Comments due July 13 for new OMB rule touching all counties

Key Takeaways

Federal grant changes loom with proposed OMB rule

Federal dollars touch all 3,069 counties — disaster management, public safety, transportation, housing, public health, workforce training, child welfare, public lands. All of it is governed by one rulebook: 2 CFR Part 200, the Uniform Guidance. 

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Comment by 11:50 p.m. ET July 13 on proposed rule

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On May 29, the president’s Office of Management and Budget (OMB) proposed the largest rewrite of this rulebook since 2013. It touches $1.1 trillion in annual federal funding, much of it flowing through state and local governments. As of press time, comments on this 400-page rule were due July 13, though NACo has communicated a need for an extension, given the scope of the proposed changes. 

There are four main risk areas county officials should review in detail now: 

OMB guidance becomes regulation. The rule reclassifies the Uniform Guidance from OMB guidance into a single government-wide binding statute, carrying what OMB itself calls independent “regulatory effect.” Guidance left flexibility for each department and program. This new one-size-fits all regulation does not — and future amendments would take effect government-wide the moment OMB issues them, it appears without separate agency rulemaking and federalism consultations with state and local governments. 

Termination gets easier, mid-project. The rule expands federal agencies’ discretionary authority to end an award that no longer fits “agency priorities” or the “national interest.” For a counties running core public services like disaster preparedness, public health, human services or a multi-year infrastructure project, this changes how confidently you can plan around federal dollars already budgeted and legal contracts already signed. And there is no clear due process or appeals process for a county to make adjustments or receive transparent clarity. 

Pass-through liability grows. Counties administering federal funds for special purpose authorities (including those of the county), municipalities, nonprofits, and regional partners take on new subrecipient monitoring and significant financial risks, alongside new E-Verify and other financial reporting requirements. So, counties would now hold more legal and financial risk on behalf of subgrantees. 

County assets carry federal strings — even without a federal funding nexus. This is a major risk area for counties and an easy part to miss in the proposal. Under a newly proposed “discriminatory event services” provision, any county or public entity that receives federal financial assistance for even one program would have to apply strict viewpoint neutrality to how unrelated events are held on any county owned property, from fairgrounds to libraries to parks, even if that specific facility gets no federal money at all. Viewpoint neutrality means the county cannot treat two events differently based on the message behind them. In practice, this cuts directly at fees and staffing: the rule bars charging additional or inconsistent security costs, fees, or insurance requirements based on an event's viewpoint. Inadvertently, this places liability on counties with having to evaluate the content of speech for events on public property. 

The OMB proposed regulations also expand the federal government’s openness to assist individuals in a “private right of action” against third parties, meaning a federal agency may, at its discretion, cooperate with individuals or organizations pursuing their own private causes of action or civil remedies, where those suits are based on a recipient's or subrecipient's failure to comply with the terms of a grant award or other federal regulation or law. 

Counties are governmental partners, not federal contractors. This distinction is not sentimental — it is the legal premise underneath our long-standing federalism system. The Unfunded Mandates Reform Act of 1995 and Executive Order 13132 on federalism both direct federal agencies to consult with state and local officials before imposing rules with substantial direct costs or effects on how the levels of government relate to one another, precisely because counties are distinct governmental partners that co-administer public programs. Counties are not a government contractor or vendor executing a federal procurement or services contract. 

The U.S. Supreme Court has addressed this subject many times over the years. In the 2012 case over the Affordable Care Act’s Medicaid expansion, Chief Justice John Roberts wrote that conditioning a state’s existing funding on acceptance of sweeping new federal terms crossed the line from persuasion into coercion — famously describing it as holding a gun to the state’s head.   

The dollar amounts in the Uniform Guidance rewrite are different, yet the underlying principle is the same: the federal government can attach strings to its money, but it cannot use that money to functionally dictate how a separate sovereign government runs its own affairs. 

A rule that reclassifies decades of guidance into binding regulation, expands termination authority with no due process or appeal process if terminated, and extends new conditions to locally owned property is worth measuring against that principle — not because counties expect a court to strike it down, but because the same federalism logic that shaped Roberts’ opinion is exactly what UMRA and Executive Order 13132 were written to enforce before a rule ever reaches a courtroom. 

Counties are not alone in raising these concerns. NACo is currently working with a bipartisan group of members of Congress and other state and local government partners to urge OMB to publish a fiscal impact analysis before finalizing the rule, showing how administrative cost shifts, especially for rural jurisdictions with limited grants-management capacity, would actually be affected. We are also advocating for OMB to engage in a separate consultation process with state and local intergovernmental partners and delay implementation until at least Oct. 1, 2027.  

We share the goals of improving government transparency and accountability, with a better focus on outcomes and impact. When the original Uniform Guidance took effect in 2014, OMB built in a two-year phased transition — one year before compliance applied to new awards, a second before it applied to existing ones. The current proposal, significantly broader in scope than that one, allows a fraction of that runway. An added year is not a delay for its own sake — it is the minimum time grantees like counties need to close out budget cycles, update internal controls, and receive clear guidance from county attorneys and auditors before being held to a rule this complex. 

Have your county attorney and auditors read the proposed rule, especially the termination, viewpoint-neutrality, and pass-through provisions. Give your feedback to NACo on the real-world impacts of this rule, from the good, the bad and the ugly. And be sure to file your comments with OMB and share copies with your congressional delegation.