The President’s annual Federal Budget Proposal was released on April 3rd, marking the start of the fiscal year 2027 budget and appropriations process in Congress. According to a White House topline document (PDF), the proposal calls for an overall 10% reduction in non-defense spending and balances other program reductions with funding for proposed new programs that could benefit local governments.
Of the proposed cuts to local government programs, many were also sought last year in the President’s FY2026 Budget Proposal and, thanks to strong bipartisan support in Congress and local government coalition advocacy, funding for programs like Community Development Block Grants and Economic Development Administration grants was preserved over the Administration’s objections. This year, however, new efforts to circumvent the formal appropriations process and challenges to Congressional authority over budgeting and spending mean that Congressional support for federal programs by members of the powerful Appropriations Committees in the House and Senate might not be enough to ensure federal dollars reach local governments.
President’s Budget Proposal
The President’s Budget aims to adjust federal discretionary spending (including all grants to local governments) by increasing defense spending by $445 billion and reducing non-defense spending by $73 billion. To achieve the $73 billion reduction, the following are some of the programs relevant to local governments targeted for elimination or deep reductions:
- The Community Development Block Grant Program
- The HOME Investment Partnership Program
- Homeless Assistance Programs (the budget proposal would maintain funds for a revamped Emergency Solutions Grant program)
- PRO-Housing Grants (PDF)
- Rebuilding American Infrastructure with Sustainability and Equity (RAISE) grants program
- USDA Community Facilities Grants
- Economic Development Administration grants
- NTIA Digital Equity Grant Program (PDF)
- Dept. of Justice State and Local Grant Programs
- State Revolving Funds for water infrastructure
- FEMA Non-Disaster Grant Programs
- Election Security Grants
- 21st Century Community Learning Centers (21st CCLC)
FY2026 funding levels for the programs above are available on NLC’s Federal Budget Tracker.
Among Agency Toplines in the President’s Budget proposal are several new or additional resources for local governments:
- Department of Justice: $100 million for a new Model Cities Initiative grant (PDF) program to facilitate unified strategic approaches between Federal, State, local, and tribal leaders to reduce violence and enhance the capacity of law enforcement agencies.
- Environmental Protection Agency: $7 million increase for drinking water disaster response (PDF) for a total of $122 million.
Left-Over Business and Budget Reconciliation
Although the FY2027 budget cycle has started, FY2026 funding for the Department of Homeland Security has not yet passed Congress. Congress is at an impasse due to disagreements between the majority and minority parties in the House and Senate. With competing Homeland Security appropriations bills passed by the House and Senate, pressure to pass a spending bill using the filibuster-proof budget reconciliation process is growing. The move to circumvent the normal appropriations process, which generally fosters bipartisan compromise and consensus, with the partisan budget reconciliation process would reinforce a new precedent on federal spending laws.
War Funding Request
That new precedent is evident in the President’s Budget Proposal. Although the President’s Budget would increase discretionary defense spending by $445 billion, $350 billion of it would not come from Department of Defense appropriations. Instead, the proposed budget calls on the Congressional majority to include $350 billion for defense in a new budget reconciliation bill, alongside FY2026 funding for the Department of Homeland Security.
Withheld Funds and Pocket Recissions
In 2025, the White House used a “pocket recission” to withhold and ultimately cancel Congressionally appropriated foreign aid and public broadcasting funding deemed out of step with Presidential priorities. At the time, the Supreme Court declined to intervene in a preliminary decision. Although pocket recissions have long been considered illegal under the Impoundment Control Act, the successful cancellation of foreign-aid funds have called that view into question. Under a pocket recission, the Administration would withhold appropriated funds and, near the end of the fiscal year, ask Congress to approve a bill that permanently eliminates the withheld funds. Even if Congress does not ultimately comply with the request, such funds would remain in limbo for most of the year. Given the view from the White House that pocket recissions are legal, it’s possible Congressional appropriations bills could no longer be the last word on program funding levels.
Speak Up for Federal Programs Important to Your Community, and For Your Budget
Many local governments experienced the uncertainty of the brief federal funding freeze early in the Trump Administration. Some local governments are still pursuing awarded funds, with no clear outlook on if those federal dollars will ultimately reach them. This should not become the norm for the federal-local partnership. With the start of the FY2027 budget and appropriations cycle, now is the time to make sure your Congressional delegations know what federal programs are at work in your communities, and what specific federal grants mean for your budget. If NLC can help in that regard, please email NLC’s Federal Advocacy Team.
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