Federal Funding Freeze and What to Expect Next

The first weeks of the new administration has been active and confusing. One area of confusion was the executive order freezing federal funds. The U.S. District Court for the District of Columbia issued an administrative stay for President Trump’s executive order freezing federal fund, temporarily halting its implementation until at least February 3,2025. A brief summary of the Order is below.

‍

Summary of the Executive Order and OMB Memorandum M-25-13

On January 27, 2025, the Acting Director of the Office of Management and Budget (OMB), Matthew J. Vaeth, issued Memorandum M-25-13, instructing federal agencies to conduct a broad review of federal financial assistance programs and pause all activities related to the obligation and disbursement of federal funds that may be impacted by certain executive orders​.This directive affected a wide range of funding categories, including:

• Foreign aid
• Grants to nongovernmental organizations (NGOs)
• Programs related to diversity, equity, and inclusion (DEI)
• Initiatives associated with gender policies
• Programs tied to environmental and energy policies, such as the Green New Deal. The pause was set to take effect at 5:00 p.m. on January 28, 2025​ However, a coalition of nonprofit organizations filed suit, alleging that the freeze was arbitrary and capricious, exceeded OMB’s authority, and violated the First Amendment and Administrative Procedure Act (APA)​

‍

In the FAQ that was released on January 29, 2025 it states “any program that provides direct benefits to Americans is explicitly excluded from the pause and exempted from this review process.” Although many agencies, citizens, and other governments at the state, local, and tribal level were left with few remaining answers. Legal Challenge and Court’s ResponseIn response to the lawsuit, the court issued an administrative stay of the executive order until February 3, 2025, at 5:00p.m.​ This stay only applies to the disbursement of federal funds under existing awards—meaning that federal agencies cannot enforce the funding freeze for currently approved grants and contracts. However, the issuance of new awards remains paused pending further legal developments.The court has set an expedited schedule:

• January 30, 2025 – The government must file its response to the plaintiffs' request for a temporary restraining order (TRO).
• January  31, 2025 – The plaintiffs must file their reply.
• February 3, 2025 – The court will hold a hearing on the TRO request.

‍

After the court issued its administrative stay, on Jan. 29,OMB rescinded the Memo. The rescission memo states that any questions about implementing the president’s Executive Orders should be addressed to the appropriate agency’s general counsel. Following the recession, the White House press secretary stated that “This is NOT a rescission of the federal funding freeze” and that the president’s Executive Orders “on federal funding remain in full force and effect and will be rigorously implemented.”Constitutional Issues and AnalysisWhile it is too early to predict how the court will ultimately rule, I believe the Executive Order is constitutionally problematic on several grounds:

1. Separation of Powers Violation – The executive branch lacks unilateral     authority to halt congressional appropriations without statutory authorization. Freezing congressionally approved funding amounts  to an effective line-item veto, which the Supreme Court has previously ruled unconstitutional in Clinton v. City of New York, 524  U.S. 417 (1998).
2. Non delegation Doctrine Concerns – The OMB’s directive arguably exceeds     the statutory authority granted by Congress. Under the non delegation     doctrine, executive agencies cannot exercise legislative power unless     Congress provides clear guidelines. The memorandum does not cite statutory     authority for the funding freeze, making it vulnerable to legal challenge.
3. Potential Administrative Procedure Act (APA) Violations – Plaintiffs argue     that the order is arbitrary and capricious, lacks reasoned decision-making, and fails to follow required rule making procedures under the APA.
4. Breaches from Treaty obligations – A freeze on all federal funding would be in     direct breech of common treaty obligations that the United States owes the     Federally recognized Tribes.
5. Constitutional  protections – As we learn more about the freezes, who is being impacted, and how, it may become apparent that the freezes are targeted attacks on individuals or organizations based on their political, sexual, or religious identities and philosophies, etc. that the Due Process Clause would require the federal government to follow the same way the Equal     Protections Clause applies to the states. With a clear focus on DE&I it is likely that targeted classes will have claims in the future depending on how these freezes play out.

‍

What to Expect Next In the 30-page opinion[1],Judge AliKhan of the U.S. District Court for the District of Columbia rightfully notes the administration's actions "run roughshod over a 'bulwark of theConstitution' by interfering with Congress's appropriation of funds." TheJudge also called attention to the massive effect the administration’s memo would have on up to $3 trillion in financial assistance ranging from elderly meals, firefighting efforts, and more. For now, federal funds under existing awards should continue to be disbursed as usual, but the pause on new and current funding will continue to be pursued by the Trump Administration despite the Court Order granting the plaintiff’s temporary restraining order. Of all the administrations in recent time, Trump’s administration is the most likely we’ve had to attempt the same antics as the Jackson Administration’s response to Worcester v. Georgia (1832). We are closely monitoring developments and will keep you informed of any critical updates.We encourage all those who may be impacted by these funding freezes to work to ensure an emergency budget is prepared to keep essential operations running by continuing to pursue your already allocated funds in the appropriate manner. We also encourage you to make sure to document how, when, and where the freeze may have impacted your organization, government, etc., and make sure to have backup copies of any awarded grants, submission materials, and other files in systems such as EHB and grants.gov. For now, we all will continue to wait and see what developments occur as this legal battle continues. By February 7^th we will have a better idea of the timeline and schedule as this matter continues in the U.S. District Court for the District of Columbia. We are closely monitoring developments and will likely have another blog post following critical updates on this matter.   

[1]See Judge AliKhan’s order here: gov.uscourts.dcd.276842.30.0.pdf

‍