FY25 Appropriations Shifts the Balance of Power to the President

On March 15, 2025, the President signed HR 1968, a full-year FY25 continuing resolution (CR) through September 30, 2025 for all twelve bills. This is the first time that the Department of Defense is funded under a full-year continuing resolution.

The CR funds all agencies at FY24 levels under FY24 terms and conditions, but with significant exceptions. Highlights of selected programs that were funded above FY24 levels include:

• VA Toxic Exposure Fund (TEF) – +$6B to finance the Medical Care shortfall resulting from implementation of the PACT The CR does not include FY26 advance funding for the TEF. The FY26 process will decide whether and how to fund the increasing PACT Act implementation costs;
• Immigration and Customs Enforcement – +$485M for detention beds;
• $5.7B of emergency funding for Navy Shipbuilding (Virginia Class Submarine);
• $8B for DOD for the 2025 pay raise and COLA;
• The CR increases DOD transfer authority, as requested, from $6B to $8B, but that’s well short of the additional $30B in transfer authority sought by OMB;
• National Nuclear Security Administration Weapons Activities – +$185M;
• Federal Aviation Administration Operations- +$754M;
• Women Infants and Children nutrition assistance – +$567M;
• FEMA Disaster Relief Fund – +$2.25B;
• Wildfire Suppression Operations – +$360M;
• Public Housing – +$4.5B.

In aggregate, the CR increases defense spending by $6B above FY24 (+$12B if you include emergency spending) and cuts non- defense spending by $7.7B. In order to pay for the increases, the CR eliminates all earmarks and rescinds another $20.2B IRS funding provided in the 2022 Inflation Reduction Act.

The CR permits agencies to pursue new starts. DOD new starts are limited to activities that received new funding in either the House-passed or Senate Appropriations Committee-approved version of the FY25 Defense Appropriations bill.

FBIQ does not expect agencies to commence new procurements soon. The CR requires all agencies to provide detailed expenditure plans to Congress by April 29. Few agencies will get permission from OMB to pursue funding solicitations until those expenditure plans are complete.

Another source of uncertainty is the structure of the full-year CR. Congress typically includes a Joint Explanatory Statement with final appropriations to provide specific direction to the President on how to allocate funds below the account level. With no Joint Explanatory Statement, the CR hands the President (OMB and DOGE) considerable flexibility on allocating or cutting funds. Some decisions, like DOD’s annual multi-billion-dollar omnibus reprogramming request, will not be made for months.

On March 14, the President issued an Executive Order directing seven agencies to eliminate, “non-statutory components and functions to the maximum extent consistent with applicable law.” These include the Federal Mediation and Conciliation Service, the US Agency for Global Media (including Voice of America which has already stopped transmitting), Woodrow Wilson International Center for Scholars, the Institute for Museum and Library Services, the US Interagency Council on Homelessness, the Community Development Financial Institutions Fund, and the Minority Business Development Agency. Several of the agencies commenced personnel lay-offs this week. Each of these agencies received specific account level funding under the CR. Expect legal challenges to these actions as Impoundment Control Act violations.

WHAT’S AHEAD

The President is expected to deliver his FY26 Budget to Congress in mid-May, delaying the start of the annual appropriations process. The lack of detail in the FY25 CR and the potential for funds being moved, cancelled or impounded will make review and evaluation of the President’s FY26 budget recommendations more difficult. Combine that with, the absence of an agreement on a topline for FY26 spending, and it is likely that FY26 appropriations process will be controversial and late.