Federal Update: Trump Administration Proposes Major Overhaul of Federal Grant Rules 

On May 29, the White House Office of Management and Budget (OMB) released a proposed rule that would significantly revise the government-wide framework for administering federal grants and other forms of financial assistance. The 412-page proposal could affect more than $1 trillion in annual federal aid, including funding for state and local governments. 

It follows the Trump administration’s earlier efforts to review, pause, or terminate grants that officials determined were inconsistent with administration priorities, including actions taken during the tenure of the Department of Government Efficiency (DOGE). Some of those efforts faced legal challenges, including lawsuits questioning whether the administration had the authority to freeze congressionally approved funding and whether agencies had followed the required procedures. The proposed rule could provide a more formal government-wide framework for future grant reviews and terminations. 

Among its most notable provisions, the rule would expand agencies’ authority to terminate awards if they determine that a grant no longer advances program goals, federal agency priorities, or the national interest. Similar to “termination for convenience” clauses commonly included in federal contracts, the change would give agencies greater flexibility to discontinue previously approved awards when priorities or circumstances change. 

The system would put senior Trump political appointees in charge of screening grant proposals, institute new reviews for foreign connections by recipients, and impose new requirements for free speech. Federal grant recipients would also be barred from instituting diversity, equity and inclusion policies, gender transition services, or voter-registration drives. 

Given the broad scope of the proposed changes, the rule could have significant implications for counties and other local governments that receive federal assistance directly or administer funding as pass-through entities. Public comments are due by July 13, 2026. 

HUD Releases FY 2026 Continuum of Care Funding Notice 

The U.S. Department of Housing and Urban Development (HUD) has issued its long-awaited FY 2026 Notice of Funding Opportunity (NOFO) for the Continuum of Care (CoC) program, the federal government’s largest competitive grant program supporting homelessness prevention efforts. 

The NOFO revives the administration’s effort to shift funding away from permanent supportive housing (PSH), allowing only 60 percent of the $4 billion available through the program to support those activities. Currently, roughly 90 percent of CoC funding goes toward permanent housing projects, including PSH. Pursuant to the NOFO, the 40 percent of grant funding appears largely aimed at transitional housing and supportive-services programs, with an emphasis on treatment, work requirements, and self-sufficiency. Transitional housing assistance generally is limited to two years. The change could shift roughly $1.2 billion away from existing housing programs and create a risk of displacement for current tenants. 

It should be noted that the FY 2026 approach differs from the administration’s earlier FY 2025 NOFO, which was blocked amid litigation over HUD’s attempt to replace the previously issued funding notice and impose new program requirements. Congress subsequently directed HUD to protect at least 60 percent of each CoC’s Annual Renewal Demand in Tier 1 as part of the FY 2026 appropriations process. 

The new NOFO includes several additional changes that could lead to legal challenges. Among other provisions, it encourages CoCs to cooperate with law enforcement and awards points based on their support for efforts to clear encampments, reduce public drug use, and connect individuals with services or treatment.  

The new plan also makes it easier for CoCs to combine into larger entities, including statewide structures, potentially bringing independent local groups under greater state-level control. In addition, the NOFO rewards CoCs that reduce local homelessness, even though those outcomes can be shaped by factors outside their control, including housing costs, health-care capacity, and state and local laws. 

The National Alliance to End Homelessness and other organizations are reviewing the NOFO and are expected to provide additional analysis in the coming days, including information on potential legal challenges. 

Separately, HUD has announced FY 2025 renewal awards for all 6,689 projects. However, based on the latest information available, only 48 awards have been fully executed. Counties that are made aware of funding delays from their CoC partners may wish to flag those concerns with their congressional delegation. 

Sens. Padilla, Curtis Expected to Introduce Bipartisan Bill Addressing Water Infrastructure for Wildfire Suppression 

Senators Alex Padilla (D-CA) and John Curtis (R-UT) could introduce bipartisan legislation as soon as this week to address a longstanding gap in federal support for water infrastructure projects that improve wildfire preparedness. 

While other federal programs provide assistance for firefighting equipment, staffing, and related needs, communities have limited options for financing water mains, hydrants, storage capacity, and other infrastructure needed to deliver water for wildfire suppression. Although the EPA’s Drinking Water State Revolving Fund (DWSRF) helps communities finance drinking water infrastructure projects, current law generally prohibits the use of DWSRF funding for projects primarily intended for fire protection. 

The Padilla-Curtis proposal would create a narrowly tailored exception under the DWSRF for projects that: (1) provide both drinking water and wildfire suppression benefits; (2) are located in communities at high risk of fire or wildfire; and (3) serve rural areas with populations of 50,000 or fewer. The language is intentionally narrow to avoid extending DWSRF eligibility to large-scale fire infrastructure projects in urban areas, an expansion that would likely face opposition from stakeholders who already view the program as heavily prescribed. 

USDA Opens Enrollment for Specialty Crop Assistance Program 

The U.S. Department of Agriculture (USDA) recently opened enrollment for the Assistance for Specialty Crop Farmers (ASCF) program, which will provide $1.625 billion to eligible producers affected by elevated input costs and market disruptions during the 2025 growing season. 

Producers with a Login.gov account may submit pre-filled applications online beginning June 1. Starting June 8, growers also may request applications from their local Farm Service Agency (FSA) county office. Applications are due by August 7, and payments will be issued as applications are approved. 

Counties with significant specialty crop production may wish to share the application timeline with local growers and agricultural stakeholders. 

Separately, Senator Adam Schiff (D-CA) recently introduced a package of six bills aimed at strengthening federal support for specialty crop producers as the Senate begins work on the Farm Bill. The proposals would provide $5 billion in additional economic relief, expand pest and disease prevention programs, improve access to crop insurance, fund agricultural automation research, create a permanent disaster-assistance program for specialty crops, and support expanded access to international markets.