The Trump administration is backing off from its proposed freeze of all federal financial aid.
That comes after the two-page memo from the acting director of the Office of Management and Budget sparked a flurry of confusion and worry about its potential impact on everything from health care for low-income Americans to Head Start to funds for state and local governments.
A federal judge halted that order just before it went into effect at 5 p.m. Tuesday.
Now acting Director Matthew Vaeth has rescinded that order in a terse, two-sentence memo sent to agencies across the federal government.
“OMB Memorandum M-25-13 has been rescinded,” Vaeth wrote, adding that agencies should consult with their general counsels about enforcing President Donald Trump’s executive orders.
Monday’s memo ordered all federal agencies to “temporarily pause” all awarding and disbursement of federal financial aid “to the extent permissible under applicable law.”
In the memo, Vaeth directed agencies to align federal loan and grant awards with the priorities of Trump, whose executive orders have targeted transgender rights, environmental justice, and diversity, equity and inclusion initiatives.
“The use of Federal resources to advance Marxist equity, transgenderism, and green new deal social engineering policies is a waste of taxpayer dollars that does not improve the day-to-day lives of those we serve,” he wrote.
Even already approved grants were supposed to be halted, The Associated Press reported.
That would have had an enormous impact across the country and in Maine, where federal funding to the state government alone totaled $5.2 billion in 2020, including one-time COVID-19 assistance. It could affect everything from medical research to Medicaid and “food stamps,” to rural energy projects, to home energy efficiency projects, to heating aid, to tribal health care, to public broadcasting and more. Under Vaeth’s guidance, the freeze wouldn’t have applied to loans or grants “received directly by individuals.” But it was unclear whether that would have affected funding that first goes through a state or local government before disbursement.
Social Security and Medicare were exempt from the order. It was unclear if Medicaid, which provides federal funding for the state’s MaineCare program, also was exempt.
The order met widespread condemnation, with U.S. Sen. Susan Collins, who chairs the powerful Appropriations Committee, calling it “too far sweeping” and U.S. Sen. Angus King, an independent who caucuses with Democrats, calling it a “blatantly unconstitutional” usurpation of congressional authority.
On Wednesday, Collins said she is “pleased” that OMB is rescinding the memo. “While it is not unusual for incoming administrations to review federal programs and policies, this memo was overreaching and created unnecessary confusion and consternation,” she said.
Under Article I of the U.S. Constitution, Congress is given authority over federal spending. The U.S. Supreme Court further in a 1975 decision, Train v. City of New York, ruled President Richard Nixon didn’t have discretion to withhold congressionally appropriated funds. While that case worked through the courts, Congress passed a law to prevent presidents from impounding funds without approval from lawmakers.