US judge leery of Trump administration’s defense of federal funding freeze

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By Daniel Wiessner

(Reuters) – A federal judge on Friday seemed likely to extend his earlier block on the Trump administration’s freeze on federal grants and other financial assistance, suggesting the broad initiative was beyond the powers of federal agencies.

U.S. District Judge John McConnell during a hearing in Providence, Rhode Island, seemed skeptical of a U.S. Department of Justice lawyer’s claim that federal agencies have broad discretion to pause specific funding programs and review whether they align with the president’s policy objectives.

Agencies are generally required to spend money appropriated by Congress, but in some cases do have latitude to review individual grants or programs.

“If agencies are not making decisions based on that individual power given to them, but rather on a categorical broad basis … then aren’t you in violation of the powers given to you?” McConnell asked the lawyer, Daniel Schwei.

“No,” Schwei replied. “If the executive has the legal discretion to pause funding, it can do it for one of those programs or all of those programs.”

McConnell, an appointee of Democratic former President Barack Obama, is considering whether to block the Trump administration from freezing federal grants to 22 states and Washington, D.C., pending the outcome of their lawsuit claiming the pause on potentially trillions of dollars in funding is illegal.

He said at the end of the two-hour hearing that he would likely rule next week.

The judge had issued a temporary restraining order on January 31 directing the Trump administration to lift the funding freeze in the states that sued until he could issue a longer-term decision.

And in a February 10 ruling, McConnell rebuked the administration for continuing to withhold some grants from states, including billions of dollars in infrastructure funding, despite his earlier decision.

McConnell at the time said the funding freeze “has caused and continues to cause irreparable harm to a vast portion of this country.”

Sarah Rice of the Rhode Island Attorney General’s office on Friday told McConnell that the harm of the freeze would be widespread and impact an array of state programs including public health and research grants, law enforcement, childcare, assistance for farmers, and foreign aid programs run by state universities.

“All of these things are essential to states and they all hang in the balance in this case,” she said.

Schwei told the judge that the states’ claims were overly broad and vague because they did not identify specific grants or programs whose funding was paused illegally.

“There is no way for the court to enter relief against a so-called funding freeze without becoming an overseer over the funding decisions of almost two dozen federal agencies,” he said.

The states originally sued the administration over a memorandum from the White House’s Office of Management and Budget announcing a wide-ranging freeze of federal spending. Soon after the lawsuit was filed, OMB rescinded that memo.

The memo was part of a larger Trump administration push to slash spending, dismantle federal programs and purge the federal workforce, which has sparked a flurry of lawsuits.

The states argued that the White House failed to account for the harm the funding freeze would impose on grant recipients and violated the U.S. Constitution by refusing to spend money appropriated by Congress. They filed an amended lawsuit last week with more detailed claims against individual agencies.

Amid the litigation, the White House tried to clarify the pause, saying it would not impact Social Security or Medicare payments or assistance provided directly to individuals and only implicated programs covered by Trump’s executive orders.

OMB then fully rescinded its memo, but the state attorneys general in court filings argued that the administration had not withdrawn the underlying policy.

McConnell on Friday said he was confused by the Justice Department’s argument that rescinding the memo meant there was no longer a government-wide policy for the states to challenge, and that it contradicted statements by White House Press Secretary Karoline Leavitt that the funding freeze was still in effect.

“It seems to me that you should be conceding that the substance of the directive remains in full force and effect, because that’s what the executive is saying,” he said.

(Reporting by Daniel Wiessner in Albany; Editing by Alexia Garamfalvi and Daniel Wallis)