The outlook for a third budget reconciliation package has weakened. Importantly, the proposal still does not include instructions for additional Medicaid funding cuts, a key concern for many providers.
Senate Republicans were unable to secure enough support for a budget resolution before leaving for the August recess. After discussions with President Trump, they agreed to postpone consideration until at least September. While Senate leaders continue to argue that additional defense and other spending priorities will eventually require a reconciliation bill, the package’s prospects before the November elections now appear increasingly uncertain.
Senate Approves CR, Setting Up House Negotiations
The Senate overwhelmingly approved a bipartisan continuing resolution (CR) that would fund the federal government through December 11, while the House has already passed a CR running through December 4. Given the broad bipartisan support for avoiding a shutdown, some version of a CR is widely expected to pass before the October 1 funding deadline. The remaining question is whether the House accepts the Senate bill or negotiates changes before a final package is sent to the President.
Senate CR Would Block Controversial OMB Grant Rule
Of particular importance to nonprofit organizations and service providers, the Senate bill includes language championed by Senate Appropriations Committee Chair Susan Collins (R-ME) that would block implementation for the duration of the CR of the Office of Management and Budget’s proposed overhaul of federal grantmaking rules. The proposed rule would give federal agencies significantly greater authority to change grant conditions, terminate awards, or withhold funding, raising concerns that grant decisions could become politicized. The Senate provision would prevent the administration from finalizing those changes while the stopgap funding measure remains in effect, setting up a likely year-end debate when Congress revisits government funding.
What Comes Next?
For now, the CR appears considerably more likely to become law than Reconciliation 3.0. Senate leaders have acknowledged that September will be crowded with funding negotiations and other legislative priorities, making it difficult to move a major reconciliation package before the election. The delay could also complicate consideration of a potential Budget Reconciliation 4.0 later this year, as Congress may have limited time to simultaneously pursue both a revived Reconciliation 3.0 effort and a new FY 2028 budget resolution. For providers, the immediate focus remains government funding and preservation of the Senate language temporarily blocking OMB’s proposed changes to the federal grantmaking process.
Sarah Dobson is Senior Director of Advocacy and Public Policy at Lutheran Services in America.