AV Issue Brief
The policy gears of the nation’s capital are shifting into overdrive to move legislation intended to lower taxes, increase spending for Trump administration priorities like border security, reduce entitlement spending, and extend the U.S. debt limit. While those efforts are garnering substantial attention, other budgetary developments are unfolding outside of the legislative process that could prove to be highly consequential.
Although obstacles to keeping the government open for the remainder of this fiscal year were removed in March through enactment of a Continuing Resolution (CR), funding-related challenges remain in play. Actions spearheaded by the White House’s Department of Government Efficiency (DOGE) — including federal agency staffing reductions, contract terminations, and other administrative actions — are not only disrupting government operations. They’re impacting budgeting in ways that raise significant legal and constitutional concerns.
Does the ICA Help or Hinder Presidential Budgeting?
The Impoundment Control Act of 1974 (ICA) lays out a legal path for the president to impound (or not spend) funds provided through the legislative process. The law specifies that whenever the president has identified funds he believes should not be spent, a special message must be sent to Congress to explain the rationale. Congress then has 45 days to consider the proposed change in spending policy using expedited procedures that limit debate time. Those procedures effectively eliminate the prospect of a Senate filibuster and require only a simple majority for passage. If such legislation is not enacted, the funds must be made available for obligation.
President Donald Trump has contended that the ICA is an unconstitutional encroachment on his power to execute laws effectively and should be repealed. Administration actions to reduce spending has been a hallmark of the initial months of the new president’s tenure. However, some funding cuts are being pursued in ways that could fail to comply not only with the ICA but with mandated spending levels contained in appropriations law.
Executive orders and directives have been issued to pause or freeze funding for various programs, particularly those related to climate change, foreign aid, and diversity, equity, and inclusion initiatives. Perhaps not surprisingly, legal challenges to such orders have arisen. Litigants, however, have achieved early victories to secure stays and restraining orders. A recent report from Governing for Impact points out legal claims could be predicated on violations involving: 1) the ICA; 2) appropriations statutes mandating the expenditure of funds; and 3) constitutional principles concerning Congressional powers.
Office of Management and Budget (OMB) Director Russell T. Vought has expressed concerns that the ICA has curtailed the president’s authority. His position centers on the notion that an expansive exercise of Congress’ power of the purse infringes on the president’s constitutional authorities. He further contends that the ICA is “unworkable in practice and should be significantly reformed or repealed.”
Nevertheless, the courts and a growing body of academic literature show little support for unilateral presidential impoundment authority and call into question whether any significant new presential budgeting powers would flow from ICA repeal. As explained by Philip G. Joyce, Professor of Public Policy at the University of Maryland: “The repeal of the ICA also does not, by itself, mean that impoundments would be legal, as the law did not make them illegal, but simply provided a fast-track mechanism for consideration of impoundments.”
Impoundment Resurrection
Impoundment concerns have largely been dormant since the Nixon administration. But now, as explored in a post for Federal Budget IQ by Charles Kieffer, FY 2025 appropriations have shifted the balance of budgetary power to the president through a lack of detail in the CR and the potential for funds to be moved, cancelled, or impounded.
In fact, it appears funds are being withheld from expenditure across the government. Democratic members of the appropriations committees in both the House and Senate have published an extensive list of funding they contend is not being spent, as required by law.
Some of those potential impoundments have occurred more transparently than others. For instance, an executive order was signed by President Trump on March 14, directing seven agencies to stop “non-statutory components and functions to the maximum extent consistent with applicable law.” While each of the affected agencies was included in the funding bill signed the next day, the executive order remains in place with some operations halting and staff being laid off.
For activities not subject to an executive order, it has been difficult to get information about how and whether funds are being spent. A statutorily required public database maintained by OMB showing how funds have been apportioned to agencies for expenditure had been a valuable source of information. (Apportionment is the process by which funds are portioned out to agencies by OMB over a period of availability.) But that website has been deactivated, an action that is the subject of a lawsuit brought against OMB by Citizens for Responsibility and Ethics in Washington.
Withholding funds for policy reasons, in the absence of a formal rescission request, may violate the ICA and infringe on Congressional power of the purse responsibilities. Executive orders to freeze funding, such as this one to stop funding certain activities of the Corporation for Public Broadcasting have included a clause directing that funding be canceled “to the maximum extent allowed by law.” If funding for activities targeted by such orders is provided in current-year appropriations (a law), then cancellations can only be realized through subsequent legislation, not by unilateral executive action.
A murkier form of impoundment may be occurring across the government as part of the DOGE-led campaign to downsize the federal workforce. While the president enjoys broad constitutional powers to administer executive branch operations, the Government Accountability Office (GAO) has asserted workforce reductions could effectively constitute an impoundment. GAO contends that certain types and magnitudes of staff cuts could make it impossible for an agency to deliver programs in a responsible manner that have been funded through the legislative process.
As the fiscal year ticks toward its close, it is unclear what happens if funds have not been made available before they expire. GAO has ruled that sending a rescission package late in the fiscal year — and refusing to release the funds in a manner to allow for their prudent obligation before expiration — would constitute an ICA violation.
GAO to the Rescue?
GAO is given duties in the ICA to provide impoundment oversight. The head of GAO, the Comptroller General (incidentally, whose term expires at the end of the year), must review each impoundment-related special message the president sends Congress. If legislation is passed by the Congress and signed by the president, the withheld funds are cancelled — otherwise they must be spent. The Comptroller General is also empowered to bring a suit to compel the release of any funds being withheld from expenditure that are required to be spent.
GAO is required to notify the Congress of any impoundment actions where the president has failed to follow the statutory procedures to withhold funds. That notification would begin the 45-day period for Congress to consider whether to approve any such impoundments.
At a hearing of the Senate Appropriations Legislative Branch Subcommittee on April 29, 2025, Comptroller General Gene Dodaro indicated GAO has 39 impoundment investigations underway. He stated GAO has been attempting to get information from agencies about their rationale for not spending appropriated dollars but only three agencies have cooperated. He indicated OMB has not been responsive.
While the ICA empowers GAO to investigate potential impoundments and to bring suit to compel spending, the statute does not articulate a specific authority for GAO to obtain data and access systems to ascertain whether such infractions are occurring. GAO has informed OMB that many of its ongoing ICA inquiries are impeded because the apportionments website is no longer available and has requested that the website be reinstated consistent with legal requirements.
Complications Getting to FY 2026
With just four months remaining in FY 2025, substantial legislative action on FY 2026 funding is needed to keep the government open. Under the best of circumstances, it is exceedingly rare for the Congress and the president to complete budget making on time (a feat not accomplished in the 21st century). If the president and Congress cannot reach agreement on appropriations or stopgap measures to keep the government running into the new year, a shutdown would result.
Congressional appropriators will be challenged to determine whether and how agencies have spent current-year funds to inform next-year decisions. While the full-year CR requires agencies to submit FY 2025 spending plans by April 29, it does not appear that deadline was universally met. While President Trump made a high-level 2026 budget request to Congress on May 2, few operating details were provided. A subsequent submission is expected to provide more explanation and supporting information. However, continuing disruptions in executing current year appropriations likely means that only rough order of magnitude spending estimates will be included.
With other budgetary matters filling the legislative docket this summer, a lack of progress on appropriations could again force Congressional Democrats to face the dilemma of whether to negotiate or block funding for the new year. A decision to support the FY 2025 funding measure angered some in the party, but the alternative of experiencing a shutdown with a president comfortable testing the limits of emergency powers carries risks.
The Other Power of the Purse Statute — The Antideficiency Act
Besides the ICA, Congress exerts budgetary power through a statute that has been in force for more than 150 years, the Antideficiency Act (ADA). Its primary purpose is to ensure the executive branch does not commit to spending money unless funding has been provided through the legislative process. It also seeks to prevent agencies — through the use of OMB-directed apportionments — from spending at rates that would exhaust budgetary resources prematurely, thereby potentially requiring a need for supplemental appropriations. Importantly, and unlike the ICA, willful violations of the ADA are subject to administrative and criminal penalties.
As explored by Eloise Pasachoff in her 2024 Georgetown Law article, Modernizing the Power of the Purse Statutes (2024), the president holds significant power to determine which activities can continue in the absence of appropriations. Those include initiatives authorized by law, such as in advance appropriations and activities undertaken pursuant to the President’s constitutional powers.
During shutdowns, OMB approves agency shutdown plans and determines which employees and activities are exempt from the ADA (the term “essential” is often incorrectly used). But transparency is lacking. Shutdown plans often lack the necessary granularity for meaningful Congressional scrutiny. Further, legal interpretations regarding permissible agency actions during shutdowns are not consistently made public.
As a result, a shutdown carries with it a unique set of circumstances under which a president can exercise substantial discretion in determining which portions of the government to deem excepted services and keep open.
The Need for Reform
As with other weaknesses in federal budgeting (e.g., debt limit showdowns, government shutdowns, reconciliation measures that increase debt), reforms are needed to ensure not only prudent and effective fiscal management but adherence with constitutional mandates setting responsibilities for the legislative and executive branches. While Article II of the Constitution gives the president the responsibility to ensure laws are faithfully executed — including budget execution — Article I provides Congress with the power to provide those resources and to conduct oversight. Changes to budgetary procedures, including those stipulated in the ICA and ADA, would best be considered in the context of a broader reimagination of budgeting — as was done in 1974.
Sensible reforms to the ICA and ADA have recently been proposed. Legislation, such as the Congressional Power of the Purse Act in the 118th Congress, would strengthen legislative branch control over federal spending by amending the ICA. Such legislation would empower Congress by improving budget execution transparency and reporting requirements, bolstering oversight (including by GAO), strengthening checks on presidential emergency spending, requiring advance notification and litigation options for impoundments, and establishing penalties for non-compliance.
In her 2024 Georgetown Law article, Pasachoff argues that the existing statutory framework governing Congress’s power of the purse is outdated and inadequate for addressing contemporary fiscal challenges and executive branch actions. She proposes modernizing the power of the purse statutes by expanding consideration to cover a wider range of executive branch actions beyond impoundment (e.g., reprogramming, administrative delays, and strategic interpretations of appropriations laws). She suggests strengthening enforcement mechanisms potentially to include automatic triggers for review, enhanced GAO authority, and clearer legal remedies for violations. She also proposes a number of reforms aimed at improving transparency and information sharing, better defining key terms used in budgeting statutes, and enhancing the ability of Congress to monitor and respond to executive branch actions related to spending.
Any potential reforms to the ICA would likely spark debate regarding the balance of power between the branches in the budgetary process. Proponents of reform would argue for strengthening Congressional authority over spending, while opponents might express concerns about hindering the president’s ability to manage the government effectively and to achieve cost efficiencies.
The Road Ahead
Despite the enactment of a funding agreement for FY 2025, the U.S. budgetary situation remains volatile and uncertain. That condition results from a convergence of factors: Executive branch actions to withhold funds from expenditure (and resulting legal challenges to those actions); disputes over the scope and interpretation of the power of the purse statutes; and the need to put FY 2026 funding in place without fully understanding how the current year budget is being administered.
The Trump administration’s aggressive approach to budget execution, including withholding appropriated funds and reducing staff levels, has raised serious legal and constitutional questions about the balance of power between the executive and legislative branches. Disputes over the application of the ICA, which lacks explicit penalties for noncompliance, coupled with a lack of transparency in agency spending and legal interpretations further complicates the matter.
As the nation’s attention in mid-2025 turns to critical legislative battles over taxes, mandatory spending, and the debt limit, the basic funding structures — discretionary appropriations — used to operate wide swaths of the federal government cannot be ignored. The withholding of funds and related difficulties in obtaining timely and detailed information on agency spending, the deactivation of an important transparency tool, and the potential for a government shutdown in October threaten to undermine the orderly functioning of government.
Ultimately, these ongoing budgeting challenges highlight the need for Congress and the president to work together to follow constitutional and statutory budgeting procedures, enforce appropriations law, and ensure greater accountability and transparency for American taxpayers.
This brief was authored by Doug Criscitello, a program integrity fellow in the Public Finance group at Arnold Ventures.
