The Legal Battles of the Federal Funding Freeze

By: David Rodriguez

Edited by: Sam Yip and anna dellit

Following the multiple executive orders of President Donald Trump, the Office of Management and Budget (OMB) issued a memorandum titled M-25-13, directing all federal agencies to temporarily pause federal financial assistance involving nongovernmental organizations and issues, such as climate change and diversity, equity, and inclusion. [1] This action aimed to review and match federal government spending with the Trump administration's agenda. [2] The broad scope of the memo sparked uncertainty among states, schools, and organizations that receive trillions of dollars from the federal government. [3] Later, the Trump administration clarified that direct assistance programs such as food stamps, Medicare, and student loans would not be affected, but provided an uncertain stance at times regarding programs like Medicare. [4] 

This prompted states and nongovernmental organizations to turn to the courts and launch lawsuits against the Trump administration. On January 28th, U.S. District Judge Loren L. AliKhan from the District of Columbia issued an administrative stay until Monday, February 3, blocking the memo moments before it was said to take into effect. [5] This action arose from an emergency hearing involving nonprofit groups that receive federal assistance. [6]

The Office of Management and Budget then rescinded M-25-13 the next day. According to White House Press Secretary Karoline Leavitt, these efforts were to end both the confusion that news outlets and courts have caused, while also ending all legal challenges. [7] Leavitt also states that eliminating the M-25-13 was not a rescission of the efforts to administer a funding freeze. [8] This prompted U.S. District Court Chief Judge John J. McConnell to issue a temporary restraining order on January 31. [9] This legal challenge was brought by 22 states and the District of Columbia in a Rhode Island Federal Courthouse. [10] The temporary restraining order prohibited the Trump administration from freezing any federal grant and loan payments. [11] Chief Judge McConnell called the funding freeze unconstitutional due to a violation of the separation of powers where the executive exercised authority reserved for congress. [12] There is no federal law that would allow the executive branch to implement such an order by itself. [13] Chief Judge McConnell also sees this federal freeze as a mechanism that causes harm to states like California’s relief efforts with wildfires. [14]

Similar conclusions were made on February 3, when U.S. District Judge Loren L. AliKhan held a hearing on the motion for a temporary restraining order. Judge AliKhan justified the granting of this temporary restraining order by displaying how a nonprofit that assists disabled West Virginians living in their own homes still could not access funds that they receive from the Department of Health and Human Services. [15] This resulted in the layoff of one employee and has led to services being reduced. [16] It is clear that the Trump administration did not obey Judge AliKhan’s original order and with the memo implicating as much as three trillion dollars in assistance [17], action needed to be taken. Judge AliKhan highlights similar concerns as Chief Judge McConnell regarding constitutionality. Judge Alikhan states that this memo tried to snatch the power of the purse from the only branch that is entitled to it, which is Congress. [18]

Throughout these legal challenges, states and nongovernmental agencies face real concern. The Trump administration crafted a 51-page spreadsheet that was sent out to federal agencies, highlighting programs that would be under review. [19] The programs ranged from special education to pool safety. [20] Many states had trouble accessing funds through Medicaid and online portals used to access federal assistance were temporarily taken offline. [21] Other organizations that involved services like childcare in Wisconsin had issues accessing federal funding. [22] Whole cities like Prichard, Alabama had concerns about federal infrastructure funding that would be critical to fix their drinking water system, but now was in jeopardy. [23] 

In February, Judge McConnell was notified of multiple Democratic-led states still having trouble accessing billions of dollars even after the issuance of the temporary restraining order. [24] He believes that this was cause for states to have a “rightful concern” while making it clear that the court was ready to enforce the temporary restraining order. [25] During the preliminary injunction hearing, Judge McConnell reasserted the unconstitutionality of the federal funding freeze stating that with this order, the executive would put itself above Congress. [26] Depending on the state, federal funding can account for around 18 to 50 percent of the state’s budget. [27] A federal funding freeze or cut means states must make up for this sum, causing hardships for states with stressed budgets. [28]

While the courts are addressing this attempt at a federal funding freeze, there are other mechanisms targeting state and federally funded programs. At the agency level, such as in the Department of Agriculture, more than one billion dollars of additional funding provided by the Biden administration has been halted. [29] This decision will impact the Local Food for Schools program and the Local Food Purchase program which provides funds to schools and food assistance organizations. [30] While the Department of Agriculture unfroze the existing funding agreements for the Local Food Purchase program, the following round of funding will not occur. [31] Additionally, Elon Musk and the Department of Government Efficiency vow to cut one trillion dollars in overall federal spending. [32]

On the congressional side, a continuing resolution bill has passed the Senate which will fund the government until September 30 with a thirteen billion dollar cut in nondefense spending impacting earmarks for items such as higher education. [33] Additionally, many programs in the continuing resolution do not have established funding levels such as Pell Grants allowing the Trump administration to have the ability and ask Congress to withdraw funds. [34] As federal funds become a continuous target, ongoing legal battles about freezes or cuts become vital to follow.

Notes:

1. National Council of Nonprofits et al v. Office of Management and Budget et al, 1:25-cv-00239, D.D.C, 1 (2025) 

2. Lindsay Whitehurst, “Judge in Nation’s Capital Extends Block on Trump Administration Federal Funding Freeze,” The Associated Press News, February 3, 2025, https://apnews.com/article/trump-federal-grants-loans-funding-freeze-court-1bc457d8e333dd8a8f374572ea33927. AP 1

3. Chris Megerian and Lindsay Whitehurst, “Federal Judge Temporarily Blocks Trump Administration Freeze on Federal Grants and Loans,” The Associated Press News, The Associated Press, January 29, 2025, https://apnews.com/article/donald-trump-pause-federal-grants-aid-f9948b9996c0ca971f0065fac85737ce. 

4. Megerian et al., “Federal Judge Temporarily Blocks Trump Administration Freeze on Federal Grants and Loans”

5. Chris Megerian, Zeke Miller, and Lisa Mascaro, “Trump White House Rescinds Memo Freezing Federal Money After Widespread Confusion,” The Associated Press News, January 29, 2025, https://apnews.com/article/donald-trump-pause-federal-grants-aid-6d41961940585544fa43a3f66550e7be. 

6. Merergian et al., “Trump White House Rescinds Memo Freezing Federal Money After Widespread Confusion”

7. Merergian et al., “Trump White House Rescinds Memo Freezing Federal Money After Widespread Confusion”

8. Jordan Fischer, “‘No Legal Authority’ | JudgeBlocks Federal Funding Freeze in 22 States and DC,” WUSA9, January 31, 2025, https://www.wusa9.com/article/news/legal/judge-mcconnell-blocks-federal-funding-freeze-in-22-states-and-dc-omb-office-of-management-and-budget/65-a69062f4-48ae-463e-972d-d43b40287d69.

9. Fischer, “‘No Legal Authority’ | JudgeBlocks Federal Funding Freeze in 22 States and DC”

10. Fischer, “‘No Legal Authority’ | JudgeBlocks Federal Funding Freeze in 22 States and DC”

11. Fischer, “‘No Legal Authority’ | JudgeBlocks Federal Funding Freeze in 22 States and DC”

12. Fischer, “‘No Legal Authority’ | JudgeBlocks Federal Funding Freeze in 22 States and DC”

13. Fischer, “‘No Legal Authority’ | JudgeBlocks Federal Funding Freeze in 22 States and DC”

14. Fischer, “‘No Legal Authority’ | JudgeBlocks Federal Funding Freeze in 22 States and DC”

15.  Maureen Groppe, “Judge Extends Pause on Trump Funding Freeze After Finding Administration Has Not Complied,” USA Today, February 3, 2025, https://www.usatoday.com/story/news/politics/2025/02/03/judge-trump-administration-funding-freeze/78180951007/.

16. Groppe, “Judge Extends Pause on Trump Funding Freeze After Finding Administration Has Not Complied”

17. NCN et al v. OMB et al, 24.

18. NCN et al v. OMB et al, 25

19. Megerian et al., “Federal Judge Temporarily Blocks Trump Administration Freeze on Federal Grants and Loans”

20. Megerian et al., “Federal Judge Temporarily Blocks Trump Administration Freeze on Federal Grants and Loans”

21. Alys Davies, Kayla Epstein, and Max Matza,“White House Rescinds Memo on Freezing Federal Grants and Loans,” BBC, January 29, 2025, https://www.bbc.com/news/articles/cyv48540n4po.

22. Whitehurst, “Judge in Nation’s Capital Extends Block on Trump Administration Federal Funding Freeze”

23. Megerian et al., “Federal Judge Temporarily Blocks Trump Administration Freeze on Federal Grants and Loans”

24. Nate Raymond, “US States Tell Judge Trump Not Fully Following Order Blocking Funding Freeze,” Reuters, February 6, 2025, https://www.reuters.com/legal/us-states-tell-judge-trump-not-fully-following-order-blocking-funding-freeze-2025-02-06/.

25. Raymond, “US States Tell Judge Trump Not Fully Following Order Blocking Funding Freeze”

26. Elena Moore, “A Second Federal Judge Has Ruled to Block the Trump Administration’s Spending Freeze,” NPR, March 6, 2025 https://www.npr.org/2025/03/06/nx-s1-5312069/trump-federal-funding-freeze-court-order.  

27. Kennedy Andara and Mimla Wardak, “The Consequences of a Federal Funding Freeze in the States,” Center for American Progress, February 6, 2025, https://www.americanprogress.org/article/the-consequences-of-a-federal-funding-freeze-in-the-states/.

28. Andara et al., “The Consequences of a Federal Funding Freeze in the States.”

29. Marcia Brown, “USDA Cancels $1B in Local Food Purchasing for Schools, Food Banks,” Politico, March 10, 2025 https://www.politico.com/news/2025/03/10/usda-cancels-local-food-purchasing-for-schools-food-banks-00222796

30. Brown, “USDA Cancels $1B in Local Food Purchasing for Schools, Food Banks”

31. Brown, “USDA Cancels $1B in Local Food Purchasing for Schools, Food Banks”

32. Nathan Layne and Costas Pitas, “Musk Says he Will Finish Most of $1 Trillion Federal Cost Within Weeks,” Reuters, March 27, 2025 https://www.reuters.com/world/us/musk-says-1-trillion-us-spending-cuts-possible-without-touching-services-2025-03-27/

33. Maria Carrasco, “Senate Passes Federal Spending Bill, Averting Government Shutdown,” National Association of Student Financial Aid Administrators, March 17, 2025 https://www.nasfaa.org/news-item/35850/Senate_Passes_Federal_Spending_Bill_Averting_Government_Shutdown

34. Carrasco, “Senate Passes Federal Spending Bill, Averting Government Shutdown”
    

Bibliography:

Andara, Kennedy and Mimla Wardak. “The Consequences of a Federal Funding Freeze in the States” Center for American Progress, February 6, 2025. https://www.americanprogress.org/article/the-consequences-of-a-federal-funding-freeze-in-the-states/.

Brown, Marcia. “USDA Cancels $1B in Local Food Purchasing for Schools, Food Banks” Politico, March 10, 2025. https://www.politico.com/news/2025/03/10/usda-cancels-local-food-purchasing-for-schools-food-banks-00222796

Carrasco, Maria. “Senate Passes Federal Spending Bill, Averting Government Shutdown” National Association of Student Financial Aid Administrators, March 17, 2025. https://www.nasfaa.org/news-item/35850/Senate_Passes_Federal_Spending_Bill_Averting_Government_Shutdown

Davies, Alys, Epstein, Kayla, and Max Matza. “White House Rescinds Memo on Freezing Federal Grants and Loans” BBC, January 29, 2025. https://www.bbc.com/news/articles/cyv48540n4po.

Fischer, Jordan. “‘No Legal Authority’ | JudgeBlocks Federal Funding Freeze in 22 States and DC” WUSA9, January 31, 2025. https://www.wusa9.com/article/news/legal/judge-mcconnell-blocks-federal-funding-freeze-in-22-states-and-dc-omb-office-of-management-and-budget/65-a69062f4-48ae-463e-972d-d43b40287d69.

Groppe, Maureen. “Judge Extends Pause on Trump Funding Freeze After Finding Administration Has Not Complied” USA Today, February 3, 2025. https://www.usatoday.com/story/news/politics/2025/02/03/judge-trump-administration-funding-freeze/78180951007/.

Layne, Nathan and Costas Pitas. “Musk Says he Will Finish Most of $1 Trillion Federal Cost Within Weeks” Reuters, March 27, 2025. https://www.reuters.com/world/us/musk-says-1-trillion-us-spending-cuts-possible-without-touching-services-2025-03-27/

Megerian, Chris, Miller, Zeke, and Lisa Mascaro. “Trump White House Rescinds Memo Freezing Federal Money After Widespread Confusion” The Associated Press News, January 29, 2025. https://apnews.com/article/donald-trump-pause-federal-grants-aid-6d41961940585544fa43a3f66550e7be.

Megerian, Chris, and Lindsay Whitehurst. “Federal Judge Temporarily Blocks Trump Administration Freeze on Federal Grants and Loans” The Associated Press News, January 29, 2025. https://apnews.com/article/donald-trump-pause-federal-grants-aid-f9948b9996c0ca971f0065fac85737ce.

Moore, Elena. “A Second Federal Judge Has Ruled to Block the Trump Administration’s Spending Freeze” NPR, March 6, 2025. https://www.npr.org/2025/03/06/nx-s1-5312069/trump-federal-funding-freeze-court-order

National Council of Nonprofits et al v. Office of Management and Budget et al, 1:25-cv-00239, D.D.C, 1 (2025)

Raymond, Nate. “US States Tell Judge Trump Not Fully Following Order Blocking Funding Freeze” Reuters, February 6, 2025. https://www.reuters.com/legal/us-states-tell-judge-trump-not-fully-following-order-blocking-funding-freeze-2025-02-06/.

Whitehurst, Lindsay. “Judge in Nation’s Capital Extends Block on Trump Administration Federal Funding Freeze” The Associated Press News, February 3, 2025. https://apnews.com/article/trump-federal-grants-loans-funding-freeze-court-1bc457d8e333dd8a8f374572ea33927.c