Senate spending patch would delay controversial OMB grant funding rule

Tierney L. Cross/Bloomberg

The Senate Sunday announced a bipartisan deal to fund the government past midterm elections until early December while also temporarily delaying a controversial grant funding rule hotly opposed by municipal bond issuers.

Lawmakers are expected to take an initial procedural vote Monday to set the bill up for passage before Friday recess.

The continuing resolution would extend current fiscal 2026 funding levels to Dec. 11. That's a few days longer than the Dec. 4 deadline in the House-passed funding patch.

Government funding runs out Sept. 30 without passage of a CR or a fresh set of 12 fiscal 2027 appropriations bills.

Unlike the House bill, the Senate version would block implementation of a proposed rule that would revamp the way grants, cooperative agreements and pass-through awards are designed, awarded, administered, and audited across all federal agencies.

The rule would, among other things, require agencies to appoint a senior political appointee who would approve grants and expand agencies' authority to terminate or suspend active grants that have already been awarded.

The proposal has alarmed cities, states, hospitals, universities and other bond-issuing entities that rely on federal grants. During a comment period that closed July 13, the rule garnered nearly 500,000 letters, most in opposition. Issuer lobbying groups like the Government Finance Officers Association and the National Association of Cities submitted opposition letters.

If adopted, the rule would take effect on Oct. 1. The Senate CR would keep the proposal from taking effect through Dec. 11.

Senate Appropriations Chair Susan Collins, R-Maine, who has called it a "deeply flawed rule" said she was "pleased that this bipartisan agreement prevents the Office of Management and Budget's proposed rule regarding federal financial assistance from taking effect."

The rule has the potential to "politicize grants and harm small, rural communities, families, and biomedical research," Collins said.

The provision may spark pushback from other Republicans, however. Sen. John Kennedy, R-La., said on Meet the Press Sunday he would vote against the CR because it would "take away President Trump's authority to review government grants."

Separately, the bill extends basic surface transportation funding to Dec. 11, a move that pushes debate over the next reauthorization until the lame duck session. The current law, the Infrastructure Investment and Jobs Act, expires Sept. 30.

The House has drafted a reauthorization, without funding provisions, but the Senate has yet to release its version, making it unlikely Congress will hit the Sept. 30 deadline.

The CR does not extend the IIJA's roughly $37 billion in advance appropriations that transportation lobbyists have been pushing to be maintained in the next reauthorization. Without the additional appropriations, public transit would take a 20% funding cut from current levels and passenger rail will see an 83% cut, the American Public Transportation Association said Friday in a letter to Congressional leaders.

Like the House bill, the Senate CR would give the Federal Emergency Management Agency flexibility to apportion Disaster Relief Fund resources as needed and would authorize Washington, D.C. to spend its local funds at fiscal 2027 levels.

The House has only passed three out of the 12 fiscal 2027 appropriations bills so far although the appropriations committee has passed all 12 and sent them to the floor. The Senate has not moved any 2027 spending bills and appropriation leaders have yet to agree on a top-line spending level.