Al Drago/Bloomberg
The White House Tuesday sought to mollify concerns and confusion about a Monday night memo that appeared to order a temporary freeze on the disbursement of all federal grants and loans.
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Associations representing local governments like the National League of Cities, the National Association of Counties and the American Association of State Highway and Transportation officials were still digesting the memo and its implications on Tuesday. The Council of Development Finance Agencies encouraged organizations that are expecting federal funding to draw down any available funding before the 5 p.m. Tuesday disbursement deadline.
Amid the confusion, White House officials said later Tuesday that only federal grants and loans deemed to be in opposition to President Donald Trump’s executive orders would be affected by the pause. The executive orders outlined the administration’s positions on a range of issues from clean energy, diversity, equity and inclusion programs, immigration and abortion.
The administration also clarified that a number of programs would continue as before, including Medicaid, Supplemental Nutrition Assistance Program, federal student loans, Pell Grants, Head Start, Section 8 rental assistance, and aid to small businesses and farmers. The memo explicitly exempted direct aid to individuals and Medicare or Social Security.
“The reason for this is to ensure that every penny that’s going out the door is not conflicting with the executive orders and actions the president has taken,” said Trump press secretary Karoline Leavitt, who was peppered with questions about the OMB memo during what was her first White House press conference Tuesday.
“This is not a blanket pause on federal assistance and grant programs from the Trump administration,” Leavitt said, adding that she had not seen the entire list of affected funds and would keep the media updated.
OMB sent questionaries and instructions to federal agencies on Tuesday, asking for information about all planned obligations and disbursements through March 15. The office gave them until Feb. 7 to respond to a raft of questions about spending including on foreign aid, immigration, climate, diversity programs and abortion.
The memo follows Trump’s actions last week to pause funding on substantial chunks of the Inflation Reduction Act and Infrastructure Investment and Jobs Act, said Philip Rocco, an associate professor at political science at Marquette University and co-editor of Publius: The Journal of Federalism.
“It is impossible to find an analogue historically where this volume of federal grant programs to state and locals governments has been threatened simultaneously,” Rocco said.
In contrast to last week’s executive orders, the OMB memo’s “chaotic rollout” harkens back to Trump’s first administration, Rocco added.
While there are legal ways for a president to unwind funds already appropriated by Congress under The Impoundment Control Act of 1974, the process is tightly controlled and almost certainly not followed in the OMB memo, Rocco said.
The litigation began almost immediately Tuesday. The National Council of Nonprofits joined with Democracy Forward to file a motion for a temporary restraining order in the U.S. District Court for the District of Columbia to block the move.
A group of Democratic states will sue to block the order, said Sen. Chuck Schumer, D-N.Y., during a news conference. New York, California, Illinois, New Jersey, Rhode Island, Massachusetts and Delaware are among the states joining the suit.
Senate Democrats at a press conference urged Republicans to postpone a Thursday vote on the nomination of Russell Vought, Trump’s pick for the OMB chief.
“This is funding that communities are expecting, and this memo is creating chaos and confusion,” said Sen. Patty Murray, D-Wash., the ranking Democrat on the Senate Appropriations Committee.
CDFA president and CEO Toby Rittner, in an email to members Tuesday, noted that the administration has also halted all open and soon-to-be-open Notices of Funding Opportunities.
“As a reminder, CDFA is a non-partisan, non-political trade association,” Rittner said. “The pause of federal funding for economic development programs and projects should be a major concern for cities, counties, non-profits, schools, development authorities, states, and any organization relying on federal funding as a source of support.”
The federal government gave $1 trillion in grants to states in fiscal year 2022, the most recent year U.S. Census grants data is available, according to The Pew Charitable Trusts. That represents 36.4% of states’ total revenue, said Rebecca Thiess, manager at Pew.
“Federal grant funding helps states pay for public services, such as health care, education, transportation, and infrastructure,” Thiess said in an emailed statement. “States are currently facing tighter budgets than in recent years due to the expiration of federal pandemic aid and stagnating tax collections, among other challenges.”