Federal grant recipients have long faced uncertainty when a change in administration brings new policy priorities. Recent decisions – both from the courts and U.S. Government Accountability Office (GAO) – provide benchmarks to consider regarding the federal government's authority to suspend, delay or terminate previously awarded grants based solely on shifting executive policy.
DOT's NEVI Program Funding
In June 2025, the U.S. District Court for the Western District of Washington issued a sweeping preliminary injunction in State of Washington et al. v. U.S. Department of Transportation et al., Case No. 2:25-cv-00848-TL (W.D. Wash. 2025), halting the U.S. Department of Transportation's (DOT) freeze on National Electric Vehicle Infrastructure (NEVI) Formula Program funds. The NEVI program, created by the Infrastructure Investment and Jobs Act (IIJA), appropriated $5 billion for states to deploy electric vehicle (EV) charging infrastructure, with funds to be distributed by a mandatory statutory formula.
What Happened?
Following a change in administration, DOT – citing new executive policy priorities – rescinded prior NEVI guidance, revoked state plan approvals and halted fund distributions. Sixteen states and the District of Columbia sued, arguing that the freeze violated the IIJA, Administrative Procedure Act (APA) and U.S. Constitution's separation of powers.
Key Findings from the Court
- Statutory Mandate Prevails. The IIJA's language is mandatory: DOT "shall" distribute funds per the statutory formula. The court found DOT's categorical freeze and plan revocations were not authorized by statute and exceeded the agency's authority.
- No Room for Policy-Driven Pauses. The court rejected DOT's argument that it could pause or suspend funding to align with new policy priorities, holding that such actions are only permissible if specifically allowed by statute and after following required procedures.
- Separation of Powers. The executive cannot override U.S. Congress' appropriations decisions or impose new policy conditions on funds without statutory authority. The freeze was deemed an unconstitutional encroachment on legislative power.
- Irreparable Harm and Public Interest. States demonstrated concrete harm – canceled contracts, halted projects and budgetary chaos – that could not be remedied by later payments. The public interest favored enforcing congressional spending decisions.
- Injunction Issued. The court enjoined DOT from suspending or revoking NEVI plans or withholding funds for any reason not set forth in the IIJA or applicable regulations, restoring the status quo for the affected states.
DOE's School Energy Grants
In a parallel development, the GAO recently found that the U.S. Department of Energy (DOE) violated the Impoundment Control Act of 1974 (ICA) by delaying the obligation of funds appropriated for the Renew America's Schools program.
Background
Congress appropriated $500 million to DOE for energy efficiency improvements at public schools to be distributed over fiscal years (FY) 2022 through 2026. After two successful funding rounds, DOE delayed a third round in FY 2025, citing the need to review applications for alignment with new administration policies, including recent executive orders on energy and diversity, equity and inclusion (DEI) initiatives.
GAO's Decision
- Policy Delays Are Improper Impoundments. Based on information available to GAO, DOE's delay was not due to statutory or operational necessity but solely to review for policy alignment. GAO found that such a policy-based delay, even absent a formal termination or cancellation, is not permitted under the ICA.
- Line-Item Appropriations Limit Discretion. The decision emphasized that DOE's discretion was limited by the line-item appropriation for the Renew America's Schools program. Unlike lump-sum appropriations, line-item appropriations reflect Congress' intent to restrict agency flexibility.
- Broad Potential Implications. While this decision is specific to DOE, it sends a signal to all federal agencies that GAO is tracking the ICA's requirements. Agencies may experience increased congressional and GAO oversight of funding delays, especially those that coincide with changes in administration or policy direction.
Key Takeaway
These decisions provide new insights and tools to consider when under award or facing a termination rooted in shifting administration policies.
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