Proposed ARC Cuts: What Appalachian Businesses Should Know

A 93% cut is on the table — and Appalachian small businesses would feel it first

Earlier this month, Appalachian Voices reported that the FY 2026 federal budget process is moving forward with deep proposed cuts to two of the most important agencies for rural business development: the Appalachian Regional Commission (ARC) and the Economic Development Administration (EDA). The administration’s discretionary budget proposal, released last May, called for cutting ARC by 93% — from $200 million in recent years down to $14 million.

The House appropriations committee has pushed back with a softer version — about $162 million, a 20% reduction rather than the full 93%. The Senate has not yet released its draft. The final number gets locked in before the September 30 deadline.

If you run a small business in any of the 423 counties ARC serves, this is not abstract budget politics. ARC dollars touch the broadband you depend on, the workforce programs that train your hires, and in some cases the grants that funded your storefront.

What ARC actually funds in your county

ARC is a federal-state partnership covering 13 states from southern New York to northern Mississippi. It does not run programs directly. It moves money to local development districts, state agencies, universities, and nonprofits that deliver services on the ground.

A few of the line items most relevant to small businesses:

POWER grants — Direct funding for communities transitioning out of coal-dependent economies. These have funded everything from advanced manufacturing workforce training in Pittsburgh to robotics curriculum at Shawnee State University in Ohio.
INSPIRE grants — Substance use disorder recovery and workforce reentry programs. For service businesses struggling to staff up, these programs feed directly into your hiring pipeline.
Broadband and infrastructure — ARC has been a quiet backbone of rural broadband expansion, often layered with USDA ReConnect dollars and state programs. Without it, the “remote work + AI tools” story that has revived a lot of small-town economies starts to fray.
Entrepreneurship and business development — Direct grants to regional accelerators, makerspaces, and small business technical assistance providers. Programs like Invest 606 in eastern Kentucky sit in this ecosystem.

The pattern matters. ARC dollars are rarely the only funding source for any single project. They are the piece that lets smaller, locally administered programs match other federal money or state appropriations. Cut ARC by 93% and the layered funding model collapses — local matches go unspent, multi-year initiatives stall, and rural communities lose the dollars that depended on ARC being there.

What is actually at risk in this round

Three concrete impacts to watch:

Workforce programs already mid-stream. ARC funds multi-year workforce training initiatives, including ones tied to advanced manufacturing and AI-adjacent skills. The Appalachian Manufacturing Action Plan explicitly counts on continued ARC support for the robotics and automation training Appalachian shops need. A funding cliff in the middle of a training cohort is worse than no program at all.

Broadband completion, not just expansion. Rural broadband projects are typically a patchwork of USDA, FCC, state, and ARC dollars. Several “last-mile” projects in West Virginia, Kentucky, and Tennessee depend on ARC pieces to close out the budget. If those pieces disappear, projects can stall in the most expensive phase — the one where you string fiber to the houses on the back of the holler.

Local development districts. ARC funds the regional planning commissions that help small businesses access federal small business funding in the first place. These are often the only place a Main Street business can walk in and get help filling out an SBA, USDA, or ARC application. Cut their operating funds and the funnel dries up well before any single grant program is closed.

What business owners should do over the next 90 days

The political outcome is genuinely uncertain. The House proposed a 20% cut, the Senate is silent, the White House asked for 93%, and the September 30 deadline still stands. Plan for the realistic worst case: meaningful cuts that show up as fewer grant rounds, smaller awards, and longer waits.

A practical playbook:

Apply now for any ARC-funded program with a current open window. Programs that have already announced FY 2025 or early FY 2026 funding rounds are operating on prior-year appropriations. Those dollars are committed even if FY 2027 looks worse.
Diversify your funding stack. State programs are independent of ARC. The WV Small Business Growth Act is moving forward regardless. Kentucky’s $29.5 million AMLER coal community grants are funded by federal coal severance dollars, not ARC discretionary funding. Build relationships with multiple regional development districts and state agencies, not just one.
Talk to your local development district directly. Every Appalachian county has one. They know which programs are funded for the rest of FY 2026 and which are waiting on appropriations. Ten minutes on the phone there beats two hours guessing online.
Make your case to your federal delegation in writing. Appropriations committees are still drafting. The letter from 80+ regional organizations urging continued funding is the kind of input legislators are reading. Individual business owners writing about specific projects ARC has supported in their county carry weight in this window.

Alternatives to plug the gap

ARC is irreplaceable for some things — there is no other agency whose entire mission is Appalachian economic development. But several other federal and regional programs overlap in scope and can carry some of the load:

USDA Rural Development — Business loans and grants for rural businesses outside ARC. Less geographically targeted but well funded.
EDA Public Works and Economic Adjustment Assistance — Despite its own proposed cuts, EDA still has active programs for distressed regions.
State-level small business growth acts and accelerators — Often less competitive than federal money and faster to award.
AI-focused small business funding — Programs like the NIST $3M small business AI initiative target technology adoption specifically, which is where many ARC POWER grants overlap.

The Foundation for Appalachian Kentucky’s 606 programs, Reimagine Appalachia’s coalition work, and a growing set of state-level grant programs are quietly building a non-federal funding stack for the region. None of them replace ARC, but together they soften the edge of any single cut.

What we are watching

Three signals will tell you where this lands:

Senate appropriations markup. When the Senate releases its draft, the spread between House (~$162M) and Senate sets the negotiating range.
Continuing resolutions. If Congress can’t pass a final FY 2026 appropriation by September 30, ARC operates on a CR — which usually means flat funding at last year’s level, a temporary win for the agency.
Reauthorization timing. ARC’s authorizing legislation is also up for renewal. A cut combined with a stalled reauthorization is the worst case; a cut combined with a clean reauthorization is recoverable.

The bottom line: this is a year to be both more proactive about applying for programs and more diversified in where you look. The economic development infrastructure of Appalachia was built piece by piece over six decades. It will not unwind in one budget cycle, but it can absolutely be weakened — and small businesses sit closer to that weakening than most line items would suggest.

If you are sorting through how to use AI to do more with whatever funding you can secure, get in touch. We help Appalachian small businesses figure out where automation actually pays for itself, with or without a federal grant attached.