Maryland Democratic Gov. Wes Moore spent a few minutes sorting donated food before signing an executive order in late October declaring a state of emergency to allow for distribution of food aid. As the federal government reopens, questions remain about how states will be reimbursed for the costs they incurred. (Photo by Bryan P. Sears/Maryland Matters)

Though Congress ended the record-setting federal government shutdown, many questions remain for states that were already wading through seismic federal changes.

One major uncertainty: whether and how states will be reimbursed for the costs they incurred, as they have been in previous shutdowns. And for the longer term, the shutdown offered a glimpse into the funding challenges facing states. They’ll have to rely more on their own money and staff to keep federal programs going even at a time when many face their own budget problems.

That’s a top concern for the federal food stamp program, known as the Supplemental Nutrition Assistance Program, or SNAP. Amid conflicting federal guidance during the shutdown, states reacted in different ways: Some issued partial benefit payments, others sent aid to food banks to keep people from going hungry.

But even after the government reopening restores SNAP aid, other challenges loom. The major tax and spending law enacted this summer tied SNAP funding to state error rates, which measure the accuracy of benefit payments. Advocates fear the shutdown will increase error rates because of conflicting federal guidance.

Air travel, SNAP benefits, back pay at issue as federal government slowly reopens

“States are really worried,” said Crystal FitzSimons, president of the Food Research & Action Center, a nonprofit working to address poverty-related hunger.

And states have been rushing to inform rural residents, veterans and older adults that they will soon be forced to meet work requirements or lose SNAP benefits. It’s just the first in a wave of cutbacks to the nation’s largest food assistance program required under the One Big Beautiful Bill Act that President Donald Trump signed in July.

FitzSimons said the shutdown highlighted the importance of SNAP and how “untenable” many of the upcoming changes will prove for states. For now, states are working to get benefits to people immediately, and then will focus more on questions of reimbursement and ongoing changes to SNAP.

“The hope is that states will be able to move quickly and then turn their attention to all the changes,” she said.

While public attention has centered on the shutdown chaos in recent weeks, more fundamental changes are occurring outside the spotlight, said Eric Schnurer, founder and president of Public Works, a consulting firm specializing in government performance and efficiency.

“The ground is shifting under their [states’] feet even as this goes on,” he said. “Even if the Trump administration and his policies were to pass on in another three years, there are serious structural changes in the relationship between state and federal government.”

Since taking office, the Trump administration has stripped states and cities of billions of dollars that Congress approved for education, infrastructure and energy projects. And the president’s One Big Beautiful Bill Act mandates deep cuts to social service programs, including Medicaid and food stamps.

Under the law, states will be required to pay a greater share of administering SNAP in the coming years. That requirement, along with eligibility changes, could result in millions of Americans losing benefits.

“I think the public in general got a taste of what that might look like over the past month,” Schnurer said, referencing the shutdown’s first-ever disruption to SNAP benefits.

State-federal strain

The legislation to reopen the government approved by Congress and signed by the president this week says that states shall be reimbursed for expenses “that would have been paid” by the federal government during the shutdown.

“So that sounds promising for states,” said Marcia Howard, executive director of Federal Funds Information for States, which analyzes how federal policymaking impacts states.

But it’s unclear how that language will be interpreted. For example, states that sent money to food banks for emergency food assistance are less likely to be made whole compared with states that sent funds through existing federal programs like SNAP, she said.

California dedicated $80 million in state funds and deployed the National Guard to food banks across the state. But Virginia launched a temporary state-level version of the federal food stamp program.

Previous administrations have been more flexible with federal funds, making it easier for states to receive funding or reimbursement, Howard said.

“This administration is really more holding states’ feet to the fire perhaps than other administrations have. So I think they’ll be less permissive in who and how they reimburse,” she said.

It could take weeks or months before states know the full fallout from the shutdown, especially with food assistance.

“[States] did such different things, and I think there’s going to be a fair bit of back-and-forth: should this be covered? Should this not be covered?” Howard said.

The shutdown and its aftermath underscore the ongoing strain between state and federal governments, said Lisa Parshall, a professor of political science at Daemen University in New York.

Federal uncertainty can cause state leaders to be more cautious about their own budgets — similar to how an economic downturn can decrease consumer spending, she said.

“There’s a delay of services, there’s a diminishment of capacity and partnership, and those things might be harder to quantify when you’re talking about what is the cost of the shutdown,” she said. “But I think those are real costs.”

And the end of the shutdown does not extinguish those tensions.

“In some ways, even though the shutdown is over, things are not going to go back to ‘normal,’” she said.

More changes coming

Aside from spending cuts and new administrative costs, Trump’s July law made major tax code changes poised to cost many states, said William Glasgall, public finance adviser at the Volcker Alliance, a nonprofit that supports public sector workers.

Most states use the federal tax code as a basis for their own income tax structures, so changes at the federal level can trickle down to state tax systems or states can choose a different structure to avoid those changes.

Last month, a Massachusetts budget official said federal tax changes would cost the state $650 million in revenue this budget year.

So even with the government back open, states have to plan for some level of unpredictability, Glasgall said. And the future of entire agencies like the Department of Education remain up in the air, he noted.

“So there’s still a lot of uncertainty, even with this bill,” he said.

On Wednesday, state budget analysts briefed Maryland lawmakers on the $1.4 billion budget gap they could face as they head into the 2026 legislative session.

That figure does not include the fallout from the federal government shutdown, which may not be known for months, according to Maryland Matters.

In late October, Democratic Gov. Wes Moore declared an emergency and directed $10 million in state funds toward food banks and pantries. Earlier this month, he announced $62 million in state funds would be deployed directly to SNAP recipients.

Rhyan Lake, a Moore spokesperson, told Stateline that Maryland expects the federal government to reimburse the state for its SNAP expenditures during the shutdown.

But lawmakers are still gearing up for a hit from major federal changes.

In addition to cuts from Trump’s domestic tax and spending law, Maryland has lost about 15,000 federal jobs, budget officials said. But many federal workers who took buyouts were paid through September. And the shutdown caused a pause in federal employment data, potentially concealing the true impact.

State Sen. James Rosapepe, Democratic chair of the joint Spending Affordability Committee, said he’s worried the state has only seen the beginning of its federally induced fiscal challenges. He also noted that this week’s shutdown-ending legislation only assures the government remains open through January, meaning another shutdown could be just a couple months away.

“We’re less than a year into the administration, and the effects of things they’ve already done don’t seem to have flowed through yet to the data that we have, which leads me to believe that the worst is yet to come,” he said.

Stateline reporter Kevin Hardy can be reached at khardy@stateline.org.

An aerial view shows an Amazon data center last year in Ashburn, Va. A new study found that most states offering subsidies for data centers do not disclose the recipients of those tax benefits. (Photo by Nathan Howard/Getty Images)

Most states offering incentives to data centers don’t disclose which companies benefit, according to a new report.

At least 36 states have crafted subsidies specifically for data center projects, according to Good Jobs First, a nonprofit watchdog group that tracks economic development incentives. But only 11 of those states — Arizona, Connecticut, Illinois, Indiana, Minnesota, Nevada, Ohio, Pennsylvania, Texas, Washington and Wisconsin — disclose which companies receive those incentives.

In a new study, the organization examined a lack of transparency in data center deals, which are proliferating across the country as technology demands increase.  

Despite data centers’ significant energy requirements, states frequently compete heavily to land the projects, which invest millions or even billions into new construction. But the study noted those projects often employ nondisclosure agreements, project code names and subsidiary names that hide the firms behind the new server farms.

“Only when governments disclose information on which companies get public money and what they do with it can there be meaningful analysis, greater public participation, and wiser use of public financial resources,” the report says.

Good Jobs First specifically examined sales and use tax exemptions that benefit data centers. The study does not account for local property tax abatements, corporate income tax credits and discounts on electricity and water rates.

Virginia, the largest data center market in the world, forgoes nearly $1 billion in state and local sales and use tax revenue each year without telling the public which companies benefit or how much they receive, the study said.

Good Jobs First underscored state calculations that show data center subsidies do not provide a return on taxpayer investments. It recommends states eliminate or curtail data center subsidies. “At the very least, states should practice full transparency,” the report said.

Good Jobs First says states must reassess their investments in data centers with federal cuts looming that will strain state finances.

Stateline reporter Kevin Hardy can be reached at khardy@stateline.org.

A bin of THC edible products from Virginia stores is displayed by the state attorney general. While states continue to expand access to legal marijuana, a separate market of hemp-derived intoxicants has blossomed. (Photo by Graham Moomaw/Virginia Mercury)

A provision significantly limiting the sale of intoxicating hemp products made its way into legislation to reopen the federal government just a day before the Senate approved the bill. Its inclusion follows years of pressure from states and the marijuana industry.

While states continue to expand access to legal marijuana, a separate market of hemp-derived intoxicants has blossomed. The products, from drinks to gummies, are sold in gas stations and smoke shops. Critics say some companies have exploited a legal loophole from 2018 to manufacture products that get people high — without the safety regulations and taxes facing the legal marijuana industry.

That’s led dozens of states to limit or ban certain intoxicating hemp products. Most states also have pushed for federal changes, though some farm states worry the pending federal bill — which the House is expected to vote on as soon as today — goes too far.

A bipartisan group of 39 state attorneys general recently urged Congress to clarify the federal definition of hemp, arguing that the underregulated industry threatens public health and undermines law enforcement.

Texas lawmakers this year approved a strict ban on intoxicating hemp, but that measure was vetoed by Republican Gov. Greg Abbott. The governor raised constitutional concerns because federal law allowed the products, but he then issued an executive order increasing state agency regulations, including age restrictions.

This summer, Florida regulators seized tens of thousands of packages of hemp products that failed to meet new child protection standards, including child-resistant packaging, marketing restrictions and enhanced labeling rules. In Tallahassee, the state Senate approved a ban on hemp-derived THC products, including beverages, but that measure died in the state House. A similar effort last year was vetoed by Republican Gov. Ron DeSantis, who said it would harm small businesses.

Last month, California Democratic Gov. Gavin Newsom signed legislation strengthening state enforcement of its ban on intoxicating hemp products. Similarly, Ohio Republican Gov. Mike DeWine declared an emergency last month in an executive order banning intoxicating hemp products for 90 days while lawmakers debate potential legislation.

Missouri hemp businesses fear new federal THC limits will destroy the industry

Tetrahydrocannabinol, or THC, is the primary psychoactive component of the cannabis plant. The 39 state attorneys general argue manufacturers are manipulating hemp to produce synthetic THC that can be more intoxicating than marijuana.

“In this way, legal, nonintoxicating hemp is used to make Frankenstein THC products that get adults high and harm and even kill children,” the attorneys general wrote.

Hemp-derived gummies and beverages are sold without consistent age restrictions or labeling regulations and oftentimes resemble candy. During his announcement, DeWine showcased brightly packaged intoxicating hemp products that resembled name-brand candy products.

“Certainly, it’s easy to see how a child will confuse this product with real candy and eat a few gummy bears and ingest enough THC to require hospitalization,” he said, according to the Ohio Capital Journal.

Though it has faced mounting restrictions in the states, the hemp industry says the federal change poses an existential threat.

On Monday, the U.S. Hemp Roundtable said the legislation pending in Congress would wipe out 95% of the nation’s $28.4 billion hemp industry.

“The language will force patients, seniors and veterans who rely on hemp products to break federal criminal law to acquire them,” the trade group posted online.

Jonathan Miller, general counsel for the organization, said the industry has been pushing for regulation rather than outright prohibition. He acknowledged the problem of bad actors, but said those can be addressed with strong regulations like those that exist in Kentucky and Minnesota.

“These are good examples of states that have put together robust regulations. But we need to see that at the federal level, and we’ve been supporting legislation to do that for the last seven years,” he told Stateline.

Republican U.S. Sen. Mitch McConnell, Kentucky’s senior senator, said he included the hemp measure in the bill to close an unintended legal loophole and that the measure would still allow farmers to grow hemp for fiber, oil and drug trials.

But fellow Kentucky Republican U.S. Sen. Rand Paul said the move would “eradicate the hemp industry” and could override some state laws. Paul offered an amendment to remove the hemp provision but failed.

The hemp loophole

Hemp derives from the same cannabis species as marijuana, but is legally defined by its lower levels of THC, the psychoactive component of the plant.

While marijuana remains illegal under federal law, Congress sanctioned hemp in the 2018 farm bill to allow an agricultural market for hemp-based textiles, animal feeds and human wellness products centered on cannabidiol, or CBD, products. The farm bill allowed cultivation of hemp plants with a THC concentration of 0.3% or lower by dry weight.

But that threshold has become essentially meaningless, said Katharine Neill Harris, a fellow in drug policy at Rice University’s Baker Institute for Public Policy.

That’s because manufacturers have found ways to convert legal hemp plants into potent forms of synthetic marijuana. Aside from the potential of creating very strong products, she said the process requires the addition of solvents and other ingredients that raise many safety questions.

“With marijuana products, you can get some very potent products,” she said. “But the psychoactive components to THC are naturally occurring. It naturally occurs in that natural amount. You’re not doing a whole bunch of manipulation to increase the potency of the product and adding ingredients.”

Harris has tracked the growing number of states regulating the industry: Six states and the District of Columbia now ban all consumable hemp products with any amount of THC. In 24 states, intoxicating hemp products are permitted, though 15 of those states allow only low-potency products.

But even states with strict regulations still must contend with legal online markets.

“There’s a big part of that activity that you can’t control as a state when something is federally legal, and so that’s one thing that they’re asking for is federal leadership on this issue,” she said. “I think there is a big demand for some sort of industry standards.”

If approved by Congress and signed by the president, as expected, the new hemp legislation will likely have uneven impacts across the states.

For example, the change likely won’t dramatically alter the legal landscape in Alaska, where the regulators have banned all intoxicating hemp products. Marijuana businesses complain those products are still being sold, despite the ban.

But in a state like Nebraska, where lawmakers have been unsuccessful in limiting intoxicating hemp, the change could drastically alter both consumer access and business sales, depending on enforcement.

On Monday, Paul said the federal legislation would wipe away hemp regulations in many states, including Kentucky, Louisiana, Maine and Utah.

“The bill before us nullifies all these state laws,” he said.

‘Running with knives’

The hemp industry has argued that a lot of the opposition to it stems from marijuana businesses looking to protect their own markets, noting that campaigns for restrictions are often more organized in states that have legalized marijuana.

But producers of intoxicating hemp are looking for market access without the associated safety regulations and tax structures states have created for marijuana, argued Chris Lindsey, the director of state advocacy and public policy at the American Trade Association for Cannabis and Hemp, an organization representing the legal marijuana industry.

“They want to have some kind of regulatory framework that’s somehow different than the one that states already have [for marijuana],” he said.

His organization cheered the Senate’s efforts “to address the dangerous proliferation of unregulated synthetic THC products.”

Lindsey said hemp-derived products can contain contaminants, including pesticides. Many hemp products can be sourced cheaply overseas, he said, and with lax oversight, there is no system to recall tainted products here.

“To me, that’s like running with knives,” he told Stateline.

Floridians react to federal legislation that could ‘devastate’ state’s hemp industry

The Missouri Cannabis Trade Association recently purchased hemp products from gas stations and smoke shops from across the state to test them in an effort to show they need more regulation.

In its “Missouri Hemp Hoax Report,” the organization said independent testing found 53 of the 55 products purchased were actually intoxicating marijuana well above the legal limit of THC. Third-party lab results also showed some of the products contained pesticides and heavy metals.

Those results underscore that the products should face the same rules as legal marijuana does, said Andrew Mullins, president and executive director of the cannabis trade association. State law requires marijuana to be grown and manufactured in Missouri, mandates lab testing and allows for sales only at licensed dispensaries.

“In my mind, if it’s marijuana, which most of this is, then it should be regulated like marijuana,” Mullins said.

He said calling the unregulated products “hemp” is akin to someone selling whiskey and calling it corn: “Everybody is using hemp as a cover to basically sell intoxicating drugs.”

Mullins acknowledged the confusion among policymakers and law enforcement. But he said there are already laws — including those against trafficking marijuana without a license — that could help address the issue.

Catherine Hanaway, a Republican who was sworn in as Missouri’s new attorney general in September, has vowed action on unregulated hemp products, particularly THC beverages that are booming in popularity.

“Our focus is on the health and safety of Missourians,” James Lawson, her deputy chief of staff, told the Missouri Independent last month. “This is an unregulated industry that makes untested, unknown substances available to the public without any oversight, including children where we think it’s particularly detrimental.”

Stateline reporter Kevin Hardy can be reached at khardy@stateline.org.