Trump’s Attempted Federal Funding Freeze Causes Panic for Local Nonprofits, Essential Services

Lucas Day | January 31, 2025

A week into his new term, President Donald Trump’s budget office issued a memo to pause federal grants and loans, an order that sent shockwaves through the world of nonprofit organizations and essential government services.

While the order was temporarily blocked by a judge and later rescinded, the directive could have impacted trillions of dollars, and left health services, schools, homeless shelters, food service programs and many more wondering how they would continue to offer vital services. Confusion around the order even brought short-lived mass layoffs to local early learning centers.

The implications of the order quickly became apparent to the family homeless shelter Haven House’s Executive Director Meghan Palma. On Tuesday, when Palma tried to log into the site federal grants are distributed to the shelter through, she found she was locked out.

“It says you’re trying to access it outside of normal business hours,” Palma said. “I’ve logged in on the weekend before and been able to get in. That’s the first time I’ve ever seen that message.”

Palma discovered she was locked out of the site around 1 p.m. on Tuesday, Jan. 28, four hours before the order was even set to go into effect. She regained access to the site the next day.

The order put a scare into Palma and other Haven House staff members, but the organization continued to offer its regular services. The same can’t be said for local Head Start early learning facilities.

Capital Area Community Services (CACS) is a Community Action Agency that serves Ingham, Shiawassee, Clinton and Eaton counties. Many programs fall under the CACS umbrella, including several Head Start early learners locations.

Head Start is for children five and younger, many from low income families. Head Start programs rely on federal funding, so when CACS Executive Director Miguel Rodriguez received word early Tuesday morning that CACS was locked out of the payment management system that funds Head Start, he was immediately concerned about the program.

“If you don’t have money to pay staff or pay bills, you can’t expect them [staff members] to work,” Rodriguez said.

As Rodriguez went in and out of meetings throughout the day, he knew he could not ask his staff to work when he was unsure if he could pay them. Late Tuesday afternoon, he sent a tentative layoff email to Head Start staff who were funded through the payment management system, around 180 or 190 employees, he said.

Families with children in the program were also notified Head Start would be closed indefinitely.

Shortly after Rodriguez sent the layoff email, he received word that the White House sent out a directive that Head Start would not be impacted by the freeze. However, it took until the next morning for CACS to verify funds from the payment management system were being transferred to its bank account.

Rodriguez sent a recall email to employees on Wednesday, though most area Head Start locations canceled classes due to the debacle. Adding to the confusion for Head Start families, five Head Start locations in the area remained open because they were funded by local school districts, Rodriguez explained.

Head Start programs restarted on Thursday, and all staff returned after the short layoff. Staff will be paid for the day off.

“The biggest impact is the anxiety and the worry that people had of being laid off and our partners wondering how long this was going to last,” Rodriguez said.

The way grants are paid out would leave nonprofits in a bind if funding is not guaranteed.

The Michigan Nonprofit Association’s (MNA) Chief Communications Officer Tammy Pitts said that had the Trump administration been allowed to follow through with its order, it would impact all types of nonprofit organizations.

“This is a reckless action by the Trump administration that can have devastating consequences for nonprofit organizations and the people they serve,” she said.

Pitts said that MNA has heard reports of agencies not being able to access portals federal grants are paid through, but that the impact is deeper than that. She explained that because 42% of Michigan’s budget is made up of federal dollars, a freeze would also impact state grants.

The bind a pause on federal spending would put on local agencies can be seen through Haven House.

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