EPA Suggests Major Budget Cut for FY 2026 | Insights
TL/DR –
The U.S. Environmental Protection Agency’s (EPA) budget proposal for fiscal year 2026 suggests a major shift in the federal government’s role in environmental policy and regulation. The budget would be cut by around 54%, from $9.14 billion in fiscal year 2025 to $4.16 billion in fiscal year 2026, and the workforce would be capped at 12,856 full-time positions, the lowest staffing levels in 40 years. The proposal argues for a “back-to-basics approach” that would reduce the cost of living, remove barriers for businesses, empower states, and focus on core statutory obligations, but the significant federal funding reduction could present challenges for state and local governments.
EPA’s Proposed Budget Cuts for FY 2026
The fiscal year (FY) 2026 budget proposal from the U.S. Environmental Protection Agency (EPA) redefines the federal government’s role in environmental policy. The budget would drop from $9.14 billion in FY 2025 to $4.16 billion in FY 2026, a 54 percent decrease. The number of full-time equivalent (FTE) positions would also be limited to 12,856 – the lowest in 40 years.
The proposal envisages “a return to common sense environmental policy” and a “back-to-basics approach”. It holds that states, Tribes, and local governments are best equipped to tackle their unique environmental challenges, consequently moving the focus of remaining funds towards Tribal capacity building.
EPA’s Five Priority Pillars and Infrastructure Cuts
The proposed budget highlights five priorities for 2026, namely ensuring clean air, land, and water; restoring American energy dominance; permitting reform and cooperative federalism; making the U.S. the Artificial Intelligence capital, and protecting and revitalizing American auto jobs.
Significant cuts have been proposed for state and local environmental infrastructure programs, most notably nearly 90 percent reductions in water infrastructure funding. Apart from three, all categorical grants to states would be completely eliminated.
Air and Climate Programs and Enforcement Policy
The budget proposal seeks to restructure the EPA’s Office of Air and Radiation, resulting in considerable cuts in air and climate programs. However, funding would increase for key priorities such as Stationary Source Deregulatory Actions, State Implementation Plan (SIP) Backlog, and Ozone-Depleting Substances (ODS).
EPA’s enforcement approach focuses on clear and substantial violations that cause significant harm. Major reductions include a 30 percent cut in civil enforcement, 49 percent cut in criminal enforcement, and the total elimination of enforcement funding for environmental justice purposes.
Superfund and Cleanup Programs
The Superfund remedial program would be entirely funded by the Infrastructure Investment and Jobs Act and the Inflation Reduction Act tax revenues. EPA’s Brownfields Program would witness a 50 percent cut.
Permitting Reform and Economic Analysis
The budget provides funds for a detailed employment analysis of rulemakings. Despite overall cuts, EPA proposes $8 million for an Integrated Environmental Strategies Program to improve permitting and environmental review processes while promoting economic growth.
Next Steps
Even if Congress rejects the projected funding reductions in the FY 2026 budget, ongoing staffing reductions will likely impact permit reviews, chemical and pesticide reviews, and rulemaking processes. Reduced federal enforcement may also lead to increased citizen suits and more aggressive state enforcement actions. Companies should monitor congressional appropriations processes closely and prepare for increased state-level regulatory activity and potential citizen suit enforcement actions.
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