Federal Update – Federal Funding Freeze Sparks Confusion and Chaos
January 30, 2025
On Monday, January 27, the White House Office of Budget Management (OMB) issued a sweeping memorandum calling for a temporary freeze on nearly all federal funding for grants and loans. On Capitol Hill, the memo was met with widespread condemnation from Democratic lawmakers and even various prominent Republicans expressed their confusion regarding the scope and effect of the administration’s directive.
Outside of the Capital Beltway, the memo sparked widespread confusion and chaos among states, local governments, non-profits, businesses and other entities that receive federal assistance, all of whom struggled to make sense of which programs were implicated. Further adding to disarray was the Trump administration’s assertion that programs delivering federal aid directly to individuals – such as the Supplemental Nutrition Assistance Program (SNAP), student loans, Pell Grants, Head Start, rental assistance, “and other similar programs” – would not be impacted by the freeze. It appears, however, that – at least initially – many of these programs have been directly affected, as states, local governments and non-profit organizations continue to report being locked out of payment systems related to Head Start, most housing and homelessness programs, and Medicaid.
Current Status of the Funding Freeze
Moments before the freeze was scheduled to go into effect on Tuesday evening, a federal judge issued a temporary restraining order (TRO) against the OMB’s directive, pausing the freeze for six days. The judge’s stay came in response to a lawsuit filed by an organization that argued that the order was unconstitutional, owing to Congress’ well-established power of the purse and the terms of the Impoundment Control Act.
On Wednesday, in response to the federal Judge’s TRO, the White House rescinded the OMB directive, although reiterated that all federal agencies are still required to comply with President Trump’s executive orders, which demand that agencies review and eliminate programs that support so-called “woke” ideology. This apparently includes, but is not limited to, “financial assistance for foreign aid, nongovernmental organizations, DEI, woke gender ideology, and the green new deal.” Upon rescinding the original memo, the acting head of OMB directed federal agencies to contact their general counsel if they are confused about how to comply with Trump’s executive orders. For example, while the freeze was apparently rescinded, the EPA nevertheless paused grants amounting to $7 billion under the Solar for All program, citing Trump’s “Unleashing American Energy” executive order.
What Comes Next
As the legal challenges to President Trump’s directive continue to play out during the six-day stay, it is unclear what will happen this coming Monday when the TRO expires. Notably, the federal judge who issued the TRO said that she will issue a more permanent decision at that particular time.
Moreover, 22 state attorney generals have filed additional lawsuits against the order – while a second federal judge is moving to block the freeze – despite the White House’s attempt to clear up any confusion by apparently rescinding the directive. Pursuant to recent statements by the White House press secretary suggesting that the administration may reinstate the freeze, it remains unclear whether the White House will abide by its decision to rescind the temporary freeze or issue a narrower directive. It is also unclear how federal agencies will implement Trump’s executive order to eliminate all pertinent funding programs in the weeks ahead.
Incidentally, some legal experts are speculating that the White House memo was intended to spark the current string of litigation in order to set the stage for a legal challenge to the Impoundment Control Act. The Act requires the president to promptly report any withholdings of congressionally appropriated funds and to abide by the outcome of the congressional impoundment review process.
For his part, Russ Vought, President Trump’s nominee for head of the OMB, argued this week that the Act is unconstitutional and that the president should be granted broad authority to withhold funds appropriated by Congress. Of course, the situation remains incredibly fluid as the OMB’s now-rescinded order works its way through the legal system and the Trump administration plots its next move.
Looking ahead, CSAC will be closely monitoring developments out of Washington, D.C. and will issue pertinent updates, as appropriate.