The last couple of weeks have sparked anxiety and confusion for many organizations that rely on federal funds with President Trump announcing Executive Orders and a federal funding freeze. There was quick action from stakeholders that provided a temporary pause on the implementation of the freeze and the administration shortly afterwards withdrew the memo that implemented the freeze.
While the immediate danger of a funding pause is gone, that does not mean that this funding will remain safe. This article will outline what happened during the past few weeks and discuss the short-, medium-, and long-term implications of a funding freeze if the administration pursues this in the future.
Executive Orders and Memoranda
President Trump has released many Executive Orders since his inauguration to illustrate his priorities. This includes three Executive Orders entitled Ending Radical and Wasteful Government DEI Programs and Preferencing, which aims to end “illegal and immoral discrimination programs, going by the name ‘diversity, equity, and inclusion’ (DEI)”, Ending Illegal Discrimination and Restoring Merit-Based Opportunities, which aims to stop diversity, equity, inclusion, and accessibility (DEIA) practices with relation to hiring, and Unleashing American Energy, which directs agencies to pause distributing funds appropriated through the Infrastructure Investment and Jobs Act (IIJA) and the Inflation Reduction Act of 2022 (IRA).
Federal financial assistance programs are defined in the memorandum as assistance the recipients or subrecipients administer or receive in various forms but do not include assistance provided directly to individuals.
On January 27, 2025, the Office of Management and Budget (OMB), issued memorandum M-25-13 entitled Memorandum for Heads of Executive Departments and Agencies. This memorandum required all federal agencies to find and review all federal financial assistance programs and supporting activities to ensure that they are consistent with President Trump's requirements and policies, as outlined in his Executive Orders. Federal financial assistance programs are defined in the memorandum as assistance the recipients or subrecipients administer or receive in various forms but do not include assistance provided directly to individuals and include all forms of assistance as defined in the first two paragraphs of the definition of this term in the Code of Federal Regulations (CRF). Federal financial assistance programs as defined in 2 CRF 200.1:
Assistance that recipients or subrecipients receive or administer in the form of:
- Grants
- Cooperative agreements
- Non-cash contributions or donations of property (including donated surplus property)
- Direct appropriations
- Food commodities
- Other financial assistance (except assistance listed in paragraph (2) of this definition).
Federal financial assistance also includes assistance that recipients or subrecipients receive or administer in the form of:
- Loans
- Loan Guarantees
- Interest subsidies
- Insurance
One day after the memo was released, OMB published Q&A Regarding Memorandum M-25-13, which attempted to clarify what would be affected. The Q&A noted that any program not implicated by the President’s Executive Orders would not be subject to the funding pause.The Executive Orders listed in the document included: Protecting the American People Against Invasion, Reevaluating and Realigning United States Foreign Aid, Putting America First in International Environmental Agreements, Unleashing American Energy, Ending Radical and Wasteful Government DEI Programs and Preferencing, Defending Women from Gender Ideology Extremism and Restoring Biological Truth to the Federal Government, and Enforcing the Hyde Amendment.
What caused the pause?
The Executive Orders are vague, and it appears that they could include many different funding streams. For example, would a grant focused on improving health outcomes be affected if part of the community that benefits are members of the LGBTQIA+ community? Would this violate the Executive Order focused on stopping DEI work? Or would it violate the Executive Order aimed at “defending women”? While these questions were not answered in the Q&A, it did state that benefits like student loans or the Supplemental Nutrition Assistance Program (SNAP) would not be affected.
The same day as the Q&A was released, a federal judge temporarily paused the administration's directive to pause federal loans, grants and other financial assistance. The next day, OMB withdrew its memo. Since the memo’s withdrawal, the federal judge who provided the temporary pause, extended it and stated that it will remain in place while deciding whether a longer injunction is needed. This was done to ensure that the memo was not just resubmitted after the original pause expired.
What happens if the pause is lifted?
Short-Term Impacts
The first impact that will come if the federal government pauses funding for certain is confusion and anxiety. Organizations will have a tough time figuring out which programs are affected, based on the information that has been provided. Additionally, programs that receive funding or are reimbursed for services provided would be interrupted.
This would include, but is not limited to, the Federal School Breakfast and Lunch program, which provides reimbursement to state to operate low-cost or free breakfast and lunch programs for kids who qualify and the Women, Infants, and Children (WIC) program, which provides free, healthy goods and personalized nutrition education, breastfeeding support and referrals to other services for pregnant, recently pregnant, and breastfeeding women, infant, and children.
Medium-Term Impacts
Changes that would come later down the line would be that organizations that receive federal awards through the federal and/or state governments might have to close due to lack of revenue. This would result in fewer providers providing services and once a provider closes its doors, it is unlikely they will reopen.
State and philanthropic organizations would have to start deciding what to fund themselves and what to let go.
Philanthropic organizations and the State cannot replace the funding the federal government provides as the federal government’s investments cannot be replaced due to the size of the investment.
Long-Term Impacts
The most impactful of the outcomes of a federal funding freeze would be uncertainty in the state budgeting process as much of the state budget is based upon assumptions of federal grants received. In Ohio for state FY 2023, 42% of dollars of state spending came from federal sources. When Medicaid funding is excluded, the largest expense funded by the federal government in the state, 28% of spending was supported by federal dollars. While it is difficult to say what percentage of the federal dollars received by the state would be affected by a pause on federal assistance, federal funds are imperative to Ohio’s State Budget, and cutting funds will result in budgetary impacts felt throughout the state.
The new administration started off in a stressful, uncertain manner for organizations in Ohio, but advocacy was successful in stopping this pause.
It was advocacy organizations that started the legal proceedings that led to the first pause being placed. The Center for Community Solutions will continue to follow the federal budgeting process and report on how this impacts organizations in Ohio. Especially those within the Health & Human Service sector.
