When Congress passed the federal fiscal year 2026 appropriations bill, it included language that explicitly restricted the Office of Management and Budget’s (OMB) ability to withhold funding. It was a bipartisan response to last July’s fiasco, when OMB froze billions of dollars on the day funds were supposed to flow to grantees. Congress’ response gave hope for fiscal regularity. We may, however, need to temper those expectations.

Last Friday, OMB issued proposed rules to convert the technical Uniform Grant Guidance (UGG) into the new Uniform Grant Regulations (UGR). Unlike guidance, these rules would carry the force of law. That distinction is extraordinary, and its implications are far-reaching.

What is the UGG? The UGG is a largely technical, behind-the-scenes framework that guides how federal grant managers and grantees handle administrative requirements, cost principles, and program standards. In normal times, it is an unglamorous but essential body of rules—the plumbing of federal grantmaking. Crucially, guidance does not carry the force of law.

What role has OMB typically played? Historically, OMB’s role has been to bring consistency to grant management across federal agencies—ensuring, for example, that the allowable-cost principles governing the Department of Labor were aligned with those of the Departments of Transportation, Health and Human Services, and others. It was a coordinating function, not a policymaking one.

What’s in the Proposal?

  • OMB doesn’t just do housekeeping. According to the proposed rules, OMB’s role is to ensure that all domestic spending reflects the values of the “American public,” as interpreted by OMB, executive orders, and a litany of related policy grievances (many of which have already failed legal challenges). If OMB has its way, these materials would become binding conditions on congressionally appropriated funds and on every grantee that depends on them.
  • Each grant would be subject to political pre-approval, and termination is discretionary. To receive any grant, each application must be approved by “one or more senior [political] appointees.” If a grantee is perceived to run afoul of the conditions, that is grounds for termination. Termination is at the discretion of OMB and the lead agency, as they deem appropriate. So, if there is suspicion of activity inconsistent with executive orders on issues deemed contrary to American values, that is cause for termination. Furthermore, to pursue those violations, the proposed rule explicitly authorizes federal agencies to cooperate with private individuals or organizations pursuing their own private causes of action or civil remedies against grantees. That is a new development.
  • OMB spends considerable effort arguing its case. The proposed regulation includes a detailed explanation of how Congress, the courts, and the Constitution have always intended to grant OMB the authority to legislate, execute, and adjudicate all domestic spending. OMB argues that the proposed rules do not infringe on the Constitution’s Spending Clause or free speech protections. Interestingly, OMB “recognizes that the factual findings in this document are inconsistent with certain factual findings” and invites public comment on the rationale.
  • The OMB would rather that school officials not gather to discuss their work with federal funds. The proposed UGR would prohibit grantees from attending any conference unless participation is expressly approved by the federal agency and written into the award’s terms and conditions at the time of approval. Professional memberships would likewise require prior written approval from the federal agency.
  • Reporting federal workers who may object. To avoid the likely tension between past practices and OMB’s proposed rules, any federal employee who worked on grant allocation in the prior two years must report to the agency’s Inspector General and the U.S. Attorney.  

The proposed UGR represents a sweeping restructuring of federal appropriations and grantmaking. While there is no doubt this rule will face legal challenge, the OMB is not waiting for the courts. The comment period closes July 13, 2026, and the administration intends to have this rule final and in place by October 2026. Read it at the Federal Register, here.