The recently enacted legislation, the One Big Beautiful Bill Act (H.R. 1), and President Trump's Fiscal Year (FY) 2026 budget request signal significant changes to the federal, state and local government partnership.
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This report outlines how the federal cost shift and spending cuts pose a significant challenge to counties nationwide. It aims to clarify the scope of the potential impact, highlight key areas of concern and provide county leaders with the information needed to prepare for and respond to these intergovernmental changes.
As the December 2026 State and Local Fiscal Recovery Funds (SLFRF) program spending deadline approaches, local governments should evaluate the long-term fiscal needs of their American Rescue Plan Act (ARPA) funded programs. The end of this large federal investment in local government signals a period of uncertainty as localities may need to address budget shortfalls.
According to the 2025 State of the Cities Report, 69 percent of respondents indicated the end of ARPA funding will negatively impact their budget and city management. To find examples of how other localities are continuing projects with other funding sources after ARPA dollars are spent, local leaders can search the Local Government ARPA Investment Tracker.
The annual appropriations process begins each year with the president submitting a budget request to Congress, outlining the administration's priorities for the upcoming fiscal year. The U.S. House and Senate Appropriations Committee then each hold a series of budget hearings with the heads of the various federal agencies and the House and Senate adopt a budget resolution outlining the topline spending limits for the respective fiscal year. Unlike the prior two federal fiscal years, Fiscal Year (FY) 2026 discretionary spending limits are not bound to statutory spending caps enforced by sequestration.
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Counties rely on federal funds determined through the annual appropriations process to provide vital services to our residents. As such, we urge Congress and the President to commit to working together to reach an agreement on all spending legislation by Oct. 1 of each year.