By Kritika Agarwal
On Thursday night, the House passed the final four spending bills for FY26: Defense, Labor-HHS-Education, Transportation-HUD, and Homeland Security. The four bills will now be bundled together with the FY26 Financial Services General Government and National Security-State bills, which the House passed last week, into a six-bill minibus that will be sent over to the Senate.
The Senate will have until January 30 to pass the minibus in order to avoid a second government shutdown this fiscal year. (Three FY26 spending bills – the Energy-Water, Commerce-Justice-Science, and Interior-Environment bills – are currently awaiting the president’s signature.)
With the passage of the four bills on Thursday, the House yet again rejected the steep cuts to science and education that President Trump had proposed last year in his budget request.
The FY26 Labor-HHS-Education bill provides $47.2 billion for the National Institutes of Health as well as $1.5 billion for the Advanced Research Projects Agency for Health (ARPA-H). (The president had proposed an $18 billion cut to the NIH and a cut of more than $500 million to ARPA-H in his budget.)
The bill also limits the NIH’s use of a forward-funding mechanism to the same percentage of grants that the agency awarded multi-year funding to in FY25 – i.e. 39% of all new grants and awards. As AAMC explains, the NIH has used the forward-funding mechanism to make the entire budget for a grant available to grantees upon the initial award, as opposed to on an annual basis. Use of this mechanism in FY25 allowed the agency to make larger grants, but to an overall smaller number of grantees.
In addition, the bill provides $79 billion in discretionary funding to the Department of Education. It, again, rejects many of the cuts proposed to education programs in the president’s budget. The bill maintains the annual Pell Grant maximum award at $7,395 for the 2026-27 academic year and sustains current funding for Federal Work-Study programs, the Federal Supplemental Educational Opportunity Grant, and TRIO. Additionally, it includes $790 million for the Institute of Education Sciences (a reduction of $3 million from FY25 but much less than the $532 million cut proposed by the president in his budget).
The bill also instructs the Department of Education and all federal agencies that it entered into agreements with last year about the delivery of certain education programs to provide the committees with biweekly briefings on staffing transfers, implementation costs, metrics on the delivery of services, availability of technical support for programs to grantees, the issuance of Notices Inviting Applications or other funding opportunities, and more. Finally, the bill prevents FY26 appropriated funds to be “used for any activity relating to implementing a reorganization that decentralizes, reduces the staffing level, or alters the responsibilities, structure, authority, or functionality of the Budget Service of the Department of Education.”
- The FY26 Defense bill provides $838.7 billion in total funding to the Department of Defense, $8.4 billion more than President Trump had requested in his budget. The bill provides $145.9 billion for the department’s research, development, testing, and evaluation functions – $4.7 billion more than the FY25 enacted level.
Both the FY26 Defense and Labor-HHS-Education spending bills also contain language blocking the NIH, the Department of Health and Human Services, and DOD from arbitrarily capping negotiated indirect cost rates. (Indirect costs, also known as facilities and administrative costs, are real costs universities incur while conducting research on behalf of the American people. They typically include infrastructure and operating expenses.)
The Labor-HHS-Education joint explanatory statement and Defense joint explanatory statement accompanying the bills further outline congressional intent related to the statutory language on indirect costs.
Both statements acknowledge that there is “room for improvement in the system used to identify and recover indirect cost rates” and note that the Financial Accountability in Research (FAIR) model advanced by the Joint Associations Group on Indirect Costs (JAG) merits “further consideration.” The Labor-HHS-Education statement directs federal agencies and departments to “engage in discussions” with the appropriations committees on proposals to improve indirect cost recovery, including the FAIR model.
A compilation of all legislative language related to indirect costs in FY26 spending bills is available on the AAU website.
Kritika Agarwal is assistant vice president for communications at AAU.