A federal judge on Tuesday ruled against the Trump administration’s attempt to reinstate a federal spending freeze, blocking the measure from taking effect.
U.S. District Judge Loren AliKhan, an appointee of President Joe Biden, sided with a group of plaintiffs who sued the administration over the decision.
As a result, the Office of Management and Budget (OMB) will be unable to proceed with its planned pause on federal grants, loans, and other financial assistance programs.
Last month, the Trump administration’s OMB issued a directive that temporarily halted agency grants and funding programs to allow for a review of federal spending.
The administration defended the move as necessary to ensure taxpayer dollars were being allocated effectively and in line with the president’s policy priorities.
“The American people elected Donald J. Trump to be President of the United States and gave him a mandate to increase the impact of every federal taxpayer dollar,” the OMB stated. “In Fiscal Year 2024, of the nearly $10 trillion that the Federal Government spent, more than $3 trillion was allocated to federal financial assistance programs, including grants and loans.”
The OMB memorandum outlined the administration’s intent to evaluate the effectiveness of federal assistance programs. “This memorandum requires Federal agencies to identify and review all Federal financial assistance programs and supporting activities consistent with the President’s policies and requirements,” the memo stated.
According to the directive, the spending freeze would provide the administration with time to conduct a thorough review and determine how best to allocate funding. The pause was set to take effect on January 28, 2025, at 5:00 PM.
The OMB further instructed agencies to assess any legally mandated actions or deadlines that might arise during the freeze and report them accordingly. Federal agencies were also ordered to suspend all activities related to open Notices of Funding Opportunity (NOFOs), including merit review panels.
However, Judge AliKhan was highly critical of the administration’s rationale for the freeze, stating that the OMB failed to provide a “reasonable explanation” for such a sweeping action.
“The scope of power OMB seeks to claim is ‘breathtaking,’ and its ramifications are massive,” Judge AliKhan wrote, as reported by CBS News. “Because there is no clear statutory hook for this broad assertion of power, plaintiffs are likely to succeed on the merits of this claim.”
AliKhan further argued that the administration had not adequately justified why the freeze needed to be implemented so rapidly. “Defendants still cannot provide a reasonable explanation for why they needed to freeze all federal financial assistance in less than a day to ‘safeguard valuable taxpayer resources,’” she added.
The lawsuit was brought by a coalition of nonprofit organizations that rely on federal assistance to operate. They argued that the abrupt funding freeze would have devastating consequences for their programs and the communities they serve.
The judge ultimately agreed, finding that the plaintiffs had demonstrated that the pause on federal funding “would be economically catastrophic — and in some circumstances, fatal — to their members.”