of about 1 million people each month.
Slightly more than half are children up to age 18. Other main groups are the blind and disabled, pregnant women, and people 65 and older in poverty.
Albritton said he does not expect many to lose coverage because of Trump’s bill.
“If there is, it’s going to be very, very few,” Albritton said. “Alabama is already in compliance with this in that we cover mostly women and children and the disabled.”
“There are very few healthy men on Medicaid at this point.”
The senator said there is still not a full understanding of everything the bill does because some of it depends on new federal regulations that will be written.
“We won’t know that for another year,” Albritton said.
‘Better than we thought’
The National Academy for State Health Policy said states that did not expand Medicaid, like Alabama, can expect to see reduced federal funding for Medicaid of 6% to 11%.
Reynolds said the state’s Medicaid professionals are trying to determine how much will be cut. He does expect a reduction in federal Medicaid dollars.
“That’s why we’ve got to work on ensuring that our programs are lean as they can be and that we are providing Medicaid to those that really need it,” Reynolds said.
His Senate counterpart, Albritton, said that overall he does not expect major negative consequences for the state budget or for those who depend on Medicaid.
“I think on both sides we’ve come out better than we thought we would. I think we’re going to be able to handle this,” Albritton said.
Reynolds said the addition to the bill of $50 billion intended to help rural hospitals and health providers should help.
Reynolds said he has been in meetings with other legislative leaders and is sharing information with the budget committee members to prepare for the impact of the bill.
“We have talked about Medicaid for weeks now about what potentially could happen there,” Reynolds said.
He said the discussions have included what to do about those who lose health insurance.
“We certainly have to begin to have that conversation as well because that too can impact our hospitals and our nursing homes,” Reynolds said.
According to the Kaiser Family Foundation, the bill will make it harder for people to obtain and keep their health insurance policies purchased through the marketplace established by the Affordable Care Act, partly by shortening the annual open enrollment period and requiring more documentation.
Also, the cost of premiums will rise about 75% after this year because enhanced tax credits to help pay for premiums during the COVID pandemic will expire, the KFF said.
No more candy or Cokes through SNAP?
The bill is intended to save federal dollars by shifting more of the cost of SNAP, formerly called food stamps, to the states.
Federal dollars now pay 100% of SNAP benefits. In Alabama, that amounted to about $1.8 billion last year.
An average of 750,000 people received SNAP benefits in the state last year, an average monthly benefit of about $200.
The bill will require states to pay a portion of SNAP benefits beginning in 2028. States can avoid that if they keep payment error rates below a certain target.
Reynolds said Alabama should begin to look at cost-savings. One possibility is to tighten the rules on SNAP purchases and exclude sodas and candy.
“That may be something we have to consider in Alabama to ensure again that we are providing the SNAP benefits to the kids that need it,” Reynolds said.
According to Alabama Arise, the changes to SNAP will result in the most negative consequences from the bill.
Alabama Arise said the new cost-sharing for SNAP would cost Alabama about $200 million if it was implemented now.
The bill also imposes new 80-hour a month work requirements on many SNAP recipients.
“Federal SNAP cuts will leave more Alabamians unable to afford to keep food on the table,” Alabama Arise Executive Director Robyn Hyden said in a news release.
“That is a step in the wrong direction, and it will undermine the benefits of the state grocery tax reduction that Alabama legislators enacted unanimously this year.”
Education budget could benefit
Rep. Danny Garrett, R-Trussville, chairman of the education budget committee in the House, said he does not expect the “big, beautiful” bill to have a major impact on school funding.
As a general rule, when Alabamians pay less in federal income taxes, they pay more in state income taxes.
That’s because Alabama allows taxpayers to use their federal taxes as a deduction to reduce what they owe in state taxes. Alabama is the only state that allows taxpayers to deduct all their federal taxes paid.
“Generally, if the federal taxes go down, which the big beautiful bill says it will, then our state receipts go up,” Garrett said.
State income taxes are the largest source of money for Alabama’s Education Trust Fund.
The bill creates federal income tax deductions for overtime pay, tips, and taxable income for people age 65 and over.
Alabama approved a state income tax exemption on overtime pay that was in effect from January 2024 through June of this year.
But lawmakers chose to let it expire because it reduced revenues to the Education Trust Fund more than expected.
Garrett said a larger concern for the education budget than the Trump bill is the delay of $68 million in federal funds for Alabama school systems for after-school, English learner and professional development programs.
The money is typically sent out July 1 every year, but federal officials notified the state that it was on hold pending a review.
“It’s my understanding, that they’re just reviewing that to make sure it’s compliant with the overall administration initiatives,” Garrett said. “But the longer that money is delayed being released, then it doesn’t get to the local level as soon as it needs to.”
Garrett said the Legislature passed the education budget for the upcoming school year with the expectation that the federal funds would be available.
The Legislature is not in session now and will begin the 2026 session in January.
Garrett said he expects hearings on the state budgets to happen in the fall.
Cuts to service might be coming
Reynolds said the tax revenues that support the General Fund are strong overall.
He said the extension of the 2017 federal tax cuts should help the economy.
Still, Reynolds acknowledged that the state might have to reduce some services because of the changes coming.
“I can’t say that the General Fund can supplant all the federal dollars that we may lose,” Reynolds said.
“But we do a balanced budget and we’re going to work hard to continue to provide services to the Alabamians that need it.”
“We will work hard to not have a significant impact on the General Fund because we’ve got to make it work,” Reynolds said.
“And we’ve got to make it work within the parameters of this legislation.”
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