2026 Federal Funding Forecast

Federal funding policy underwent significant changes in 2025. The Trump administration froze federal funding, pausing programs and awards for several months while ongoing funding was reviewed. Since the freeze, federal funding has continued to be altered with short program deadlines, agency restructuring, and budget cuts. 2025 also saw the longest government shutdown in history, delaying the release of new funding programs. While 2025 was an unusual year, it provided important insights into what to expect for federal funding in 2026.

2026 Appropriations and Budget

The federal shutdown clock is once again ticking as Congress has until January 30, 2026, to pass the nine remaining appropriations bills to fund the federal government. These budget bills include reduced funding for government programs and shifted priorities towards workforce development, domestic material production, streamlined administrative processes, and investment in nuclear developments. Programs that are not aligned with current administration priorities are likely to be at risk as congressional majorities look to reduce discretionary spending.

What we expect in 2026: Once Congress passes the remaining funding bills, agencies will begin administering programs between March and May. There may be slight increases to topline programmatic funding levels, as this is the final year of authorization for funds appropriated by the Infrastructure Investment and Jobs Act (IIJA). The Trump administration has been creative in repurposing IIJA funds to achieve its priorities. Any unobligated funds not repurposed this year will expire on October 1, 2026.

FY25 Unspent Funds

2025 was an unusual year for spending, as many competitive grant programs remained closed. A common question from clients is “What happens to those funds?” Unspent funds generally expire for new use after their period of availability outlined in the budgeting legislation. After their expiration date, they are canceled and returned to the US Treasury. There are certain exceptions, such as when Congress appropriates funds for multi-year use or when they have an indefinite period of availability and remain available until entirely spent. However, most appropriations are under the one-year umbrella and will no longer be available.

Surface Transportation Reauthorization

The Surface Transportation Reauthorization is legislation that provides authorization for funding levels, policy directives, and requirements for various programs, including the Federal Transit Administration, the Federal Railroad Administration, and the Federal Highway Administration. The current authorization was included as a part of the IIJA legislation, which expires on October 1, 2026. Congress will need to pass a new reauthorization bill this year to provide authorization that allows the federal government to fund transportation projects. The IIJA provided a 67% increase in funding for transportation, so it is unlikely that the new reauthorization will provide such a high top-line funding level as we have seen in the previous five fiscal years. However, infrastructure has been a focal point for the Trump administration, so marquee programs such as INFRA, BUILD, and PIDP will likely see robust funding.

What we expect in 2026: We anticipate the reauthorization bill to be more narrowly focused than the previous one, as Congress and the White House are more spending-adverse towards climate projects and electric vehicles. We expect increased funding for highway and port programs.

Agency Reorganization

This year, the Department of Energy, the Department of Education, and the National Science Foundation underwent major restructures. The DOE reorganized its main offices to eliminate those tied to green energy and climate programs, and rebranded others to reflect the prioritization of critical minerals/materials, geothermal energy, and nuclear power. Furthermore, ED established six interagency agreements with four other federal agencies to coordinate federal education activities, and ED transferred oversight of the Workforce Innovation and Opportunity Act to the Department of Labor. NSF restructured its offices to implement the reduction in force plan announced by the Trump administration. The new changes include eliminating assistant directors and reconfiguring social science departments.

What we expect in 2026: We anticipate that additional ED programming will shift to other agencies. Secretary McMahon argued that the government shutdown proved education is best left to the states and argued her intent to continue the Department’s path of delegating programs.

DOE is likely to continue shifting its focus away from renewable energy and toward critical minerals and domestic production. Historically, the Department of Energy was focused more on research and development before becoming a marquee granting agency during the Biden Administration. CFS expects this version of the agency to fall somewhere in between, with reduced funding compared to 2020-2024, but still an active tool of the administration to advance energy policy and projects.

NSF signals a downsizing in the agency, increased focus on STEM sciences, with less emphasis on behavioral sciences. It is likely that NSF will further downsize, especially in the behavioral science departments.

Finally, other major agency realignments are becoming increasingly possible, as two agencies have already undergone a shift. DOW, DOL, or DOT are likely candidates for this shift since they have the resources to implement the Trump administration’s priorities.

Permitting Reform

Permitting reform has become a legislative focus at the end of the year. The House has passed the SPEED Act and the PERMIT Act, two key pieces of legislation that significantly alter the permitting process for infrastructure and energy projects. SPEED streamlines environmental reviews, clarifying what constitutes a "major federal action" and imposing a 150-day limit on legal challenges. These changes aim to accelerate permitting for infrastructure and energy projects, reducing delays and litigation risk. PERMIT limits the scope of the Clean Water Act by redefining navigable waters to exclude waste treatment systems. These ephemeral features flow only in direct response to precipitation, prior converted cropland, groundwater, or any other features determined to be excluded by the U.S. Army Corps of Engineers. 

What we expect in 2026: Permitting has emerged as a bipartisan legislative effort, as “permitting paralysis” significantly hampered the rollout of green energy projects funded by the IRA/IIJA, and has been a historical talking point for Republicans. These will most likely not be the only pieces of legislation introduced regarding permitting reforms and expediting marquee projects.

While the “Great Funding Freeze of 2025” completely reshaped the competitive funding landscape, we expect to return to more regular order in 2026, as agency programs are more aligned with current administration priorities. We believe agencies will experience a top-level decrease in spending, and we expect to see large opportunities for artificial intelligence, critical minerals/materials, defense, fossil energy, geothermal and nuclear systems, infrastructure, workforce development and apprenticeships, and supply chain security.  We are also noticing an emerging trend of this administration using a variety of funding vehicles outside of traditional grants to allow for more flexibility in soliciting and selecting projects.

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