Public Policy Update - July 23, 2026

Read a summary of recent public policy updates that may be of interest to North Carolinians with intellectual and other developmental disabilities (I/DD). This update is from July 23, 2026 and covers updates from the federal and state level on public policy that is of interest to the intellectual and developmental disabilities community. 

FEDERAL

Budget

The federal budget process stalled after the House passed only three appropriations bills out of the 12 that came out of committees. And on the Senate side, there was no progress on the budget due to no agreement on the total budget number. However, there has been other activity around funding.

Stopgap Measure

The week of July 20, 2026, the House passed a stopgap measure that would fund federal agencies at existing levels through December 4, 2026, in an effort to avert a potential government shutdown before the end of the fiscal year on September 30, 2026. The measure now heads to the Senate, where it faces long odds amid the chamber’s 60-vote threshold and potential Democratic opposition.

Emergency Supplemental Request

President Trump’s administration has requested a 87.6 billion emergency supplemental funding package to fund U.S. military operations against Iran, assist farmers, and respond to the Ebola outbreak. About $67.1 billion of the funding would be provided to the Department of Defense to refill military stockpiles; the remaining $20.5 billion would provide additional support for the U.S. Coast Guard, temporary economic assistance to farmers, international affairs and humanitarian assistance, the design and construction of a modernized Penn Station, and continued restoration projects on the National Mall. The Senate Appropriations Committee held a hearing to review the package July 21, 2026. 

Reconciliation 3.0 

The reconciliation process is what was used to pass HR1 (OBBB), which included significant Medicaid cuts. Reconciliation is a special legislative tool that can be used by the Senate for mandatory spending and only requires 51 votes instead of 60.  

House Republicans on Wednesday approved a $95 billion framework for a third budget reconciliation package that would boost funding for the Pentagon, provide agriculture aid, and provide money to encourage states to adopt voting restrictions. 

House Republicans managed to overcome internal disagreements and approve a budget framework for another reconciliation package ($95 billion) on July 22, 2026. This third budget reconciliation package would boost funding for the Pentagon, provide agriculture aid, and provide money to encourage states to adopt voting restrictions. 

This is only the first vote in a long, multistep budget reconciliation process, which requires that both the House and the Senate adopt the same budget framework. So now the process moves to the Senate, where it is uncertain whether there is enough support for a reconciliation budget.   

Federal Administration - Medicaid work requirements  

Last month, we covered the Centers for Medicare and Medicaid Services (CMS) interim final rule around the process for determining and proving someone is “medically frail” for exemption from new work requirements. It creates a more restrictive definition of “medically frail.” This new rule creates additional administrative burdens for the person and for the Medicaid program, and more people will lose access to healthcare.  

A coalition of officials from 25 states and Washington, D.C., including North Carolina, filed a lawsuit challenging recently released rules for Medicaid work requirements. In the lawsuit filed against CMS and the U.S. Department of Health and Human Services, the states allege that the Trump administration’s interim final rule is more restrictive than Congress intended. The complaint also names CMS Administrator Mehmet Oz and Health and Human Services Secretary Robert F. Kennedy Jr.  

All House Democrats sent a unified letter to CMS demanding that the administration reverse course on this rigid new rule.  

While the rules apply to the Medicaid expansion population, the I/DD community should be concerned and provide feedback: 

• Some people with I/DD may be in the expansion population and directly impacted.  
• Additional administrative and paperwork burdens to the Medicaid system can affect everyone on Medicaid. 
• It is an opportunity to point out that these rules go against the administration’s promise to protect all vulnerable populations. It is not being followed. 

Department of Justice and Olmstead 

In 1999, the Supreme Court in Olmstead vs LC recognized that people with disabilities have a ‘right to live in the world’ and states have an obligation to provide services in the community that promote integration. This ruling is the foundation of disability rights and so integral to the inclusion of people with I/DD in their communities.  

In the June Highlights & Hot Topics newsletter, we covered an opinion that was issued in June by the Department of Justice saying that federal law does not explicitly require states to provide community-based care for people with disabilities. The memo asserts that neither Title II of the Americans with Disabilities Act nor Section 504 of the Rehabilitation Act contains a strict "integration mandate" that forces states to serve people in community-based settings instead of institutions. This interpretation goes against current federal integration policy and signals a shift in enforcement regarding the Olmstead mandate. 

Following this, on July 20, 2026. the U.S. Department of Justice issued a notice clarifying that its long-standing guidance on enforcement of the ADA’s integration mandate and Olmstead v. L.C. is “not enforceable.” In other words, the Department of Justice will not rely on the guidance from Olmstead to enforce Title II of the ADA. This creates further uncertainty and anxiety among advocates and people with disabilities.  

While neither the opinion issued in June nor the notice issued in July carries the full force of law – neither takes away the Olmstead ruling or the ADA or Section 504 – there is a real fear that the rights of people with disabilities to live in their own homes and communities are being threatened. The guidance from Olmstead has been one of the strongest protections for people to remain in their communities and not be forced into institutional care. It is alarming that the federal government may not enforce these laws. 

Department of Education 

Last month, we covered some of the changes occurring within the Department of Education. Oversight of special education programs, transition services, and vocational rehabilitation is moving to the U.S. Department of Health and Human Services. Responsibility for investigating disability-related education civil rights complaints will move to the U.S. Department of Justice. Considering the Department of Justice’s recent interpretation of Olmstead, the protection of students with disabilities to receive Free and Appropriate Public Education (FAPE) under the Individuals with Disabilities Education Act (IDEA) is also a growing concern. Dividing the support and oversight of these educational services among other federal departments will create an environment where it is harder to know how to get help when a student’s needs are not being met.   

STATE 

Budget 

We finally have a budget in North Carolina! The legislature passed the $34.4 billion state budget on July 2, 2026, and it was signed by the Governor on July 7, 2026. Key investments included in the budget are raises for teachers, state workers, and law enforcement officers, as well as $700 million for ongoing Hurricane Helene rebuilding and relief efforts.  

Investments that impact people with I/DD include: 

• Fully fund the Medicaid rebase. 
• Restart the Healthy Opportunities Pilot, an innovative Medicaid initiative that addresses food insecurity, housing, transportation and other non-medical factors that influence health. 
• Fund the state's share of SNAP administration, helping maintain North Carolina's SNAP program, but shifts new administrative costs to counties.  
• Increase pay for direct support professionals (DSPs) - $21.3 million. 
• Increase rates for personal care services - $70.8 million.  
• Recipients of Innovations waiver and Traumatic Brain Injury waiver services will have no copays.  
• Provide additional funds for I/DD work training programs at community colleges. 

While the budget does not include funding for additional Innovations waiver slots,  

I/DD advocates were surprised and pleased to see the increases in pay for DSPs. The advocacy and education about the needs for DSPs has been effective! 

IOLTA Funds 

The Interest on Lawyers’ Trust Accounts (IOLTA) program has historically provided grants to more than 40 organizations across the state, including Disability Rights NC and Legal Aid of NC, in their work to secure and protect basic needs around housing, health care, and employment. The budget includes a provision that redirects IOLTA funds away from civil legal aid and moves funds toward criminal defense services. The funds for civil legal aid will drop dramatically from $12 million to less than $2 million per fiscal year. North Carolina is the only state in the country to make this shift. This is another area where supports to protect the rights of people with I/DD seem to be eroding.  

Lawmakers are scheduled to return to Raleigh on July 27, 2026.