Senate advances appropriations 'minibus' but funding fight looms

Kent Nishimura/Bloomberg

The Senate Friday approved a trio of bipartisan fiscal 2026 appropriations bills ahead of its month-long summer break, but the threat of a government shutdown in October still looms large.

Senators passed appropriation bills for Military Construction-Veterans Affairs, Agriculture, Rural Development, Food and Drug Administration, and the Legislative Branch. Plans to include the Commerce-Justice-Science in the "minibus" stalled amid a dispute over the location of a new FBI headquarters.

"We are on the verge of an accomplishment that we have not done since 2018, and that is pass appropriations bills across the Senate floor prior to the August recess," Senate Appropriations Chair Susan Collins, R-Maine, said before the chamber took its final vote. "That is exercising our constitutional responsibility for the power of the purse."

Nine of the 12 annual appropriations bills still need to be negotiated before government funding runs out on Sept. 30. Since the House has passed only two bills, it's likely that Congress will turn to stop-gap funding if they want to avoid a shutdown. The current fiscal year is running on a year-long continuing resolution.

For the municipal bond market, government shutdowns mean the loss of federal funds in key sectors like transportation, energy, healthcare and for cities and states — which would compound existing uncertainties around the Trump administration's efforts to unwind some grants and other funds.

Direct-pay bonds like Build America Bonds are subject to cuts under automatic sequestration, which kicks in without a new funding bill. President Trump in May signed an executive order that mandates sequestration on direct spending starting Oct. 1 without a new funding bill. The reduction for direct-pay bonds is expected to be 5.7%, according to the Office of Management and Budget.

Senate Democrats joined in passing the appropriation bills while fighting the Trump administration's efforts use of impoundment and rescissions to shape spending.

"I believe Congress should decide how to spend taxpayer dollars, not Russ Vought or the President," Appropriations committee ranking Democrat Patty Murray, D-Wash., said after the vote. "I strongly believe that the bills we passed tonight, and the other bipartisan bills we are writing, are the best path forward."

The appropriations bills largely avoided the deep cuts sought by the Trump administration and included in some early House drafts. The Senate agriculture bill features a 1% increase over 2025 spending levels. The legislative bill increases spending by 5% over current levels, and the military construction-VA bill boosts spending by 3%.

The Senate Appropriations Committee advanced other bills last week that the full Congress may take up in September. The committee on Thursday passed a $197 billion 2026 appropriations bill for the Departments of Labor, Health and Human Services, Education and other agencies by a bipartisan 26-3 vote.

The appropriations committee also advanced its version of the Transportation Housing and Urban Development and Related Agencies Act. The House passed its version of THUD on July 17, which contained a $939 million cut in HUD funding and an overall 4.7% cut in the discretionary allocation below the enacted fiscal 2025 level.

Lawmakers return Sept. 2.

The bills move through each house of Congress going from markup to subcommittee approval, full committee approval, initial passage, resolution of House-Senate differences, and final presidential approval.