A coalition of 21 states, along with Washington, D.C., has filed a lawsuit against the Trump administration, accusing the federal government of unlawfully stripping billions of dollars in congressionally-appropriated funds. The lawsuit, which was filed in response to the actions of the Office of Management and Budget (OMB), claims the administration has misinterpreted federal regulations to terminate crucial federal funding that states rely on for various essential programs.
Allegations of Unlawful Funding Cuts
The 80-page complaint, filed by New Jersey and its allies, argues that the Trump administration’s interpretation of a specific clause in federal regulations is illegal. According to the lawsuit, the OMB’s decision to cite a regulation from 2 C.F.R. §200.340(a)(4), which allows for funding termination “if an award no longer effectuates the program goals or agency priorities,” is being misused. The regulation, initially created in 2020, is an internal rule—rather than a law—meant to guide agency behavior.
The states contend that the OMB has applied this regulation in an unprecedented way, using it to justify cutting funding for programs that were previously funded by Congress. The complaint claims this new interpretation is a departure from the OMB’s original guidelines, which only allowed for such cuts under very specific, limited circumstances.
Government’s Broad Use of the Clause
The Trump administration, according to the lawsuit, is invoking this clause without providing explanations or identifying specific reasons why the funding no longer aligns with agency priorities. This, the states argue, has led to a widespread reduction in critical funding for programs such as law enforcement, public health, education, and social services. The lawsuit points out that these cuts have been made without advance notice to the state recipients, or any clear justification that would align with the original intentions of Congress when appropriating the funds.
The Impact on State Programs
The lawsuit underscores the severe consequences of these funding cuts, which, according to the states, have been devastating. These cuts are said to affect programs designed to combat crime, protect public safety, ensure access to clean drinking water, support education, and address food insecurity, among others. The plaintiffs claim that by using the clause in this way, the administration is bypassing Congress’s authority, effectively impounding funds that had been allocated for specific purposes.
Constitutional Concerns and the Separation of Powers
A central argument in the lawsuit is that the administration’s broad use of the clause violates the Constitution, particularly the separation of powers doctrine. The states argue that by cutting funds that Congress has already allocated, the Trump administration is undermining the legislative process and improperly exerting control over appropriated funds. The lawsuit claims that this action constitutes an unlawful impoundment of funds, as Congress had already directed how these funds should be spent.
Violations of the Administrative Procedure Act (APA)
The lawsuit also asserts that the Trump administration’s actions violate the Administrative Procedure Act (APA) in two key ways. First, the states argue that the use of the clause to terminate funding is contrary to the law, as the clause was not intended to allow such sweeping cuts. Second, they claim that the administration’s actions are “arbitrary and capricious,” meaning they go beyond reasonable limits and disregard formal processes meant to ensure transparency and fairness in government decision-making.
The Relief Sought by the Plaintiffs
While the states are not seeking to recover the funds that have already been cut, they are asking the court for a declaratory judgment. Specifically, they want the court to rule that the OMB’s regulations, which rely on the clause in question, do not grant agencies the authority to terminate funding based on a shift in agency priorities after the funds have already been allocated.
This lawsuit represents a significant legal challenge to the Trump administration’s approach to federal funding cuts. If successful, it could prevent the OMB and other federal agencies from continuing to use this regulation as a basis for wide-reaching funding terminations. As the case proceeds, the states are pushing for a ruling that would clarify the limits of agency authority when it comes to the termination of federal grants and ensure that the will of Congress is upheld in the allocation and distribution of public funds.
