Press Release|Public Finance
KBRA Releases Research – One Big Beautiful Bill: Ugly Costs for State and Local Governments
2 Sep 2025 | New York
KBRA releases research discussing how policy changes in Washington are transferring greater responsibility for funding certain federal programs to state and local governments. The recently enacted tax and spending law known as the One Big Beautiful Bill Act (OBBBA), along with several separate policy proposals, aims to reduce federal expenditures by tightening program requirements and realigning costs. These changes are likely to create budgetary headwinds for many issuers across the municipal market, potentially necessitating difficult fiscal and policy decisions to absorb additional costs.
Key Takeaways
- Reduced federal cost-sharing for Medicaid and Supplemental Nutrition Assistance Program (SNAP) will require states to absorb a larger share of program costs. In addition, a tightened work requirement will make it more difficult for individuals to qualify for benefits.
- Tighter Medicaid eligibility standards will increase the volume of uncompensated care borne by safety net hospitals, creating financial strain for these institutions as well as the state and local governments that support them.
- Increased scrutiny of Federal Emergency Management Agency (FEMA) disbursements and a proposal to raise the threshold for disaster declarations would limit the resources available to state and local governments recovering from disasters.
- Proposed cuts to National Institutes of Health (NIH) research grants would pressure academic and medical research institutions that depend on this funding, many of which also generate ancillary economic activity within their communities.
- KBRA’s credit ratings will reflect these shifts, as the economic and fiscal effects of federal program changes flow through the municipal market.
Click here to view the report.