Illinois Legislative News: July 14, 2025
Third Reading Consulting Group
The One Big Beautiful Bill Act (OBBB) passed both chambers of Congress, and President Trump signed it into law on July 4. Most major provisions, including Medicaid cuts, tax cuts, and SALT deduction changes, will take effect on January 1, 2026. SNAP eligibility requirements will change before the end of 2025, administrative funding reduction will take effect October 1, 2026, and state error rate penalties will begin October 1, 2027.
Medicaid Cuts: Medicaid will see $1.02 trillion in national cuts over ten years. Illinois will be severely affected by new restrictions on provider taxes, which currently generate $4.1 billion annually for the state’s Medicaid program. The bill gradually reduces the provider tax cap from 6% to 3.5% by 2031. In addition, the legislation imposes new work requirements and eligibility restrictions that would significantly increase the state’s administrative burden to ensure compliance. Additional cuts include reductions in supplemental provider payments and restrictions on immigrant eligibility.
SNAP Cuts: The federal SNAP budget will be cut by approximately 20% or $186B through 2034. Beginning on October 1, 2026, states will have to cover 75% of SNAP administrative costs, rather than the current 50%. Additionally, the bill adds a penalty of 5% to 15% of SNAP benefit costs for state’s with error rates over 6%, effective on October 1, 2027. Illinois’ FY 2024 error rate was 11.56%, a level that would require the state to fund 15% of SNAP benefits for a cost of around $705 million. Illinois will have to significantly increase its administrative capacity to avoid the penalty.
Tax Changes: The bill increases the State and Local Tax (SALT) deduction cap to $40,000 for five years before returning to the current $10,000 limit. It also makes the Child Tax Credit permanent at $2,200, indexed to inflation. Tipped income up to $25,000 is not taxed through 2028, with income-based limitations.
Clean Energy Changes: The OBBB terminates federal electric vehicle tax credits at the end of September 2025, seven years earlier than scheduled. Wind and solar tax credits also face December 2027 project deadlines. New restrictions on foreign entities, particularly Chinese companies that dominate the renewable energy and electric vehicle markets, may slow future renewable energy projects that rely on global supply chains. These changes could limit future renewable energy development, which the State of Illinois has invested heavily into.
Limited Spending Increases: Despite significant cuts, Congress approved $50 billion nationally to be used toward rural health transformation grants over five years. The bill also provides $150 million in new national funding for home and community-based service waivers.
Important Upcoming Dates – Statewide
October 14-16 – Veto Session Week 1
October 28-30 – Veto Session Week 2