Mass. nonprofits react to Trump's sudden funding freeze
Image | Courtesy of State House News Service via Clifton Dowell, State Affairs
Donald Trump speaks to supporters at a North Carolina rally in August.
The Trump administration's move to pause trillions of dollars in federal spending triggered an avalanche of uncertainty, panic and outrage, including a lawsuit from Attorney General Andrea Campbell and several of her counterparts.
Policymakers, nonprofit leaders, watchdogs and other affected parties spent most of Tuesday trying to unravel the implications of a sweeping freeze on grants and loans while President Donald Trump's deputies try to align government spending with his political and ideological aims.
They could have at least a few more days to figure out the landscape. A federal judge in Washington, D.C. temporarily blocked the proposed freeze late Tuesday afternoon, according to POLITICO. The judge's order is due to expire at 5 p.m. Monday.
Reports emerged over the course of the day about federal dollars left out of reach, including for Medicaid in Massachusetts, even as Trump's team sought to clarify that some popular aid programs are exempt.
Campbell joined with at least five other Democratic attorneys general to pledge a lawsuit challenging the pause, which they argued is unconstitutional.
"Congress controls the purse strings, and the executive branch cannot decide to halt funding just because they don't like how Congress chooses to spend it," Campbell said.
The full impact of the administration's pause remains unclear. Campbell said Massachusetts has been unable to access tens of millions of Medicaid dollars it tried to withdraw Monday. Nonprofit leaders in the state worried they might have to reduce employee hours or lay off workers. School superintendents warned that programs providing meals to students might be affected.
Gov. Maura Healey said she worries the pause will impact funding for a host of services, ranging from child care to road maintenance to energy affordability.
"It's devastating, and it touches all aspects, which is why I don't understand this," Healey said. "Donald Trump ran on a promise to lower costs. All he's done is offer proposals and take actions that are going to raise costs for people, raise costs for businesses and hurt our economies."
The interim head of the federal Office of Management and Budget on Monday wrote to the heads of federal executive departments and agencies instructing them to "temporarily pause all activities related to obligation or disbursement of all Federal financial assistance" while undertaking a review of their funding distributions.
While federal aid is governed in part by Congressional appropriations and longstanding funding formulas, OMB Acting Director Matthew Vaeth said the administration wants to ensure trillions of dollars the federal government spends in grants and loans match Trump's goals.
"Financial assistance should be dedicated to advancing Administration priorities, focusing taxpayer dollars to advance a stronger and safer America, eliminating the financial burden of inflation for citizens, unleashing American energy and manufacturing, ending 'wokeness' and the weaponization of government, promoting efficiency in government, and Making America Healthy Again," Vaeth wrote in the memo, a copy of which was published by The New York Times. "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."
Medicare and Social Security benefits would not be impacted by the pause, the memo said.
The memo dated Monday said the pause would take effect at 5 p.m. Tuesday. The White House reportedly sent a second memo Tuesday pledging that some programs such as the Supplemental Nutrition Assistance Program would not be affected.
White House Press Secretary Karoline Leavitt defended OMB's move in a briefing Tuesday afternoon, saying it was "not a blanket pause on federal assistance and grant programs from the Trump administration." Individual assistance programs such as welfare and nutrition aid would not be affected, she said.
"The reason for this is to ensure that every penny that is going out the door is not conflicting with the executive orders and actions that this president has taken. So what does this pause mean? It means no more funding for illegal [diversity, equity and inclusion] programs. It means no more funding for the green new scam that has cost American taxpayers tens of billions of dollars. It means no more funding for transgenderism and wokeness across our federal bureaucracy and agencies. No more funding for Green New Deal social engineering policies," Leavitt said. "Again, people who are receiving individual assistance, you will continue to receive that. And President Trump is looking out for you by issuing this pause, because he is being [a] good steward of your taxpayer dollars."
Leavitt described the pause as "temporary," but did not specify an end date.
States across the country reported Tuesday they were unable to access federal payment portals for Medicaid, which funds health insurance coverage for millions of low-income Americans. Democrat Sen. Ron Wyden of Oregon said the platform was down in all 50 states.
During a virtual press briefing alongside other AGs, Campbell said Massachusetts officials on Monday tried to draw almost $40 million in Medicaid funding "and haven't received the payment yet."
"This is just one potential funding stream that could be impacted by this reckless order," she said.
After a rapid back-and-forth with a reporter at the White House, Leavitt was asked if Medicaid would be affected by the freeze.
"I gave you a list of examples -- social security, Medicare, welfare benefits, food stamps -- that will not be impacted this federal pause. I can get you the full list after this briefing from the Office of Management and Budget," she replied.
Another reporter followed up later in the briefing and asked for clarification from Leavitt about whether any individuals on Medicaid would see their coverage cut off.
"I'll check back on that and get back to you," Leavitt said before turning to the next question.
Later in the afternoon, Leavitt posted on social media that the White House was aware of a "Medicaid website portal outage."
"We have confirmed no payments have been affected — they are still being processed and sent," Leavitt wrote. "We expect the portal will be back online shortly."
New York Attorney General Letitia James described several other reports of frozen funding, including Head Start grants in Michigan, child development block grants in Maryland and child support enforcement in another unnamed state.
The AGs on the call, all Democrats, pledged to file a lawsuit asking a court to intervene. It was not immediately clear Tuesday in which jurisdiction they would file their case.
"The president in this country is powerful. He is not a king," New Jersey Attorney General Matt Platkin said. "He does not get to wake up in the morning or after an afternoon nap and direct his entire government to stop funding critical services that Congress has duly authorized and appropriated, that millions and millions of Americans, Republicans, Democrats, independents, children, adults, [and] seniors depend on for life-saving care because he doesn't like something that he woke up thinking about."
Federal aid is a major source of revenue for states. According to Pew Charitable Trusts, federal grants represented 36.4% of total revenue for state governments in fiscal year 2022.
State records show Massachusetts expects to receive more than $15 billion in federal reimbursements in fiscal year 2025, a year when the state budget carries a $57.78 billion bottom line.
Healey did not say if she would file legislation to put state dollars to work to cover any lost federal funding, telling reporters that "we've got to take everything a step at a time."
Asked about options to keep payrolls flowing amid a federal funding pause, Healey replied, "We've got to see what happens in the courts."
"This is not just a blue state issue. This is a blue state, red state, every state issue," she said. "All of our states rely on this federal funding, so my hope is that a court will quickly put an end to his overreach of executive authority. He doesn't have the power to do this, and more than that, it's really, really harmful."
Doug Howgate, president of the Massachusetts Taxpayers Foundation, noted that Medicaid reimbursements are the second-largest source of revenue in the state budget. He called the OMB pause "incredibly problematic."
"The uncertainty in and of itself is a huge problem, and there's a chance that when we get past uncertainty to more certainty, the problem is even bigger," Howgate said.
Significant federal money also flows to nonprofits, local governments and many other entities, which use it to fund a suite of programs and services.
Massachusetts Nonprofit Network CEO Jim Klocke said the freeze would affect nonprofits "in every city and town in Massachusetts, large, medium and small," even if federal funding for individual assistance programs is not affected.
Nonprofits on Tuesday had to "immediately shift into triage mode," Klocke said, calling the risk of cutting employee hours or layoffs "very real."
"Federal funding is hugely important to the nonprofit sector, and more importantly, to the people served by nonprofits. Billions of dollars come every year from the federal government to nonprofits in Massachusetts. Tens and tens of thousands of nonprofit jobs depend on that funding," Klocke said. "It's in every sector. Housing, crime prevention, research, after-school care -- they all have federal funding in them to one degree or another. So when OMB says we're going to put a blanket freeze in place ... what that does is it freezes all those services."
Associated Industries of Massachusetts, one of the state's largest business groups, sent an alert to members just before 1:30 p.m. urging them to get in touch with the organization to share concerns.
"Many Massachusetts companies receive federal grants and loans for a variety of purposes. Some of those companies could now face issues making payroll at the end of the month," AIM wrote in its alert. "AIM is working with members of the Massachusetts Congressional delegation to determine the moratorium's potential effect on employers."
Federal offices and agencies must identify "any legally mandated actions or deadlines for assistance programs arising while the pause remains in effect" and report that information to OMB under the memo Vaeth issued Monday. They are also required to submit detailed information about affected spending activity by Feb. 10.
Vaeth instructed agencies to review pending federal financial assistance announcements to ensure they comply with Trump's priorities. To the extent allowed by law, agencies could modify unpublished aid announcements, withdraw already-announced funding or cancel awards "that are in conflict with Administration priorities" under the OMB memo.
The administration also ordered agencies to give a "senior political appointee" responsibility to ensure each federal aid program "conforms to Administration priorities," and to investigate programs to "identify underperforming recipients."
"OMB may grant exceptions allowing Federal agencies to issue new awards or take other actions on a case-by-case basis," Vaeth wrote. "To the extent required by law, Federal agencies may continue taking certain administrative actions, such as closeout of Federal awards (2 CFR 200.344), or recording obligations expressly required by law."
Sam Doran and Ella Adams at State House News Service contributed reporting.
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