Why It Matters

Congress scrutinized how the Trump administration is using a 94-year-old law to shuffle federal spending with minimal oversight. The House Appropriations Subcommittee on Financial Services and General Government held an oversight hearing on the Economy Act on September 15, examining whether the statute has become a tool for executive branch flexibility that sidesteps appropriations controls.

Ranking Member Steny Hoyer (D-MD-5) highlighted the tension: the administration moved funds from the Consumer Financial Protection Bureau to pay Department of Government Efficiency employees and shifted Education Department functions to other agencies, all under Economy Act authority.

The Big Picture

The Economy Act, enacted in 1932 during the Great Depression, was designed to help agencies save money through shared contracts and reduce redundant spending. The law authorizes one agency to purchase goods and services from another using reimbursable agreements. But nearly a century later, it has become a vehicle for broader executive power, one that Congress increasingly views as eroding its spending authority.

The Trump administration's use of interagency agreements has accelerated the debate. The Education Department has entered into 14 interagency agreements with six other federal agencies, outsourcing critical functions under Economy Act authority. School districts and states have filed lawsuits challenging these arrangements on constitutional and statutory grounds. Congress responded by embedding guardrails in the Consolidated Appropriations Act, 2026, requiring biweekly briefings on implementation and placing limits on fund transfers.

According to analysis by Akin Gump, members are asking a fundamental question: how much spending flexibility is Congress ceding to the executive branch, and what can be reclaimed?

What They're Saying

Witnesses Shirley Jones, Managing Associate General Counsel at the Government Accountability Office, and Dominick Fiorentino, an Analyst in Government Organization and Management at the Congressional Research Service, provided the legal framework. The GAO's formal report, released the same day, stated plainly: the Economy Act does not authorize an agency to circumvent statutory limitations on its use of appropriated funds. The Congressional Research Service added in another report that an agency "may not ignore" a statutory mandate.

Committee Chair Dave Joyce (R-OH-14) emphasized that Congress needs to understand the Economy Act's limitations and strengths to ensure it remains effective.

Political Stakes

Litigation over the interagency agreements continues, with amended complaints from school districts filed in late November 2025 and from state plaintiffs in early January 2026. Congress has already signaled displeasure through the Consolidated Appropriations Act, 2026, which strongly condemned and discouraged the transfer of key programs out of Education.

For appropriators, the hearing is about reclaiming institutional power. Democrats proposed significant guardrails in 2025 but lacked bipartisan support for broader protections. Still, Congress managed to include targeted protections in the 2026 appropriations bills. The CRS report on Department of Education Interagency Agreements (LSB11392) explicitly outlined legislative options for Congress, including whether to omit Section 512-like language or enact an amended form of the limitation that either expressly bars or expressly allows covered agencies to transfer discretionary funds.

The Trump administration has used Economy Act authority across government. Appropriators now face a choice: strengthen oversight through legislation, tighten reporting requirements, or accept that the executive branch has a tool to move resources with limited congressional visibility.

Yes, But

The Economy Act does serve legitimate purposes. At its best, the statute promotes efficiency and reduces duplication by allowing agencies to leverage existing contracts and avoid redundant work. Rep. Joyce acknowledged this, noting that Economy Act transactions occur throughout government for a variety of purposes and produce substantial benefits.

The challenge lies in distinguishing efficient interagency coordination from executive overreach. The GAO confirmed the statute's legitimate scope: it applies broadly to federal entities for procurement of goods and services. But there is no publicly available government-wide data on agency use of the Economy Act, and no requirement that agencies regularly report on their transactions to Congress. Interagency agreements can obscure how appropriated funds are ultimately used and make it difficult for Congress to track spending decisions across agencies.

What's Next

No associated legislation has been identified in connection with the hearing as of now. But the subcommittee's inquiry signals that Congress is weighing legislative options. The CRS report provided a roadmap: members could amend the Economy Act's limitations, tighten reporting requirements, or restrict which agencies can use interagency agreements for certain functions.

The biweekly briefings mandated by the Consolidated Appropriations Act, 2026 will provide ongoing data on Education Department and partner agency compliance.

The Bottom Line

Congress is waking up to the Economy Act as a flashpoint in the broader battle over executive spending power, and appropriators want answers before more agencies slip beyond their oversight.

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