The New Reality of Federal Funding: Why States and Locals Must Track Real, Pocket, and Process Rescissions

September 3, 2025

Bottom line: The ground is shifting under federal financial assistance. Congress has begun canceling previously appropriated funds; the White House is attempting “pocket rescissions”; and agencies are, at times, compressing application windows or altering processes in ways that reduce the odds of successful applications. If you manage grants for a state, city, county, or COG, this isn’t a headline to watch—it’s an operating environment to plan for.

What changed

• Legislative (real) rescissions are back. In July, the House passed a package clawing back billions—including foreign aid and public media funds—signaling renewed appetite to cancel appropriations already on the books. CBS News
• The White House is pushing “pocket rescissions.” A late-August briefing touted an “historic pocket rescission package” aimed at canceling spending near the end of the fiscal year. GAO and many legal analysts say the “pocket rescission” tactic effectively sidesteps Congress and is unlawful under the Impoundment Control Act (ICA). The White House Government Accountability Office
• Process pressures are real. While 2 CFR 200.204 tells agencies funding opportunities should be open ~60 days and not less than 30 days absent exigent circumstances, we’ve seen periods of compressed timelines as agencies rush to issue or re-issue NOFOs—shrinking applicant prep time and depressing award competitiveness. eCFRGovInfo
• Context: The August 7, 2025 Executive Order on Improving Oversight of Federal Grantmaking also tightens agency oversight of NOFOs/awards and elevates drawdown controls—further increasing volatility for applicants. The White House

Three kinds of “rescissions” you need to monitor

1. Legislative (Real) Rescissions Congress cancels (“rescinds”) previously appropriated budget authority through statute. Track bills and conference reports closely; when enacted, funding truly disappears. (See BPC’s explainer, CRS primers.) Bipartisan Policy CenterCongress.gov
2. Pocket Rescissions (Contested) The executive proposes rescissions so late in the fiscal year that funds lapse before Congress can act—functionally canceling them. GAO describes this as bypassing Congress’s power of the purse and has flagged it as unlawful under the ICA. If attempted, expect litigation and operational uncertainty for agencies and recipients. Government Accountability Office
3. Process Rescissions (De Facto Reductions) Not a legal term—but a useful operational one. These happen when application windows are shortened, review burden spikes, or pre-issuance bottlenecks push timelines into impractical territory. Even without a formal rescission, fewer applicants can realistically compete or comply—so available dollars effectively shrink for many. 2 CFR 200.204’s 60-day/30-day norms show what “reasonable” looks like; deviations matter. eCFRGovInfo

Why this matters to state & local governments (and COGs)

• Budget and service risk: Real rescissions can pull funding mid-cycle. Pocket/process rescissions can strand projects at the starting line, with staff time sunk and match dollars tied up.
• Equity impacts: Compressed windows disproportionately hurt smaller/rural jurisdictions and subrecipients without bench capacity.
• Audit exposure: Rapid pivots increase the chance of approval gaps, documentation lapses, or misaligned drawdowns under tighter oversight. The White House

What to do now: a 10-point playbook

1. Stand up a rescission tracker. Monitor three lanes: (a) bills with rescission riders, (b) executive/OMB rescission messages and budget execution bulletins, (c) agency NOFO cadence (window length vs. historical norms). Use alerts and a weekly huddle. Congress.gov
2. Score program exposure. Heat-map current awards by: end-of-term proximity, reliance on discretionary funds, statutory vulnerability, and prior delays. Prioritize stabilization plans for red-zone programs.
3. Scenario model the hit. Run low/med/high rescission cases and “process-loss” cases (e.g., a 15-day window). Identify impacts to services, subrecipients, and positions; pre-define cut or backfill options.
4. Pre-build application packets. Keep evergreen narratives, budgets, and attachments ready. If a window drops to <30 days, you’re not starting from zero.
5. Forecast watch. Require departments to follow Grants.gov forecasts and agency policy pages; flag when forecast-to-NOFO intervals shrink. grants.govHHS.gov
6. Strengthen drawdown discipline. Align documentation to the EO’s tighter expectations: reason codes, packeted evidence, approvals—so you can pivot awards without audit risk. The White House
7. Rehearse go/no-go speed. Adopt a 72-hour triage: eligibility fit, match, staffing, subrecipient readiness, and compliance hurdles; escalate quickly to leadership.
8. Coordinate regionally. Use your COG/metropolitan planning partners to share intel on windows and to package multi-jurisdiction projects quickly.
9. Protect subrecipients. Offer pre-application clinics and templates; compressed windows hit them hardest.
10. Document everything. Keep a contemporaneous log when windows are materially shorter than 30 days; it explains portfolio choices to auditors and electeds later. GovInfo

A constructive way forward

Regardless of politics, clarity and cadence are what grantees need. Transparent posting norms (near 60 days), early forecasts, and plain-language NOFOs make the system fairer and more efficient. Until that’s the rule—not the exception—states and localities should assume rescission risk can arrive via statute, executive timing, or process design, and manage accordingly.

Managing grants efficiently, without compromising compliance and integrity, can be a challenging task. If your organization is navigating the complexities of grant management, we can help you enhance oversight, streamline processes, ensure outcomes and reduce the risks of waste, fraud, and abuse. Reach out today to learn how our expertise in grants management can ensure your programs meet their goals, stay compliant, and make the best use of taxpayer dollars. 

Authored by: