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Jan. 30, 2025

What Cities Should Know About the Federal Funding “Freeze”

What Has Happened

• Since the inauguration of President Trump, the White House has unveiled a series of Presidential Actions in an effort to align Federal programs with the new administration’s priorities and to repeal provisions and policies viewed to be in conflict with those priorities.
• Many of these actions unwind the priorities of the Biden administration, including priorities previously announced under the 2021 Infrastructure Investment and Jobs Act (IIJA) and the 2022 Inflation Reduction Act (IRA). Areas and activities that have come under heightened review include the “green new deal” and diversity, equity and inclusion (DEI).
• The executive actions culminated in M-25-13, a Jan. 27 memo from the Office of Management and Budget (OMB) calling for a temporary pause beginning Jan. 28 at 5 pm ET on the obligation and disbursement of funds for all Federal financial assistance, as well as any agency activities implicated by the preceding executive orders, to the extent permitted by law.
• Local governments, nonprofit organizations, universities and other entities that receive federal funding could be impacted and see cancellation of grant announcements and awards already made if a conflict arose.
• Federal lawmakers from both parties described the OMB memo as being “broadly written” and were hearing from constituents across business, government and nongovernment sectors that obtaining clarity was paramount. Communicating impacts to your city makes a difference.
• In response to various interpretations of these executive actions and questions about the ramifications, the Office of Management and Budget provided initial clarification, i.e. noting that direct assistance to individuals such as Social Security, welfare, food stamps and Medicare would not be affected.
• The “funding freeze” faced immediate legal challenges, and just before it were to take effect on Tuesday, a federal judge halted the implementation of the OMB memo to allow until Monday, Feb. 3 for the courts to assess the consequences.
• On the afternoon of Jan. 29, OMB issued M-25-14, a follow-up memo rescinding M-25-13 effectively overturning the blanket freeze, while upholding previous orders implicating funding for clean energy, DEI and other focus areas of the Administration.
• In her statement on Wednesday, White House Press Secretary Karoline Leavitt said, “The Executive Orders issued by the President on funding reviews remain in full force and effect and will be rigorously implemented by all agencies and departments.”
• Citing the White House Press Secretary’s statements, a different federal judge who is presiding over litigation filed by 23 state attorneys general against the freeze stated that he would be “inclined to grant a restraining order”. Such order has yet to be issued.

What Your City Can Do

• Always refer to the source material (such as the written executive order or the guidance document provided by the agency) first for the latest and most accurate information. News articles are sometimes incomplete or misleading. If you have questions about a specific grant your city received, reach out to the agency directly and ask about the status of your award.
• Review federal grant agreements and contracts your city has in place, including payment obligations and drawdown procedures.
• In order to advocate for the preservation of local investments and future such investments by the new Congress and the Administration, the National League of Cities is gathering data on pending awards and any disruptions encountered by local governments in receiving federal support. Please fill out this form to inform NLC of any recent disruptions to federally funded projects your city manages. If you have encountered a disruption, please contact your member(s) of Congress and also share your information with Claire Chan of the GMA staff.
• Document the related costs and losses that would result from a disruption or cancellation of a federally funded project.
• When communicating with your members of Congress, describe the consequences if agencies were to withhold funding for projects that are underway. Focus your messaging on the actual impact to your residents, taxpayers, progress of community projects, and municipal budgets.

So What Now?

• Every Presidential transition comes with a shake-up of the existing structure and a realignment of priorities to fit the new Administration. Actions and reactions will happen at a rapid pace. With lots of information swirling, cities must first get the facts.
• Proposed actions have called into question the validity of certain Congressionally approved programs. GMA’s immediate focus is on examining the impact of executive actions on community projects that rely on federal funds.
• Now more than ever, your city needs to stress the direct and indirect benefits of federal funding on your community via improvements to infrastructure, housing and other essential public services.
• GMA is working closely with the National League of Cities, the International Municipal Lawyers Association, members of Georgia’s congressional delegation, and agencies to understand the changes and provide the best guidance to cities based on information that is changing at a very rapid pace.