Federal judge blocks Trump plan to freeze spending on grants, loans

by Jennifer Shutt, Alabama Reflector
January 31, 2025

WASHINGTON — A federal district judge issued a temporary restraining order on Friday, blocking the Trump administration from moving forward with a proposed spending freeze on grants and loans.

Chief Judge John J. McConnell Jr. of the U.S. District Court in Rhode Island wrote in the 13-page ruling the administration’s “actions violate the Constitution and statutes of the United States.”

“Federal law specifies how the Executive should act if it believes that appropriations are inconsistent with the President’s priorities–it must ask Congress, not act unilaterally,” McConnell wrote. “The Impoundment Control Act of 1974 specifies that the President may ask that Congress rescind appropriated funds. Here, there is no evidence that the Executive has followed the law by notifying Congress and thereby effectuating a potentially legally permitted so-called ‘pause.’”

The lawsuit, filed by Democratic attorneys general from 22 states and the District of Columbia, stems from a two-page memo the Office of Management and Budget issued Monday evening.

The document called for a freeze on all federal grants and loans, leading to widespread confusion about how far reaching the halt could be and how long it would last.

While the memo said it wouldn’t impact Social Security or Medicare, it was silent on Medicaid and hundreds of other federal programs, including those that go to veterans, schools and food support programs.

A separate document from OMB listed thousands of programs that were subject to the original OMB memo.

District Judge Loren L. AliKhan of the U.S. District Court of the District of Columbia issued a short-term administrative stay of OMB’s actions Tuesday, blocking the Trump administration from implementing the freeze. That ruling was in response to a separate lawsuit over the OMB memo filed by the National Council of Nonprofits, American Public Health Association and Main Street Alliance. 

The following day, the Trump administration rescinded the OMB memo shortly before McConnell heard from the attorneys in the lawsuit filed by the attorneys general.

White House press secretary Karoline Leavitt posted on social media that rescinding the memo was “NOT a rescission of the federal funding freeze.”

“It is simply a rescission of the OMB memo,” Leavitt wrote. “Why? To end any confusion created by the court’s injunction.”

“The President’s EO’s on federal funding remain in full force and effect, and will be rigorously implemented,” she added.

Her comments were noted in Judge McConnell’s temporary restraining order.

“Based on the Press Secretary’s unequivocal statement and the continued actions of Executive agencies, the Court finds that the policies in the OMB Directive that the States challenge here are still in full force and effect and thus the issues presented in the States’ TRO motion are not moot,” McConnell wrote.

An attorney for the U.S. Justice Department had argued during a virtual hearing before McConnell on Wednesday that the case was no longer necessary since OMB rescinded the original memo.

McConnell’s temporary restraining order will stay in place until he rules on an upcoming request from the Democratic state attorneys general for a preliminary injunction.

McConnell wrote in the temporary restraining order that the Trump administration’s assessment that it has a responsibility “to align Federal spending and action with the will of the American people as expressed through Presidential priorities … is a constitutionally flawed statement.”

“The Executive Branch has a duty to align federal spending and action with the will of the people as expressed through congressional appropriations, not through ‘Presidential priorities,’” McConnell wrote.

The U.S. Constitution gives Congress the power to approve and direct federal spending in Article 1, Clause 9, Section 7. Lawmakers have used that over time to approve mandatory spending on programs like Medicare, Medicaid and Social Security, as well as discretionary spending on the dozen annual appropriations bills.

Those measures fund the vast majority of federal departments and agencies, including Agriculture, Energy, Homeland Security, Interior, Justice, State, Transportation, and Housing and Urban Development.

Those bills include hundreds of grant and loan programs, many of which were frozen by the original OMB memo, which McConnell wrote in his temporary restraining order would have significantly impacted states.

“The Executive Orders threaten the States’ ability to conduct essential activities and gave the States and others less than 24 hours’ notice of this arbitrary pause, preventing them from making other plans or strategizing how they would continue to function without these promised funds.” McConnell wrote.

Since Congress approved funding for those programs, McConnell wrote, “the Executive’s refusal to disburse them is contrary to congressional intent and directive and thus arbitrary and capricious.”

Democratic attorneys general who filed the lawsuit before McConnell are from New York, Arizona, California, Colorado, Connecticut, Delaware, Hawaii, Illinois, Maine, Maryland, Massachusetts, Michigan, Minnesota, Nevada, North Carolina, New Jersey, New Mexico, Oregon, Rhode Island, Vermont, Washington, Wisconsin, and the District of Columbia.

Last updated 4:08 p.m., Jan. 31, 2025

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