Trump administration causes nationwide whiplash on suspension of federal grants, loans

By Zach Hagadone
Reader Staff

The Trump administration walked back a temporary pause on a swath of federal loans and grants Jan. 29, adding a coda to more than 24 hours of nationwide chaos resulting from a surprise Office of Management and Budget memo on Jan. 27 that seemed to indicate thousands of government agencies and entities, nonprofits, and other public and private sector recipients would be cut off from federal dollars.

According to Idaho Reports, state agencies had been directed by the Division of Financial Management as of Jan. 28 not to use general fund monies to backfill shortfalls resulting from the freeze on payments, which according to the Jan. 27 memo were intended to provide a period for review of financial assistance programs in order to ensure they were “consistent with the President’s policies and requirements.”

Specifically, the memo targeted recipients of federal money that purportedly advance “Marxist equity, transgenderism and green new deal social engineering policies,” going on to cite Trump’s hair of executive orders issued during his first week in office.

Illustration by Marcos Silva

Agencies, organizations and other entities identified on a list that accompanied the memo were directed to “complete a comprehensive analysis” of the federal assistance they receive, and “identify programs, projects and activities that may be implicated by any of the President’s executive orders.” Meanwhile, “to the extent permissible under applicable law,” their federal support would be temporarily suspended.

Those analyses were to be submitted to OMB no later than Monday, Feb. 10, after which they would be reviewed in order to “modify unpublished Federal financial assistance announcements, withdraw any announcements already published and, to the extent permissible by law, cancel awards already awarded that are in conflict with Administration priorities …” 

The memo caused recipients of federal assistance across the country to scramble throughout Jan. 28 to determine which — if any — of their programs and services would be affected, creating what the Associated Press described as “the most chaotic day for the U.S. government since Trump returned to office,” as the president sought to conduct “an across-the-board ideological review to uproot progressive initiatives.”

Meanwhile, a federal judge blocked the order until Monday, Feb. 3, minutes before it was intended to go into effect at 5 p.m. (Eastern) on Jan. 28. 

Then, in a midday announcement on Jan. 29, OMB Acting Director Matthew Vaeth rescinded the memo with the brief statement: “If you have questions about implementing the President’s Executive Orders, please contact your agency General Counsel.”

However, White House Press Secretary Karoline Leavitt posted Jan. 29 on X, “This is NOT a rescission of the federal funding freeze. It is simply a rescission of the OMB memo. Why? To end any confusion created by the court’s injunction. The President’s EO’s [executive orders] on federal funding remain in full force and effect, and will be rigorously implemented.”

Statewide agencies were working to parse through the potential implications of the order prior to it being rescinded — even as the administration tried to narrow the scope of the funding freeze in a Jan. 28 press conference, during which Leavitt said that individual assistance such as Social Security, Medicare, SNAP and welfare benefits would not be affected.

Heads of Idaho government departments, speaking to Idaho Reports on Jan. 28, expressed uncertainty and confusion, while representatives of statewide city and county government associations were also left wondering about the potential impacts.

Association of Idaho Cities Executive Director Kelley Packer told Idaho Reports that the freeze could cost billions of dollars in federal funding for Idaho’s municipalities.

“You have big transportation projects already going in the state that have federal funds,” she told Idaho Reports. “Some of it could be emergency service needs, like fire trucks and police fleets and other things. I mean, there’s a lot of different funding sources that the cities reach out for to help subsidize the dwindling property tax money they receive.”

In a statement to the Reader on Jan. 28, Sandpoint Mayor Jeremy Grimm wrote, “Federal funding plays a critical role in Sandpoint, supporting infrastructure projects like our wastewater treatment plant upgrades, economic development initiatives and essential services that residents rely on every day. Rural communities like ours also depend on state and federal partnerships, including Idaho Commerce, the Idaho Department of Environmental Quality (IDEQ) and the USDA to provide resources for infrastructure, small business support and wildfire assistance. A sudden funding pause jeopardizes these partnerships and risks leaving rural areas like Sandpoint without the tools we need to thrive.”

Grimm added that he supports the goal of ensuring the efficient operation of government programs; and, while some may need to be reevaluated, “change must come thoughtfully and incrementally. Broad, sweeping actions can unintentionally harm the very people they aim to help, particularly in rural communities that do not have the resources to fill the gaps left behind. Stability and predictability are not luxuries — they are the foundation upon which progress is built.”

Bonner County commissioners, Clerk Michael Rosedale and other officials were in Boise for a conference on Jan. 29, and could not be reached for comment by press time.

Idaho Gov. Brad Little’s office issued a statement Jan. 28, writing that, “Governor Little is all in on President Trump’s efforts to rein in federal spending. As Governor Little has stated many times in the past, Idaho is better positioned than any other state to handle changes at the federal level because of how well we have managed government and the budget at the state level.”

In a Jan. 28 press conference, Idaho Republican Sen. Jim Risch described the OMB funding pause as coming from a “50,000-foot standpoint” and “a work in progress” meant to curb inflation by looking at “government overspending.”

“For all of you who haven’t noticed, this is a different day in Washington, D.C.,” he said, adding later, “Everybody take a deep breath. Stay calm. Every one of these programs is going to be looked at.”  

The Idaho Democratic Party blasted the move as “illegal” and “a dangerous assault on the Constitution.”

“It flagrantly disregards the separation of powers, stripping Congress of its authority over federal spending,” IDP Chair Lauren Neochea wrote on Jan. 28. “The order jeopardizes vital services that thousands of Idahoans depend on every day, including prenatal health care for expectant mothers, early education programs for our youngest learners, crop insurance for farmers and suicide prevention resources for our veterans.

“Across the nation, attorneys general are fighting for their residents, defending their states against Trump’s unlawful power grab,” she added. “Yet here in Idaho, Republican leaders remain unwilling to challenge him. Their silence is not only a failure of leadership but also a betrayal of Idaho families whose health and economic well-being hang in the balance.”

Dist. 1 Sen. Jim Woodward, R-Sagle, told the Reader in a Jan. 28 email that “everyone was caught off guard today,” but couldn’t elaborate on how the Joint Finance-Appropriations Committee — which he serves as vice-chair — would react to a sweeping suspension of federal funding.

Given the fluidity of the announcements coming from the administration since Jan. 27 — and Leavitt’s post on X suggesting that the Jan. 29 rescission was of the OMB memo only, and not the “funding freeze,” as she described it — it remained to be seen by press time how federal assistance policy would or wouldn’t be affected in the coming days and weeks.