Overview
FY27 Outlook. The House is in recess through the midterms, and while the Senate will remain in Washington for its final scheduled week before the October recess, FY27 appropriations are not expected to be a focus of the Senate’s remaining time. Senate appropriators have yet to reach an agreement on overall defense and non-defense spending levels, leaving the process largely on hold and reinforcing expectations that most substantive FY27 appropriations work will take place during the lame-duck session.
Senate Majority Leader John Thune (R-SD) said Thursday that he is keeping the Senate in session next week to make progress on a handful of outstanding priorities before members return home to campaign. In addition to completing the Name, Image, and Likeness (NIL) bill, other potential agenda items are Congressional Review Act votes to strike down federal regulations, nominations, and the House-passed Ratepayer Protection Act.
NIH Funding Decisions. A fast-moving fight over federal research funding appears to have ended, at least for now. Over the weekend, reports emerged that President Trump had instructed OMB Director Russ Vought and National Institutes of Health (NIH) Director Jay Bhattacharya to draft an executive order creating a board of political appointees that would have a direct role in NIH grant decisions. The proposal quickly drew pushback from top congressional appropriators, including Senate Appropriations Chair Susan Collins (R-ME), Vice Chair Patty Murray (D-WA) and House Appropriations Ranking Member Rosa DeLauro (D-CT).
Much of the criticism focused on concerns that the proposal would undermine NIH's congressionally mandated peer-review process and conflict with congressional intent. On the latter, appropriators argued the proposal would circumvent recently enacted language from the continuing resolution temporarily blocking the administration from finalizing changes to the Uniform Guidance that gives political appointees greater federal grant decision authority.
On Wednesday, the White House dropped the planned executive order. While the immediate fight on this issue has subsided, the episode underscores the continuing tension between the administration and congressional appropriators regarding the White House's efforts to exercise greater control over federal funding decisions.
Debt and Deficit. Congressional attention to the nation's worsening fiscal outlook continued this week, with the House Budget Committee holding its first field hearing in three decades in Dallas. Chairman Jodey Arrington (R-TX) used the hearing to make the case for a bipartisan fiscal commission to address the federal debt and deficits, while Ranking Member Brendan Boyle (D-PA) suggested taking additional Budget Committee hearings around the country to build broader public support for a responsible fiscal strategy.
House Ways and Means Chairman Jason Smith (R-MO), who is not a member of the Budget Committee but attended the hearing, questioned the need for a commission, arguing that Congress already knows the fiscal challenges it faces and should act directly. Legislation to establish a fiscal commission has so far failed to gain meaningful traction in either chamber.
The renewed focus comes as the federal debt has surpassed $40 trillion and lawmakers begin looking ahead to the next debt limit debate. The current statutory debt limit was increased by $5 trillion to $41.1 trillion under the One Big Beautiful Bill Act last July. While Congress will need to address the debt limit again, lawmakers have historically waited until the deadline draws closer and pressure intensifies before acting. We expect the growing focus on debt and deficits to shape the broader fiscal debate, but as we have noted previously, we do not expect Congress to act on the debt limit before next year.
FY28 Budget Development. While FY27 remains unfinished on Capitol Hill, federal agencies are already developing their FY28 budget proposals for submission to OMB. This is an important time to refine FY28 priorities, engage the relevant agencies and begin socializing policy and funding requests within the administration. The next several months will provide a critical window to build support before the OMB makes its funding decisions and the President's budget request takes final shape.
