A set of new federal funding rules can affect how cities serve their residents. The Office of Management and Budget (OMB) released the proposed rules for federal grant funding. These include increased documentation, monitoring, and compliance to a new set of rules. There would be grant terminations and a review of grants by political appointees at the White House. The proposed rules would be in effect on Oct. 1, 2026.
National League of Cities (NLC) CEO Clarence Anthony wrote a letter on July 13 citing all the new rules and their concerns over how federal funding would be administered to cities. Anthony said in the letter that local government compliance already involves extensive financial management, procurement, reporting and audit requirements under federal and state laws. The proposed changes include sending the same information in multiple forms instead of streamlined administrative requirements.
Union City Vice Mayor Jaime Patiño said their city doesn’t have the resources to monitor the new requirements. “We’re a mid-sized city,” he said. “We don’t have staff to keep up with that. It would drastically hurt us.”
Federal agencies would have the authority to suddenly terminate awards if they no longer meet program goals, agency priorities and national interest. Concerns from the letter include where the proposed changes will take effect and whether or not they affect already signed grant contracts, or only new ones. Other questions in the letter ask what are the additional terms and conditions, and what would prompt a federal agency to add new terms and conditions to existing grants.
Patiño said the vague rules make it hard to stay compliant when it comes to grant applications. “It would take a lot of staff time to read up on the new rules, then read up on the old rules, and see where we are not compliant, and then change the grant [application] so that it fits to what the new rules are. So it could potentially take hundreds of hours of work time.” Patiño said the city just received a federal grant for renovation of one of the fire stations.
“It’s going to put an extra burden on us, and if we can’t keep up with the changes, or it’s beyond the scope of what we originally had envisioned the grant to be about, they could terminate our grant,” Patiño said.
It’s not clear if there will be any notice before a grant is terminated and why. There are also questions about whether or not communities can get reimbursement, concerns about partially done projects that need more federal funding, and requesting assistance with cancelling contracts with business contractors when federal funding gets terminated.
Cities are worried about awards becoming politicized, since they would be reviewed by senior political appointees. NLC asks that OMB use experts who can assess the capacity of grant applicants and decide if the application would fulfill program goals.
Anthony wrote, “The administration’s going to get an earful from everybody. Because this is not a Democrat or Republican issue. This is an everyone issue because every single state, whether it’s red or blue, they have grants. It’s going to make everybody’s life a bit more difficult.”
NLC asks that OMB extend the implementation deadline past Oct. 1, streamline administrative requirements for local governments with limited staff, and set clear standards and protections against grants being modified or suspended.
Other NLC requests include having a timeline of when federal grants would be distributed to local governments, removing or revising provisions that allow senior political appointees to review and approve grants, and having technical and grant management support for cities.
