State leaders scrambled Tuesday to respond to the Trump administration putting a temporary stop to federal grants and loans, a move that appeared to block funding for a dizzying array of programs that states administer and Americans rely on.
Those programs include funding for high-poverty public schools, disaster relief, rural communities and meals for homebound seniors.
“We hope that this senseless action is reversed urgently before too much damage is done to people and businesses,” Colorado Gov. Jared Polis (D) said in a statement.
Some state leaders reported trouble accessing Medicaid funding systems. Others noted delayed payments into state treasuries.
Meanwhile, the Trump administration put out clarifying statements that only deepened the confusion.
“We’ve already started to see certain checks that were supposed to arrive today that have not yet arrived today, and that’s something that’s causing us concern,” said Washington Treasurer Mike Pellicciotti (D). “And obviously, we’re not getting much helpful guidance or information from the White House related to that.”
Democratic attorneys general immediately sued to block the funding freeze.
“There is no question this policy is reckless, dangerous, illegal and unconstitutional,” New York Attorney General Letitia James (D) said on a press call announcing a multi-state lawsuit. “This policy will disrupt the lives of millions of Americans in New York and nationwide.”
Acting head of the federal Office of Management and Budget, Matthew Vaeth, issued a vaguely-worded memo Monday directing all federal agencies to halt grant and loan payments “to the extent permissible under applicable law” starting Jan. 28 at 5pm.
The goal, the memo said, was to identify any federal programs that could conflict with Trump’s recent executive orders. Medicare and Social Security benefits were exempt from the freeze.
OMB later circulated a 52-page spreadsheet, published by Politico, requesting information on a stunning sweep of federal programs, including funding for agriculture, education, health care and defense.
White House press secretary Karoline Leavitt said Tuesday that “direct assistance” to individuals would not be affected.
“This is not a blanket pause on federal assistance and grant programs from the Trump administration,” she said during a press briefing. Social security benefits, welfare benefits and food stamps were among the exempt programs, she said.
“Mandatory programs like Medicaid and SNAP will continue without pause,” OMB told members of Congress on Tuesday, STAT news reported.
But that still leaves a whole lot of federal spending potentially at risk, with major implications for state budgets.
About 34% of the more than $3 trillion states spent to provide services last fiscal year came from the federal government, according to the latest estimates from the National Association of State Budget Officers. Fiscal Year 2024 ended on June 30 for most states.
A little over half the federal dollars helped fund Medicaid, the public health insurance program for low-income people, according to the budget officers. About 10% of the money helped fund schools, 6% helped fund transportation, and 3% helped fund colleges and universities.
“Congress has committed this money to states. Our states are relying on this money to serve our residents,” Rhode Island Attorney General Peter Neronha (D) said on the press call announcing the multi-state lawsuit.
Neronha said he found it astonishing that the Trump administration would put out a memo that was so clearly unlawful and that affects so many people. “What a ham-handed way to run a government,” he said.