Feb. 9 Federal Update: Congress Reaches a Funding Agreement

Following a temporary, partial government shutdown, Congress passed five full-year funding agreements alongside a temporary continuing resolution for the Department of Homeland Security. 

The appropriations legislation encompasses the Departments of Health and Human Services, Education, Labor, Transportation, and Housing and Urban Development, extending their funding through the end of the fiscal year, Sept. 30.  

The funding agreement contained notable increases, including for homeless assistance grants, Head Start, and the Child Care and Development Block Grant. It also required HHS to ensure that disbursements through the Payment Management System are processed within 5 business days. Any delays must be reported to Congress, along with an explanation of the circumstances. It extended Medicare telehealth flexibilities through the end of 2027, increased funding for Community Health Centers, and removed certain age restrictions under Medicaid’s optional buy-in groups for working adults with disabilities.

Additionally, the appropriations bill required that the Department of Health and Human Services report staffing levels to Congress, ensuring they retain sufficient staffing to fulfill their statutory responsibilities in a timely manner. Any reorganizations will need to be made publicly available to allow for an independent review. Notifications must be made at least 60 days before any steps are taken to begin the reorganization. 

However, the Department of Homeland Security’s funding agreement will expire Feb. 13. The legislation has sparked strong debate in Congress as representatives diverge over legislative guardrails to regulate immigration enforcement. If representatives fail to reach an agreement, the Department’s funding will lapse, affecting the agencies within, including the Federal Emergency Management Agency. 

HHS Announces Investment in Recovery Initiatives Following a Recent Executive Order 

Following an executive order to coordinate the federal government’s response to substance use disorder, HHS announced a comprehensive plan to strengthen prevention and expand treatment through two primary initiatives: the STREETS Initiative and the Assisted Outpatient Treatment Grant Program.  

The Safety Through Recovery, Engagement, and Evidence-based Treatment and Supports (STREETS) Initiative will fund targeted outreach, psychiatric care, medical stabilization, and crisis intervention, while connecting Americans experiencing homelessness and addiction to stable housing with a clear focus on long-term recovery and independence.  

Additionally, the Assisted Outpatient Treatment (AOT) grant program is designed to support adults with serious mental illness. AOT is a civil court-ordered, community-based outpatient mental health treatment program for adults with serious mental illness who are unable to engage with conventional outpatient treatment and are unlikely to be able to live safely in their community.  

The STREETS Initiative and AOT grant announcements coincide with SAMHSA’s $794 million first allocation of 2026 annual block grant awards. The grant will direct $319 million to support comprehensive community mental health services for adults with serious mental illness and children with serious emotional disturbance. Additionally, $475 million is allocated to the agency’s Substance Use Prevention, Treatment, and Recovery Services Block Grant program to prevent and treat substance abuse. 

ACF Launches New Public Dashboard on State Child Welfare Performance 

On Jan. 26, ACF announced a new public dashboard showing state-by-state performance data on critical child safety and permanency outcomes. The dashboard presents seven statewide data indicators: two safety indicators examining whether children are protected from abuse and neglect once involved with the child welfare system, and five permanency indicators that evaluate whether children achieve stability and permanency in their living situations. ACF hopes the platform will enable states to identify, collaborate on, and scale best practices to further innovation in child welfare. 

CMS Announces Selection of Drugs for Third Cycle of Medicare Drug Price Negotiation Program 

On Jan. 27, the Centers for Medicare & Medicaid Services (CMS) announced the selection of 15 high-cost prescription drugs covered under Medicare Part D and medications payable under Medicare Part B for the third cycle of the Medicare Drug Price Negotiation Program. The medications treat a variety of conditions, including cancer, psoriatic arthritis, and human immunodeficiency virus type 1 infection. 

Negotiations with participating drug companies will take place in 2026, and any negotiated and renegotiated prices will become effective Jan. 1, 2028.  

The announcement follows federal guidance clarifying pathways for pharmaceutical manufacturers to offer lower-cost prescription drugs directly to patients, including Medicare and Medicaid enrollees. Additionally, TrumpRX was recently announced, a direct-to-consumer website that offers individuals access to discounts on several medications. While the discounts are currently offered primarily for fertility and weight loss medications, the Administration expects to announce additional drugs soon.

Together, the actions work to increase healthcare accessibility during a critical period of growing challenges in obtaining affordable coverage. While additional time is needed to understand the impact of expired Affordable Care Act subsidies, early federal and state estimates show drops in enrollment.

Departments of Labor and Education Issue Guidance for State Plans to Align Education and Workforce Development Systems 

The Department of Labor recently issued a Training and Employment Guidance Letter outlining the priorities, modification requirements, submission process, and deadline for the required modification of the Workforce Innovation and Opportunity Act (WIOA) Unified and Combined State Plans for PY 2026 and PY 2027. The guidance is intended to simplify processes for states, integrate stakeholder engagement, and better align education with sector needs.  

The departments expect more states to submit Combined State Plans with partner programs, including Perkins V Career and Technical Education. The original deadline for State Plan modifications was March 3 but has been extended to April 30 to allow flexibility and promote greater alignment.  

ACF Expands Access to Medications for Opioid Use Disorder for At-Risk Families 

On Feb. 2, ACF announced that buprenorphine, methadone, and naltrexone are now approved as prevention services eligible for funding through Title IV-E. Each of the medications was approved by the Food and Drug Administration as Medications for Opioid Use Disorder (MOUD). 

States and tribes can now receive a 50% federal match to provide buprenorphine, methadone, and naltrexone to parents when children are at imminent risk of entering foster care but can remain safely in the home or in a kinship placement with access to these treatments. 

The Assistant Secretary issued a corresponding letter. Meanwhile, the Children’s Bureau has shared related language jurisdictions may use to amend their Title IV-E Prevention Plans. 

HUD Orders Immediate Citizenship Verification for All Tenants in HUD-Funded Housing Nationwide 

On Jan. 23, the Department of Housing and Urban Development (HUD) announced that all Public Housing Authorities (PHAs) and owners participating in HUD-funded housing are required to review their EIV-SAVE Tenant Match Report, verify that they have accurately reported individuals’ citizenship or immigration status to determine eligibility, and initiate corrective actions. PHAs and owners who fail to comply with the established requirements by Feb. 22 will be subject to sanctions.   

Departments of Education and Treasury Release Joint Fact Sheet on the Education Freedom Tax Credit 

The Education Freedom Tax Credit created by the recent reconciliation bill, H.R. 1, enables taxpayers to claim a federal tax credit of up to $1,700 for contributions to Scholarship Granting Organizations (SGOs).   

Scholarships may be directed toward any qualified education expense of an eligible student, whether they attend a K-12 public, private, or charter school. Examples include tuition for students to attend private schools of choice, tutoring at public schools, and support services for students with disabilities.  

For further information, the Departments of Education and Treasury released a joint fact sheet.  

Final Rule Reduces Civil Service Safeguards for a Broad Swath of Policy Federal Employees 

The Trump administration recently finalized a rule to improve employee accountability and address performance management challenges across the federal workforce. However, in amending their status, an estimated 50,000 federal workers will experience the loss of essential civil service safeguards and whistleblower protections. The rule also facilitates the administration’s ability to terminate their employment as the new status more closely mirrors that of political appointees.  

The Office of Personnel Management is now accepting comments.

ACF Releases Funding Update for SSBG and CBG for Fiscal Year 2026 

The Office of Community Services announced the release of the first quarter and 30 days funding release for the Social Services Block Grant (SSBG) and Consolidated Block Grant (CBG) for Fiscal Year 2026.

The SSBG allocation chart details each grant recipient’s allotment.

ACF Publishes Issue Brief Regarding TANF Contingency Fund

In January 2026, ACF published an issue brief examining the TANF Contingency Fund, which provides temporary supplemental funding to states during economic downturns. States qualify according to unemployment rates or Supplemental Nutrition Assistance Program (SNAP) caseload growth relative to fiscal year (FY) 1994 or 1995 baselines.

This brief examines how the Fund’s SNAP caseload benchmark and maintenance-of-effort (MOE) requirement hold the potential to result in routine eligibility, regardless of economic distress, and funding concentrations among a small number of states. 

The brief was published near the release of fiscal year 2024 TANF and MOE spending and transfers.

Sector Updates from the Judiciary  

Federal Court Upholds Asylum Fees 

A previous court order prevented agencies from implementing fees created by the recent reconciliation bill, H.R 1, because of inconsistencies in the policies. The U.S. District Court for the District of Maryland recently overturned the ruling, determining federal agencies maintained a uniform interpretation of asylum fees. 

The verdict follows a policy memo issued by the Executive Office for Immigration Review, within the Department of Homeland Security, offering further guidance regarding required payments of annual asylum fee for individuals with claims pending for one year between July 5 and Sept. 30.

Federal Court Temporarily Blocks DHS Termination of Haitian Migrant Protections 

The US District Court for the District of Columbia temporarily paused federal efforts to remove deportation protections for Haitian immigrants. Individuals with Temporary Protected Status (TPS) will retain their lawful status and employment authorization as litigation continues. 

As its title suggests, TPS is a temporary immigration status provided to nationals of certain countries who cannot return home safely, often due to conflict, environmental disasters, and epidemics. Foreign nationals with TPS may stay in the US for up to 18 months with legal work authorization.   

The order arrived shortly after the District Court for the District of Massachusetts stayed the termination of TPS status for Ethiopian immigrants. Approximately 5,000 TPS recipients may lawfully remain in the US pending litigation as a result.

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