Understanding the “Big Beautiful Bill” and Grant Spending
On July 4, 2025, H.R. 1—officially the “One Big Beautiful Bill Act” (OBBBA)— was signed into law. Passed via budget reconciliation to require only a simple majority in both chambers, it enacts sweeping changes across taxes, entitlement programs, discretionary spending (grants!), and federal contracts.
While most of the policy focus has centered on permanent tax cuts, Medicaid and SNAP cuts, and boosts to border enforcement, the bill also rescinds or reduces billions in discretionary grant funding across key programs—including infrastructure, research, environmental, health, and K-12 education grants.
Discretionary Grants: Program Rescissions and Research Cuts
💡 Grant Funding Rescissions
OBBBA rescinds unused or unobligated funds from prior discretionary grant programs, many authorized under previous legislation:
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Roughly $2.4 billion in obligated grants from the Neighborhood Access and Equity program (part of the Inflation Reduction Act) are clawed back—eliminating grants already awarded to local governments despite prior commitments.
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Additional rescissions target programs like environmental and climate justice grants, low-carbon transportation materials programs, and federal building assistance grants.
These sharp cuts effectively cancel grant funding already in the pipeline—stranding local project planners, communities, and non-federal partners.
🔬 Research and Training Grants
The bill mandates a 43% cut in research-related discretionary grants, deeply impacting:
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Basic and intramural research grants
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Researcher training programs
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Centers like the National Institute on Minority Health and Health Disparities, the Fogarty International Center, and others—all losing over $1 billion in fiscal support.
These reductions slow the pace of research, harm early-career scientists, and jeopardize federally funded studies across health, environment, and social sectors.
Discretionary Grant Impacts in Context
Lost Infrastructure and Community Investment
The rescissions to transportation, environmental, building, and community redevelopment programs directly undermine local infrastructure and revitalization efforts, especially in underserved areas. Communities relying on these grants now face delays or cancellations, reducing momentum on projects tied to equity, climate resilience, and urban renewal.
Reduced Federal-Local Partnership Capacity
Discretionary grants serve as a vital conduit for federal-state-local collaborations—funding education, environmental protection, research, workforce training, and community services. By rescinding large tranches of this funding, OBBBA significantly shrinks federal support mechanisms for local initiatives, exacerbating gaps in public services and innovation.
Academic, Research & Workforce Ripple Effects
With nearly half of discretionary research grant funding pulled:
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Universities and research institutions will see fewer federally funded studies and training slots.
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Early-career researchers may lose critical grant support for fellowships, bridge funding, or pilot projects.
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NIH, NSF, and HHS-funded institutes lose capacity for new initiatives and training.
Broader Federal Budget Picture
OBBBA’s discretionary grant cuts dovetail with its mandatory spending changes but target a separate slice of the budget. In the federal fiscal year 2024, discretionary spending (appropriated annually) made up roughly 25% of federal outlays, while mandatory spending—entitlements like Medicaid, Social Security, etc.—comprised the remainder.
The OBBBA rescission package—in addition to permanent entitlement rules—reduces discretionary grant funding that would otherwise flow through the FY 2026 appropriations process. These cuts are layered on top of earlier mandatory spending reductions, compounding pressure on communities, universities, and service providers that rely on grants.
Meanwhile, projections from the CBO expect OBBBA to add roughly $3.0–3.4 trillion to the federal deficit over ten years—even with discretionary rescissions.
Real-World Grants Affected
Infrastructure & Equity Grants
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Neighborhood Access and Equity program: $2.4 billion rescinded despite most funds previously obligated to local projects.
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Other environmental and infrastructure grant rescissions (climate justice block grants, low-carbon transport programs, etc.) stripped funding from projects still in early phases.
Education & Workforce Grants
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Pell Grant eligibility changes reduce federal aid coverage. Meanwhile, workforce Pell and performance-based grants are realigned using mandatory savings—further eroding discretionary grant pools.
Academic Research Labs
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Institutes focused on minority health, global health, nursing research, mental health, and integrative health lose over $1 billion in grants and research support.
Reacting to OBBA
The response to OBBBA has been swift and pointed. Advocacy groups, research universities, and local officials alike have voiced serious concerns about rescinding grants that were already awarded. Communities that had moved forward with planning now face sudden funding gaps, eroding trust in the federal partnership. Research leaders warn that the steep cuts to discretionary grants threaten the capacity of major institutions and disrupt the pipeline for early-career scientists. At the political level, representatives from districts that depend heavily on federal research or rural health programs are organizing pushback, highlighting the very real impact these decisions have on both innovation and community well-being.
The so-called “Big Beautiful Bill” makes deep cuts to the discretionary side of the federal budget, separate from its high-profile tax and entitlement provisions. For nonprofits, universities, and local governments, this means cancelled or reduced grants across infrastructure, education, research, and community development programs. These reductions do more than trim budgets; they disrupt projects already underway and stall initiatives once thought secure. While the bill is projected to add trillions to the federal deficit despite these cuts, the immediate consequence is felt most acutely at the community level where critical grant support is disappearing.
For regional stakeholders, the implications of OBBBA are practical and pressing. Organizations that rely on federal grants—whether for community redevelopment, climate adaptation, rural health, or minority-serving programs—must now reconsider timelines, budgets, and commitments. State and local agencies may be forced to develop contingency plans to keep projects alive without promised federal support. Because many of these changes can only be reversed through future legislation, communities across the country are left navigating uncertainty that could persist well beyond 2025.
Final Thoughts
For Appalachia and other underserved regions, where federal partnership has historically filled vital gaps, these cuts are not abstract—they are felt in cancelled contracts, delayed projects, and fewer services. Frankly, as an Appalachia native whose home region was ravaged by Hurricane Helene less than a year ago, I am angry and deeply concerned about the sustainability of our recovery.
While much of the national conversation frames OBBBA as an entitlement and tax overhaul, the changes to discretionary grants deserve equal attention. By clawing back previously awarded funds and slashing future research and infrastructure support, the bill fundamentally reshapes how federal, state, and local partners work together. For nonprofits, local governments, and community-based organizations, the stakes are high: the stability of federal grant programs has always been a cornerstone of planning and sustainability. As OBBBA is implemented, staying informed and adapting quickly will be essential for organizations that depend on these resources to serve their communities.
At KFA Nonprofit, we are committed to tracking these developments closely and will continue doing our level best to keep you informed, equipped, and prepared to navigate the shifting grant landscape.