Government Relations Update — July 2026: Funding Deadlines, Grant Reform, and the Quantum Push

This update covers the latest developments in the federal appropriations process, OMB’s proposed changes to federal grantmaking rules, NSF’s related comment period, and two executive orders on quantum information science and technology.

In this July 2026 update:

• What’s happening with federal science funding for FY2027?
• How would OMB’s new grant rules affect federally funded research?
• How is NSF changing its own grant policies?
• What do the new quantum executive orders mean for R&E?

What’s happening with federal science funding for FY2027?

Key Takeaways

• The House Appropriations Committee has passed all twelve annual appropriations bills. The two bills most relevant to the R&E community contain cuts to federal science funding agencies, but they are not nearly as severe as those proposed by the White House.
• The Commerce, Justice, and Science bill would set NSF’s funding level for FY2027 at $7 billion, a $1.75 billion cut from current levels; the Administration requested only $3.9 billion. It also provides funding to support the NAIRR transitioning beyond the pilot stage.
• The Energy and Water bill rejects the Administration’s request to cut DOE Office of Science funding and reallocate it to a new office designed to house Genesis Mission and other AI research activities.
• The Senate Appropriations Committee has struggled to make progress on funding legislation.
• The need for a short-term funding extension until after the midterms is increasingly looking like a certainty. The challenges and delays to reaching bipartisan agreements on appropriations legislation make a government shutdown more likely, though it remains a relatively remote possibility.

Why This Matters to You

• The research & science community: The NSF, NOAA, and NIST funding levels set in these bills determine the resources available to the R&E community in FY2027.
• The IT leadership community: These bills affect programs like the NAIRR and the DOE Office of Science that support shared research infrastructure.
• The public policy community: With a September 30 deadline approaching and both chambers in recess for most of the next few weeks, a short-term funding extension and the possibility of a shutdown are increasingly in play.

The Deep Dive

The House. Work in the House ground to a halt for weeks as a group of conservative members pushed back against House leadership over demands for action on both immigration legislation and the SAVE America Act, a White House priority that would change many voting rules ahead of the midterms. On July 21, the House narrowly passed a bill that would provide a short-term funding extension at current FY 2026 levels for all federal programs and agencies through December 4. The Senate has not yet signaled that it will embrace this bill as an acceptable temporary compromise to fully fund the government for the 2027 fiscal year.

The Senate. The Senate has struggled to make meaningful progress on funding legislation due to divisions over topline funding levels. Senate Democrats have demanded an agreement on overall levels of defense versus non-defense spending before moving forward with the details of any particular piece of legislation. Meanwhile, Senate Republicans remain focused on delivering the nearly 50% increase in defense spending requested by the White House without committing to the traditional bipartisan bargain that any such increase be matched by an equal increase in overall funding for non-defense programs.

The situation has been further complicated by the recent death of Senator Lindsey Graham (R-SC) and the extended absence of Senator Mitch McConnell (R-KY), both senior members of the Senate Appropriations Committee. With their influence missing from the process, the ability to negotiate potential solutions to the existing impasses has diminished. While Senator Graham’s seat has been filled by a temporary replacement, Senator McConnell’s continued absence also means that Senate Republicans effectively have one fewer vote, making efforts to use what was already a narrow 53–47 majority even more difficult.

Looking Ahead

The House has now departed for a five-week recess, leaving little time after their return to Washington on August 31 to negotiate a path forward with their Senate colleagues and pass funding legislation before the September 30 deadline. Speaker Mike Johnson (R-LA-04) has made progress towards getting the House back on track, but still faces an unstable majority and competing priorities that may once again halt the body’s momentum. The Senate is scheduled to depart for its own five-week recess beginning on August 7; if no progress is made by then, the chamber will have only two-and-a-half weeks after its return to reach and pass a funding deal.

Lawmakers on both sides of the aisle will face increased pressure in the coming weeks to reach a resolution that allows them to leave Washington as far ahead of the September 30 deadline as possible, as many are running for re-election and want to focus on their campaigns ahead of the midterms. However, some of these deep-seated policy disagreements may mean a fight over the details of a short-term funding bill until the last possible moment.

How would OMB’s new grant rules affect federally funded research?

Key Takeaways

• On May 29, 2026, the Office of Management and Budget (OMB) published a new Grantmaking Proposal that would significantly impact grantmaking processes across the federal government. The 45-day comment period closed on July 13.
• OMB’s plan is a broad reshaping of the entire federal grant process, not a targeted attack on R&E; it will affect everything from Medicaid and food assistance to transportation infrastructure projects.
• The rule would not adjust indirect cost rates, but would create new restrictions on allowable costs including conference attendance, subscriptions, and professional memberships, which could ultimately have a similar impact.
• There is a lack of clarity on the definitions of terms this plan would rely on, including “covered foreign collaborations,” “anti-American values,” and “Gold Standard Science.”
• The rule would codify grant termination authority, encourage multi-year awards, and require the use of grants.gov as the sole home for all grant announcements and activities. Political appointees would conduct mandatory reviews for all grants, and peer reviews would be merely advisory.

Why This Matters to You

• The research & science community: New allowable-cost restrictions and undefined standards create ambiguity about which entities you could partner with, what activities you could engage in, and what scientific standards you would be held to.
• The IT leadership community: Consolidating all grant activity on grants.gov and codifying termination authority affects how research infrastructure investments are planned and sustained.
• The public policy community: Making political appointee review mandatory while rendering peer review advisory is a structural change to how scientific merit is weighed in federal funding decisions.

The Deep Dive

Nearly 500,000 organizations and individuals filed comments in response to OMB’s Grantmaking Proposal. Internet2’s comments encourage OMB to refine several aspects of the proposed rule to improve clarity, predictability, and consistency, while preserving the collaborative foundations of the nation’s research enterprise.

Specifically, Internet2 recommended:

1. Maintaining the central role of merit-based review;
2. Establishing clear and objective compliance standards;
3. Providing greater certainty for long-term research infrastructure investments;
4. Preserving support for scientific collaboration and dissemination;
5. Appropriately balancing research security with international collaboration; and
6. Recognizing the essential role that shared national research infrastructure and trusted public-private partnerships play in implementing the nation’s research priorities.

Looking Ahead

Under federal law, OMB is required to read all submitted comments prior to finalizing its proposed rule and must respond to “significant comments.” OMB plans to implement the proposed rules by October 1, coinciding with the start of the 2027 federal fiscal year.

How is NSF changing its own grant policies?

Key Takeaways

• NSF announced on June 24 that it is seeking comment on its own plan to align its grant policies with OMB’s Grantmaking Proposal. The comment period will close on August 24.
• This announcement comes as NSF has reportedly slashed funding for traditional basic science programs by up to 30% to free up hundreds of millions of dollars to support its X-Labs initiative, which is led by the Technology, Innovation, and Partnerships Directorate.

Why This Matters to You

• The research & science community: A significant shift away from traditional basic science programs could reshape which proposals are competitive at NSF.
• The public policy community: The August 24 comment window is a near-term opportunity to weigh in before NSF finalizes its alignment with OMB.

What do the new quantum executive orders mean for R&E?

Key Takeaways

• On Monday, June 22, two Executive Orders (EOs) were signed regarding quantum information science and technology (QIST). On Tuesday, June 23, the Department of Energy announced the Quantum Genesis initiative, which it describes as “a core component” of the Genesis Mission.
• The first EO, “Ushering in the Next Frontier of Quantum Innovation,” mandates an update to the 2018 National Quantum Strategy within 180 days and establishes the Quantum Computer for Application Development and Discovery Science (QC-ADDS) Effort.
• The EO directs the Department of Defense to identify at least three next-generation quantum sensor projects to prioritize, aiming to field quantum sensors by 2028, and directs NSF to issue grants to establish QIST user facilities under the National Quantum and Nanotechnology Infrastructure Program.
• The second EO, “Securing the Nation Against Cryptography Attacks,” directs federal agencies to adopt PQC-aligned standards.

Why This Matters to You

• The research & science community: New user facilities and open access to an at-scale quantum computer create new avenues for participation in federal quantum research.
• The IT leadership community: The direction to adopt PQC-aligned standards signals that quantum readiness and cryptographic evolution will move up the priority list.
• The public policy community: The reliance on public-private partnership models across QC-ADDS, sensing, and supply chains is where the R&E community can help shape how these programs develop.

The Deep Dive

The first EO establishes the Quantum Computer for Application Development and Discovery Science (QC-ADDS) Effort. This initiative will pursue the development of a quantum computer at scale, with the intent to deliver one to a DOE facility and make it available to the scientific community. The QC-ADDS Effort will pursue public-private partnership models to understand the cost, scope, and potential timeline for delivery of at least one such system. The EO also directs several agencies, including NSF, to develop five-year plans for basic research to accelerate the development of quantum sensing and networking applications, and directs agencies to seek public-private partnerships to address QIST-specific supply chain gaps.

The DOE announcement outlined plans for a new initiative in support of the Administration’s QIST goals that will focus on three priorities:

• The DOE Q Competition: A funding opportunity released with the goal of demonstrating a fault-tolerant quantum computer by 2028. The Q Competition encourages participants to collaborate with National Labs, the National Quantum Information Science Research Centers (NQISRCs), and SC User Facilities to demonstrate quantum systems in 2028 with logical qubit numbers in the low hundreds.
• Focused R&D for Quantum Computing Applications: DOE will develop “keystone scientific applications,” similar to the Genesis Mission’s Science and Technology Challenges, to guide collaborations among universities, National Labs, and industry partners to define and advance use cases for quantum computing.
• The Quantum Computing User Facility: Previously discussed during the June 12 DOE Town Hall on the future of quantum computing for scientific discovery, this effort aims to develop and provide access to a user facility that integrates existing exascale computing systems with the Energy Sciences Network and the American Science and Security Platform.

Looking Ahead

These newly announced initiatives may provide important opportunities for the R&E community to engage with federal QIST investments and priorities through new public-private partnerships.