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Key takeaways from the HORNE team’s presentation at the NGMA Compliance Conversations webinar “Grants in Transition: Practical Steps on Navigating the Now & Preparing for What’s Next.” In this expanded webinar, the HORNE team covered what’s coming up next in the federal funding landscape. To read a summary of the presentation covering navigating federal budget shifts, click here.
Missed the live presentation? Access the recording here.
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The federal funding landscape is poised for major transformation with significant proposed changes to discretionary funding, program priorities, and agency responsibilities suggesting a period of turbulence that demands strategic foresight and proactive planning from states, local governments, nonprofits, and education institutions. To navigate what’s ahead, stakeholders must pay close attention to shifting federal priorities, prepare for reform-driven sustainability efforts, and develop adaptive strategies for long-term success.
Major Shifts in Federal Budget Priorities Are Coming
At the heart of the upcoming changes is the recently passed “One Big Beautiful Bill Act” (OBBBA). The OBBBA brings significant shifts to federal grant funding, with a clear reallocation of resources across sectors. One of the most notable changes is the elimination of numerous climate and environmental grant programs, including those related to low-emission energy, climate justice, and greenhouse gas reduction. These cuts reverse many of the investments made under the Inflation Reduction Act, signaling a shift away from federal support for green initiatives. Similarly, in education, the bill tightens Pell Grant eligibility and introduces new but limited workforce-training vouchers, reducing overall support for low-income and non-traditional students.
At the same time, the bill increases targeted grant funding for rural and agricultural programs. A key highlight is the doubling of the Rural Hospital Fund to $50 billion, aimed at offsetting the impact of deep Medicaid cuts that threaten access to care in low-population areas. The USDA also receives enhanced support for rural grants, farm-related funding, and protections for domestic biofuels.
Defense and homeland security spending are also set to grow significantly, with defense budgets increasing by 13% and homeland security receiving an additional $175 billion. Other areas receiving increased attention include traditional infrastructure and rural/agricultural assistance. The Department of Transportation’s infrastructure programs, drinking water initiatives under the EPA, and charter school programs are also positioned for potential funding increases.
With respect to larger federal funding opportunities for local and state governments with potential infrastructure projects, the legislation, as passed, includes large opportunities in these areas:
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Roads, Bridges, and Major Road Projects: $194.38 billion
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Airports: $20 billion
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Public Transportation: $35.26 billion
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Electric Vehicles, Buses and Ferries: $6.25 billion
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Ports and Waterways: $3.25 billion
Sustainability and Reform Require State and Local Preparedness
As federal funding priorities shift, states and local entities will be expected to carry more of the burden, particularly in areas like broadband expansion, education, and disaster response. We have seen several program-specific examples illustrate how sustainability and reform are being restructured to rely more on local execution and preparedness.
For instance, the Broadband Equity, Access, and Deployment (BEAD) program has issued updated guidance removing many social equity and engagement requirements while maintaining a focus on network resilience, compliance with labor laws, and accountability. This reduces federal oversight in favor of more state-driven implementation models.
In education, the proposed budget consolidates 18 federal grant programs into a single $2 billion formula grant. This change provides states with increased flexibility but also places the responsibility on the states to make strategic, needs-based decisions aligned with local workforce trends and policy shifts.
The FEMA Building Resilient Infrastructure and Communities (BRIC) program similarly underscores a move toward local responsibility. Proposed reforms prioritize empowering state, tribal, and territorial governments to lead disaster recovery efforts while the federal government retains core response duties. This includes encouraging local mitigation strategies, cost-sharing innovations, and fiscal preparedness.
Across all areas, one message is clear: sustainability in the face of reform will depend heavily on how well state and local entities prepare for and manage change.
Strategic Planning Is Crucial for Navigating Change
Given the sweeping nature of these shifts, we recommend these strategies to help organizations adapt:
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Diversify Funding Sources: As traditional funding streams are reduced or restructured, stakeholders should explore non-traditional sources and public-private partnerships.
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Budget Forecasting and Tracking: Accurate forecasting will be essential in anticipating funding gaps and identifying opportunities. Monitoring guidance changes in real time ensures that organizations can remain compliant and responsive.
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Target Traditional Grant Areas: Established programs in agriculture, transportation, homeland security, and law enforcement (e.g., DOJ’s COPS program) are expected to remain viable. Entities should refocus efforts on these dependable areas.
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Improve Communications: Real-time updates and transparent stakeholder engagement are critical. Establish recurring reporting mechanisms and communication protocols to ensure alignment across teams.
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Initiate Internal Task Forces: Organizations should consider forming internal working groups to analyze federal guidance, digest programmatic shifts, and lead planning efforts across departments.
Finally, understanding local-level impacts, developing backup plans, and preparing to advocate for essential programs will be critical steps in ensuring resilience through what may be a prolonged period of federal funding realignment.
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Sarah Legner, CGMS is a senior manager; Ashley Swain is the director of compliance and monitoring; Kyle Skene, CPA, is a senior manager; and Lindsey Howard is a compliance and monitoring manager at HORNE LLP. Learn more at horne.com.
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