OMB pauses federal financial assistance; rescinded before taking effect

On 27 January 2025 the Office of Management and Budget issued Memorandum M-25-13, “Temporary Pause of Agency Grant, Loan, and Other Financial Assistance Programs,” signed by Acting Director Matthew J. Vaeth, directing every federal agency to “temporarily pause all activities related to obligation or disbursement of all Federal financial assistance,” effective 5:00 p.m. EST on 28 January 2025.¹ The memo and a subsequent OMB question-and-answer document excluded Medicare and Social Security benefits, Medicaid, the Supplemental Nutrition Assistance Program and other “assistance received directly by individuals.”¹² On 28 January 2025, Judge Loren L. AliKhan of the U.S. District Court for the District of Columbia, in National Council of Nonprofits v. Office of Management and Budget, No. 1:25-cv-00239, entered an administrative stay running through 5:00 p.m. EST on 3 February 2025 pending a temporary restraining order hearing.³ On 31 January 2025, Chief Judge John J. McConnell of the U.S. District Court for the District of Rhode Island, in State of New York et al. v. Trump, No. 1:25-cv-00039, entered a TRO on a coalition complaint brought by 22 states and the District of Columbia.⁴ OMB rescinded M-25-13 on 29 January 2025 through Memorandum M-25-14.⁵ The Office of the White House Press Secretary characterised the rescission as a response to “confusion” caused by the court orders and stated that the President’s executive orders on federal funding remained in full force.⁶

1. The Impoundment Control Act bars the executive branch from withholding appropriated funds without congressional notification. Under 2 U.S.C. § 684, deferrals are permitted only for contingencies, savings from changed requirements or efficiency, or as otherwise specifically provided by law; § 683 governs rescissions and the 45-day Congressional consent procedure.⁷⁸ In Train v. City of New York, 420 U.S. 35 (1975), the Supreme Court held that the Federal Water Pollution Control Act Amendments did not authorise the President to “allocate sums less than the full amounts authorized to be appropriated” — establishing the general rule against executive impoundment of mandatory appropriated funds.⁹

2. Federal recipients — states, tribes, universities, non-profits and businesses — operate against the Treasury disbursement schedule.¹⁰ A pause of more than a few business days creates cash-flow stress at the recipient level in proportion to the share of revenue tied to federal awards.

3. Litigation under the Administrative Procedure Act, 5 U.S.C. § 706(2)(A), tests the adequacy of the pause’s stated justification.¹¹ The 28 January D.D.C. administrative stay and the 31 January D.R.I. TRO restrain implementation pending merits proceedings.