Special Update – A Federal Freeze?

It’s Tuesday, January 28, 2025. There are 99 days left in the 2025 Colorado General Assembly and 222 items introduced thus far with more on the way soon  (bills, resolutions, rules, etc.) according to State Bill Colorado.

I wanted to share some updated information regarding the federal funding situation currently unfolding in Washington, D.C.

This Is A Big Deal – On January 27th, the OMB announced a temporary pause on federal grants and financial assistance programs, affecting areas like foreign aid, DEI, and the Green New Deal, while agencies review whether their funding aligns with Trump’s executive orders.

• On January 27th, the Office of Management and Budget (OMB) issued a memo announcing a “Temporary Pause of Agency Grant, Loan, and Other Financial Assistance Programs.”
• The memo instructs federal agencies to temporarily halt activities related to the obligation or disbursement of federal financial assistance, as allowed by law. It specifically targets programs related to foreign aid, nongovernmental organizations, DEI, gender ideology, and the Green New Deal. A footnote clarifies that the pause does not apply to Medicare or Social Security benefits, though Medicaid is not mentioned.
• Federal agencies are now tasked with reviewing whether their programs are impacted by Trump’s executive orders, signed during his first week in office. These orders focused on border security, the federal workforce, and other government priorities.
• A senior Trump official argued that this memo doesn’t equate to a funding freeze. According to the official, if an agency’s funding isn’t in conflict with Trump’s agenda, it will be disbursed without issue. They emphasized that such pauses are common at the start of a new administration to ensure spending aligns with new priorities.
• A separate OMB memo lists programs that will be paused while the review process takes place. Affected programs include the Department of Agriculture’s tribal food sovereignty initiative, Head Start, Veterans Affairs suicide prevention grants, the Low-Income Home Energy Assistance Program (LIHEAP), and various sexual assault prevention programs under the Department of Justice.
• In a memo Sen. Patty Murray, D-Wash., the top Democrat on the Senate Appropriations Committee, listed dozens of programs that could be affected in a memo to Senate Democrats obtained by Puck News, including grants to prevent violence against women and victims funding for local and state police departments, federally funded public transit projects; and grants to support firefighters, state and local law enforcement, veterans and child care programs, among others.
• The pause will take effect at 5 PM ET today and agencies are required to report to the Office of Management and Budget by Feb. 10 which programs and activities they have paused.
• Agencies must examine which programs conflict with Trump’s executive orders to halt government spending that falls under “financial assistance for foreign aid, nongovernmental organizations, DEI, woke gender ideology, and the green new deal,” according to the memo.
• All federal agencies must also task “a senior political appointee” to monitor spending “to ensure federal financial assistance conforms to administration priorities.”

What About Medicaid? – Medicaid is not exempt from the White House’s directive to pause federal grants and loans, already causing issues in some states like Illinois, though HHS has not clarified whether Medicaid payments will continue.

• As noted by AP, Medicaid is notably excluded from the exemption in the White House directive to pause all federal grants and loans by Tuesday, while Medicare and Social Security were spared.
• The U.S. Department of Health and Human Services (HHS) oversees more than half a trillion dollars in joint funding for Medicaid, which provides healthcare to around 80 million low-income Americans, including millions of children.
• A spokesperson for Illinois Governor J.B. Pritzker’s office reported that state agencies are encountering issues accessing the site used for Medicaid payment disbursements.
• HHS has not yet responded to inquiries about whether Medicaid payments will continue during the freeze.

Legality & Confusion – The memos have caused confusion among agencies, with grants on hold and legal challenges on the way.

• These memos are causing significant confusion among agencies, especially since grants already awarded but not yet spent are now on hold — a major concern.
• Many view this as an executive power-grab that will likely face legal challenges.
• Senate Minority Leader Chuck Schumer, during a press conference this morning, revealed he had spoken with New York Attorney General Letitia James about launching a legal challenge to the freeze.
• “I spoke to my attorney general this morning. She’s head of the state attorneys general association,” Schumer said. “They’re going to court right away on this horror.”
• Article I, Section 9, Clause 7 of the Constitution gives Congress the “power of the purse,” meaning it has the authority to approve federal spending. The 1974 Impoundment Control Act further restricts the president from refusing to spend money Congress has appropriated.
• Four advocacy groups—the National Council of Nonprofits, the American Public Health Association, the Main Street Alliance for small businesses and the LGBTQ advocacy nonprofit SAGE—filed a lawsuit Monday.
• Russ Vought, Trump’s pick for OMB Director, has repeatedly called the “power of the purse” law unconstitutional, arguing that the president should have the authority to disregard parts of spending law. While Vought’s nomination has not been confirmed yet, the Senate is expected to vote on it soon.

Concerns Across The Country – Democrats and nonprofits are deeply concerned about the lack of detail in the funding pause announcement, fearing it could disrupt vital services, research, and financial support for communities, while lawmakers like Senators Schumer and Murray urge the administration to uphold constitutional guidelines and ensure proper distribution of federal resources.

• Democrats and nonprofits are expressing strong concerns, mainly due to the lack of detail in the announcement. Charities that rely on government funding are left uncertain about which programs will be impacted.
• “This is a potential disaster for nonprofits and the communities they serve,” said Diane Yentel, president of the National Council on Nonprofits. “From halting cancer research to closing homeless shelters, stopping food assistance, and shutting down vital services like domestic violence support and suicide hotlines, even a temporary freeze could have devastating consequences and cost lives.”
• The Association of American Universities, representing major research institutions like Notre Dame and Georgia Tech, is still evaluating the effects of the pause. These universities rely heavily on federal funding for public health research, addressing national issues, and contributing to the economy, all while educating future leaders.
• Top Democratic appropriators, Sen. Patty Murray and Rep. Rosa DeLauro, also raised alarms, describing the move as “breathtaking and unprecedented.” In a letter to the White House, they urged the administration to follow constitutional guidelines and ensure federal resources are distributed properly.
• Schumer also criticized the freeze, pointing out that these grants were approved by Congress and are legally required. “These funds help families, support communities, and strengthen our nation, whether in red or blue states,” Schumer stated. “This freeze threatens billions in community grants and financial support, potentially leading to missed paychecks, unpaid rent, and chaos for universities and nonprofits alike.”

This will likely develop further during Vought’s nomination process, scheduled for Thursday, though Democrats are now advocating for a delay in light of the memos. More information will be shared as it becomes available. 

Best,

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