OBBBA’s implications on the SLED IT Market

The One Big Beautiful Bill Act (OBBA), enacted on July 4, 2025, is a significant piece of legislation outlining President Trump's executive agenda and guiding future U.S. tax and spending policies.

The OBBBA cuts approximately $1 trillion in federal funding to state and local governments over the next 10 years. The majority of funding cuts stem from programmatic changes within Health and Human Services. These shifts in federal funding for state programs, such as Medicaid and SNAP, could create state-level budget shortfalls, potentially reducing IT spending or leading states to pursue cost-effective technology solutions and/or provide justification for new acquisitions.

At the federal level, the OBBBA dedicates significant funding to enhance border security and technology, including the use of AI and biometric systems. The Act also increases funding for NASA's space programs and restores the FCC's general authority to auction spectrum through September 30, 2034. This could set precedent for future adoption state-level technology adoption such as the inclusion of biometric technology to support public safety and enhanced broadband initiatives.

The OBBBA phases out Inflation Reduction Act (IRA) green energy tax credits, which could shift states’ priorities and minimize green tech initiatives. However, the Act strongly supports bolstering American infrastructure, with emphasis on enhanced digital systems, utilities and energy grids. State and local governments may receive future federal funding to upgrade technology in these sectors, driving greater need for technology solutions such as AI and machine learning for grid management.

The OBBBA's call for reduction of federal funding for state programs may challenge states to shift management of public services, resulting in budget cuts for technology purchases. State and local governments may have less room for discretionary modernization projects and may need to prioritize compliance and innovation to meet new mandates. IT companies should work with end users to ensure future technology investments enhance operational efficiency, support innovation, bolster resilience and minimize costs. Focus on offering solutions that support federal initiatives such as digital infrastructure.

SLED fiscal constraints may also spur demand for Managed Service Providers (MSPs) and Public Private Partnerships (P3s) to offset challenges. IT companies can also expect demand for creative technology solutions that integrate innovation with practicality, such as AI-driven workflows, advanced analytics to generate long-term ROI, such as for fraud reduction, data integration platforms, cloud-based solutions and advanced security tools.

Finally, the shift toward enhanced federal AI spending may promote more state-level AI innovation generating more opportunities in AI governance, health tech, infrastructure modernization and Fintech solutions to meet compliance standards. IT companies may also see subsequent fiscal changes to administration and finance, justice and public safety, environment and housing and education.

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About the Author: Yvonne Maffia is the senior analyst covering state, local and education markets. She applies insights and analysis to purchasing trends to help vendors and partners shorten their sales cycles. Prior to joining TD SYNNEX Public Sector, Yvonne spent 8 years working in state and local government, where she oversaw advisory boards across the State of Florida and served as an analyst to a local politician. Yvonne currently lives in Washington, DC.