Highlights
- The U.S. Environmental Protection Agency's (EPA) proposed fiscal year (FY) 2026 budget seeks a 54 percent reduction from FY 2025 levels, cutting total funding from $9.14 billion to $4.16 billion.
- The proposal includes cuts to enforcement functions – 30 percent reduction in civil enforcement, 49 percent cut to criminal enforcement and 35 percent decrease in compliance monitoring – and eliminates environmental justice enforcement funding entirely. Since there exists significant EPA discretion in how to deploy its enforcement resources irrespective of the levels at which Congress ultimately funds these activities, a significant slowdown in EPA enforcement efforts could result in an increase in citizen suits seeking to compel enforcement of alleged violations of environmental statutes.
- Nearly all categorical grants to states would be eliminated, and water infrastructure funding would be slashed by approximately 90 percent, fundamentally altering federal-state environmental partnerships.
- Even if Congress does not enact the cuts included in this proposed budget, significant personnel reductions at EPA (both past and prospective) are likely to slow work at the agency and increase the potential for separate state environmental regulatory actions to be pursued.
The U.S. Environmental Protection Agency's (EPA) budget proposal for fiscal year (FY) 2026 fundamentally reimagines the federal government's role in environmental policy and regulation. If enacted by Congress, EPA's budget would be cut from $9.14 billion in FY 2025 to $4.16 billion in FY 2026 – a roughly 54 percent reduction without precedent in the last 50 years. EPA's workforce would be capped at 12,856 full-time equivalent (FTE) positions – the lowest staffing levels in 40 years, down from FY 2025 levels (14,130 FTE).
The proposed budget frames these changes as signaling "a return to common sense environmental policy" and emphasizes "a back-to-basics approach that will lower the cost of living, remove unnecessary barriers for business and industry, empower states, and return the Agency to administering core statutory obligations as Congress intended."
The budget proposal recognizes that states, Tribes and local governments "are best positioned to address the unique environmental challenges facing their communities" while concluding that "many programs are mature or have accomplished their purpose" with previous federal funding. The emphasis for the remaining funding shifts to Tribal capacity building with a goal of "encouraging greater independence from federal oversight." If enacted, the significantly reduced federal funding could present barriers for states and local governments in their budget processes and regulatory compliance efforts, particularly as they seek to build or repair critical infrastructure.
EPA's Five Priority Pillars
The budget outlines five priorities for 2026, titled as follows:
- Ensure Clean Air, Land, and Water for Every American
- Restore American Energy Dominance
- Permitting Reform, Cooperative Federalism and Cross-Agency Partnership
- Make the United States the Artificial Intelligence Capital of the World
- Protecting and Bringing Back American Auto Jobs
Infrastructure and State Grant Eliminations
The budget makes dramatic cuts to programs supporting state and local environmental infrastructure, representing the largest dollar reductions. Water infrastructure funding faces cuts of nearly 90 percent: Clean Water State Revolving Fund would be cut by $1.5 billion from $1.64 billion (90.5 percent reduction), Drinking Water State Revolving Fund by $976.1 million from $1.13 billion (87 percent reduction), and Water Infrastructure Finance and Innovation Act funding by $64.3 million from $72.3 million (89 percent reduction). All but three categorical grants to states would be eliminated entirely, with only Underground Injection Control, Tribal General Assistance Program and Tribal Air Quality Management grants left in place (and at approximately FY 2025 levels). The largest categorical grant eliminations include State and Local Air Quality Management ($235.6 million), Pollution Control Section 106 grants ($225.4 million), Nonpoint Source Section 319 grants ($174.3 million), Public Water System Supervision ($115.8 million) and Brownfields ($46.2 million), with categorical grants totaling approximately $1 billion in cuts.
Additional major program eliminations include Atmospheric Protection ($108.4 million), Resource Recovery and Hazardous Waste Grants ($101.4 million), Environmental Justice ($100 million) and the Diesel Emissions Reduction Grant Program ($90 million), among other programs totaling $557.1 million. The proposal would also cut more than $83 million from regional water quality "geographic programs," with the largest reductions affecting San Francisco Bay (76 percent cut), Lake Pontchartrain (54 percent cut), Puget Sound (47 percent cut) and Lake Champlain (37 percent cut).
Air and Climate Programs
The budget proposal reflects EPA Administrator Lee Zeldin's announced intentions to significantly restructure the agency's Office of Air and Radiation by eliminating the Office of Atmospheric Protection (OAP) and Office of Air Quality Planning and Standards (OAQPS), along with restructuring their components into two new offices: Office of State Air Partnerships and Office of Clean Air Programs. The budget proposal would result in substantial cuts in numerous air and climate programs, including several areas slated for 100 percent elimination, including State and Local Air Quality Management Categorical Grants ($235.6 million), Atmospheric Protection Program ($100 million) and Diesel Emissions Reduction Act Grant Program ($90 million), among others. Additional areas are slated for major decreases, such as the proposed 65 percent cut to air quality research (from $96 million to $33 million).
The proposed budget would increase funding for a few key priorities:
- Stationary Source Deregulatory Actions. The budget highlights and indirectly opines on multiple Clean Air Act rules EPA intends to reconsider, including greenhouse gas requirements for power plants, methane rules "throttling" the oil and gas sector, and Mercury and Air Toxics Standards (MATS) requirements that "improperly target" coal-fired power plants. The administration proposes to set aside funding to support its efforts to reconsider these and other Clean Air Act rules.
- State Implementation Plan (SIP) Backlog. The budget proposal sets aside funding within the Federal Support for Air Quality Management Program "to address and resolve the backlog of SIPs," despite an overall $18.7 million reduction to this program. This reflects the administration's previously stated priority to clear the backlog of SIPs awaiting EPA action. Extra funding and resources devoted to this issue could help ensure that as the agency works to clear this backlog, it does so not only swiftly but in a durable and legally defensible way.
- Ozone-Depleting Substances (ODS). The administration also proposes to increase funding and staffing for programs aimed at reducing ODS under the Clean Air Act.
Enforcement Transformation
The budget reflects EPA's enforcement approach, with the agency stating it will "focus[] enforcement on clear and substantial violations of the law that cause significant harm and that cannot be addressed by states." Major cuts include a 30 percent reduction in civil enforcement (cutting $61.1 million from $201.3 million), 49 percent cut to criminal enforcement (cutting $29.6 million from $60 million), 35 percent reduction in compliance monitoring (cutting $38 million from $107.1 million) and complete elimination of enforcement funding for environmental justice purposes.
The agency states it "will target enforcement and compliance assurance on pollution, ensuring a fair approach to environmental remediation" and "focus on critical national security actions" such as illegal imports.
The proposed cuts reinforce signals of a clear federal retreat from enforcement activities. Unlike regulatory actions subject to statutory deadlines, EPA and the U.S. Department of Justice (DOJ) have enormous discretion regarding enforcement cases. The administration has already shifted and narrowed enforcement priorities simply by aligning them with its own directives and executive orders, regardless of congressional action on the proposed budget. However, most of the major EPA-enforced statutes also include citizen suit enforcement provisions, often allowing private actors to sue over alleged environmental violations in federal court. Reduced federal enforcement – coupled with potential cuts in EPA funding for state environmental programs, if enacted – will likely create more opportunities for these private citizen enforcement cases.
Superfund and Cleanup Programs
Congressional appropriations for the Superfund remedial program would be eliminated entirely, with the administration arguing that renewed Superfund taxes from the Infrastructure Investment and Jobs Act and Inflation Reduction Act can fund the program. The program would gain 45.7 new full-time positions while transitioning entirely to tax-based funding to "conduct critical pre-construction projects, continue ongoing construction projects, and initiate new remedial work at National Priority List (NPL) sites to address contaminants including lead and per- and polyfluoroalkyl substances (PFAS)."
EPA's Brownfields Program would face a 50 percent cut ($12.9 million reduction from $25.7 million), with various state brownfield assistance grants being slashed or eliminated entirely.
Enhanced Economic Analysis and Permitting Reform
The budget includes funding for "a more detailed employment analysis" of rulemakings that would account for "regulatory job displacement, including through offshoring of production," focusing on electric power, oil, gas and auto manufacturing sectors. This suggests the administration is intent on not just advancing abstract legal arguments, but also building a robust economic justification to support its deregulatory agenda. Those factual considerations could prove important as courts continue to defer to agencies on discretionary, technical details even though no longer deferring to agency statutory interpretations.1
Despite overall cuts, EPA proposes $8 million for an Integrated Environmental Strategies Program to improve permitting and environmental review processes while promoting economic growth. The budget specifically calls for "data tracking, analysis, and problem-solving to support permitting reform initiatives such as implementing a continuous improvement project to reduce the time it takes for EPA to issue Class VI well permits and standardize EPA's Class VI permitting process across regions."
National Environmental Policy Act (NEPA) implementation would receive a 6 percent increase ($1.2 million additional funding from $19.9 million), reflecting the administration's focus on permitting reform and making environmental reviews "faster, and more cost effectively while building capacity and improving testing on innovations."
Next Steps
During the first Trump Administration, Congress ultimately did not support similarly focused proposed cuts to EPA's budget following advocacy from those who would be adversely impacted by them. However, even if Congress acts to reject most or all of the projected reductions in funding when it acts on the FY 2026 budget, significant staffing reductions that have already taken place and are expected to continue to progress will likely slow activities such as permit reviews, chemical and pesticide reviews and approvals and rulemaking processes. The departing staff are expected to include some of EPA's most experienced senior scientists and other personnel, representing a wide range of expertise in administering EPA programs. This expertise will be very difficult to replace.
Companies face immediate compliance considerations as regulations remain in effect even if federal enforcement thereof diminishes, and personnel reductions could lead to longer-than-expected delays in any planned regulatory repeals or adjustments. The combination of reduced federal oversight, slowed rulemaking efforts and potential increases in state-level regulations creates regulatory uncertainty since states may pursue alternative approaches or standards that don't require federal approval, potentially creating a patchwork of requirements.
Reduced federal enforcement may also lead to increased citizen suits and more aggressive state enforcement actions, creating different enforcement priorities and approaches in some states compared to traditional federal enforcement patterns.
The FY 2026 budget proposal represents a shift toward deferring to state agencies while also proposing to dramatically reduce federal support for those state agencies, all while EPA is also making significant reductions to the numbers of personnel who would typically be charged with writing new regulations and providing support in federal oversight or enforcement efforts. Companies should monitor congressional appropriations processes closely, prepare for increased state-level regulatory activity and potential citizen suit enforcement actions, and consider how voluntary compliance agreements might provide certainty in an uncertain regulatory environment.
Footnote
1. See e.g., Seven County Infrastructure Coalition v. Eagle County, Colorado, 605 U.S. ___, slip op. at 6–8 (2025) (citing Loper Bright Enterprises v. Raimondo, 603 U.S. 369, 391–392 (2024)).
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