WASHINGTON – After years of budget deficits, Mr. Bush's 2009 budget outlines a path to surplus by 2012, although that calculus assumes higher taxes on the upper middle class and doesn't include funding for the wars in Iraq and Afghanistan beyond 2009.

Mr. Bush highlighted some of the targeted cuts in his State of the Union speech last week. He followed through with a budget that drew fire from Democrats and could prompt a spending battle that won't be resolved this year.

Texas, with a large number of uninsured, would be affected by any major changes to Medicaid, the joint state-federal program that provides medical care to the poor.

Mr. Bush's proposal to cut its projected spending by $1.8 billion in 2009 would shift some administrative costs to the state.

Jim Nussle, White House director of management and budget, acknowledged that a compromise with Congress would be tough but insisted the president's package confronts the runaway growth of entitlement spending. Mr. Bush is a lame-duck president and faces Democratic majorities in both houses of Congress.

"Every year they [Congress] delay, it becomes closer to the time when this unfunded obligation is actually going to collapse on the country and the fiscal budget," Mr. Nussle said.

In the last year of his presidency, Mr. Bush has declared war on earmarks, congressionally directed projects that he calls wasteful, and has proposed to limit the growth of nonsecurity discretionary spending – the amount that is set by Congress – to less than 1 percent.

Mr. Bush proposed eliminating all or part of 151 federal programs, some of which provide assistance to state and local governments, saving $18 billion in 2009. They include funding to house noncitizens in state prisons, which provides about $26 million for Texas, and grants for undergraduate students, which provide about $22 million to Texans, according to the Center for Public Policy Priorities in Austin.

Overall, federal grants to Texas would total almost $27 billion in 2009, about 2.3 percent more than in 2008.

But the state would see reduced funding from federal grants for highway planning and construction, foster care, anti-poverty programs and subsidized housing. The administration proposes to eliminate the social-services block grant, which would take away $38 million in 2009. Texas uses the money to pay for long-term care and adult protective services.

The state's allotment of community development block grants, a prized source of aid for nonprofits and local governments, would drop from $250 million in 2008 to $190 million in 2009.

Grants for programs such as child protection, child care and children's health care would remain at 2008 levels. Texas' share of funding for some social services, including subsidized school lunch and breakfast programs, would increase.

On Medicare, which provides care to the elderly, projected savings would come from freezing increases in reimbursement rates to hospitals, nursing homes and other health care providers. Those reimbursements are typically adjusted for inflation.

White House officials said the changes would lower the annual growth of spending from 7.2 percent to 5 percent.

"Hospitals, because they deliver a significant portion of the services, must be part of the solution," said Kerry Weems, acting assistant secretary of Health and Human Services.

Mr. Bush's plan to reduce Medicaid spending would cut reimbursements to states for administering federal Medicaid money; would cap the reimbursement rate on some prescription drugs; and would tie Medicaid grants to new Medicaid performance measures.

The cuts, some of which require congressional approval, would save about $1.87 billion – offsetting much of a proposed $2.1 billion increase in the State Children's Health Insurance Program.

Democrats indicated Mr. Bush's proposals won't get a warm reception in Congress.

"The president writes only in red ink, having never submitted to Congress a balanced budget," said Rep. Lloyd Doggett of Austin, a member of the House Budget Committee. "He piles on more debt to fund his misguided foreign policy while neglecting so many needs at home."

Mr. Bush's long-term budget outlook assumes the extension of his 2001 and 2003 tax cuts and doesn't account for revenue that would be lost if Congress stops the alternative minimum tax from reaching more taxpayers. The alternative minimum tax was originally written to secure taxes from very wealthy households but increasingly reaches upper-middle-class households because it wasn't indexed for inflation.

The overall federal debt would reach $5.9 trillion in 2009. The White House blames the mounting debt on necessary spending to defend against terrorism and to wage the wars in Iraq and Afghanistan.

"Security is worth whatever it takes in order to make sure that we're secure," Mr. Nussle said.

Defense and security are among areas in which Mr. Bush's budget would grow. Defense spending would rise to $515 billion, the most in inflation-adjusted terms since World War II. That amount does not include $70 billion that Mr. Bush is seeking to pay for the wars in Iraq and Afghanistan for the first months of the fiscal year.

The proposed budget for the U.S. Department of Veterans Affairs would increase funding for veterans' health care by 6 percent in 2009 but would increase enrollment fees on veterans and some pharmacy co-pays. The budget also reduces funding for the construction, renovation and rehabilitation of medical care facilities.

Mr. Bush's proposal wouldn't provide funding in 2009 for several priority projects at the Dallas VA Medical Center, including an expansion of the hospital's emergency room.

"The increase in medical services is a step in the right direction," said Rep. Chet Edwards, D-Waco. "But American veterans deserve better than a budget that would cut VA medical research and hospital construction this year."

The Department of Homeland Security's $50 billion budget would be 6.8 percent higher than last year. That includes a $442.4 million increase to hire, train and equip 2,200 new Border Patrol agents.

Mr. Bush also proposed more money for some types of alternative-energy research, one area in which he's likely to find agreement with many Democrats.

His budget for the Department of Energy proposes more funding to reduce carbon dioxide emissions from coal-burning power plants. But it would eliminate research funding for oil and natural gas exploration and provides only $1 million more for energy-efficiency and renewable-energy programs.