The General Assembly’s Joint Health and Human Services Appropriations Committee begins its budget review on Feb. 25, 2025. (Photo: Lynn Bonner)
North Carolina legislators began public budget discussions Tuesday in the shadow of a giant question mark. How will North Carolina respond to any federal budget cuts?
Republicans in the U.S. House have prepared a budget blueprint that would mean deep cuts to Medicaid, the government health insurance program for people with low incomes.
“In the next 60 days, we’ll know what’s going to happen, and it could change everything,” said state Sen. Jim Burgin (R-Harnett), a chairman of the Senate Health and Human Services budget committee.
Congressional Republicans are also considering reductions in the Supplemental Nutrition Assistance Program, or food stamps, and changes to a policy on school meals that would lead to cuts to breakfast and lunch programs, with fewer schools able to offer all students in high-poverty areas meals at no charge.
The U.S. House and Senate must agree on a budget before it goes to President Donald Trump. That agreement isn’t expected until April or May at the earliest. North Carolina’s budget year ends on June 30. Legislative budget committees are starting to dig into the details of state agency spending this week.
The federal cuts to safety net programs would help pay for the tax cuts and immigration plans that top President Donald Trump’s domestic agenda.
More than a third of the money North Carolina spends each year comes from the federal government. In fiscal year 2023, 37.5% of the money the state spent was federal money, according to a National Association of State Budget Officers report.
Much of that federal money flows to the state Department of Health and Human Services, which houses the Medicaid program.
The reliance on federal funds for health was reinforced Tuesday at the legislative committee that began to review the state DHHS budget.
The agency’s budget this year is nearly $40.7 billion, with Medicaid accounting for nearly $32.8 billion of that. About $6.2 billion of North Carolina’s Medicaid costs are paid from state coffers. The federal government picks up most of the rest.
Burgin said in an interview he hopes Congress approaches Medicaid cuts with a scalpel rather than a meat cleaver.
DHHS touches everybody in the state all the time, he said, and they don’t even realize it. “I want North Carolina to be the healthiest state in the country and I want us to control our costs while we do it.”
Rep. Allen Buansi (D-Orange), a member of the House health budget committee, said he is “gravely concerned,” about potential federal cuts.
“We depend a lot on our federal government when it comes to health and human services,” he said.
Republicans in the U.S. House have discussed reducing federal support for adults who have insurance coverage due to Medicaid expansion. The federal government picks up 90% of the cost of people covered under Medicaid expansion. In North Carolina, the state doesn’t cover any of the costs.
North Carolina is one of nine states that has a statutory trigger that ends Medicaid expansion if the federal government stops paying 90%. More than 600,000 North Carolinians enrolled in expanded Medicaid in the year after the state enacted it in December 2023.
U.S. House Republicans are also considering changing Medicaid so that it pays a set amount per person rather than paying for a percentage of allowable costs.
Sen. Ralph Hise (R-Mitchell), a chairman of the Senate budget committee, said he didn’t see a point in speculating when the U.S. House and Senate are far from an agreement on cuts.
“I don’t see a lot of value in guessing,” he said.
Aside from the federal budget debate, what North Carolina does know is that the overall percentage of Medicaid costs the federal government will pick up is expected to drop over the next two years, Hise said.
The federal government calculates its Medicaid support for states based on average per capita income relative to other states.
North Carolina has been doing well, so the federal reimbursement percentage has been dropping, and will continue to drop over the next two years, said Hise. Preliminary estimates put the loss at $1.3 billion over two years, he said.
Helene road repair costs
Members of the Joint Appropriations Committee on Transportation heard the sobering news that the projected cost to repair all the roads and bridges damaged by Hurricane Helene will be just shy of $5 billion.
And while more than $432 million has been spent to date on repairs, that represents less than 9% of the cost estimates, with thousands of rebuild projects remaining. Department of Transportation engineers also cautioned lawmakers that redirecting dollars from the deferred maintenance fund to address Helene damage would leave fewer dollars to improve road conditions in other regions of the state.
NC Newsline’s Clayton Henkel contributed to this report.
