What Happened?
A 93-year-old budget law is at the center of a fresh fight between Congress and the White House over who controls federal spending. The Economy Act, passed in 1932 to help agencies share resources and cut waste, lets one federal agency pay another to do work on its behalf. The House Appropriations Subcommittee on Financial Services and General Government held an oversight hearing on Sept. 15 to examine whether that tool has grown into something far broader than Congress intended. [](#ngr-a7031b7d-5e9b-4e61-bbb0-975ef09ef4ac)
The Trump administration used the law to move money from the Consumer Financial Protection Bureau to pay Department of Government Efficiency employees and to shift Education Department functions to other agencies. The Education Department alone entered into 14 interagency agreements with six other federal agencies under Economy Act authority, according to the Legis1 report on the hearing.
Why Does it Matter to Me?
School districts and states have already filed lawsuits challenging those Education Department agreements on constitutional and legal grounds. If the courts or Congress roll back these arrangements, the services and programs that were shifted could be disrupted, with unclear consequences for students, teachers, and local administrators who depend on federal education funding.
More broadly, when agencies move money through interagency agreements, it becomes harder for the public and lawmakers to track where federal dollars actually go. The Government Accountability Office (GAO), the nonpartisan watchdog arm of Congress, stated plainly in a report released the same day as the hearing: the Economy Act does not let an agency use the law to get around legal limits on how its money can be spent.
Both Sides, Now
Rep. Dave Joyce (R-OH), the subcommittee chair, acknowledged that Economy Act transactions happen across the government for many purposes and produce real benefits, including cutting duplicate contracts and saving money. He said Congress needs to understand both the law's limits and its strengths.
Democrats argue the administration has stretched the law beyond those legitimate uses. Ranking Member Rep. Steny Hoyer (D-MD) pointed to specific transfers, including Consumer Financial Protection Bureau funds used to pay government efficiency employees, as examples of the executive branch sidestepping Congress's spending authority. The Congressional Research Service (CRS), the nonpartisan research arm of Congress, added in a separate report that an agency "may not ignore" a statutory mandate, reinforcing the GAO's conclusion that the law has boundaries.
Congress has already responded in part. The Consolidated Appropriations Act, the annual government funding law, required biweekly briefings on Education Department agreement compliance and strongly condemned transferring key programs out of the department. Democrats pushed for broader protections in 2025 but could not get bipartisan support for them.
What Happens Next?
No legislation directly tied to the hearing has been introduced. The CRS report laid out options for Congress, including amending the Economy Act to expressly bar or allow certain fund transfers, tightening reporting requirements, or restricting which agencies can use interagency agreements for specific functions.
The biweekly briefings required under the 2026 spending law will keep flowing, giving lawmakers ongoing data on how the Education Department and its partner agencies are complying. Litigation from school districts and states, with amended complaints filed as recently as early January, remains unresolved. Any legislative changes would require agreement between the House and Senate and a presidential signature.
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This article was generated by AI pulling from data. Each article is edited by an editor for accuracy and clarity.
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