OMB Rescinds Funding “Pause” Memo, but Executive Orders Remain in Effect

UPDATE: On January 29, the Trump administration rescinded OMB’s January 27 memo, which announced a pause on many types of federal funding pending OMB review. The rescission memo instructs agency staff to direct any further executive action questions to their agency’s general counsel. The White House Press Secretary has that, although the OMB memo has been rescinded, federal agencies will continue to assess federal grants and other funding to ensure alignment with President Trump’s executive orders.

We will continue to update this page as policies evolve.

On January 27, the acting director of the White House Office of Management and Budget (OMB) issued a memorandum directing federal agencies to “temporarily pause all activities related to obligation or disbursement of all Federal financial assistance” effective 5 p.m. E.T. on January 28. The memo further directs agencies to pause any other “relevant agency activities that may be implicated” by President Trump’s executive orders. OMB’s memo acknowledges, however, that federal agencies may continue taking actions “required by law.”

The original memo expressly exempted Medicare and Social Security payments from the funding freeze, but left stakeholders concerned about possible payment interruptions for Medicaid and many other federal programs. Meanwhile, some states reported on January 28 that they currently cannot access the Health & Human Services (HHS) portal through which they access federal funds for Medicaid and other programs (Payment Management Services). This has created some concern and questions as to whether the portal is down for maintenance to block other federal grants or reflects an intent to block access to Medicaid funds. In a , White House Press Secretary Karoline Leavitt acknowledged the outage, confirmed that “no payments have been affected,” and predicted that “the portal will be back online shortly.

In a follow-up FAQ released January 28, OMB confirmed that “any program that provides direct benefits to Americans is explicitly excluded from the pause and exempted from this review process,” including “mandatory programs like Medicaid and SNAP.” The FAQs emphasize that “any payment required by law to be paid will be paid without interruption or delay.”

Although OMB’s FAQs provide additional clarity, stakeholders remain uncertain about whether certain federal grant programs are considered to “provide direct benefits to Americans,” or whether certain payments are exempt because they are “required by law.” Absent additional guidance from OMB or the relevant federal agency, stakeholders must provide a separate analysis for each type of federal assistance in order to form predictions.

Manatt is currently analyzing other funding streams relevant for states, such as Medicaid-related planning grants, Center for Medicare and Medicaid Innovation (CMMI) demonstrations, and section 1332 waivers. Meanwhile, before OMB issued the FAQs, a coalition of state attorneys general had already plans to file a lawsuit challenging the pause on federal funding.

In addition to pausing federal payments (where permissible), the OMB memo directs federal agency staff to identify funding sources that implicate President Trump’s executive orders. Based on the original memo and an accompanying template for federal agencies, this review appeared to be required for all federal financial assistance, including programs not subject to the pause on federal payments. In the new FAQs, however, OMB states that “any program that provides direct benefits to Americans is explicitly excluded” from this review, as well as the pause on funding. Among other questions, federal agency staff must identify programs that:

• Provide federal funding to non-governmental organizations supporting or providing services, either directly or indirectly, to removable or illegal aliens.
• Provide funding that is implicated by the directive to end discriminatory programs, including illegal diversity, equity, and inclusion (DEI) and “diversity, equity, inclusion, and accessibility” (DEIA) mandates, policies, programs, preferences, and activities, under whatever name they appear, or other directives in the same executive order, including those related to “environmental justice” programs or “equity-related” grants.
• Promote gender ideology.
• Promote or support in any way abortion or other related activities identified in the Hyde Amendment.

This data collection may inform future policymaking by the Trump Administration.

On January 28, U.S. District Court Judge Loren AliKhan issued a Temporary Restraining Order blocking enforcement of OMB Memo M-25-13 until February 3 in lawsuit was filed by the National Council of Nonprofits and other organization. The plaintiffs allege that the OMB Memo violated the Administrative Procedure Act because it was arbitrary and capricious and exceeded OMB’s statutory authority. They also allege that the Memo unconstitutionally targeted recipients of federal funding with disfavored views in violation of the First Amendment. The Court temporarily enjoined the Memo’s enforcement in order to maintain the status quo until a full court hearing next week. Separately a group of State Attorneys General have announced that they are seeking an injunction blocking the Memo in federal court in Manhattan.

On January 29, the Trump administration rescinded the OMB memo, instructing agency staff to direct any further executive action questions to their agency’s general counsel. The White House Press Secretary has that, although the OMB memo has been rescinded, federal agencies will continue to assess federal grants and other funding to ensure alignment with President Trump’s executive orders.