Overview
Pedal to the Minibus Metal. Congress made notable progress this week on fiscal year (FY) 2026 appropriations, with the House overwhelmingly advancing a $180 billion three-bill "minibus" covering Commerce‑Justice‑Science (CJS), Interior, and Energy‑Water. The measure has support from leadership in both chambers and is expected to pass the Senate next week. The Senate's first procedural vote is set for Monday evening, and appropriators are optimistic about moving quickly to the next set of bills once consideration of the first package is complete.
The administration has issued a Statement of Administration Policy (SAP) expressing support for the package, noting it avoids a large omnibus and reduces discretionary spending by $2 billion from current levels. The statement also highlights investments in violent crime reduction and energy priorities, as well as spending reductions in many programs that do not align with the administration's objectives. Nonetheless, the funding levels in these bills provide a window into the delicate environment appropriators are operating in to get them over the line. For example, appropriators provided increased funding to offices responsible for the president's trade agenda, but refrained from cutting some Democratic priorities, particularly clean energy programs.
Appropriators expect to unveil a second January three‑bill minibus over the weekend, likely containing Financial Services, Homeland Security, and State‑Foreign Operations. While Homeland Security negotiations remain sensitive, particularly over immigration enforcement provisions, leaders remain committed to completing the bills before the January 30 funding deadline. If consensus cannot be reached on certain measures, those agencies would be funded through a full‑year continuing resolution (CR), locking in current funding levels and constraining new initiatives.
Despite some lingering policy disagreements, the "four corners," or the top appropriations leaders from both parties in both chambers, are working in lockstep toward passing the FY26 bills. That coordination was on display this week when an earmark provision threatened to derail the CJS bill. The leaders moved quickly to quell dissent within their ranks and keep the process on track. The appropriations committees remain a rare bright spot for bipartisan cooperation, with members on both sides committed to advancing bills through regular order.
Sharp Turn to FY27. Once FY26 is complete, the FY27 cycle will begin almost immediately. The State of the Union is scheduled for February 24, with the President's Budget Request expected shortly afterward. Senate Appropriations Chair Susan Collins (R‑ME) has already signaled she aims to have all bills out of committee by the August recess – a critical target ahead of the election season. With hearings and markups beginning this spring, the timeline will be compressed, leaving little margin for delay.
On defense spending, the president's recent proposal for an increase of more than 50 percent has prompted concerns about deficit impacts. Such an increase would only gain Democratic support (critical to overcoming a Senate filibuster) if it were matched by a proportional increase to domestic programs, specifically those funded in the Labor-H bill. Of course, the GOP-led Congress could look at increasing defense spending in another reconciliation bill, similar to last year's One Big Beautiful Bill, which would bypass the need to overcome a Senate filibuster. However, we think, in an election year, this strategy is a longshot.
For now, the focus remains on completing FY26 quickly, while positioning priorities for the fast‑moving FY27 process.
