Trump Administration Pauses New Grant Agreements with Bombshell OMB Memo: Heavens to Murgatroyd!

NOTE: Shortly after this was posted, the pause was ended, but I decided to leave this up as it illustrates that grant seekers will face a bumpy ride for the next few months.

Since January 20, the nascent Trump Administration has been doing something fairly remarkable in American politics: fulfilling campaign promises by issuing hundreds of Executive Orders (EOs). This should not be a surprise—as President Obama famously stated in 2008: “elections have consequences.” The response from media, Democrats, and the nonprofit world is as predictable as Snagglepuss on the Quick Draw McGraw cartoon series of my youth shouting “Heavens to Murgatroyd!” when distressed.

On January 27, Trump’s Office of Management and Budget (OMB) issued a memorandum titled “Temporary Pause of Agency Grant, Loan, and Other Financial Assistance Programs,” which directs Federal agencies to temporarily suspend the obligation and disbursement of federal financial assistance while conducting a comprehensive review of programs and awards to ensure alignment with the administration’s policies and priorities. As part of this review, agencies are also instructed to temporarily suspend the issuance of new program solicitations.

Contrary to most main stream media reporting, however, financial assistance programs for individuals, such as Social Security, Medicaid, SNAP, Pell Grants, Head Start, and Rental Assistance, were specifically named as being exempt from the pause (OMB FAQs). The funding suspension took effect January 28, with agencies required to submit detailed reports by February 10 identifying programs, projects, or activities impacted by the pause. On Tuesday afternoon and right on cue, Federal District Judge Loren AliKhan temporarily blocked Trump’s freeze, but this order will expire February 3 at 5 PM (again no surprise since court challenges to Executive Branch decisions are de rigueur these days). In the meantime, the Trump administration cannot suspend disbursement of congressionally appropriated funds.

The practice of temporarily pausing funding, including grants, is not unprecedented and has been seen in the previous Trump administration, as well as in transition periods under Nixon, Reagan, and Clinton (yes, that Clinton). This process typically involves review and modification of funding programs and solicitations for grant funding to reflect incoming administration priorities.

Thus, the grant sky is not falling, and won’t be, unless Trump seeks actual budget rescissions under the mostly forgotten Impoundment Control Act of 1974  which “requires the President to report promptly to the Congress all withholdings of budget authority and to abide by the outcome of the congressional impoundment review process.” I doubt this will happen. Without an actual rescission of previously authorized spending or attempts to claw back funds from signed grant agreements, this crisis will soon pass. [see note above, the crisis is already over]

Still, it’s also clear that the Trump administration is especially concerned with existing and unsigned grant agreements relating to DEI, gender identity, support for undocumented migrants, foreign aid to overseas NGOs, climate change, EVs, and some infrastructure programs under recent spending bills like the IRA and IIJA. Most nonprofits are engaged in human service delivery; grants for such purposes are not in the bullseye and are unlikely to become a budget target. There may be pressure, however, on certain funding for self-declared sanctuary cities, but such efforts must be very targeted to survive court challenges (i.e., holding back DOJ funding to try to force collaboration with ICE, as opposed to suspending CDBG funding). This will be mostly political theater with little impact on the kinds of grants most nonprofits seek.

But the OMB memo is not the whole story, as some Executive Orders (too complex to review in this post) could impact some nonprofits like Federally Qualified Health Centers (FQHCs), as these EOs relate to CMS eligibility and enrollment grants, as well as reversing mandates for health care agencies to find methods to expand affordable health care coverage, enhance health care quality, strengthen health coverage benefits, and boost health insurance enrollment. In addition, Federal refugee resettlement support is under review.

Even if grant disbursements and/or reimbursements to FQHCs and other grantees are delayed, this should not be a cash-flow crisis for well-managed nonprofits. Most have (or should have) prudent reserves and a standby credit line to deal with this, just like most well-run businesses, including S + A. Unless there are claw backs of some kind, the Federal grant spigot will soon be turned on again and it’ll be feeding time at the grant trough.

There is a lesson for nonprofits to learn, however, which is to diversify funding streams beyond Federal grants. Start applying for grants from foundations, which should be interested in funding stuff like DEI, gender identity, and immigrant services as Federal priorities change. Also, don’t forget state and city/county grants, which are not likely to be affected by the flurry of EOs, at least in the short term. In the meantime, there’s no reason to act like Snagglepuss or Chicken Little.