October 21, 2025

Information Sharing on Federal Funding: October 22, 2025

Over the past year, the Trump Administration has engaged in efforts to withhold or rescind federal funds, with the most recent headline being that funding cuts are directed at states that did not support the president in the 2024 election. These actions are seeming almost commonplace now, and as a result, there appears to be a misconception among the general public that the administration has the authority to do this. In actuality, these actions contravene Congress’s constitutional authority over federal spending and violate federal appropriations law. The below primer is meant to serve as a refresher for those of us who took Civics class – should we say, quite a while ago? – as well as the implications of the current funding environment on organizations who seek and manage Federal grants.

How Federal Funding Legally Works: A Refresher

Each year, the President submits a budget request to Congress outlining policy priorities and proposed spending levels. This proposal is advisory, not binding. It signals executive priorities but does not control federal spending. You can view the President’s FY2026 proposed budget here.

The House and Senate Budget Committees draft a concurrent budget resolution that sets total spending levels, which acts as a blueprint to guide the Appropriations Committees in crafting the actual spending bills.

The House Appropriations Committee divides total spending into 12 subcommittee bills (e.g., Defense, Education, Energy & Water, etc.). Each subcommittee drafts and marks up a funding bill. Once they pass subcommittee, they move to the House for a full vote. After House passage, the bills move to the Senate Appropriations Committee for review and amendment. Once both chambers pass their versions, differences are reconciled in a conference committee.

Finally, both chambers vote on the final version and send it to the President. The President may sign the bills into law or veto them. Once signed, agencies are legally obligated to distribute the funds as appropriated. For discretionary spending (i.e., not entitlement programs like Medicare and Social Security), much of this funding is distributed via a formulaic or competitive grant process:

  • Formulaic funding is allocated automatically based on criteria set by Congress, such as population size, poverty rates, or other need-based factors. Examples include Title I Education Funds and Community Development Block Grants.
  • Competitive grants are awarded through application processes managed by federal agencies, allowing nonprofit organizations, states, local governments, and other eligible entities to propose projects that advance national priorities and are reviewed on a rubric that evaluates need, merit, impact, alignment, and organizational capacity.

Federal grants are the primary way the U.S. government translates national priorities into action. Grants fund programs that provide clean drinking water, strengthen education, feed families in need, advance medical research, and support community and economic development among many other priorities. Through these grants, Congress ensures that federal investments directly serve the public interest and address critical needs across states and communities.

The Impoundment Control Act of 1974 prohibits the President from withholding or delaying funds without congressional approval (except in narrow, temporary circumstances).

“Once enacted, an appropriation is a law like any other, and the President must implement it by ensuring that appropriated funds are obligated and expended prudently during their period of availability unless and until Congress enacts another law providing otherwise.”

– Edda Emmanuelli Perez, Government Accountability Office (GAO) General Counsel

What is Happening Now

In March 2025, the president signed the FY2025 spending bill into law (we were operating on a continuing resolution that kept funding at FY2024 levels beforehand). Despite that, the administration has systematically impounded funds, directing agencies to delay or halt grants already approved by Congress. This sets an unsettling precedent because Congress holds the “power of the purse,” and the executive branch is constitutionally bound to execute appropriations as enacted.

From the January 27 OMB federal funding freeze memo to DOGE efforts to slash spending, to later agency directives to eliminate federal funding or programs, examples include (not an exhaustive list, only meant to be illustrative):

Further, the Community Development Financial Institutions Fund has been hit with recent Reductions in Force this October, effectively dismantling the agency and calling into question its FY2025 and 2026 funding commitments. These staffing cuts, similar to those seen across other Federal agencies, threatens grantees currently managing Federally-funded projects and also undermines confidence in the stability of future funding cycles.

There have been numerous legal challenges to these cuts. Litigation Trackers can be found at Just Security and the Independent Sector (covering grant cuts as well as other challenges).

As we discussed in the introduction, a new development is targeted funding cuts to “blue” states, or states that did not vote for Trump in 2024. In the past couple of weeks, at least two instances of such cuts being politically motivated were described by the administration and reported on in third-party sources:

What Does This Mean for Federal Grants Moving Forward?

If the Trump administration has not respected Congress’ authority in appropriating funds throughout 2025, what will happen in 2026? If the administration continues to disregard this authority, FY2026 funding may continue to be vulnerable to the same selective enforcement. Even if Congress reaches a bipartisan budget deal and the government reopens, implementation could again depend on political discretion rather than law.

“It is therefore vital that any 2026 funding deal includes enforceable legislative provisions to ensure that the money provided by Congress reaches, in full, the people and services for which Congress appropriated it.”
— Center on Budget and Policy Priorities, October 2025

As of mid-October 2025, the Federal government remains in a shutdown after Congress failed to pass FY2026 appropriations by the October 1 deadline. Agencies are operating under contingency plans, with only essential personnel working and many grantmaking activities, such as application reviews, award processing, and some payment draws, on hold.

This shutdown underscores the now-broad instability in the Federal funding process. Even once appropriations are enacted, recent history shows that Federal grants have now become unpredictable for applicants and grantees.

Another New Development: Updated OMB Circular A-11, the “Budget Bible”

OMB Circular A-11 is a comprehensive document that guides Federal agencies on all aspects of budget preparation, submission, and execution. On August 25, OMB issued an updated circular, with OMB Director Russell Vought positing that the Government Accountability Office (GAO) does not have a role in overseeing the decisions of the executive branch. Specific changes to A-11 include:

  • Weakening established checks on the executive branch’s handling of appropriated funds by removing references to “impoundment” and redefining rescissions and deferrals.
  • Reducing oversight by stating that GAO opinions are “non-binding on the Executive Branch.”
  • Potentially slower NOFO releases, longer approval cycles, or program re-designs by increasing time needed to “establish a new program” or “align with Administration policy.”
  • Shifting away from an equity focus, as Section 31.3 directs agencies to prioritize “budgetary savings,” “efficiencies,” and “administration priorities” in areas that used to reflect commitments to equal opportunity and equity.

A fuller breakdown is provided by the Bipartisan Policy Center.

Recommendations

Should your organization continue to apply for federal funds, once a budget is finally negotiated and new NOFOs are released? While the outcome of a grant application has always been uncertain, and nowadays federal grants have become less predictable sources of funding, our answer still remains “yes.”

It’s important to remember that withholding or rescinding funds without congressional approval is illegal under the Impoundment Control Act of 1974. Nonprofits and other tax-exempt agencies play a critical role in implementing the programs Congress has authorized. By continuing to apply for Federal funding, organizations are protecting their own programs as well as standing up for the communities they serve and ensuring that Federal investments reach the people they were intended to help.

Federal grants are still the largest source of mission-aligned funding. The scale and scope of Federal grants exceeds what private philanthropy or local government can sustain. These grants are often the pathway to transformational programs and systems change that benefit the quality of life within communities. And, the exercise of putting them together is a benefit that keeps your organization grant-ready, as grant applications in themselves (funded or not), often build internal capacity, strengthen external partnerships, and solidify plans and resource alignment.

Continue to prepare your organization to be ready to apply once the government reopens, a continuing resolution is passed, and finally a new budget is approved. Those who do will:

  1. Stay competitive: Federal grant cycles and funding priorities often move quickly once appropriations are finalized. Being prepared allows you to submit strong applications as soon as NOFOs are released.
  2. Secure critical resources: Grants support programs that address clean water, education, research, among many other national priorities. Skipping cycles risks losing funding that may or may not come back around.
  3. Maintain relationships with Federal agencies: Submitting applications helps agencies better understand community needs and available resources and positions the applicant organization for communications with Federal program officers about the merits of the application post-review process.
  4. Position the organization for stability post-shutdown: Once NOFOs and subsequent funds are released, applicants who are ready can receive awards faster, minimizing the potential disruption to programs and communities.

Is there risk? Yes. As a consultancy in a “blue” state (although there is certainly plenty of diversity of thought here), we are concerned about potential political decision making at the cost of our clients’ hard work. However, the risk in not applying is that your organization loses its seat at the table and the resources that drive your work forward. By stepping back, we allow political dynamics to dictate outcomes that should be driven by need, merit, and mission. Staying engaged in the Federal grants process ensures that our clients’ programs, values, and impact continue to shape how Federal dollars are spent.

Conclusion

We’re cheering on the National Council of Nonprofits, which continues to stand up for the essential work nonprofits do in the face of politicized rhetoric and misinformation. We are also looking to the Grant Professionals Association (GPA) and other national partners for continued advocacy and education to protect the integrity of the Federal grantmaking process and the communities these investments are meant to serve.

Our partner, Instrumentl, just released an in-depth report on how nonprofits are adapting to Federal funding cuts. Download it here for further insight.

We are also here to serve our clients and our community. If you are considering applying for a Federal grant, or are currently managing a Federal grant, we can support you with a risk assessment or detailed consultation call. We are monitoring the shutdown closely, and our staff is ready to apply on behalf of our clients once NOFOs are released (a few are trickling out, even now).

This is part of a bi-monthly series on the impact of Federal funding cuts. Have resources to share? Let us know at mail@thegrantplantnm.com.

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