Trump administration cannot implement ‘sweeping’ funding freeze, US court rules

BOSTON – A federal appeals court on March 16 largely upheld a ruling that blocked a “sweeping and unprecedented” freeze on trillions of dollars in government financial assistance that US President Donald Trump’s administration instituted early in 2025.

A three-judge panel of the Boston-based 1st US Circuit Court of Appeals sided with Democratic attorneys-general from 22 states and the District of Columbia in finding that the White House’s budget office had directed federal agencies to implement a categorical freeze on funding that was likely improper.

Chief US Circuit Judge David Barron said the Office of Management and Budget (OMB) “directed the agency defendants to freeze such funds without considering an obvious aspect of the problem – namely, the reliance interests of the recipients of the obligated federal funds that were to be frozen”.

The judge, who like the other panel members was appointed by a Democratic president, pointed to a lower-court judge’s conclusion that the agencies failed in carrying out OMB’s directive to assess whether such payments were legally required or appropriate on a case-by-case basis.

The court as a result said it would largely uphold Rhode Island-based US District Judge John McConnell’s March 2025 injunction blocking the policy, as well as a later order he issued directing the Federal Emergency Management Agency to comply with his order after it failed to do so.

California Attorney-General Rob Bonta, a Democrat, said in a statement the ruling made clear that the administration’s unilateral funding freeze “was deeply harmful, reckless, and wholly unreasoned”.

While the court largely sided with him and other Democratic attorneys general, it overturned part of Judge McConnell’s injunction to the extent it required agencies to make payments to the states, saying a US Supreme Court decision required claims for money to be pursued in a different court.

The White House did not respond to a request for comment.

The states sued after the OMB in January 2025, shortly after Mr Trump returned to the White House, issued a memo directing federal agencies to temporarily pause spending on federal financial assistance programmes.

That memo said the freeze was necessary while the administration reviewed grants and loans to ensure they are aligned with Mr Trump’s executive orders, including ones ending diversity, equity and inclusion programmes and directing a pause on spending on projects seeking to combat climate change.

The freeze implicated up to US$3 trillion (S$3.8 trillion) in federal funding.

OMB later withdrew that memo after it became the subject of litigation. But the states argued the memo’s withdrawal did not mean the end of the policy itself. REUTERS