The Office of Management and Budget (OMB) issued memorandum M-25-13, “Temporary Pause of Agency Grant, Loan, and Other Financial Assistance Programs,” (OMB Memo) on Tuesday, January 27, 2025. Two days later on January 29, 2025, OMB rescinded its Memo amid litigation challenging the freeze. While this likely means that the impacted grant and assistance programs will resume normal operation, later the same day the White House Press Secretary issued a statement on X that the freeze was still in effect despite rescission of the OMB Memo: “This is NOT a rescission of the federal funding freeze. It is simply a rescission of the OMB memo.”
The OMB Memo froze federal funding across a variety of initiatives and directed executive agencies to perform a “comprehensive analysis of all of their Federal financial assistance programs to identify programs, projects, and activities that may be implicated by any of the President’s executive orders.” Among the policy areas identified by the OMB Memo as potentially impacted were “financial assistance for foreign aid, nongovernmental organizations, DEI, woke gender ideology, and the green new deal.”
The OMB Memo prompted confusion among federal contractors and grantees, leaving many wondering about the status of their federal funds. This confusion was compounded by the volume of Executive Orders (EOs) issued by President Trump, many of which were explicitly referenced in the OMB Memo. For more information on the EOs that impact government contractors, see our prior blog, Executive Orders to Watch for Federal Contractors and Fund Recipients.
On January 28, 2025, a collection of plaintiffs sought a temporary restraining order in the U.S. District Court for the District of Columbia to halt enforcement of the policies outlined in the OMB Memo. See Case No. 1:25-cv-00239-LLA.[1] The plaintiffs alleged that the OMB Memo violated the Separation of Powers, the Administrative Procedure Act, and the First Amendment of the U.S. Constitution.
On the same day the plaintiffs filed their complaint, January 28, 2025, Judge Loren L. AliKhan granted an administrative stay on enforcement of the directives outlined in the OMB Memo, which was set to “maintain the status quo” until February 3, 2025. Currently, the Government must respond to Judge AliKhan’s order no later than 5 PM on January 30, and the plaintiffs must reply by 5 PM the following day. However, not long after Judge AliKhan’s order, OMB publicly rescinded its Memo. This move may end the litigation as moot, unless the court takes seriously the Administration’s statement on X that it intends to continue the freeze despite rescinding the OMB Memo. Regardless, it is clear that the Trump Administration will continue to review the federal spending at issue to determine whether it aligns with recently issued EOs.
Whether through EOs, agency memos, or other executive actions, the Trump Administration will likely continue to search for ways to cut federal spending that conflicts with its policy choices. As demonstrated by the OMB Memo and its rescission, businesses relying on federal funding should remain vigilant and consult counsel regarding both their rights in the face of contract terminations and how to comply with new federal funding requirements and restrictions.
[1] Separately, Attorneys General representing 22 states and the District of Columbia sought to stop the funding freeze with a lawsuit filed in the U.S. District Court for the District of Rhode Island. See State of New York et al. v. Trump et al., case number 25-cv-00039. That case is pending.
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