Senate Democrats said on Tuesday morning their states’ attorneys general were planning to launch lawsuits.

Senate Democrats said on Tuesday morning their states’ attorneys general were planning to launch lawsuits. John M. Chase/Getty Images

Court temporarily blocks Trump's spending freeze; government's top watchdog is reviewing whether it is legal

GAO has enforcement options if it deems the Trump administration is violating the law.

A federal judge on Tuesday blocked President Trump's widespread freeze of many federal grants, loans and assistance programs just minutes before it was set to take effect. 

Just before the judge's decision, the government’s top watchdog and enforcer of federal spending law said it was looking into whether Trump’s widespread freeze of many federal grants, loans and assistance programs is legal. The spending pause was set to go into effect at 5 p.m. on Friday, but U.S. District Judge for the District of Columbia Loren AliKhan issued a temporary injunction on the directive. It will remain on hold until at least Feb. 3 as litigation plays out. 

The lawsuit was brought by the National Association of Nonprofits and other groups. 

If the funding pause is eventually allowed to proceed by the court, it could face other resistance. The comptroller general, the head of the Government Accountability Office, must report to Congress when a withholding of federal funds has taken place and the executive branch fails to send its own notification, or “special message.” After the Office of Management and Budget on Monday ordered federal agencies to freeze federal spending on grants and loans, while allowing for an array of carve outs and exempting programs that provide direct assistance to individuals, a GAO official told Government Executive it is examining the manner. 

“GAO is examining the steps and information needed to determine if there are any Impoundment Act issues with respect to the administration’s actions to pause funds,” the official said, referring to the 1974 Impoundment Control Act. “GAO also has authority under the ICA to review potential impoundments.”

The impoundment law prohibits the executive branch from withholding congressionally appropriated funds for policy reasons. It does allow for a narrow set of circumstances when the president can freeze funding, including for unforeseen circumstances, as provided in law or from savings realized by operational efficiencies. In those cases, however, the White House must notify Congress of its deferrals and specify a timeframe for releasing them. It does not appear the Trump administration has made any such formal notice.

Instead, OMB said in clarifying guidance provided to Congress, the Trump administration is seeking to merely instituting a temporary pause that is normal for program implementation. OMB did not say when the freeze would be lifted but set Feb. 10 as a deadline for agencies to submit information on all programs and activities subject to the pause and explain their purpose. The uncertainty of the matter led to widespread panic and confusion across government as agencies scrambled to determine the implications of the memo. 

If GAO disagrees with that assessment and informs Congress an impoundment or deferral has occurred, it can, after 25 days, sue the executive branch. GAO, a legislative branch agency, found in 2020 that the Trump administration violated the Impoundment Control Act by withholding aid to Ukraine. 

Once GAO informs Congress a deferral has taken place, lawmakers in either chamber can force the White House to resume spending by passing a resolution with a simple majority. 

Brian Finch, an attorney focusing on government law at the firm Pillsbury, said the Trump administration may have some wiggle room in framing its pause as a "programmatic delay” rather than an impoundment. Such an action, he said, may be “inherently within the president’s authority.” There is no specific timeframe for how long Trump can deem the pause a delay rather than an impoundment, Finch said, but if the Feb.10 deadline comes and goes without the spigots being turned back on the administration’s argument would become more difficult to sustain. 

White House Press Secretary Karoline Leavitt, in part by citing the OMB memo itself, said on Tuesday the president was acting within the confines of the law. 

"The White House Counsel's Office believes that this is within the president's power to do it, and therefore he's doing it," Leavitt said.

Finch said all grant recipients should be contacting OMB and the disbursing agency to determine if their program will be impacted and, if so, ask how it should proceed when the next payment is missed. 

Melissa Prosock, an attorney at Greenberg Traurig focusing on government contracts, said the government can cancel a grant award for no longer aligning with “program goals or agency priorities,” but only if such a clause were clearly and unambiguously made known to the grant recipient. Those awardees should be carefully reviewing the terms and conditions of their grant agreements to prepare for potential terminations. 

“All grant recipients could be impacted, so they need to plan for the disruption,” Prusock said. 

This story has been updated to note the federal judge's temporary injunction.