Judge blocks part of Trump’s federal financial assistance pause

A federal judge blocked President Donald Trump’s pause on federal financial assistance programs Tuesday before the deadline took effect, temporarily halting the directive that has caused confusion. 

The order by U.S. District Judge Loren AliKhan imposes a limited administrative stay on the directive until 5 p.m. Feb. 3. It came after organizations representing nonprofits and small business owners filed a lawsuit Tuesday against the action, saying the Office of Management and Budget’s memo violated the Administrative Procedure Act and asked the court to declare it unlawful and strike it down. 

AliKhan’s order is specifically focused on OMB’s instruction to agencies to halt the “disbursement of Federal funds under all open awards.” The stay does not apply to the memo’s directive as it relates to the “issuance of new awards” or other actions in agencies that are impacted by Trump’s executive orders.

The Monday memo (M-25-13) from acting OMB Director Matthew J. Vaeth directed agencies to pause all financial assistance disbursement “and other relevant agency activities that may be implicated by the executive orders, including, but not limited to, financial assistance for foreign aid, nongovernmental organizations, DEI, woke gender ideology, and the green new deal.”

According to the two-page document, the pause was set to go into effect Tuesday at 5 p.m., giving agencies a roughly 24-hour window to comply. 

The document was posted on social media Tuesday by journalist Marisa Kabas and later reported by the Washington Post. FedScoop also independently obtained and viewed a copy. 

OMB didn’t respond to FedScoop requests for comment on whether it planned to publicly disclose the memo and its process for assessing the impact of the measure. During her first briefing as press secretary on Tuesday, however, Karoline Leavitt confirmed that the memo had been sent Monday night. She also said the pause doesn’t impact assistance to individuals. 

“This is not a blanket pause on federal assistance and grant programs from the Trump administration,” Leavitt said. Specifically, she said examples of individual assistance not impacted by the memo are benefits from Social Security, Medicare, food stamps, and welfare. 

“I want to make that very clear to any Americans who are watching at home, who may be a little bit confused about some of the media reporting. This administration, if you are receiving individual assistance from the federal government, you will still continue to receive that,” Leavitt said. “However, it is the responsibility of this president and this administration to be good stewards of taxpayer dollars.”

Her comments came after lawmakers, such as Sens. Brian Schatz, D-Hawaii, and Chris Murphy, D-Conn., posted on X about Medicaid outages in multiple states. In a post to X later Tuesday, Leavitt said the White House was aware of the outage and has “confirmed no payments have been affected — they are still being processed and sent. We expect the portal will be back online shortly.”

The Centers for Medicare & Medicaid Services didn’t respond to a request for comment about a reason for the reported outages.

The move was immediately expected to have widespread impact across the government, and legal experts raised questions about its lawfulness. Cary Coglianese, a processor at Penn Carey Law focused on political science and administrative law, told FedScoop the memo “raises serious constitutional questions.”

“The thrust of the memo, which halts spending that Congress had authorized or mandated, is incompatible with our constitutional structure, which gives Congress the spending power,” Coglianese said. Under that structure, he said, the president has “the responsibility to carry out spending, not to halt it, even temporarily.”

David A. Super, a professor at Georgetown Law focused on administrative law, constitutional law and public welfare law, similarly said in a blog post Tuesday that the pause would be an unlawful deferral under the Impoundment Control Act. 

Super said the measure was unlawful because it violates the sections of the act requiring the president to transmit a message to Congress containing information about proposals to defer budget authority for specific purposes, and that those deferrals are only permitted to provide for contingencies, achieve savings, or are provided under law.

“Nothing in the OMB memo makes even the slightest gesture toward any of the three permissible grounds,” Super said.

According to Vaeth’s memo, $3 trillion of the nearly $10 trillion in fiscal year 2024 spending by the federal government was used for federal financial assistance. The memo also said that career and political staff have a responsibility to “align Federal spending and action with the will of the American people as expressed through Presidential priorities.” 

“The use of Federal resources to advance Marxist equity, transgenderism, and green new deal social engineering policies is a waste of taxpayer dollars that does not improve the day-to-day lives of those we serve,” the memo said.

The pause would allow the administration time to review the impacted programs, the memo said. Under the pause, agencies were required to halt issuance of new awards, disbursement of federal funding on open awards, and “other relevant agency actions that may be implicated by the executive orders, to the extent permissible by law, until OMB has reviewed and provided guidance to your agency with respect to the information submitted.”

According to the memo, OMB may allow exceptions on a case-by-case basis. Agencies could also continue taking certain actions like closing out federal awards or recording obligations required by federal statute.

In a Tuesday statement, the American Civil Liberties Union said it is assessing the impact of the memo.

“Even a short pause in federal funding will have devastating consequences that impact each and every person in this country, and we are working with our affiliates to identify exactly how it has hurt our communities already,” said Mike Zamore, national director of policy and government affairs for the ACLU.

Despite the court order, the memo already impacted certain activities within the government, such as merit review panels for financial support, which were halted Tuesday by at least one agency.

A National Science Foundation spokesperson said the agency was rescheduling all review panels that had been scheduled for the week of Jan. 28 to future dates. “This will allow the agency to make the best use of everyone’s time and resources as we continue to develop guidance to ensure compliance with the recent executive orders,” the spokesperson said.

The NSF, an independent agency supporting scientific research, provides “hundreds of funding opportunities” to support scientific and engineering research and education, according to its website. 

This story was updated Jan. 29 to reflect the details of the court’s administrative stay and note that CMS didn’t respond to a request for comment.