As we warned in a January 29 client alert, President Trump's Executive Orders and the subsequent Office of Management and Budget (OMB) memorandum ordering federal agencies to "temporarily pause" any and all funding disbursements and obligations were "just the beginning." Despite the purported rescission of the OMB memorandum and two court orders enjoining its implementation, the status of federal funding is, if anything, even more tenuous two weeks later.
The Administration's Shifting Positions
Since late January, federal funding recipients have lived in a state of perpetual whiplash. As reported by states and other organizations, federal grantees have lost access to their funds, then temporarily regained access, only to again see their accounts suspended—all on the basis of unknown or shifting rationales.
The Government's changed positions are too many to recount, particularly when it comes to climate and infrastructure funding appropriated through the Inflation Reduction Act (IRA) and Infrastructure Investment and Jobs Act (IIJA). To briefly recap, on January 20, Trump issued the "Unleashing American Energy" Executive Order ("the Energy EO"), which directed federal agencies to "immediately pause the disbursement of funds appropriated through the [IRA] or [IIJA]." OMB then issued Memo M-25-11, reiterating the executive order's "immediate[] pause" of what they dub "Green New Deal" funding. And on January 27, 2025, OMB issued Memo M-25-13, which states in relevant part that:
Litigation ensued, with twenty-two states and the District of Columbia bringing a federal suit in Rhode Island, and several nonprofit organizations filing a separate lawsuit in Washington, D.C. Each lawsuit challenged the legality of OMB Memorandum M-25-13 and sought a temporary restraining order prohibiting the Government from withholding funds pursuant to the directive. (Two weeks later, on February 13, the States expanded their pleadings to directly challenge and enjoin the Energy EO's funding-freeze mandate, OMB Memo M-25-11, and other related executive actions.)
What happened next is an ongoing game of whack-a-mole. Shortly after the first lawsuit was filed, OMB rescinded Memorandum M-25-13, ostensibly eliminating the federal directive implementing the funding freeze. The government then claimed that the lawsuits were moot and insisted they be dismissed. But just hours after the memo's rescission, White House Press Secretary Karoline Leavitt announced on X that the rescission of the memorandum did "NOT [mean] a rescission of the federal funding freeze." The memo was withdrawn, she stated, simply to "end any confusion created by the court's injunction." Ms. Leavitt continued: "The President's EO's [sic] on federal funding remain in full force and effect, and will be rigorously implemented."
No surprise, the confusion persisted. On January 31, the district court in the States' lawsuit granted the States' request for a Temporary Restraining Order ("TRO") and instructed the Government to provide notice of the TRO to all federal agencies. The Government issued the required notice, broadly instructing that, under the TRO, "[f]ederal agencies cannot pause, freeze, impede, block, cancel, or terminate any award or obligations on the basis of the OMB Memo, or on the basis of the President's recently issued Executive Orders." The guidance further explained that the prohibition applied to "all awards or obligations—not just those involving the Plaintiff States in the above-referenced case." Finally, the guidance advised that, "[o]ut of an abundance of caution, all federal agencies (even those not named as defendants in the case) should comply with the above-referenced terms."
This expansive view of the TRO proved short-lived. After issuing that guidance late Friday, January 31, the Government reversed course the following Monday morning. In a February 3 filing, the Government stated that it did not read the TRO "as enjoining the President's Executive Orders" or "as imposing compliance obligations on federal agencies that are not Defendants in th[e] case." And then, four days later, the Government took the position that the TRO does not enjoin the freezing of funds appropriated under the IRA and IIJA because, they maintained, such funding had in fact been suspended pursuant to OMB Memo M-25-11 (see above), not OMB Memo M-25-13, and the States' lawsuit targeted only the latter.
Another Court Order, Another Ploy
One week after the district court issued the TRO in the States' case, recipients of IRA- and IIJA-appropriated grants continued to report widespread suspension of their award accounts. A few programs had slowly come back online—including, on the morning of February 7, the accounts of Solar for All awardees, an IRA program aimed at creating solar programs in low-income and disadvantaged communities. But many others remained frozen.
The States responded by filing a motion to enforce the TRO. Based on evidence of the government's noncompliance, the district court granted the motion on February 10. In no uncertain terms, the court instructed: "The [Government] must immediately restore withheld funds, including those federal funds appropriated in the Inflation Reduction Act and the Infrastructure Improvement and Jobs Act. The directives in OMB M-25-11 are included in the TRO."
Some were surprised, then, when IRA and IIJA award recipients—including Solar for All grantees—found their award accounts frozen again the following morning. That evening they learned why: the Government had yet another tack. According to an EPA spokesperson, the agency was now freezing funds for reasons "[s]eparate from any Presidential [executive order] or OMB guidance"—i.e., the executive actions enjoined by the court's TRO (as reaffirmed in the court's order on the motion to enforce). According to the agency, "EPA personnel have identified certain grants programs," including those established by the IRA and IIJA, "as having potential inconsistencies with necessary financial and oversight procedural requirements or grant conditions of awards or programs." So much for the TRO.
Then another ball dropped. The next day, EPA Administrator Lee Zeldin announced on X that the agency would seek to claw back $20 billion of funding from the IRA-established National Clean Investment Fund (NCIF) and Clean Communities Investment Accelerator (CCIA) programs. As with the Solar for All grants and other IRA- and IIJA-related funds frozen in recent weeks, these NCIF and CCIA funds have long been obligated via award contracts. According to this White House and EPA, however, those contracts—executed at Congress's direction—matter little because they conflict with the policy priorities of this Administration.
What's Next?
If the last few weeks have taught us anything, it is that courts are struggling to keep up with the Government's games. EPA's recent moves suggest that this Administration will continue to find creative ways to thwart the disbursement of funds already appropriated by Congress and obligated to grant recipients and contractors.
As we advised previously, recipients of federal funding should remain vigilant, ensuring compliance with all terms and conditions of federal awards. Recipients should carefully document that compliance, as well as the status of their award accounts, communication with their program officers, and—in the event they need to seek relief in court—the concrete harms caused by any inability to access obligated funds. Take special care with respect to records retention, other federal regulatory requirements, and electronic communications. Recipients are also advised to carefully review their awards to understand the circumstances under which the relevant federal agency may terminate or unilaterally modify the award. Such terms vary widely among programs and agencies. Having a clear understanding of the agency's latitude today will help you anticipate and weather adverse agency action tomorrow.
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