UPDATED 12:44 P.M.
(Reuters) -Advocacy groups representing non-profits and small businesses filed a lawsuit on Tuesday challenging the Trump administration’s sweeping directive to temporarily freeze federal loans, grants and other financial assistance.
The lawsuit filed in federal court in Washington, D.C., said the directive issued by the acting head of the U.S. Office of Management and Budget on Monday “will have a devastating impact on hundreds of thousands of grant recipients.” The lawsuit asked a court to halt the freeze, which was set to take effect at 5 p.m. ET (2200 GMT) on Tuesday.
Matthew Vaeth, OMB’s acting director, said the money would be put on hold while the administration of Republican President Donald Trump reviews grants and loans to ensure they are aligned with the president’s priorities, including executive orders he signed ending diversity, equity and inclusion programs.
The groups — National Council of Nonprofits, the American Public Health Association, Main Street Alliance and SAGE — said in the lawsuit that OMB lacked authority to unilaterally terminate all federal financial assistance programs across the government.
The groups argued that OMB’s directive targeted grant recipients based in part on recipients’ rights to free expression and association under the U.S. Constitution’s First Amendment.
“The actions taken yesterday are a callous disregard for the rule of law and a drastic abuse of power that will harm millions of Americans across the country,” said Skye Perryman, the head of the liberal-leaning legal group Democracy Forward, which is representing the plaintiffs.
The U.S. Department of Justice, which would defend the policy in court, did not respond to a request for comment.
The U.S. Constitution gives Congress control over spending matters, but Trump said during his campaign that he believes the president has the power to withhold money if he disagrees.
A 1974 law called the Impoundment Control Act established procedures designed to restrict a president from not spending money appropriated by Congress.
The freeze marked the latest in a flurry of actions by the Trump administration since the Republican’s return to office on Jan. 20 to dramatically reshape the federal government.
Trump’s order not only impacts a broad swath of nonprofits but could lead to turmoil in state and local governments that depend on federal aid for everything from highway construction to school lunches to foster care.
(Reporting by Nate Raymond in Boston;Editing by Noeleen Walder and Bill Berkrot)
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WASHINGTON (Reuters) – The Trump administration has temporarily paused grant, loan and other financial assistance programs at the Office of Management and Budget, according to a memo seen by Reuters, prompting criticism from congressional Democrats.
The memo referenced the executive orders, including those seeking to dismantle programs related to diversity, equity and inclusion (DEI), President Donald Trump has signed since taking office last week.
“In the interim, to the extent permissible under applicable law, federal agencies must temporarily pause all activities related to obligation or disbursement of all federal financial assistance, and other relevant agency activities that may be impacted by the executive orders, including, but not limited to, financial assistance for foreign aid, nongovernmental organizations, DEI, woke gender ideology, and the green new deal,” Matthew J. Vaeth, the acting director of the Office of Management and Budget, wrote in the memo.
The suspension goes into effect on Jan. 28 at 5 p.m. eastern time (2200 GMT), according to the memo.
Top Democratic congressional budget appropriation lawmakers responded to reports of the memo by sending a letter demanding the OMB reverse its decision.
“The scope of what you are ordering is breathtaking, unprecedented, and will have devastating consequences across the country. We write today to urge you in the strongest possible terms to uphold the law and the Constitution and ensure all federal resources are delivered in accordance with the law,” Democratic Senator Patty Murray and Democratic Representative Rosa DeLauro wrote.
Agencies have until Feb. 10 to submit detailed information on any programs, projects or activities subject to the pause, the memo states.
The suspension will provide the administration with time to review agency programs and determine the best uses of funding for those programs consistent with the law and Trump’s priorities, it added.
Agencies must identify legally mandated actions or deadlines for assistance programs before completing the analysis, it added.
Vaeth directed federal agencies to halt all activities associated with open notices of funding opportunities.
“This memorandum requires federal agencies to identify and review all federal financial assistance programs and supporting activities consistent with the president’s policies and requirement,” Vaeth wrote.
(Reporting by Steve Holland and Jasper Ward; additional reporting by Bo Erickson; Editing by Kate Mayberry)
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