With the recent transition of Presidential administrations, there have been a substantial number of new Executive Orders that have led recipients of federal grants and cooperative agreements to ask whether the funding they receive is at risk and, if the funding continues, whether changes in federal program policy goals may materially alter the implementation requirements attached to that funding.
Although these questions arise each time there is a change in Presidential administration, in the current cycle, national attention is more heavily focused on federal spending during and after the pandemic and emphasis by the incoming administration on funding reductions. Moreover, there is a clear contrast in the policy aims of the outgoing and incoming administration that which is, in part, being implemented through funding conditions placed upon federal grants.
Current examples include a funding pause for programs funded through the Inflation Reduction Act and Infrastructure Investment and Jobs Act under the Executive Order entitled "Unleashing American Energy," and changes in anti-discrimination, affirmative action, and "diversity, equity, and inclusion (DEI)" requirements attached to grant and contract funds under the Executive Order entitled, "Ending Illegal Discrimination and Restoring Merit-Based Opportunity," issued on January 20 and 21, 2025.1
Concerns in these areas generally boil down to the following three specific questions:
- Can the budget authority for the federal program under which funding is awarded to an organization be eliminated or substantially cut?
- Can a specific federal grant made to an organization be terminated on the grounds that, in the grant's current form, it is designed to achieve policy aims that are inconsistent with the policy aims of a new administration?
- To what extent can new terms and conditions oriented toward revised policy goals be placed on an existing federal grant?
Each of these is addressed below.
Question 1: Can the budget authority for the federal program under which funding is awarded to an organization be eliminated or substantially cut?
Short answer: Generally, yes—through the Impoundment Control Act of 1974—if the President and a majority in each Chamber of Congress are in agreement that it should be. Such reductions in budget authority are, however, generally limited to unobligated funds.
In 1974, Congress enacted the Impoundment Control Act ("ICA"), 2 U.S.C. § 681 et seq, a specific statutory mechanism by which a President may seek a reduction of amounts previously appropriated by Congress for federal activities. Despite various arguments for and against its necessity or appropriateness within the constitutional framework of the United States,2 it appears that Presidents have generally employed this mechanism when seeking to reduce appropriations made by Congress.3 4
The statute is heavily procedural in its focus, establishing steps and deadlines within the legislative process to enable a President to request a rescission of existing budget authority with a reasonable assurance that Congress will—whether favorably or unfavorably—act upon it. Most notably, those steps are:
- "Whenever the President determines that all or part of any budget authority . . . should be rescinded for fiscal policy or other reasons" the President may commence the rescission process through a special message transmitted to both the House of Representatives and Senate and published in the Federal Register, specifying the budget authority for which rescission is requested and setting forth supporting facts, circumstances, and reasons.5
- In response to such message, within both the House of Representatives and Senate, any member may introduce a rescission bill within the pertinent committee for consideration of such bills.6 Within the House or Representatives, that is generally the Appropriations Committee.7 Within the Senate, such bills are generally referred to both the Appropriations Committee and Budget Committee.8
- If a rescission bill is introduced and the relevant committee fails to report it within 25 days of continuous session, any member may move to discharge the bill from the committee, provided the motion is seconded by one-fifth of members of the chamber involved.9 Once reported or discharged, the rescission bills are subject to special privilege in the House and Senate enabling them to be taken up for consideration through a mere majority vote.10 As explained by Mark Strand and Tim Lang of the Congressional Institute, "[a] rescission bill is privileged, which means that it is pretty much guaranteed a vote on the Floor—regardless of the views of the Appropriations Committee."11
- If a rescission bill passes both the House and Senate within 45 days of continuous session, it will be enacted.12 If it does not, the funds at issue can no longer be withheld from obligation and cannot be proposed again for rescission.13
Under the above-described procedures, where the majority party in the House of Representatives and Senate are both aligned with the President, it appears likely that a rescission bill would receive expeditious consideration and favorable treatment.
Importantly, rescission bills under the ICA may be used only with respect to budget authority amounts that are not obligated.14 Relevant to federal grants, grant funds are generally considered obligated upon the award of the grant.15 Thus, grant funds that have been awarded through a notice of award or grant agreement for a current grant period are beyond the reach of the ICA's rescission process unless the award is terminated in whole or in part.16
Question 2: Can a specific federal grant made to an organization be terminated on the grounds that, in the grant's current form, it is designed to achieve policy aims that are inconsistent with the policy aims of a new administration?
Short answer: It depends upon the specific terms and conditions set forth in the notice of award or grant agreement and when the grant was made.
The bases upon which a funding agency may terminate a grant award are set forth within the Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards ("Uniform Guidance"), 2 C.F.R. Part 200, at § 200.340(a), as follows:
The Federal award may be terminated in part or its entirety as follows:
(1) By the Federal agency or pass-through entity if the recipient or subrecipient fails to comply with the terms and conditions of the Federal award;
(2) By the Federal agency or pass-through entity with the consent of the recipient or subrecipient, in which case the two parties must agree upon the termination conditions. These conditions include the effective date and, in the case of partial termination, the portion to be terminated;
(3) By the recipient or subrecipient upon sending the Federal agency or pass-through entity a written notification of the reasons for such termination, the effective date, and, in the case of partial termination, the portion to be terminated. However, if the Federal agency or pass-through entity determines that the remaining portion of the Federal award will not accomplish the purposes for which the Federal award was made, the Federal agency or pass-through entity may terminate the Federal award in its entirety; or
(4) By the Federal agency or pass-through entity pursuant to the terms and conditions of the Federal award, including, to the extent authorized by law, if an award no longer effectuates the program goals or agency priorities.
(emphasis added).
These bases have evolved in important ways over the past decade. They appeared in a form very similar to the current form when the Uniform Guidance was first promulgated in late 2014.17
Likely based upon programmatic policy changes implemented by the Department of Health and Human Services ("HHS") under the first Trump Administration,18 recipients under the Teen Pregnancy Prevention Program ("TPPP") were notified that their awards would end at the end of their then-current one-year budget periods, shortening their overall potential project periods from five years to three years.19
Several recipients brought suit against HHS, asserting that the cessation of funding before the end of their competitively approved multi-year project periods constituted "terminations," and that none of the above-described termination bases were at issue, rendering the terminations improper.20 In each case, the recipients prevailed.21
In 2020, as part of a broader set of changes, the text of the Uniform Guidance grant termination provision was amended to add the following termination basis: "[b]y the Federal awarding agency or pass-through entity, to the greatest extent authorized by law, if an award no longer effectuates the program goals or agency priorities."22
Although no connection to the TPPP cases was asserted in the Federal Register notice effectuating the change,23 the timing and nature of the change are such that the added text seems likely to have at least been informed by them.
Effective October 1, 2024—again as part of a broader set of changes to the Uniform Guidance—the new basis for termination that had been added in 2020 was removed as a stand-alone basis. As reflected in the current text of 2 C.F.R. § 200.340 (reproduced above), the language was relocated to appear merely as an example of the type of basis that an agency could expressly include through award-specific terms and conditions.24 In the Federal Register notice implementing this change, the Office of Management and Budget specifically explained its intent that such a policy-oriented termination basis be included in the express terms of an award if the funding agency wishes to apply it.25
The combined practical result of the TPPP cases and the regulatory changes to the termination language is that any grantee concerned about the possibility its award may be terminated for the reason that it no longer furthers policy goals consistent with the goals of its funding agency must evaluate: (i) the specific terms of its award, and (ii) when its award was made. If the award terms—whether expressly included in the notice of award or grant agreement document or incorporated by reference through clear agency guidance—provide specifically for termination if the grant no longer effectuates agency policy, such termination basis will likely be available to the funding agency.
If not incorporated into the terms and conditions of the award, the answer depends in part upon timing. As a general rule, the Supreme Court has held that substantive award terms binding grantees are based upon federal regulations and guidance in effect at the time the award was made.26 Therefore, for awards that do not expressly include a policy-based termination provision which were made on or after October 1, 2024, such basis is almost certainly unavailable to the federal awarding agency.
By comparison, for such awards made prior to October 1, 2024, the answer is less certain and a potential point of litigation. The express text of the Uniform Guidance suggests the narrowing of termination bases by the government may effectively reduce its termination options even for awards made prior to October 1, 2024. Specifically, 2 C.F.R. § 200.110(a) states: "[t]he standards set forth in this part affecting the administration of Federal awards by Federal agencies become effective once implemented by Federal agencies or when any future amendment to this part becomes final."27 Consistent with this language, the Department of Education serves as a practical example of an agency apparently considering the changes broadly effective for all awards. In its recent Federal Register notice asserting adoption of the amended Uniform Guidance standards, the Department instructed that all grant award notices are to be considered updated to "ensure that . . . new flexibilities and due process protections . . . apply uniformly to Department grantees . . ."28
Question 3: To what extent can new terms and conditions oriented toward revised policy goals be placed on an existing federal grant?
Short Answer: Congress' ability to attach conditions to federal grants has very few limits. Executive branch personnel must act within the scope of their delegated authority and in a manner consistent with the pertinent program's authorizing statute, necessitating a case-by-case assessment.
As discussed above with respect to termination provisions, federal awarding agencies can generally adjust grant terms prospectively. The extent to which grant funds can be subjected to conditions designed to accomplish various policy goals is, however, a separate question that—despite well-established general principles—remains highly dependent upon the circumstances of the particular funding condition.
Congress has long had broad discretion to impose conditions upon federal grant funding, subject to only a few limitations. Those limitations, which developed independently over time, were articulated in the form of a succinct list by the Supreme Court in 1987 in South Dakota v. Dole, as follows:
- Funding conditions must be in furtherance of the general welfare—though what furthers the general welfare is a matter largely within Congress' discretion.29
- Funding conditions must be attached unambiguously so that the recipient is able to make a voluntary decision to accept the conditions30—though the extent to which the condition must be clearly stated is itself an uncertain matter.31
- Funding conditions must be related to the federal interest or purpose of the program32—though such relatedness can be satisfied by even a loose connection that furthers the program's ostensible goals.33
- Funding conditions may not contravene another constitutional requirement, referred to as the "independent constitutional bar" limitation.34
- Funding conditions may not be applied under circumstances that go beyond inducement to coercion35—though findings of coercion are extremely rare given that most recipients participate voluntarily in grant programs.36
Of the above limitations on Congressional power to condition funds, the independent constitutional bar limitation has arguably been the most effective, limiting the ability of the federal government to condition speech outside the four corners of the grantee's federally funded program.37 Still, even this limitation is ineffective to the extent that Congress is imposing messaging conditions upon how the federal program itself is implemented.38
Executive agencies are subject to stricter limitations on how they may condition federal grant funds, as they may only do what Congress has authorized them to do. Since grant programs are always specifically authorized by legislation, an agency's discretion to place conditions on the funding must be authorized by Congress and consistent with the statutory scheme established thereby. Two cases involving Department of Justice ("DOJ") grants to the City of Los Angeles illustrate this additional consideration: Los Angeles v. Barr, 929 F.3d 1163 (9th Cir. 2019) and Los Angeles v. Barr, 941 F.3d 931 (9th Cir. 2019).
In the first case, the Ninth Circuit upheld certain competitive award scoring criteria implemented by DOJ in a discretionary grant program for community policing.39 The criteria prioritized applicants who, among other things, asserted a commitment to supporting certain federal immigration enforcement activities.40 In assessing DOJ's authority to impose such scoring criteria, the Court emphasized DOJ's broad authority under the relevant program statute to establish implementing program requirements.41 As a result of the broad statutory grant of gap-filling power to DOJ, the Court applied a highly deferential standard in evaluating DOJ's decision to employ the criteria at issue.42 Specifically, the Court reasoned that it would "give DOJ's inclusion of an illegal immigration focus area . . . controlling weight unless [such approach were] manifestly inconsistent with the statute or lack[ed] any reasonable basis. . ."43 Under this standard, the Court unsurprisingly found the criteria permissible.44
Conversely, in the second case, the Ninth Circuit voided certain conditions related to cooperation with federal immigration enforcement45 that DOJ attempted to impose upon Edward Byrne Memorial Justice Assistance Grant ("Byrne JAG") program formula grants.46 In doing so, the Court carefully analyzed the language of the Byrne JAG authorizing statute, searching for express language granting DOJ authority to place the pertinent policy-oriented conditions upon the funding.47 Finding no adequate express delegation of such authority in the statute, the Court struck down the conditions as ultra vires.48
As can be seen from the above-described framework, the extent to which revised funding conditions may be effectively imposed to accomplish priorities that vary from the priorities of the funding recipients will be circumstance dependent, with key factors being: (i) the nature and scope of the particular funding condition; (ii) whether Congress or the Executive is seeking to impose the condition, and (iii) the specific language of the particular grant program's authorizing statute.
Conclusion
With changing administrations come changing priorities and changing funding conditions. Although the guiding principles and mechanisms applicable to funding reductions and changes in funding conditions are well-established, those principles and mechanisms are highly circumstance-dependent.
Footnotes
1. Trump Administration Executive Orders are currently available at: https://www.whitehouse.gov/presidential-actions.
2. Arguments have variously been made that the ICA was unnecessary, based upon a view that expenditure of Congressional appropriations was inherently required, or overreach, based upon the countervailing view that impoundment of appropriated amounts was long-standing practice of Presidents before the Act was passed. See, e.g., Zachary S. Price, The President Has No Constitutional Power of Impoundment, Notice & Comment Blog, Yale J. on Regul. (Jul. 18, 2024), https://www.yalejreg.com/nc/the-president-has-no-constitutional-power-of-impoundment-by-zachary-s-price/ (arguing that most appropriation laws have the effect of mandating spending) ; Richard Kogan, FAQs on Impoundment: Presidential Actions Are Constrained by Long-Standing Constitutional Restrictions, Ctr. on Budget and Pol'y Priorities (Nov. 21, 2024), https://www.cbpp.org/research/federal-budget/faqs-on-impoundment-presidential-actions-are-constrained-by-long-standing (arguing the existence of limitations on Presidential impoundment authority beyond the ICA); Mark Paoletta and Daniel Shapiro, The President's Constitutional Power of Impoundment, Ctr. for Renewing Am. (Sep. 10, 2024), https://americarenewing.com/the-presidents-constitutional-power-of-impoundment/ (describing a longstanding history of impoundment authority prior to the ICA); Eloise Pasachoff, Modernizing the Power of the Purse Statutes, 92 Geo. Wash. L. Rev. 359, 384 (Apr 2024) (describing discussing positions on the ICA of officials from the first Trump Administration, including OMB Director Russel Vought and OMB General Counsel Mark Paoletta). Congress went so far as to intentionally avoid the Act itself rendering judgment on such contentions by including an express "disclaimer" section stating, "Nothing in this Act, or in any amendments made by this Act, shall be construed as . . . [among other things] asserting or conceding the constitutional powers or limitations of either the Congress or the President." 2 U.S.C. § 681(1). This article assumes the Impoundment Control Act would be the primary vehicle used to seek and process any rescission.
3. Zachary S. Price, supra note 1, (citing Eloise Pasachoff, supra note 1 and Josh Chafetz, Congress's Constitution: Legislative Authority and the Separation of Powers 65 (Yale U. Press 2017)).
4. By comparison to efforts to reduce amounts appropriated for specific purposes, the Supreme Court has held that repurposing amounts within a lump-sum appropriation that makes no mention of the particular program being discontinued is generally a matter committed to unreviewable agency discretion. Lincoln v. Vigil, 508 U.S. 182 (1993) (Explaining with respect to a particular Indian Children Program of the Indian Health Service that "Congress never authorized or appropriated moneys expressly for the Program, and the Service continued to pay for its regional activities out of annual lump-sum appropriations . . ." and holding that the decision was unreviewable under the Administrative Procedure Act because "[t]he allocation of funds from a lump-sum appropriation is [an] administrative decision traditionally regarded as committed to agency discretion."). Cf. Shawnee Tribe v. Mnuchin, 984 F.3d 94 (D.C. Cir. 2021) (Finding the Treasury Department's allocation of funding under a particular CARES Act Program reviewable in contrast to the allocation at issue in Lincoln based upon the fact that the appropriation specifically named and described the program.).
5. 2 U.S.C. §§ 683 and 685.
6. Id. § 688(a); Congressional Research Service, Expedited Procedure for Considering Presidential Rescission Messages Under Section 1017 of the Impoundment Control Act of 1974 at 2 (Jul. 6, 2017) [hereinafter CRS Memorandum], https://gallery.mailchimp.com/d4254037a343b683d142111e0/files/a92c5795-7f8c-4ef7-953a-a626626794fa/CRS_Memo_Expedited_Rescission_Procedure_Final.pdf.
7. CRS Memorandum, supra note 5, at 3.
8. Id.
9. Id.; 2 U.S.C. § 688(b).
10. CRS Memorandum, supra note 5, at 3–4; 2 U.S.C. § 688(b)(2).
11. Mark Strand and Tim Lang, Rescissions, Rescissions: How Congress Can Use the Rescission Process Responsibly, Congressional Institute (May 17, 2018), https://www.congressionalinstitute.org/2018/05/17/rescissions-rescissions-how-congress-can-use-the-rescission-process-responsibly/.
12. 2 U.S.C. §§ 682(3), (5) (defining "continuous session" for purposes of rescission bills) and 683(b) (requiring action within 45 days of continuous session).
13. 2 U.S.C. § 683(b).
14. See id. § 683 (describing rescission as relating to amounts "available for obligation"); Congressional Budget Office, CBO Explains How It Estimates Savings From Rescissions (May 26, 2023), https://www.cbo.gov/publication/59209 (explaining a rescission will not impact funds that are obligated).
15. Gov't Accountability Off., GAO-04-261SP, Principles of Federal Appropriations Law, [hereinafter the "Redbook"], Ch. 10, § C.2.b.
16. Some agencies fund grants incrementally, year-by-year, with an express disclaimer that funds not yet obligated for future budget periods within a multi-budget-period (generally multi-year) project period are subject to availability of funds. Prospective incremental funding amounts under such circumstances would be within reach of the recission process.
17. See 78 Fed. Reg. 78590, 78638 (Dec. 26, 2013) (providing the original text of the original termination provision at 2 C.F.R. § 200.339, as subsequently implemented by final rule at 79 Fed. Reg. 75187 (Dec. 19, 2014)).
18. See Planned Parenthood, Inc. v. U.S. Dept. of Health and Hum. Servs., 337 F.Supp.3d 308, 315–19 (S.D.N.Y. 2018) (Describing certain programmatic changes in the context of a challenge to the terms of a 2018 TPPP funding opportunity.).
19. See, e.g., King County v. Azar, 320 F.Supp.3d 1167, 1170–71 (W.D. Wa. 2018) (also listing three similar TPPP termination cases in footnote 5).
20. Id. at 1171–73.
21. Id. at 1171 n.5.
22. 2 C.F.R. § 200.340 (2021); 85 Fed. Reg. 49506, 49559 (Aug. 13, 2020).
23. See 85 Fed. Reg. 49506, 49507 and 49509–10 (Aug. 13, 2020) ("Related to the above changes that aim to strengthen program planning and Federal award terms and conditions, OMB is revising §§ 200.211 Information contained in a Federal award and 200.340 Termination to strengthen the ability of the Federal awarding agency to terminate Federal awards, to the greatest extent authorized by law, when the Federal award no longer effectuates the program goals or Federal awarding agency priorities.").
24. 89 Fed. Reg. 30046 (Apr. 22, 2024) (specifying an effective date of October 1, 2024).
25. Id. at 30089 (Apr. 22, 2024). At the same time, OMB specifically declined to implement a proposed change to the regulatory text that would have clarified that decisions not to fund future budget periods through incremental funding (termed "continuation awards") were not "terminations" within the meaning of § 200.340. Id.
26. Bennett v. New Jersey, 470 U.S. 632, 638 (1985) (Reasoning that changes in substantive requirements for federal grants should not be retroactively applied, in part because "[p]ractical considerations related to the administration of federal grant programs imply that obligations generally should be determined by reference to the law in effect when the grants were made."). Such implementation is often expressly acknowledged by federal awarding agencies. See, e.g., HHS Grants Policy Statement (2024) at 3 ("The 2024 HHS GPS applies to awards and award modifications that add funding made on or after October 1, 2024.").
27. 2 C.F.R. § 200.110(a) (Effective date).
28. 90 Fed. Reg. 4727 (Jan. 16, 2025). By comparison, see HHS Grants Policy Statement supra note 25, at 3 (Asserting, albeit with respect to subregulatory grant guidance, "[t]he 2024 HHS GPS applies to awards and award modifications that add funding made on or after October 1, 2024.").
29. 483 U.S. 203 (1987) (citing Helvering v. Davis, 301 U.S. 619 (1937)).
30. Id. (Citing Pennhurst State School and Hospital v. Halderman, 451 U.S. 1 (1981)).
31. See Bennett v. Kentucky Department of Education, 470 U.S. 656, 665 (1985) (Explaining that the federal government need not assert in advance the details of how a funding condition will be construed in practice for such condition to be binding when later implemented.); Cf. West Virginia v. U.S. Dep't of Treasury, 59 F.4th 1124, 1141–43 (11th Cir. 2023) (Emphasizing the impact of Pennhurst and instructing that "a state cannot knowlingly accept a condition if it is unable to ascertain what is expected of it." (internal quotation omitted)).
32. South Dakota, 483 U.S. at 207–08.
33. Los Angeles v. Barr, 929 F.3d 1163, 1177–82 (2019).
34. South Dakota, 483 U.S. at 208.
35. Id. at 211.
36. See State of Nevada v. Skinner, 884 F.2d 445 (9th Cir. 1989) (Noting that "[t]he coercion theory has been much discussed but infrequently applied in federal case law . . ."). Coercion was found with respect to mandatory Medicaid expansion under the Affordable Care Act in National Federation of Independent Business v. Sebelius, 567 U.S. 519 (2012), and has occasionally been relied upon by other courts since, but remains a difficult argument to make. See also 2 C.F.R. § 200.340(a)(3) generally permitting grantees to unilaterally terminate a grant agreement.
37. Agency for Int'l Dev. v. All. for an Open Soc'y, 570 U.S. 205, 221 (2013) (Holding that USAID could not condition eligibility for a particular program upon the applicants adopting a particular point of view in their messaging outside the confines of the federally funded program.).
38. Id. at 214–19 (Distinguishing between in-program messaging, which can be regulated through funding conditions; and out-of-program messaging, which cannot.)
39. See generally Los Angeles, 929 F.3d 1163 (Assessing the funding conditions under both the South Dakota factors discussed above and through the lens of agency authority.).
40. Id. at 1170–71.
41. Id. at 1177 (Citing 34 U.S.C. §§ 10382(b) (which authorized DOJ to create a competitive grant program and establish the form of the application) and 10388 (which states with respect to community policing programs, "[t]he Attorney General may promulgate regulations and guidelines to carry out this subchapter.")).
42. Id.
43. Id.
44. Id. at 1183.
45. The conditions required recipients to notify the Department of Homeland Security ("DHS") of scheduled release dates for detained individuals suspected of being undocumented immigrants and to grant DHS agents access to interview such individuals in detention facilities.
46. Los Angeles, 941 F.3d at 934. For formula grants, the authorizing statute for the program generally prescribes a specific formula to be applied in calculating the amount of federal funds to be granted to the recipient (usually a state or local government) each year. See Redbook, Ch. 10, Ch. 10, § B.3.
47. Id. at 938–44.
48. Id. at 945.
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