By: Virginia Brown
The first two weeks of President Donald Trump’s (“Trump”) second term have been marked by a flurry of activity: executive orders, firings, and hirings, but arguably nothing more dramatic or wide-sweeping than the attempted federal funding freeze.[1]
The story starts with the Office of Management and Budget (“OMB”) memorandum (the “memo”) released on Monday, January 27, 2025.[2] This memo directed federal agencies to “to the extent permissible under applicable law… temporarily pause all activities related to obligation or disbursement of all Federal financial assistance and other relevant agency activities that may be implicated by the executive orders.” The “executive orders” in question were the ones that Trump had just signed which, according to the memo, aimed to eliminate “Marxist equity, transgenderism, and green new deal social engineering policies.”[3]
Immediate Response
The broad language of the memo caused widespread outcry and confusion, both among federal agency employees and the states themselves.[4] Twenty-two states and the District of Columbia, including North Carolina, sued to prevent the memo from being enforced.[5] The pause would affect every federal agency and would seem to, at least temporarily, freeze every grant of money from a federal agency, including things from SNAP benefits to student loans. While uncertain, this appeared to affect trillions of dollars in federal grants and loans.[6]
Concerningly, while there were carveouts for Medicare and Social Security, the status of Medicaid was uncertain.[7] Medicaid is a massive federal expense, and the impact of suddenly pausing such payments would be astronomical.[8] North Carolina alone gets billions of dollars in federal funding from Medicaid.[9] The federal freeze was even suspected of causing Medicaid reimbursement portals to go offline in all 50 states on Tuesday, the day after the memo was issued.[10]
Legal Challenges and Executive Response
One day after the federal freeze was issued, a federal judge issued an injunction blocking the memo from taking effect until Monday, February 3 while he considered arguments about the freeze’s legality.[11] The next day, the OMB rescinded the memo.[12] This is notable, not just for the chaos of the two days when it was out, but because it is the only blemish, and so far the only successful pushback in the otherwise smooth rollout of President Trump’s agenda for his second term.[13] However, later that same day, the White House, in an X post by President Trump’s Press Secretary Karoline Leavitt, stated that this rescission is “NOT a recission of the federal funding freeze. It is simply a recission of the OMB memo…. The President’s EO’s on federal funding remain in full force and effect, and will be rigorously implemented.”[14]
On January 31, another federal judge ordered a temporary pause in the freeze,[15] finding that, based on the post, there was “sufficient evidence” that the government still planned to carry out the policy. Trump administration officials have since clarified that programs that provide direct assistance to Americans would not be affected by any pause in funding.[16]
Constitutionality of the Funding Freeze
Although the current status of the funding freeze is uncertain, the fact remains that this is a policy that the Trump administration intends to pursue in some form and that such a policy would have undetermined, wide-ranging effects. But is this a legal exercise of executive power?
Challengers to these actions are likely to look to the Impoundment Control Act.[17] This 1974 law was passed to prevent the President from withholding spending on programs that he does not support.[18] That law does allow the President to temporarily withhold funds, but he must notify Congress, and the decision cannot be policy-motivated.[19] However, Trump’s nominee to run the OMB and his appointment to OMB general counsel both believe that the Impoundment Control Act itself is unconstitutional.[20]
Challengers also may argue that the action is unconstitutional based on the provision that the President “take care that the laws be faithfully executed” and the idea that it is the role of Congress, not the executive to impose taxes and spend money.[21] While the Trump administration seems to assume that the Supreme Court will be sympathetic, there is Supreme Court precedent acknowledging restrictions on presidential power when it comes to spending or withholding money.[22] In 1974, the Court ruled that the President could not withhold funding that Congress had allocated to reducing water pollution.[23] In 1998, the Court invalidated a law that allowed the president to issue “line item” vetoes of laws passed by Congress – that is the President could not veto specific items within legislation instead of accepting or vetoing the full text.[24] Freezing certain programs based on ideology is akin to a years-delayed line item veto.[25] It seems imminent that the issue will at least end up before the Supreme Court, but the outcome remains to be seen.[26]
[1] See The Daily, Trump 2.0 Arrives in Force, The New York Times (Jan. 31, 2025), https://www.nytimes.com/2025/01/31/podcasts/the-daily/trump-guantanamo-confirmation-rfk.html.
[2] Memorandum for Heads of Executive Departments and Agencies from the Office of Management and Budget (Jan. 27, 2025).
[3] Id.
[4] Dan Mangan & Kevin Breuninger, White House Says Trump Funding Freeze Remains in Effect Despite Rescinding OMB Memo, CNBC (Jan. 29, 2025, 3:40 PM), https://www.cnbc.com/2025/01/29/white-house-rescinds-federal-funds-freeze-memo.html.
[5] Sophie Clark, Full List of States Suing Donald Trump Over Federal Funding Freeze, Newsweek (Jan. 29, 2025, 6:58 AM), https://www.newsweek.com/full-list-states-suing-donald-trump-federal-funding-freeze-2022653.
[6] Katherine Faulders & Will Steakin, OMB General Counsel Faces Backlash Following Federal Funding Freeze Order: Sources, ABC News (Jan. 31, 2025, 3:04 PM), https://abcnews.go.com/US/omb-general-counsel-faces-backlash-federal-funding-freeze/story?id=118321938.
[7] Clark, supra note 5.
[8] Health Care in North Carolina, KFF (last visited Jan. 31, 2025), https://www.kff.org/statedata/election-state-fact-sheets/north-carolina/#:~:text=Total%20Medicaid%20and%20CHIP%20enrollment,the%20pandemic%20in%20February%202020.
[9] Id.
[10] Mangan & Breuninger, supra note 4.
[11] Id.
[12] Id.
[13] Faulders & Steakin, supra note 6; The Daily, supra note 1.
[14] Mangan & Breuninger, supra note 4.
[15] Michael Casey, Second Judge Temporarily Blocks Federal Funding Freeze Efforts by Trump Administration, PBS News (Jan 31, 2025, 5:21 PM), https://www.pbs.org/newshour/politics/second-judge-temporarily-blocks-federal-funding-freeze-efforts-by-trump-administration.
[16] Id.
[17] Lindsay Whitehurst, White House Rescinds Federal Funding Freeze Amid Legal Battle, Widespread Confusion, Associated Press (Jan 29, 2023, 5:45 PM), https://apnews.com/article/federal-grants-loans-pause-trump-supreme-court-87f4951ad01ea2782ef5290642b0305e.
[18] Id.
[19] Id.
[20] Lawrence Hurley, Trump’s Effort to Withhold Federal Funding Triggers Constitutional Showdown, NBC News (Jan. 28, 2025, 5:22 PM), https://www.nbcnews.com/politics/white-house/trumps-effort-withhold-federal-funding-will-trigger-imminent-legal-act-rcna189583.
[21] Id.; Ivan Pereira, Trump Funding Freese a Blatant Violation of Constitution, Federal Law: Legal Experts, ABC News (Jan. 28, 2025, 5:20 PM) https://abcnews.go.com/Politics/trump-funding-freeze-blatant-violation-constitution-federal-law/story?id=118183957.
[22] Hurley, supra note 20.
[23] Whitehurst, supra note 17.
[24] Hurley, supra note 20.
[25] See id.
[26] Whitehurst, supra note 17.
