'Catastrophic': Trump's pause in federal grants prompts lawsuits from 6 states, nonprofits

WASHINGTON – A Trump administration memo pausing federal grants and loans is facing immediate legal scrutiny from six Democratic-led states and separately from a coalition of advocacy groups for nonprofits, health care and small businesses who told a federal judge the Republican president's plans would be "catastrophic."
“There is no question this policy is reckless, dangerous, illegal and unconstitutional,” New York Attorney General Letitia James said in a news conference announcing a lawsuit they have filed to block the policy. “This policy will disrupt lives of millions of people in New York and nationwide.”
The advocacy groups represented by Democracy Forward – the National Council of Nonprofits, the American Public Health Association, the Main Street Alliance and SAGE advocates for LGBTQ+ and elderly – took issue with the plan by asking for a temporary restraining order in U.S. District Court in the District of Columbia, to prevent the pause scheduled for 5 p.m. Tuesday.
White House press secretary Karoline Leavitt said the pause wouldn’t cover Social Security and Medicare benefits or food stamps – assistance that is going directly to individuals.
“This is not a blanket pause on federal assistance and grant programs from the Trump administration,” Leavitt said. “However, it is the responsibility of this president and this administration to be good stewards of taxpayer dollars.”
The memo set off a firestorm in among Democrats in Congress. The 1974 Impoundment Control Act allowed a president to identify funds he wanted to rescind to Congress, but if lawmakers didn't agree within 45 days, the money would be spent. The Supreme Court ruled in 1996 that the line-item veto, for presidents to cancel parts of legislation rather than entire laws, was unconstitutional.
Steve Vladeck, a law professor at Georgetown University, said the memo appeared in “flagrant violation” of the Impoundment Control Act.
States call memo 'reckless' and 'ham-handed'
The states fighting the memo besides New York are California, Illinois, Massachusetts, New Jersey and Rhode Island.
California Attorney General Rob Bonta said in the news conference that $3 trillion in nationwide assistance is at risk from the memo, which he said had “thrown state programs into chaos.”
Bonta said he thinks disaster aid, such as for wildfires that caused billions in damage in the Los Angeles area, is at risk under the OMB memo.
“I do believe the FEMA funding is at risk,” Bonta said. “We need it, we need it now.”
James said at least 20 states were frozen out of their Medicaid health care programs for the poor by Tuesday morning. Massachusetts Attorney General Andrea Campbell said her state receives $20 billion a year from the federal government, but a request Monday for $40 million from the Medicaid program has gone unanswered, she said.
“It has a national impact,” Campbell said.
Rhode Island Attorney General Peter Neronha said the impact will ripple across programs that pave roads, provide law enforcement and distribute food.
“What a ham-handed way to run a government,” Neronha said. “Every American, every Rhode Islander is impacted by this.”
Leavitt said after her news conference that the White House was aware of the Medicaid website outage but that it would be online again soon.
“We have confirmed no payments have been affected – they are still being processed and sent,” Leavitt said in a post on X. “We expect the portal will be back online shortly.”
Nonprofits, health groups warn of 'catastrophic' harm
The advocacy groups and Democratic lawmakers said grant recipients would be reluctant to spend money until they knew their programs were approved by OMB.
“This reckless action by the administration would be catastrophic for nonprofit organizations and the people and communities they serve,” said Diane Yentel, CEO of the National Council of Nonprofits. “From pausing research on cures for childhood cancer to halting housing and food assistance, shuttering domestic violence and homeless shelters, and closing suicide hotlines, the impact of even a short pause in funding could be devastating and cost lives."
Georges Benjamin, executive director of the American Public Health Association, said the memo threats to stall health programs. “Halting these funds stymies progress and is a matter of life and death,” he said.
Richard Trent, executive director of the Main Street Alliance, said federal funding provides the backbone for community programs such as workforce training and childcare programs.
Michael Adams, CEO of SAGE, said the memo puts LGBTQ+ individuals at risk because they are more vulnerable to health issues, disabilities and social isolation.
White House says memo matches funding with Trump priorities
Leavitt said the goal of the memo was to block funding for programs the president opposes such as Diversity, Equality and Inclusion in hiring and the Green New Deal for climate policy. Officials found $37 million about to be sent to the World Health Organization, which Trump ordered the U.S. to withdraw from, and $50 million for condoms in Gaza, which Leavitt called “a preposterous waste of government money.”
“President Trump is looking out for you in issuing his pause,” she said.
(This article has been updated with additional information.)