A funding freeze aimed at pausing the disbursement of federal loans, grants, and other financial assistance is among a flurry of executive orders President Donald Trump issued shortly after returning to office. Abby Ritz, AE2S Nexus Senior Funding Programs Specialist, is focused on finding answers for clients who are wondering how project funding could be impacted.
“I see three things at the federal level that could impact client projects – the funding freeze, layoffs, and the continuing resolution,” says Ritz.
Federal Funding Freeze
Most of the federal agencies typically involved in project funding have already returned to obligating and disbursing funds. These agencies include State Revolving Fund (SRF), U.S. Department of Agriculture (USDA), and the Federal Emergency Management Agency (FEMA).
While those programs have returned to normal operations, programs funded through the Inflation Reduction Act, which was named in an executive order, are experiencing additional scrutiny and delays. U.S. Secretary of Agriculture Brooke Rollins announced on February 20th, the USDA will release approximately $20 million in contracts for the Environmental Quality Incentive Program and two conservation programs. Rollins said additional USDA funding announcements will be released as the review of Inflation Reduction Act funding continues.
Ritz says there is a lot of confusion about the funding freeze, which means staff at both the Federal and State levels may be reticent to disburse funds and potentially jeopardize their jobs. In addition, funding from other agencies or programs may still be impacted, especially if the funds may be connected to diversity, equality, and inclusion (DEI) initiatives.
Federal Layoffs
Along with the new Department of Government Efficiency’s employment buyout offers, there have also been layoffs at Federal agencies. An ABC News report lists the following Federal layoffs: 200 at FEMA, 2,000 at the Department of Energy, 388 let go from the Environmental Protection Agency, and 2,300 from the Interior Department. The New York Times reports an estimated 4,200 layoffs at the USDA, and five of seven loan specialists are no longer with the USDA Rural Development’s Community Programs Division in North Dakota.
FEMA’s Building Resilient Infrastructure and Communities (BRIC) program supports States, local and territorial governments, as well as Tribes to reduce hazard risk by supporting infrastructure projects. Ritz says BRIC funding applications are proceeding normally; however, she cautions the review time for applications will most likely take longer than the typical six to seven months due to staff reduction.
Layoffs may potentially have the additional impact of increasing the turnaround time for environmental reviews. The loss of personnel can create confusion and stress at the State level as long-time Federal contacts leave their positions and take their institutional knowledge with them.
Continuing Resolution
The Federal government is currently operating under a Continuing Resolution to avert a government shutdown due to the lack of a Congressionally approved Federal budget. However, on February 21st, the Senate voted 52-48 to pass a budget resolution. The House passed a budget resolution 217-215 on February 25th.
The two chambers have approximately two weeks to find a compromise between the two budget resolutions as the existing Continuing Resolution is scheduled to expire on March 14th. Some contacts in Washington D.C. tell AE2S Nexus they believe Congress will approve a budget soon, while others say they expect a Continuing Resolution to be needed into fiscal year 2026.
Until a budget is agreed upon, many Federal agencies will be unable to obligate funds. Ritz says projects associated with Federal funding agencies, such as USDA and the U.S. Economic Development Administration, should expect ongoing delays to funding approvals until a budget is passed.
Some Success Stories
Amongst all the uncertainty, it is helpful to note that success stories continue to surface. For example, AE2S Nexus staff are close to securing a $4 million funding package for a large water line project. The benefiting community will receive 80% of the funding in the form of a grant and the remaining 20% in a loan. That equates to $3.2 million in grant funding from State and Federal sources, which will be used to make the water system safer for customers.
“Funding programs are always changing, and I think in large part, what the last few weeks boil down to is the need to continuously pay attention. Although the injection of funding into infrastructure programs we’ve seen over the last few years, and the underlying policies that drive the flow of money, may be changing at some level, there are still great opportunities for communities to pursue,” says Kayla Mehrens, funding professional and AE2S Consultant.
Mehrens also notes, “Communities should never hesitate to contact us and ask questions. We spend our day-to-day tracking and working within these programs and are always glad to offer advice on how to capitalize on available opportunities. Pursuing funding can certainly be hard work and take time, but it’s always inspiring to see public leaders pull down meaningful funds, especially knowing their ultimate end goal is to make residents’ quality of life better.”
Rachel Schultz, also a funding professional and AE2S Consultant, outlines another tangible solution. “It’s important to reach out to State and Federal elected representatives and explain to them how the surge of bipartisan funding provided over the last few years has helped your community. If a pipe gets built under a street and no one is around to see it, did it really get built? Infrastructure funding originates at the top, and this positive knowledge sharing can be really beneficial, especially as we look to the future and vitality of these critical programs,” says Schultz.
The AE2S Nexus funding team will continue to monitor activities at the State and Federal levels. If you have funding questions, please contact Abby Ritz.