States Step Up Fight With Trump Administration on Grant Cuts (2)

Nearly two dozen US states sued the Trump administration to stop it from using what they say is a budget loophole to cut billions of dollars in federal grants that were already approved by Congress.

The lawsuit, filed Tuesday, claims the administration is illegally using an Office of Management and Budget spending clause as a “limitless authority to cut grant funds that support essential services throughout the country.”

The suit in Boston federal court is the latest move by Democratic-led states in the wide-ranging fight over President Donald Trump’s use of executive power to rescind grant money that doesn’t align with his policy priorities.

At the center of the case is the administration’s use of an OMB clause that lets federal agencies terminate a grant if it “no longer effectuates the program goals or agency priorities.” The states seek a court order barring the government from allegedly abusing the clause.

The administration will “continue to use this obscure provision in its slash-and-burn campaign” if the a judge doesn’t put a stop to it, New Jersey Attorney General Matt Platkin said at a press conference Tuesday. His New York counterpart, Letitia James, said the OMB provision is Trump’s “primary strategy” for justifying cuts she says are illegal.

The states say Trump’s termination of grant money under the OMB provision is undermining state efforts around the environment, law enforcement, education and infrastructure.

White House spokesman Harrison Fields said the suit is a “toothless” attempt by “Leftist AGs and governors” to “stick it to Trump” instead of addressing problems in their states.

“Every one of these elected officials should focus on serving their constituents, not their party bosses, and work with the president and this administration to enact the agenda the American people overwhelmingly supported,” Fields said in a statement.

The Justice Department has defended the government’s use of the OMB clause in several cases that challenged the spending cuts on different grounds. In those lawsuits, the government said it was using the spending provision properly and that grant recipients were on notice that it could be used to terminate funding. One judge called the Trump administration’s use of the OMB clause “pretextual.”

Executive Orders

Trump’s slew of executive orders since taking office have mandated the termination of programs including diversity initiatives, gender equity efforts and environmental policies in the federal government. Agencies have been terminating grants through letters saying the funding no longer meets the administration’s priorities.

In Harvard University’s clash with Trump, the school pointed to a letter it received from the National Institutes of Health in May that formally ended $2.2 billion in awards, saying the grants “no longer effectuate agency priorities.” The principle even cropped up in New York City’s fight with Trump over traffic congestion pricing, with the US saying it was pulling out of a Joe Biden-era deal with the city “based on changed agency priorities.”

The states in the latest suit argue that the administration is misusing the OMB clause to achieve the president’s broader goal of slashing federal spending — an effort that led to an earlier wave of litigation over abrupt spending freezes on trillions of dollars. The new suit focuses on the government’s use of the spending clause since then.

‘Limited Power’

“OMB has made clear that the regulation only gave agencies limited power to end certain grants,” James’ office said in a statement. “Agencies need additional evidence that a particular grant is not effective at achieving a program’s goals, and the regulation cannot be used to arbitrarily make mass funding cuts.”

The states say the funding cuts are undermining critical services, including preparation for natural disasters, medical research, clean water initiatives and improvements to state unemployment systems. According to the complaint, the Justice Department has cited the provision to cancel funds for states to combat hate crimes, while the Environmental Protection Agency blocked funds for research into removing “forever chemicals” from drinking water.

The case is State of New Jersey v. US Office of Management and Budget, 25-cv-11816, US District Court, District of Massachusetts (Boston).

(An AI summary at the top of this story was removed because it didn’t include other perspectives on the OMB spending provision.)

(Adds White House comment.)

--With assistance from Zoe Tillman.

To contact the reporter on this story:
Erik Larson in New York at elarson4@bloomberg.net

To contact the editors responsible for this story:
Misyrlena Egkolfopoulou at megkolfopoul@bloomberg.net

Peter Jeffrey, Steve Stroth

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