Threading the needle to avoid a shutdown, Congress is set to pass the latest funding package, including fiscal year 2026 Transportation-Housing and Urban Development appropriations. Here’s what’s inside the compromise:
Last week, Congress looked like it was on track to pass a package of fiscal year 2026 funding bills, including the Transportation-Housing and Urban Development (THUD) bill, ahead of the January 30 deadline to avoid a government shutdown. After passing in the House on January 22nd, it looked like it was on its way to passing in the Senate, up until federal agents employed by the Department of Homeland Security (DHS) killed another American in Minneapolis. In response, Senate Minority Leader Schumer vowed to withhold Democrats’ votes for DHS funding unless new reforms to hold the agency accountable are included in law. With DHS funding tied together with several other “must-pass” funding bills in H.R. 7148 (THUD among them), Congressional leaders were in a difficult position to avoid a shutdown. However, late on January 29, Congress and the White House announced a deal to keep the government open by separating out the DHS bill and extending funding at current levels for two weeks to negotiate a deal on DHS accountability.
Congress now has to thread the needle to pass the funding packages on time, and there’s a chance there will be a brief government shutdown over the weekend as Congress negotiates policy provisions with holdouts (all outside of the scope of the THUD bill). Whatever funding package passes, and whenever it does, will likely contain the following fiscal year 2026 transportation funding details.
What’s in the bill, though?
When it comes to topline funding numbers for USDOT, the bill is a bipartisan compromise. However, it’s important to evaluate how this Congress got to those toplines.
While the Senate’s draft of the bill won out over the President’s and the House’s preferences for drastic cuts and potentially harmful policy riders, not every program or grantee was so lucky. Over $2.3 billion in Infrastructure Investment and Jobs Act funding was either rescinded or shuffled around in the bill, undermining trust and confidence in the supposed certainty expected with a five-year surface transportation reauthorization bill.
Transit
The bill provides $16.7 billion for the Federal Transit Administration (FTA). As expected, $14.6 billion would go to the Mass Transit Account for transit formula grants. On top of the formula grants, there is $211 million for Transit Infrastructure Grants. $147 million is for “Community Projects” earmarks proposed by members of Congress. This is a major increase over 2025, since last year’s funding bill included no money for earmarks. However, like with other areas in the bill, that increase is from rescinded and reprogrammed funding— in this case, nearly $10 million for ferry programs, $40 million from FTA oversight funds, and $138 million from the Federal Railroad Administration’s oversight and technical assistance funds from the Federal-State Partnership for Intercity Passenger Rail Program.
Congress falls especially short in supporting transit when it comes to the Capital Investment Grant program, which is intended to build out America’s project pipeline of major transit infrastructure improvements. The bill provides only $1.7 billion for the program, about $500 million below the funding levels set last year. It’s not all bad news, though, as some $194 million in old grant funding is repurposed exclusively for transit projects to support the FIFA World Cup and 2028 Olympics (fulfilling a wish of T&I ranking member Rep. Rick Larsen)—but again, that’s all old money. Overall, the bill cuts transit funding when you discount expected Mass Transit Account funds.
Passenger rail
The bill “provides” the FRA $2.9 billion for FY26, but Congress once again reached this top line by using various transfers of funding for the Federal-State Partnership program and CRISI grants. The bill took $150 million from IIJA advanced appropriations for the Federal-State Partnership Program, instead allocating $110 million to CRISI grants and $40 million to FY26 Federal-State Partnership Program projects. Compared to previous bills for fiscal years 2024 and 2025, the FY26 bill flips the script on how funding is distributed between Amtrak’s National Network and Northeast Corridor. The bill provides $850 million for the Northeast Corridor (a decrease of $291 million relative to FY25) and $1.57 billion for the National Network (an increase of $291 million relative to FY25).
Pulling from old, unobligated funding sources—includinga grant the administration cancelled for California High Speed Rail—the bill permanently rescinds nearly $1 billion in unobligated funds. This includes roughly $2 million in rail funding left over from appropriations made in the 109th through 114th Congresses, $14 million in Maglev grants from the 116th Congress, a massive $929 million made for California High Speed Rail from the 111th Congress, and finally $20 (yes, $20) for Amtrak funds originally appropriated in 1996, sending these funds back to the treasury.
Highway programs
Federal Highway Administration programs are funded at $65 billion, with $62.6 billion for highway formula programs and $2.4 billion for general fund programs. This is a major $1.34 billion increase over last fiscal year, and that increase mostly comes from $1.3 billion in reprogrammed funds.
National Electric Vehicle Infrastructure (NEVI) program funds are among the funds being traded for highway program earmarks in the bill. This comes after a judge recently ruled in favor of states seeking to use NEVI after funds were frozen by the administration at the start of last year. Over $503 million in NEVI funds that would have gone to state DOTs as formula funds are rescinded—but notably, this rescission is made in proportion to how much a state has obligated out of their first fiscal year of IIJA funding. That means states that were slower to obligate this funding for building electric vehicle charging infrastructure will lose more than those that moved fast. While that may potentially be a silver lining for state DOTs still eager to build out new electric vehicle chargers, EV adopters are losing out across the country as plans for a comprehensive national charging network are being surrendered to highway program earmarks. We estimate what that might look like here.
On top of that formula cut, $300 million will come out of NEVI’s little-discussed 10 percent discretionary grant set-aside for localities and states. Since the set-aside program was used to increase Round 1B and Round 2 Charging and Fueling Infrastructure Program funding awards, existing awardees under that program could be affected. The Charging and Fueling Infrastructure Grants program is among those we previously noted were slow to obligate under the Trump administration, with some funding at risk of expiring or already expired, so it’s likely these grantees never had a chance to spend their funding down. SMART grants, which funded things like advanced traffic signal management and autonomous and connected vehicles project pilots, were also slashed by over $200 million, likely affecting existing awardees.
Some oversight and common sense
In response to USDOT’s disruptive implementation of programs during its first year under President Trump’s second term, many of Congress’s policy provisions in the bill focused on improving transparency and oversight of the agency. Among other changes detailed below, the bill would require DOT to deliver Congress status reports on grants that have been awarded but not obligated—a huge issue throughout this past year since the administration took office and began either canceling or slow-walking grants that they don’t like.
While the only thing in this country stronger than law is the Trump administration’s willingness to bend (or break) it, the bill makes great efforts, especially given the composition of this Congress, to bring some much-needed transparency to DOT’s policies, processes, grant cancellations, organizational changes, and available data.
USDOT would be required to be more transparent in its actions, including by giving Congress advance notice before making cancellations, compiling details on cancelled or impacted grants, and putting together a report on the grant review backlog, including findings on how staffing reductions may have played a role in worsening delays. This backlog update requires a status update of all awarded but not obligated competitive grants and earmarks—something we’ve specifically advocated for with Congress over the past year. Additionally, old Notices of Funding Opportunity, grant award lists, and guidance from the administration must be kept online for at least ten years to ensure continuity between administrations.
One positive in the highway program is $30 million for reconnecting communities projects that lost their grant funding under the One Big Beautiful Bill Act. Unfortunately, those funds come at the expense of other rescinded programs and are available only for a handful of very large awards over $145 million. Additionally, the excessive 40 percent planning set-aside for the Safe Streets and Roads for All (SS4A) grants is reduced to 30 percent, freeing up millions for useful capital projects. (The final year of SS4A grant funding will open up this spring, with a likely June application deadline for implementation and planning/demonstration grant applications.)
Standing issues
So, while Congress seems to have threaded the needle to avoid another shutdown, the baggage from the previous shutdown remains unresolved. The Gateway Tunnel project, the largest transit project in the United States and an economically critical infrastructure connection in the Northeast Corridor, remains frozen at the President’s behest, with little justification. Obligation rates for competitive grant programs that the administration dislikes remain low.
If Congress fails to meet the deadline to pass the appropriations bills required to keep the government open, it’s not unlikely that the Trump administration will once again look to transportation program funding as another lever to pull to increase the pressure on Congressional Democrats to reach a deal. It certainly would not be the first time the administration has used the threat of withholding transportation funding to pressure states and federal funding recipients to conform to its priorities.
The post What’s in the tangled FY26 transportation spending bill? appeared first on Transportation For America.