White House Freezes Federal Grants and Loans, Sparking Confusion and Legal Challenges
You may have heard, in a two-page memo, that the Office of Management and Budget ordered all federal agencies to temporarily suspend payments. President Donald Trump’s budget office yesterday ordered a total freeze on “all federal financial assistance” that could be targeted under his previous executive orders pausing funding for a wide range of priorities — from domestic infrastructure and energy projects to diversity-related programs and foreign aid.
While the new order could affect billions of dollars in grants to state and local governments while causing disruptions to programs that benefit many households, there was also widespread confusion over how the memo would be implemented and whether it would face legal challenges.
Sen. Susan Collins (R-Maine), the chair of the powerful Senate Appropriations Committee, called a new memo from the White House budget office freezing the disbursement of federal loans and grants “far too sweeping” and warned it would have a substantial impact on the delivery of federal services.
A lawsuit was filed last night in federal court in Washington, D.C., taking aim at the directive the acting head of the U.S. Office of Management and Budget issued - that could disrupt education and health care programs, housing assistance, disaster relief and other initiatives that depend on billions of federal dollars.
A senior administration official on Tuesday clarified the scope of Monday's sweeping pause on federal financial assistance, saying it will not affect a number of specific aid programs, including the following: Medicaid, Supplemental Nutrition Assistance Program, federal student loans, Pell Grants, Head Start, Section 8 rental assistance, and aid to small businesses and farmers. The official reiterated that Medicare and Social Security would not be affected, nor would "similar" direct benefit programs.
The official emphasized that the only funding affected by the review would be any grants or loans that run counter to President Donald Trump's executive orders laying out his policies on immigration; abortion; foreign aid; clean energy; diversity, equity and inclusion programs; and "woke gender ideology."
OMB just released a Q&A (attached) which states that:
The guidance establishes a process for agencies to work with OMB to determine quickly whether any program is inconsistent with the President’s Executive Orders. A pause could be as short as day. In fact, OMB has worked with agencies and has already approved many programs to continue even before the pause has gone into effect.
Any payment required by law to be paid will be paid without interruption or delay.
Q: Is this a freeze on benefits to Americans like SNAP or student loans?
A: No, any program that provides direct benefits to Americans is explicitly excluded from the pause and exempted from this review process. In addition to Social Security and Medicare, already explicitly excluded in the guidance, mandatory programs like Medicaid and SNAP will continue without pause.
Funds for small businesses, farmers, Pell grants, Head Start, rental assistance, and other similar programs will not be paused. If agencies are concerned that these programs may implicate the President’s Executive Orders, they should consult OMB to begin to unwind these objectionable policies without a pause in the payments.
We are in touch with Senator Collins' office and others on Capitol Hill and will continue to monitor the situation closely as it unfolds. We will keep you updated.
David and Bob