Congress Contends with FY26 Deadlines

With none of the twelve annual spending bills signed into law, Congress has returned from its August recess and has begun negotiations on a short-term stopgap funding bill to fund the government beyond Fiscal Year 25, which expires on September 30, and to provide additional time to complete action on the FY2026 budget process. While these initial negotiations on Capitol Hill have been bipartisan – a reflection of the fact that any final agreement must have Democratic support to avoid the legislative filibuster in the Senate – it is unclear if these discussions will stay on track, which could make multiple continuing resolutions (CRs) likely and a government shutdown possible later in the year.

In addition, Congress will be attempting to complete action on other must-pass bills, including the National Defense Authorization Act (NDAA) and other expiring provisions.

What follows is an update on FY26 funding, a brief summary of the NDAA, and the latest on the implementation of higher education policy changes from One Big Beautiful Bill Act (OBBBA).

Fiscal Year 2026

Due to the early focus of the Congress and the Administration on the passage of the OBBBA and the delayed completion of FY25, the FY26 budget process got a late start. As a result, none of the twelve annual spending bills have been enacted into law. Appropriations committees in the House and Senate have made progress on most of the bills and the Senate and House have each passed three bills; but almost uniformly, the House and Senate bills are very different with significantly less funding in most House bills along with the inclusion of contentious policy riders. With the fast-approaching September 30 deadline, and little chance of passing all twelve bills before the new fiscal year, Congressional leaders have turned their attention to a CR, a stopgap funding measure that would allow federal agencies to operate at prior year’s funding levels and provides additional time for Congress to finalize FY26 funding. 

Initial negotiations have focused on a short-term CR, lasting several weeks or months, perhaps packaged with full-year funding for several less controversial full-year appropriations bills (likely Agriculture, Military Construction-VA, and Legislative Branch). Although such an approach could achieve the bipartisan support necessary to overcome the legislative filibuster in the Senate, fiscal conservatives in the House and Senate are advocating for a CR into January or longer, potentially with some built-in program cuts. Democrats (and some Republicans) are opposed to such a partisan CR, given that it further delays possible funding increases and abandons efforts to negotiate policy guardrails on issues of bipartisan concern. This, combined with continuing White House action to rescind or reallocate existing funding, makes it unlikely there will be quick resolution to the FY26 process. Of course, there is a scenario where Congress is unable to agree on a CR or the passage of the twelve funding bills, which could cause a lapse in appropriations, otherwise known as a government shutdown, although the path forward will become clearer as negotiations between the House, Senate, and the White House continue.

Still, Democrats and many Republicans believe that the best way to fund the government is through the regular appropriations process, and both chambers have been making progress – albeit slower than normal – on the 12 annual spending bills. That said, there are significant differences in approach by the House and Senate. The process in the House, where bills can pass with a simple majority vote, has been partisan. House Republicans, following the lead and proposals from President Trump, have been willing to make some cuts; but many of the deepest cuts have been tempered and, in some cases, funding levels maintained as with the NIH. In the Senate, the process has been bipartisan, with Republicans and Democrats working together to reject the President’s cuts and, in some cases, provide modest funding increases, including for NIH. (Both the House and the Senate reject the President’s proposed restructuring of NIH.)

The chart below includes the current status of the University priority accounts. These funding levels are preliminary but instructive for any final, full-year funding agreement.

Consistent with their respective approaches, the House Republicans’ spending bills include a host of partisan policy riders to limit or restrict federal funding. In particular, the House Labor-HHS-Education bill includes numerous policy riders of concern, including bans on so called gain-of-function research, the use of fetal tissue from induced abortions in federal research, and partnerships or collaborations with entities in China. It also includes a rider to cap facilities and administrative (F&A) cost reimbursement rates at 30 percent per award for all schools that are subject to the endowment tax and a provision to prohibit funding to institutions that fail to address or punish antisemitism. All of these policy riders were offered and ultimately rejected as part of the FY25 process.

The Senate version of this bill refrains from the inclusion of partisan policy riders. Instead, it includes bipartisan language to prevent the Administration from deviating from the negotiated F&A rate, which has been successfully included in each spending bill that has been enacted into law since the first Trump Administration.

NDAA and Expiring Provisions

In addition to FY26 funding, Congress is facing looming deadlines for a host of expiring authorizations, including the annual NDAA. Both the House and Senate have released their bills, and this week the Senate is expected to take up and pass its version as the House is teeing up its floor consideration. A final bill must be a compromise among the House, Senate, and White House, but all signs indicate strong bipartisan support to enact the bill for the 65^th consecutive year.

The House NDAA would authorize $882 billion in total defense funding, in line with the President’s FY26 budget request; the Senate version would authorize $914 billion. Both bills advanced out of committee with strong bipartisan support. Unfortunately, both recommend similar cuts to Defense Basic (-11.2 percent and -11.9 percent) and Applied (-22.1 percent and -20.5 percent) research accounts. The NDAA is often the legislative vehicle for research security provisions, and each bill seeks to make clarifications and reforms in this space, although the House includes more restrictions on DOD-funded investigators and universities from engaging in research collaborations with certain foreign entities of concern. Although many of these provisions have been offered – unsuccessfully – in previous years, bipartisan concern about China and other hostile countries continues to be part of the discussion. We expect the negotiations on a final bill to be ongoing with completion toward the end of the year.

Congress is also facing deadlines to extend programs and authorities in the Farm Bill, to renew the National Flood Insurance Program, and to continue various health programs, including community health centers, Medicare telehealth waivers, and the Special Diabetes Program. These programs, as well as the expiring health insurance subsidies, could be included in a larger funding package to avert a shutdown, offering additional motivation for Congress to strike a deal.

OBBBA Implementation of Education Reforms

While much of the focus was on tax cuts, the endowment tax, and cuts to Medicaid and nutrition support, the OBBBA, enacted in July, made significant changes to the federal student-aid programs, including the elimination of Grad PLUS, the federal loan program that allowed Graduate and Professional Students to borrow up to cost-of-attendance, and modifications to loan limits for all federal borrowers. Many of these changes are scheduled to go into effect July 1, 2026. The Department of Education announced its schedule for two negotiated rulemaking panels to help flesh out the details of these changes and write new rules for implementation and compliance, which will meet later this year and into the beginning of next year. The negotiators have not been publicly announced, but national associations have submitted initial comments to the Department ahead of the negotiated rulemaking process, and the comments highlighted the transition period for current borrowers and the lack of clear standards to determine whether a program is “graduate” or “professional” and therefore eligible for higher annual borrowing limits. These and other questions and concerns are expected to be addressed through guidance or during the rulemaking process, as it continues into calendar year 2026. Harvard and peer institutions are working with national associations to prioritize issues and identify unanswered questions regarding definitions, interpretations, and the overall implementation.

Contact Us

As the path forward on FY26 funding becomes clearer, we will stay in touch with significant developments. In the meantime, if you have any questions or concerns, please feel to be in touch with Suzanne Day (suzanne_day@harvard.edu), Kara Haas (kara_haas@harvard.edu), or Peter DeYoe (peter_deyoe@harvard.edu).