The One Big Beautiful Bill Act (OBBBA) Becomes Law – Now What?

On July 4, following weeks of intense negotiation, President Trump signed into law the One Big Beautiful Bill Act (OBBBA) (Pub. L. 119-21) — a sweeping piece of legislation that reshapes federal fiscal policy, tax rules and entitlement programs. Passed through the budget reconciliation process, the new law is set to impact public services and the national economy.

OBBBA carries forward parts of the 2017 tax cuts, temporarily exempts tip and overtime income from federal taxation, and raises the statutory debt ceiling by $5 trillion. To offset some of these changes, it slashes over $1 trillion in federal healthcare spending, particularly targeting Medicaid.

If you work with federally funded programs — especially in healthcare, food assistance, workforce training, rural development or public broadcasting — the new law introduces a series of reforms that may directly affect your funding, operations and compliance responsibilities.

What is reconciliation and why was it used to pass OBBBA?

Reconciliation is a process used to allow Congress to avoid a Senate filibuster by needing only a simple majority instead of 60 votes. The process is often used when one party believes they have enough votes to pass legislation by a simple majority despite the legislation being constrained by the Byrd rule, which allows the Senate Parliamentarian to exclude provisions unrelated to budget changes. The Byrd rule requires that the legislation does not: produce a change in outlays or revenues, increase the deficit beyond the “budget window” (10 years) or make changes to Social Security

What are the provisions worth noting in the bill?

Medicaid

Reforming Medicaid is one of the biggest changes under OBBBA. With over $1 trillion in cuts, states could face deep budget shortfalls, prompting tough decisions about how to maintain services.

Among the new mandates is a work requirement for most Medicaid recipients aged 19 to 64, who must now work at least 80 hours per month to remain eligible. Exceptions exist for individuals with young children or certain medical conditions, but the change represents a significant policy shift.

Other measures include increased cost-sharing for enrollees just above the poverty line, who may now be charged up to $35 per medical service. Additionally, states must verify eligibility twice a year — a notable increase from the previous annual check — along with quarterly audits to remove deceased individuals and ineligible providers from Medicaid rolls.

States will also face a reduction in their ability to raise Medicaid funding through the provider tax, which will shrink from 6% to 3.5% by 2031. Medicaid payments may no longer exceed Medicare rates, and new coverage restrictions ban the program from funding gender-affirming care. The law also introduces a five-year waiting period for green card holders before they can apply for benefits.

SNAP

Food assistance is another area undergoing a noticeable change. OBBBA raises the work requirement for SNAP (food stamp) recipients to include individuals aged 18 to 64, up from the previous age cap of 54. These beneficiaries must work at least 80 hours per month to qualify for benefits.

The financial burden on states is increasing. Any state with a SNAP error rate above 6% will be responsible for covering up to 15% of benefit costs. Meanwhile, states must contribute 75% of SNAP administrative costs, a sharp increase from the prior 50%. Future benefit increases may be harder to come by, as updates to the Thrifty Food Plan — which governs benefit levels — are now restricted under the law.

Affordable Care Act

Several elements of the Affordable Care Act (ACA) are weakened. OBBBA eliminates automatic re-enrollment, adds verification hurdles, shortens the open enrollment window and removes caps on how much households must repay if they receive excess premium tax credits. These changes may increase the burden on consumers during the enrollment process and reduce participation in ACA plans.

New Funding

OBBBA also includes funds for national security and event preparedness. It authorizes $10 billion in reimbursement grants to states for prior expenditures related to border security, $625 million for security planning for the 2026 FIFA World Cup and $1 billion for the 2028 Olympics. These funds are intended to support law enforcement, emergency response readiness and cybersecurity enhancements. Also of note, it provides $500 million to improve the detection of emerging threats, including those posed by unmanned aerial systems (UAS).

What Should Employers and Grant Recipients Consider?

Even if you are not directly administering federal benefits, OBBBA could still affect your organization — especially if you manage payroll or handle federal compliance. The law introduces new reporting requirements related to tipped income, overtime deductions, childcare flexible spending accounts and student loan assistance. Employers will need to adjust payroll systems and tax documentation processes to remain in compliance.

It is also important to be aware of other impacts to specific grants you may manage. For instance, tax credits for electric vehicles, wind and solar production, and hydrogen innovation enacted by the Inflation Reduction Act were repealed or phased out, resulting in cuts to programs.

Moving Forward

The One Big Beautiful Bill Act marks a notable change in U.S. fiscal policy. While it aims to simplify taxes and reduce long-term federal spending, it also passes significant responsibilities — and challenges — on to states, employers and federally funded organizations.

The loss of discretionary federal infrastructure and climate grant funding for projects already in planning or execution phases could be problematic. In addition, Medicaid and SNAP reforms represent major budget pressures and administrative shifts for states.

Understanding the implications of this law is the first step toward adapting effectively. No matter what your role in the funding process, staying informed will be essential in navigating the changes ahead. Look for future guidance from the federal agencies implementing the new law, stay informed and plan for changes to minimize the impact on your operations.

Cornelia Chebinou has been the director of the Washington office of the National Association of Auditors, Comptrollers and Treasurers (NASACT) since August 1999. She serves as the primary liaison with Congress, the administration, federal agencies and other associations on national issues of intergovernmental finance while representing state governmental positions and providing information to the membership. She has served as the point person for state finance officials on implementation of the American Recovery and Reinvestment Act, the recent COVID aid legislation and is a past co-chair of the National Grants Partnership and International Consortium of Public Finance Managers.