OMB temporarily pauses federal agency grants, loans, and assistance

Update: February 10, 2025: Today the federal judge in the case brought by Attorney Generals in 22 states and the District of Columbia found that the Trump administration has not fully followed his order to unfreeze federal spending and told the White House to release all funds from grants. U.S. District Court Judge John McConnell ruled that ongoing struggles to get federal money for things like early childhood education, pollution reduction and HIV prevention research violated his Jan. 31 order. He ordered the Trump administration to “immediately take every step necessary” to follow his temporary restraining over halting its plans for a sweeping freeze of federal funding.

Update: February 4, 2025: Yesterday, U.S. District Judge Loren AliKhan in Washington, D.C., granted a temporary restraining order against the federal grant, loan and aid freeze, siding with the National Council of Nonprofits and other nonprofit organization defendants that claimed they were still unable to access federal funds despite the government’s insistence that the OMB memo from January 27 was no longer in effect. The decision follows the administrative stay Judge AliKhan issued last Tuesday, January 28 that was set to expire by 5 p.m. yesterday, February 3. The temporary restraining order preventing the freeze or pause of federal funds went into effect and will be reviewed when the court reconvenes on February 7.

Note - this decision is separate from the case being heard by a Rhode Island federal judge who ruled Friday, January 31 to block the Trump Administration’s freeze of various federal spending programs tied to his executive orders. The Rhode Island case only applies to the 22 states and District of Columbia that had filed the lawsuit.

Update: January 31, 2025: Clarification that while the Administration’s Office of Management and Budget rescinded the memo from last Monday, the review and vetting of all federal assistance grants and loans (except those to individuals) being conducted by federal agencies is still underway. Federal agencies are reviewing all grants and loans to ensure they comply with new Executive Orders including the Order “Ending Radical And Wasteful Government DEI Programs And Preferencing,” which ceases all federal government and contracted DEI, DEIA, and “environmental justice” programs and policies, positions, committees, programs, services, activities, budgets, and expenditures. The two federal court cases, filed to stop the review and vetting of grants to ensure compliance with the Orders, continue as of this morning.

Update: January 29, 2025, 1 p.m. ET: The Administration’s Office of Management and Budget issued a new memo on Wednesday rescinding the OMB Memo from January 27. The new, two-sentence memo released Wednesday by the Office of Management and Budget rescinds the original memo published by the office two days earlier. As a result, no pause or delay in federal grants and assistance will go into effect.

Update: January 28, 2025, 6:30 p.m. ET: A federal judge has placed a “brief administrative stay” on the temporary suspension of federal grants until 5 p.m. Monday, February 3, 2025. More information on POLITICO.

On January 27, 2025, the Office of Management and Budget (OMB) issued a memo outlining the temporary pause of federal agencies' grant, loan, and other financial assistance programs. This is expected to impact a wide range of stakeholders, including state and local governments, nonprofit organizations, businesses, and other entities that rely on federal funding. The temporary freeze on federal grants and assistance, scheduled to go into effect as of January 28, 2025 at 5 p.m. ET, is subject to what is “permissible under applicable law.”

In many cases, a permanent freeze on federal grants would violate the law. However, a temporary freeze would not.

In the short term, the funding pause will:

• Stop scheduled federal payments to entities (Head Start centers, school nutrition programs, etc.) for programs counting on funding that is provided under existing laws
   
• Halt work and disbursement of funding for competitive grant programs and ongoing grants already funded

Get updates about education and afterschool policy

What this means for education funding –

• Most K-12 formula grant programs already have their FY 2024 funding – this pause should not affect most K-12 formula grant programs between now and February 10 or whenever OMB completes its review of the submitted information because those programs. Title I, IDEA, Title II, etc. received all their FY 2024 funding on either July 1 or October 1, 2024. Virtually all K-12 programs, except Impact Aid, get their funding not at the beginning of the fiscal year or when a continuing resolution is enacted but on the following July 1 as “forward funding” or as “advance funding” that becomes available the first day of the subsequent fiscal year. These programs have their current funding already, so it is not at risk. These programs wouldn’t get their FY 2025 funding until this July or October. State education agencies should still be able to draw down federal formula funding, as per a new memo from the White House. Additional clarification from CCSSO states “The funding pause directed by the January 27, 2025, OMB memorandum only applies to discretionary grants at the Department of Education. These will be reviewed by Department leadership for alignment with Trump Administration priorities. The temporary pause does not impact Title I, IDEA, or other formula grants.”
   
• Other education funding that goes to organizations are affected. Higher education funding that goes to organizations like colleges and universities and for other education programs that are not forward funded, including Impact Aid, AmeriCorps programs, institutional grants, research programs, training grants, funds for Head Start centers, and ongoing food and nutrition assistance that goes not to an individual but to a school or other entity.

According to the OMB Memo, the primary reason for the temporary suspension is to allow for a comprehensive review of existing financial assistance programs across federal agencies. This review aims to ensure the efficacy, compliance, and integrity of these programs in light of ongoing efforts to improve government accountability and financial management. The extent of the impact of the Memo remains unclear, and individual federal agencies will be interpreting the Memo. Guidance from agencies that manage federal grants is expected soon.

By February 10, agencies are to report all “programs, projects, and activities that may be implicated” and in the meantime, “to the extent permissible under applicable law” stop all obligations or disbursements of federal funds, including new and existing awards and “other relevant agency actions that may be implicated by the executive orders.” OMB can make exemptions, and this order does not apply to assistance provided directly to individuals (such as Pell grants) or to Medicare or Social Security benefits. (Roll Call has a good summary article.)

Action limited by “to the extent permissible under applicable law” – The Memo language that this pause in spending is only “to the extent permissible under applicable law” creates confusion.  The continuing resolution is law that extends government funding through March 14 on the activities specified in the FY 2024 appropriations law. It is a violation of the Impoundment Control Act for the Administration not to follow the law.

• Impoundment Control Act – Senate Appropriations Committee Ranking  Member Patty Murray’s (D-Wash.) issued a fact sheet on this issue, as did her counterpart, House Appropriations Committee Ranking Member Rosa DeLauro (D-Conn.).
   
• Appropriations Committees ranking member letter to OMB – Senator Murray and Representative DeLauro wrote to the acting head of OMB today “with extreme alarm the Administration’s efforts to undermine Congress’s power of the purse, threaten our national security, and deny resources for states, localities, American families, and businesses.”
   
• Existing law requiring certain federal spending – There are statutes that authorize ongoing mandatory funding for child nutrition and other assistance that goes to schools and other institutions, so it seems that funding would be subject to the pause.

The uncertainty around future financial support could be a major concern for organizations that rely on federal funds to operate programs for children and families. Afterschool  programs, child care centers, and child nutrition programs are highly dependent on federal funding to continue serving the communities that need them most.

Afterschool programs are a critical resource for working families, offering safe, supervised environments for children while their parents are at work. These programs often provide not just a place for children to go after school but also enrichment activities, educational support, and meals. Federal funding through the 21^st Century Community Learning Centers program provides more than 1.3 million students access to afterschool programs. Funds for this formula grant program for the current 2024-2025 school year were sent to state education agencies last summer and therefore do not appear to be subject to this freeze in grant funding. Federal funding for other formula or block grants, like Title I education funds and the Child Care Development Block Grant through the Department of Health and Human Services, have also been dispersed to states and therefore do not appear to be impacted by the suspension. However, grantees should defer to Agency guidance.

While the order requires agencies by February 10 to give OMB their analysis of programs subject to the President’s executive actions, the directive does not say when the temporary spending pause will be lifted or when OMB will decide on funding for programs identified by agencies. The OMB memo emphasizes that the pause is temporary and that agencies will resume processing applications and disbursements once the review process has been completed. During this pause, recipients of federal assistance are encouraged to keep in close contact with the agencies involved and stay informed on any updates or new guidance issued.