Trump Administration Orders Federal Funding Freeze, Judge Issues Temporary Restraining Order

The Trump Administration ordered a federal funding freeze, on Jan. 27, and rescinded the memo authorizing the freeze two days later, after a federal judge issued a temporary restraining order.

On Jan. 27, the White House Office of Management and Budget (OMB) issued Memo M-25-13, a directive instructing federal agencies to temporarily pause the obligation and disbursement of federal financial assistance starting Jan. 28 at 5 p.m. E.T. This pause extended to any agency activities that might be impacted by President Trump’s executive orders, though agencies may still proceed with actions required by law. The memo further stated that federal programs offering direct benefits to individual Americans were exempted, as were Medicare and Social Security payments, but concerns arose regarding Medicaid and other federal programs.

On Jan. 28, some states reported being unable to access the Health & Human Services (HHS) portal used for federal Medicaid funding, raising further questions. White House Press Secretary Karoline Leavitt later acknowledged the outage, assured that no payments had been affected and stated that the portal would soon be restored.

To provide clarity, OMB released an FAQ document, on Jan. 28, confirming that programs offering direct benefits to individual Americans, including Medicaid and the Supplemental Nutrition Assistance Program (SNAP), are explicitly exempt from the funding pause. The document reiterated that legally mandated payments would continue without disruption. Despite this clarification, stakeholders remain uncertain about the categorization of specific federal grant programs and whether certain payments fall under exemptions. Without further guidance from OMB or relevant agencies, organizations must analyze individual federal assistance programs to determine their status.

Beyond halting federal payments where applicable, the OMB memo instructs agencies to review funding sources tied to President Trump’s executive orders. Initially, this review appeared to include all federal financial assistance, even those not subject to the payment pause. However, OMB’s FAQs later clarified that programs providing direct benefits to Americans are excluded from both the pause and the review process. Agencies must identify programs that support non-governmental organizations aiding undocumented immigrants; funding diversity, equity and inclusion (DEI) initiatives; promoting gender ideology; or supporting abortion-related activities restricted by the Hyde Amendment. Agencies must turn over this data to OMB by Feb.10, 2025. The collected data may influence future policy decisions under the Trump Administration.

On Jan. 28, U.S. District Court for the District of Columbia Judge Loren AliKhan issued a Temporary Restraining Order blocking enforcement of OMB Memo M-25-13 until Feb. 3. The lawsuit requesting the restraining order was filed by the National Council of Nonprofits and other organizations. The plaintiffs alleged that the OMB Memo violated the Administrative Procedure Act because it was arbitrary and capricious and exceeded OMB’s statutory authority. They also allege that the Memo unconstitutionally targeted recipients of federal funding with disfavored views in violation of the First Amendment. The Court temporarily enjoined the Memo’s enforcement in order to maintain the status quo until a full court hearing next week.

On Jan. 29, the Trump administration rescinded the OMB memo, instructing agency staff to direct any further executive action questions to their agency’s general counsel. The White House Press Secretary has confirmed that, although the OMB memo has been rescinded, federal agencies will continue to assess federal grants and other funding to ensure alignment with President Trump’s executive orders.

Also on Jan. 29, a group of State Attorneys General filed a complaint seeking an injunction blocking the OMB Memo in federal court in U.S. District Court for Rhode Island.

The states assert the administration has violated the Administrative Procedure Act and the constitutional separation of powers. In their complaint, the states say the order would illegally “permit the federal government to rescind already allocated dollars that have been included in recipient budgets—monies that are otherwise necessary for the plaintiffs to ensure that their residents have quality healthcare, the protections of law enforcement, the benefit of safe roads and assistance in the aftermath of natural disasters, among many other key services.” The states go on to say that they will be unable to provide essential services and benefits, pay public employees and satisfy other obligations.

Though the OMB Memo has rescinded, Rhode Island District Court Judge John McConnell, Jr., is not convinced that the issue is moot. During the hearing on the motion for an injunction, the Judge stated that the plaintiffs “convinced me that, while the [memo] may not exist, there’s sufficient evidence that the defendants collectively are acting consistent with that [memo]. While much of the verbiage of the states’ submission revolved around the OMB [memo], that the effect of it is the same, and therefore is not moot.”

Judge McConnell continues to review the case and has not issued an order as of Jan. 30.