State Impacts of the One Big Beautiful Bill Act of 2025
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Key Takeaways:

  • The OBBBA's timing delays major benefit cuts until late 2026, after congressional midterm elections, but requires state policymakers to begin making difficult budget decisions in preparation for the scheduled reductions.
  • The 2026 election cycle will have major implications for the states , with gubernatorial seats in 36 states and 88 of 99 state legislative chambers up for election, meaning thousands of lawmakers will face voters while managing OBBBA's fiscal impacts.
  • Governors, primarily Democrats, are warning of budgetary disasters, with estimated costs ranging from tens of millions to billions of dollars that states cannot absorb without making steep reductions to other state-funded services.
  • The political implications of OBBBA provisions will likely extend far beyond federal races, affecting state-level campaigns as governors and legislators may be forced to justify spending cuts, tax increases, or both to voters in 2026.

This is an excerpt from our report on the state impacts of the One Big Beautiful Bill Act (OBBBA). To read the full report, download it here.

On July 4, 2025, President Trump signed H.R. 1, the One Big Beautiful Bill Act (OBBBA), into law. The bill’s changes to tax, healthcare, border security, and immigration enforcement are federally significant, but many of these provisions will also affect the states, their spending decisions, and their budget health. The OBBBA extends and modifies many of the tax changes from the 2017 Tax Cuts and Jobs Act (TCJA), which were set to expire at the end of this year. To offset some of these lost federal revenues, the OBBBA makes significant spending reductions in healthcare and other programs, many of which are run by the states. All states will be impacted in some form by these federal changes, but states differ in how drastically their budgets will be impacted.


The OBBBA will force the states to make difficult decisions when it comes to Medicaid and SNAP benefits for low-income individuals, and will put significant pressure on state budgets. However, many of the provisions will not go into effect until late 2026 or beyond, so states have some time to begin preparing for the changes. There was initially talk of states calling special legislative sessions to adjust current state budgets in response to the OBBBA, but it’s likely that most states will have time to make changes during their regular 2026 legislative sessions. 

OBBBA's Impact on State Gubernatorial Elections

The OBBBA’s cuts were designed with the congressional midterm elections in mind, and many of the biggest benefit cuts don’t start taking place until the end of 2026. But state policymakers will soon need to begin making key budget decisions in preparation for the scheduled cuts.

Massive 2026 Election Cycle Implications

Gubernatorial seats in 36 states are up for election in November 2026, with up to 20 of those 36 governors running for reelection. That’s a huge increase from 2024, when only three incumbent governors ran for reelection. Along with those governors, 88 of the 99 state legislative chambers will be up for election in 2026, which means thousands of state lawmakers will need to answer to voters as well. It’s too early to tell which way the political winds will be blowing by that time, but chances are the politics around the OBBBA provisions will reverberate beyond Congress and the White House. 

Governor Reactions: Warnings of Budget Disasters

As the debate over the OBBBA in Congress was concluding, Governors, primarily Democratic Governors, were warning of budgetary disaster. Delaware Gov. Meyer said, “The fact is in our state government, we simply cannot shoulder the extra $50 to 80 million burden over the next decade without sacrificing serious investments in education, in health care and public safety.” Illinois Gov. Pritzker warned that “the state of Illinois can’t cover the cost — no state in the country can cover the cost of reinstating that health insurance that is today paid for mostly by the federal government, partly by state government.” And Arizona Gov. Hobbs responded to the enactment of the OBBBA, “It’s billions of dollars that we don’t have. Even if we cut every single thing in the state, we don’t have the money to backfill all these cuts.”

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This article appeared in our Morning MultiState newsletter on July 22, 2025. For more timely insights like this, be sure to sign up for our Morning MultiState weekly morning tipsheet. We created Morning MultiState with state government affairs professionals in mind — sign up to receive the latest from our experts in your inbox every Tuesday morning. Click here to sign up.