After much delay, President Trump released his "skinny" FY 2026 Budget on the first Friday of May, about three months later than normally expected. Here, we delve beyond the headlines on this annual move.
What exactly is the importance of the President's Budget?
The President's Budget, and the Appropriations legislation that follows it, covers discretionary spending, i.e., annual programs administered by the federal agencies, including the Department of Defense, and logistics needed to have these agencies running, like staff salaries. It does not include mandatory programs such as Social Security, Medicaid, Medicare, interest on national debt, and other programs authorized by Congress as direct (mandatory) spending. As such, discretionary spending covers about one-third of the federal budget.
Traditionally, the release of the President's Budget marks the beginning of the appropriations process: the Appropriations Committees in both the Senate and House of Representatives evaluate the President's proposal and conduct multiple hearings with the Administration's leadership on policy priorities and individual program funding needs. Oftentimes, these hearings are used not so much to get to the bottom of budget needs, but to score political points and sound bites. Traditionally, the arrival of the President's Budget on Capitol Hill has been treated with the attitude of "President proposes, Congress disposes." While the President's Budget is an important step in the process, Congress is the branch of the government with the final say.
How are the unique dynamics of President Trump's second term impacting the process?
Of course, "traditionally" is no longer the guiding principle, and in many ways by design. President Trump has made it clear that he is the final decision maker when it comes to federal spending, and the Congressional Republicans so far have been supportive of his efforts. It should be noted that not many major legislative bills have come up for voice vote yet in 2025 to test this support in earnest.
In the first budget release of his second term, President Trump has proposed to cut non-defense funding by 23% from FY 2025 enacted levels, while increasing defense spending by 13%. The budget for the Department of Homeland Security, which is responsible for immigration enforcement, is proposed to be increased by 65% but, according to the WH press release, the increase "will be made possible through the passage of [the Budget Reconciliation Bill]" – this signifies mandatory funding outside the appropriations process. Other highlighted budget changes reflect priorities which have been dominating the first 100 days, such as:
- Cutting Diversity, Equity, and Inclusion (DEI) initiatives;
- Canceling $15 billion from the Bipartisan Infrastructure Law clean energy programs;
- Reorganizing foreign aid programs under USAID and the Department of State; and
- Amplifying the Make America Healthy Again (MAHA) movement under the guidance of Secretary of Health and Human Services Robert F. Kennedy, Jr.
Where does Congress stand?
Given that nothing in the President's Budget is legally binding, it remains to be seen whether the Republican leadership in the House and Senate abide by the President's direction, and the extent to which the Appropriations Committees' Chairs will be able and willing to chart their own course. Specifically, the Senate Chair, Sen. Susan Collins (R-ME), is a distinctly moderate member and has on multiple occasions shown a willingness to buck her party.
The House and Senate Committee chairs struck a different tone in their official statements in response to the Budget release. The House Chair, Rep. Tom Cole (R-OK-04), put the emphasis on praising President Trump for his "decisive leadership in delivering a clear starting point for the budget process," before noting that the committee would work to "fulfill [its] Article I duties," softly but alluding to the Constitutional power of Congress to appropriate federal funds. The Senate Chair was more direct, voicing her "serious objections" to certain cuts and pointing out explicitly that "it is Congress that holds the power of the purse."
How much say the Appropriations Committees and the Republican leadership choose to exert over federal funding is overshadowed by the question of whether the Trump Administration would honor and follow the budget if and when it is passed. President Trump, more so than any other President in history, has extensively disregarded previous Congressional direction by freezing government programs, withholding grants, and dismantling large swaths of federal agencies. Earlier this spring, Congress gave up on completing the FY 2025 Appropriations bills when it passed a full-year CR, effectively extending the previous year's funding top lines.
Another issue traditionally of much interest to constituents is the availability of Congressionally Directed Spending for specific projects. These projects vary extensively among federal agencies and normally benefit community organizations, local governments, and non-profit entities. Because of this close connection to constituents, many members politically benefit from the appropriations process when Congressionally Directed Spending is available, and thus are much more engaged in its fate. Last year, Congress eliminated all individual project funding in the FY 2025 CR. For this coming year, both the Senate and the House have been proceeding with their traditional process of collecting members' requests – a process which will be completed by the end of May to prepare for the committees' release of bills later this summer.
FY 2026 will begin on October 1, 2025, and it is all but certain that none of the Appropriations bills will be finished by then. Many signs point to an unusual process ahead. Return to Ankura Insights for more analysis as the process unfolds.
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