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Gongwer: Judge Temporarily Blocks Trump's Freeze On Federal Dollars, MI Officials Struggle

January 29, 2025

As Judge Temporarily Blocks Trump's Freeze On Federal Dollars, MI Officials Struggle For Answers

Minutes before it was set to take effect, a sweeping order from the Trump White House pausing federal loans and grants was temporarily blocked by a federal judge – but Michigan officials and organizations are still reeling over the impact it may have if the freeze becomes permanent with little guidance from the federal government on how to comply.

Announced in a memo from the White House Office of Management and Budget Monday night, the pause drew swift attention from state governments, as Medicaid management portals went offline in all 50 states Tuesday afternoon and many states reported being unable to access Head Start reimbursements.

Attorney General Dana Nessel and several of her counterparts in other states rushed to file lawsuits against the Trump administration before 5 p.m., but it was ultimately litigation from the National Council of Nonprofits that resulted in U.S. District Judge Loren AliKhan ordering the White House to hit pause on the pause, at least until February 3, when further arguments are set to be held on the matter.

"I am aware of the OMB memo issued last night by the White House, and my department is learning already of services impacted throughout the state, including Medicaid and Head Start," Nessel said in a Tuesday afternoon statement. "We are receiving reports of critical impacts to significant programs many millions of Michiganders rely upon daily for vital services."

The freeze stands to wipe out trillions of dollars' worth of programming across the country, with almost no direction from the federal government on how states must comply. A second memo was issued Tuesday to clarify the order was not intended to encompass all federal grants and loans, and that certain programs like the Pell Grant, Medicaid and other grants to individuals should not be affected but remained vague about other aspects of the order.

One member of a Michigan government department speaking on background said employees and officials at the state level were provided no directives from their federal counterparts and spent the day trying to make sense of documents obtained through the news and social media to understand which programs would be affected and how they would have to make drastic changes to comply with the order.

Even more confusing, the department official said, was the language of the OMB memo circulated Monday evening, which directed federal agencies to "temporarily pause all activities related to obligation or disbursement of all federal financial assistance," specifically citing "D.E.I., woke gender ideology and the Green New Deal." The Green New Deal has never been passed by Congress, and the memo's vague nature left state governmental agencies wondering which of their programs would be subject to a longer pause.

In Michigan, the impact of the freeze was felt even before it took official effect. Lansing-area Head Start programs were suspended indefinitely and a spokesperson for the Michigan Department of Health and Human Services confirmed the Medicaid Payment Management System was inaccessible for a period of time. Even after the order was blocked by the judge, U.S. Department of Housing and Urban Development grantees were sent a notice at 5:25 p.m. from the federal government that said they would no longer be able to access the Line of Credit Control System used to disburse grants. Social media users reported that the Free Application for Federal Student Aid, FAFSA, was also inaccessible throughout the day.

Although requests for comment to Governor Gretchen Whitmer's press office went unreturned, State Budget Director Jen Flood said state officials are working to understand what the freeze would truly mean for Michigan.

"Federal funding is critical to protecting the health and safety of all Michiganders – ensuring drinking water is clean and food is safe, keeping people in their homes and the power on and funding homeland security and emergency management," Flood said in a statement to Gongwer. "We are currently working across state government to examine how recent federal action to withhold funds appropriated by Congress will impact vital programs like food assistance, Medicaid and Head Start. Nearly $34 billion of Michigan's budget is built on federal dollars – which equates to 42 percent of our total in FY25."

Michigan League for Public Policy CEO Monique Stanton said she believes the intent of the memo and the ongoing lack of clarity from the White House was intentional.

"The intent around this is to cause confusion, fear and chaos, and so the lack of guidance, I would say, is potentially intentional," Stanton said. "When there isn't clear communication, that makes the administration of programming services even more difficult and causes a potential further lack of trust and more mistrust among government."

The memo prompted immediate outcry from Democratic elected officials at the state and federal levels and raised questions of the constitutionality of a president blocking congressionally appropriated funds from their recipients. U.S. Sen. Elissa Slotkin (D-Holly) issued a statement calling the move "clearly unlawful" and said she's already begun fielding concerns from constituents.

"This isn't a wonky, Washington conversation – there are real, actual effects that will harm Michigan and put a hold on federal dollars that were already awarded. My office is being inundated with questions from local mayors of both parties, universities, veteran care and nursing homes, people who have had cancer trials stopped, child care centers, farmer programs, Army contracts – all fearful that they will need to take drastic action to end programs and grants," Slotkin said in the statement. "This administration, like every administration, must follow the law, and the law says that money is appropriated by Congress. As I noted in several confirmation hearings, senior administration officials swear an oath to the Constitution, not to President Trump, and now is the time to uphold that oath."

U.S. Rep. Lisa McClain (R-Bruce Township), however, praised Trump's action. In a post on X, she said Trump paused funding for "DEI programs," the "Green New Deal" and "America last initiatives." She said the order is proof that "Republicans are getting our fiscal house in order and the country back on track."

McClain also said the pause is not across the board and the Democratic outcry is "fearmongering."

Save for McClain's comments, legislative Republicans largely stayed quiet on the matter. A spokesperson for U.S. Rep. John Moolenaar (R-Caledonia), Michigan's sole representation on the U.S. House Appropriations Committee Track, did not immediately respond to a request for comment.

Although the full scope of the order remains unknown, Stanton said untold damage could be done to nonprofit organizations from even a short pause in federal funds.

"These are services and things that people care about in their local communities, and so having those things taken away is going to be potentially really devastating," she said. "We think about rural Michigan, with all the health care grants and Medicaid, and we have a shortage and a struggle with access to rural health care services. Behavioral health organizations and substance use disorder providers and homeless service organizations, the list goes on, and it's not been clear who is going to be impacted, but (the tactic) is to really cause confusion and stress. And lots of organizations don't have deep cash reserves and so making sure that they're able to get the funding that they need to survive is really important."

Disability Network/Michigan estimated services for over 2 million Michiganders would be stopped indefinitely if the pause takes effect.

"Our centers provide vital services and resources for people with disabilities," the organization's board of directors Chair Alex Gossage said in a statement. "A pause in federal funding means an immediate interruption of these services that many rely on to navigate the barriers that exist for people with disabilities."

Kelly Kuhn, CEO of the Michigan Nonprofit Association, said her organization will be monitoring the situation as it continues to unfold.

"This reckless action by the administration could have serious consequences for nonprofit organizations and the people they serve," Kuhn said in a statement. "Pausing critical services like cancer research, housing, and food assistance, Head Start and preschool programs, domestic violence shelters, and so much more could cause real harm and put lives at risk. Our partners at the National Council of Nonprofits have filed a temporary restraining order in the U.S. District Court to block OMB from pausing all federal grants and loans, and we fully support that effort. We will continue to monitor the situation closely."

The Senate and House Fiscal Agencies said one of the initial provisions of the pause was a February 10 deadline for federal agencies to have submitted a review of grants and loans, presumably to determine which ones would be "un-paused" and which would see an indefinite end to federal funding. It's uncertain now when that deadline would be if the order is allowed to proceed next week.

– By Lily Guiney

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