California Faces $17 Billion Economic Hit, 140,000 Job Losses Under GOP Budget Cuts

California could lose nearly 140,000 jobs and see its economy shrink by close to $17 billion next year, far more than any other state, if congressional Republicans push through massive cuts to Medicaid and SNAP programs.

That’s according to a new study by the Commonwealth Fund, a left-leaning health policy group, and George Washington University, that estimates the potential economic hit to each state under the current Republican proposal to slash more than $1 trillion from Medicaid and SNAP — the Supplemental Nutrition Assistance Program — over the next decade.

While recent analyses have largely focused on the tremendous consequences such sweeping cuts would have on program recipients, far less attention has been given to how such cuts would “necessarily weaken states’ economies and result in substantial job losses through a ‘multiplier effect,’” the study’s authors note.

“Part of the point we’re trying to make is these are not harmless cuts,” said Leighton Ku, the study’s lead author, who is a professor of health policy and management at George Washington University. “We were trying to say there are broader effects for state economies. There are the sorts of things that also lead to unemployment rates going up, to state tax revenues going down as opposed to just the effect for the low-income people.”

Although huge numbers of lower-income Americans benefit from the programs, Ku said, the direct recipients of Medicaid payments and SNAP benefits are actually health care providers and grocery stores.

“What happens is if they lose money because of the SNAP or Medicaid cutbacks, then these businesses need to reduce how much spending they have,” said Ku, whose analysis is based on each state’s most recent federal medical assistance expenditures, as well as U.S. Department of Agriculture SNAP benefit spending.

“So they need to lay off staff. They need to buy fewer stuff from other places,” he said. “Ultimately speaking, this leads to broader reductions in the economy.”

The cutbacks will also lower the amount of taxes that state and local governments can collect, with state and local tax revenues falling by about $1.4 billion in California alone, Ku added.

“This would be in addition to the budget problems the state is already facing,” he said.

Medicaid provides health insurance to more than 72 million Americans with limited incomes and funds long-term care for some seniors. In California, nearly 15 million people — more than a third of residents — are enrolled in Medi-Cal, the state’s version of the program. About two-thirds of funding for state Medicaid programs is federal.

Meanwhile, nearly 42 million Americans — including more than 5 million in California — are enrolled in SNAP, which offers food benefits to lower-income families and is funded entirely by the federal government.

Taken together, the Republican proposal to cut upward of $880 billion in funding for Medicaid and $230 billion for SNAP over the next 10 years would collectively reduce state GDPs by $113 billion in 2026, resulting in the loss of more than 1 million jobs, Ku estimates.

“I would say the point that we’re trying to make is [Republicans] should be aware that the deep cuts they’re talking about are going to increase unemployment. They’re not going to help strengthen the economy of states,” Ku said. “They’re going to make it harder for states to balance their budgets.”

The U.S. House of Representatives’ current budget resolution offers a blueprint for the so-called reconciliation bill that Republicans hope to pass in the coming months. The legislation would extend the 2017 tax cuts that lawmakers passed during President Donald Trump’s first term, offsetting the cost by slashing funding to safety net programs, which Republicans have long attacked as being rife with fraud and waste.

And while the House resolution doesn’t explicitly call for cutting Medicaid or food assistance, it directs two House committees with jurisdiction over the programs to identify the $1 trillion in cuts, something that would be virtually impossible without slashing Medicaid and SNAP.

“There’s a fairness problem here,” Ku said. “These will be cuts that will harm people, will harm state economies, will increase unemployment.”

KQED’s Lesley McClurg contributed to this story.