Medicaid, SNAP, SALT: Joint Committee Reviews Billions in Federal Budget Risks to Maryland

Facing potential cost shifts in the billions, Maryland lawmakers met this week to assess how sweeping federal budget proposals and policy changes could upend the State’s finances — with ripple effects likely to reach counties through increased service demands, reduced federal support, and added pressure on local budgets.

The Maryland General Assembly’s Joint Committee on Federal Relations convened its first interim meeting this week to assess the mounting federal fiscal and policy challenges, including the uncertain path of the fiscal 2026 federal budget, sweeping reconciliation proposals, and the potential for significant cost shifts to states and local governments.

Director and Senior Advisor for the Governor’s Office of Federal Relations, Matthew Verghese, staff from the Department of Legislative Services (DLS), and Maryland Attorney General Anthony Brown briefed lawmakers on the evolving congressional actions and their potential implications for Maryland’s budget, service delivery, and federal grant landscape.

For county governments, the implications are far-reaching — from disaster recovery and public health systems affected by Medicaid policy shifts to tax compliance, infrastructure funding, and long-term budgeting.

Top of Mind: Medicaid, SNAP, and Tax Changes

The focus centered on key provisions from the reconciliation bills advancing through Congress, where both House and Senate plans propose significant changes to entitlement programs, revenue policy, and state-federal partnerships.

While the final package remains in flux, Verghese and DLS flagged profound long-term implications, particularly:

  • Medicaid cost shifts, including work requirements, eligibility redeterminations, and penalties for covering undocumented immigrants;

  • SNAP cost sharing, potentially reversing decades of fully federally funded food assistance;

  • Revenue impacts from permanent changes to the state and local tax (SALT) deduction and limits on pass-through entity tax workarounds.

Although many provisions would phase in over several years, early analysis suggests Maryland could eventually face $700 million or more in new annual costs, primarily in Medicaid and SNAP.

Medicaid Changes: Disenrollments and State Cost Exposure

Both the House and Senate reconciliation plans propose new work requirements and more frequent eligibility checks for Medicaid recipients in the ACA expansion population. DLS estimates these changes could result in the disenrollment of 130,000 Marylanders — more than one-third of the expansion group.

Maryland would incur new administrative costs (estimated at $22 million) to implement these requirements; however, the reduced enrollment could result in a net annual savings of over $100 million. Still, DLS warned that those avings would come with increased pressure on uncompensated care systems.

The Senate proposal would also phase down the federal cap on provider taxes — a tool many states, including Maryland, use to help finance their Medicaid match, creating long-term uncertainty for hospital and managed care assessments. Maryland may need to implement technical and structural changes to preserve these funding mechanisms under revised federal rules.

Maryland’s Healthy Babies Program, which provides Medicaid coverage to pregnant undocumented individuals, also faces risks. If the federal government withdraws match funding and Maryland continues coverage, the State could trigger a 10-point reduction in its ACA federal match rate, resulting in a cost of up to $250 million per year.

SNAP: New Cost-Sharing Burdens

For the first time, both the House and Senate proposals would shift benefit costs of the federal Supplemental Nutrition Assistance Program (SNAP) to states — a significant break from current law.

Based on Maryland’s error rate, the State could face an annual SNAP cost burden of up to $375 million under the House plan or $225 million under the Senate version. Administrative cost shifts could take effect earlier and total $80 million annually.

DLS emphasized that these changes would take effect at a time when Maryland, like all states, would be least able to absorb them: during economic downturns, when SNAP demand spikes.

Tax Changes: SALT Cap Extension, Pass-Through Reforms

Lawmakers also examined federal tax changes that could affect Maryland’s revenue outlook. Both reconciliation proposals extend or revise the cap on the state and local tax (SALT) deduction, and both aim to limit the use of pass-through entity tax workarounds, such as Maryland’s PTE election.

Maryland decouples from most federal income tax changes unless the General Assembly acts. However, interactions with federal adjusted gross income, filing behavior, and taxpayer compliance still carry potential revenue impacts, particularly among high-income filers.

On the surface, increasing the SALT deduction offers relief to residents in high-tax states, such as Maryland, by allowing them to deduct a greater portion of their state and local taxes from their federal taxable income. But this shift could have broader implications for state and local revenue.

Although Maryland does not allow taxpayers to deduct SALT payments on their state returns, changes to federal deduction behavior — especially among high-income filers — can still affect Maryland’s tax base.

When the 2017 federal tax law capped the SALT deduction at $10,000, many Marylanders opted for the larger federal standard deduction, which increased their federal adjusted gross income (AGI) — the starting point for Maryland income tax calculations. That shift inadvertently broadened Maryland’s tax base and boosted state and local revenues.

Raising the SALT cap would likely encourage more taxpayers to return to itemizing. Itemizing again would lower taxpayers’ federal AGI, which in turn would reduce their Maryland taxable income, even though taxpayers must still add back the SALT deduction on their state returns.

The result? A narrower income tax base and potentially lower revenue collections for counties, which depend on local income taxes to fund core services like education, public safety, and infrastructure.

DLS noted that the Bureau of Revenue Estimates will conduct a more in-depth review this summer to refine projections based on the final federal action.

Federal Grants: Cancellations and Conditions

In addition to legislative changes, analysts warned that executive actions are already reducing or delaying the receipt of awarded federal funds.

The State has received cancellation notices for:

  • $201 million in opioid treatment grants

  • $98 million in education aid

  • Multiple infrastructure and equity programs, including digital access and unemployment system modernization

Lawsuits are pending, including multi-state challenges to new federal conditions tied to immigration enforcement and anti-DEI directives. Maryland Attorney General Anthony Brown has joined litigation aimed at preserving funding from the DOT, DOJ, FEMA, and other federal agencies.

Appropriations Outlook: Shutdown Still Possible

Finally, lawmakers heard an update on the federal appropriations timeline. With the current continuing resolution set to expire at the end of September and no full-year appropriations bills passed, the possibility of a federal government shutdown remains on the table.

Proposed cuts in the President’s budget — while not binding — include steep reductions to education, housing, clean water, and workforce development programs, all of which flow to local governments and communities across Maryland.

What’s Next

Congressional action will shape the final impact. The President has called for the reconciliation package to be finalized by July 4, but the process remains uncertain.

The Senate is still working through procedural rules and the “Byrd bath” to determine what can remain in the bill. Once the Senate passes its version, the House must decide whether to accept it as is or initiate a conference process to reconcile the differences. With the debt ceiling tied to the package, many observers believe the more realistic deadline is mid-August, when federal borrowing authority expires.

While many of the federal proposals remain subject to change, the overall direction — shifting costs to states, cutting federal aid, and imposing new compliance requirements — represents a clear risk to Maryland’s fiscal and operational stability.

The National Association of Counties (NACo) has offered dedicated coverage on the county effects of the sweeping bill and will continue its coverage as Congress moves toward final action.

Please note: The information presented in this article reflects the most current analysis available at the time of the Joint Committee on Federal Relations meeting. Many of the proposals discussed — including reconciliation provisions, appropriations actions, and federal agency directives — remain subject to change as Congress continues to negotiate and finalize legislation. Fiscal impacts, program requirements, and funding conditions may shift as new details emerge. MACo will continue monitoring developments and provide updates as they become available.

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Maryland’s Fiscal Outlook: Balancing State Budget Challenges and Priorities

As Maryland navigates uncertain economic terrain, staying ahead of fiscal and policy shifts is critical for counties on the front lines.

At the 2025 MACo Summer Conference, Maryland Comptroller Brooke Lierman will sit down with MACo Executive Director Michael Sanderson for a candid, forward-looking conversation on the State’s fiscal outlook.

MACo’s Summer Conference is August 13-16, 2025, at the Roland Powell Convention Center in Ocean City, Maryland. This year’s theme is “Funding the Future: The Evolving Role of Local Government.” For more information, please visit the conference website.

Learn more about MACo’s Summer Conference: