Understanding the Impact of the “One Big Beautiful Bill” on Public Libraries

While much of the public discussion about the newly enacted tax reconciliation package, known as the “One Big Beautiful Bill,” has focused on Medicare and Medicaid, several provisions significantly affect the financial landscape for public libraries, especially those that rely on property tax revenue or capital financing.

Key takeaways for public libraries, whether municipal or independent districts, include considerations about issuing debt via municipal bonds and changes to the deductibility of local property taxes by homeowners, along with anticipating significant changes to the cost to states about healthcare. 

1. Tax-Exempt Status of Municipal Bonds Preserved

In a legislative win for special districts and other local governments, the final package maintains the tax-exempt status of municipal bonds. By preserving this exemption, the bill ensures that special districts can continue to issue municipal bonds to finance public infrastructure projects at a lower cost to taxpayers. This includes investments in transportation infrastructure, water systems, public safety facilities, schools, hospitals, and public libraries. Public libraries retain access to one of the most important low-cost tools for capital improvements. Investor demand for municipal bonds remains high, which supports favorable financing conditions for library construction, renovation, and modernization projects.

2. SALT Deduction Cap Temporarily Raised

The final reconciliation bill raises the cap on the State and Local Tax (SALT) deduction to $40,000 for the 2025 tax year, applicable to individuals and joint filers earning less than $500,000 annually. The cap will gradually phase down and revert to $10,000 in 2030. Taxpayers in higher-tax states, who often fund libraries through property taxes, will temporarily benefit from greater deductibility. This change could reduce resistance to local tax rates and create a more favorable climate for maintaining or increasing public library funding.

3. No Federal Changes to Property Tax Caps or PILOT Programs

Despite wide-ranging reforms, the bill does not alter state-level property tax caps or federalize any aspect of Payments in Lieu of Taxes (PILOT) programs. These tools remain entirely governed at the state or local level. Public libraries in jurisdictions with tax caps or PILOT funding should not expect any changes due to this federal legislation (e.g., New York State's PILOT allocation to libraries). 

4. Downward Budget Pressure from Medicaid/SNAP Changes

The bill enacts significant changes to Medicaid and SNAP eligibility, shifting greater financial and administrative responsibility to states starting in 2026. States may pass some of these new costs to counties or municipalities, increasing pressure on local budgets. Public libraries may experience indirect impacts if local governments adjust their budget priorities in response.

Recommendations for Library Leaders

As the SALT benefit begins to phase down, it is crucial for public library leaders to stay engaged in the ongoing discussions surrounding property tax levels. This engagement is particularly important as it affects library allocations from city and county budgets. Building strong relationships with budget leaders at these levels will help ensure that libraries continue to receive the necessary funding to serve their communities.

In addition, with the preservation of the municipal bond tax exemption, there is a significant opportunity to leverage bond financing strategically. Collaborating with local finance authorities can open doors to exploring and potentially expanding capital projects while market conditions remain favorable. This proactive approach can facilitate the development and enhancement of library facilities, ultimately benefiting the public.

Although the "Big Beautiful Bill" does not explicitly legislate library funding nor impact IMLS, National Archives, or the Library of Congress, its broader influence on the financial behavior of taxpayers, states, and local governments will undoubtedly shape the funding landscape in the years to come. It is absolutely essential for library leaders to prepare for potential shifts in state budgets. By advocating for new state and local revenue, we can protect and potentially grow their funding streams, ensuring that libraries continue to thrive and serve their communities well into the future.

As a non-partisan public policy think tank for libraries, the EveryLibrary Institute is committed to helping public library leaders understand and anticipate the impact of federal legislation on local funding. For more policy analysis and strategic guidance, visit www.everylibraryinstitute.org or contact us at [email protected].