Proposed OMB grant rule raises concerns over presidential control

The public-comment period has closed on an Office of Management and Budget proposal that could give the executive branch more control over how some federal grants are approved, administered and terminated.

OMB published the proposed Regulation for Federal Financial Assistance on May 29, 2026. Comments were due July 13. The proposal is not a final regulation, and existing grant arrangements are not automatically changed by it.

The dispute centers on whether OMB is using administrative rules to turn government-wide grant guidance into binding regulations while giving presidential priorities a larger role in spending decisions Congress has authorized.

What OMB proposed

The proposal would revise the Uniform Guidance for federal grants, cooperative agreements and other forms of federal financial assistance. The framework is set out in Title 2 of the Code of Federal Regulations and is used across federal grant-making agencies.

OMB says the changes would improve transparency, accountability and oversight, protect taxpayer dollars and reduce unnecessary burdens. The proposal also seeks to clarify that the government-wide requirements are OMB regulations rather than nonbinding guidance.

Under the proposal, agencies would be required to consider presidential policy priorities when administering grants and other assistance, subject to applicable law. Roll Call reported that the rule would also require political-appointee review and approval of discretionary or competitive grants after the merit-review process.

Another provision would allow an agency or pass-through entity, to the extent permitted by law, to terminate some awards during the period of performance if it determines that the award no longer advances program goals, agency priorities or the national interest. The proposed language generally applies to discretionary awards and excludes categories such as entitlement and formula-based funding when statutory protections apply.

OMB’s proposal says termination decisions would have to comply with governing statutes and that recipients would receive notice and a brief explanation of the reasons. Whether the authority could be used broadly in practice would depend on the final rule, the terms of individual awards and the statutes governing particular programs.

Why Congress is objecting

Sen. Susan Collins, a Maine Republican who chairs the Senate Appropriations Committee, asked OMB on July 6 to extend the comment period by at least 90 days and withdraw provisions that could affect small and rural communities, scientific and biomedical research and Congress’ control over federal spending.

Collins said the proposal could impose new burdens on recipients and raised concerns about changes to grant conditions, political review and mid-award termination. She also questioned how agencies would ensure that consideration of presidential priorities does not supersede congressional intent.

Her letter reflects a broader separation-of-powers question: Congress appropriates money and establishes programs, while the executive branch administers them. Opponents argue that allowing agencies to condition or terminate awards based on changing presidential priorities could conflict with Congress’ constitutional spending authority. That remains a legal argument, not a court ruling.

States and cities cite added costs

The National Conference of State Legislatures said the proposal could impose disproportionate implementation costs on states, which are major recipients of federal assistance and generally must balance their budgets. NCSL also said accelerated compliance requirements could limit state flexibility in federally supported programs.

The National League of Cities has raised similar concerns for municipalities. It points to proposed payment documentation, additional compliance steps, possible changes to grant conditions during an award and pre-payment checks that could make federal funding harder for small, rural and under-resourced communities to manage.

For universities, nonprofits, researchers and local governments, the practical question is whether a grant selected through an established process could later face political review, additional paperwork or termination even when the recipient is meeting project requirements.

How broad was the response?

Roll Call reported that 496,769 comments were submitted during the 45-day public-comment period, while just over 54,000 had been publicly posted on Regulations.gov when the article was published.

The same report cited an outside analysis by Tech Policy Press of about 51,000 posted comments. That analysis found 94 percent opposed and 6 percent supported the proposal, but it was based on only part of the docket and does not represent an independent review of every submission.

Roll Call also reported that the rule could affect about $200 billion a year in discretionary or competitive grants and potentially reach some of the roughly $900 billion in formula and block grants distributed annually to state and local governments. Those figures are reported estimates and should not be treated as an independently verified total of all funding covered by the proposal.

What happens next

OMB proposed an effective date of October 1, 2026, to align the government-wide requirements with fiscal year 2027. The proposed date is not a final decision, and OMB has not issued a final rule.

OMB could revise, delay or withdraw parts of the proposal after reviewing the comments. Congress could seek to restrict implementation through appropriations or other legislation, and lawsuits could challenge OMB’s statutory authority or compliance with administrative law.

For now, no final rule has automatically changed existing grant arrangements. If the rule is finalized substantially as proposed, grant recipients could face new review, documentation and termination risks across a wide range of federally funded programs. The next key developments are OMB’s final action, any change to the October 1 timetable, congressional restrictions and court challenges.

Sources

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