20 States, DC Sue Trump Admin Over Clause Used to Cut Federal Funding

The states and the District of Columbia argue that the administration cited language in the clause to unlawfully terminate the critical funding.

The U.S. District Court for the District of Massachusetts in Boston on April 14, 2023. Learner Liu/The Epoch Times

A coalition of attorneys general from 20 states and the District of Columbia has filed a lawsuit against the Trump administration over a provision it used to justify cuts of billions of dollars in critical federal funding.

The lawsuit, filed in the U.S. District Court for the District of Massachusetts in Boston by attorneys general from states including Arizona, California, Illinois, Massachusetts, Michigan, and New York, cites a clause from the Office of Management and Budget (OMB) that says a grant can be terminated if it “no longer effectuates the program goals or agency priorities.”

The suit lists dozens of federal agencies as defendants, including the Departments of Agriculture, Commerce, Defense, Homeland Security, Justice, Labor, and State, as well as the Environmental Protection Agency.

The complaint states that since January, the Trump administration has directly cited language in the clause to unlawfully terminate critical funding expressly authorized by Congress and awarded to states for various projects and programs.

The aims of the projects and programs include combating violent crime, educating students, protecting clean drinking water, conducting life-saving medical and scientific research, safeguarding public health, and addressing food insecurity, according to the lawsuit.

“The Trump Administration has claimed that five words in this Clause—'no longer effectuates ... agency priorities’—provide federal agencies with virtually unfettered authority to withhold federal funding any time they no longer wish to support the programs for which Congress has appropriated funding,” the lawsuit states.

“And it has made a concerted decision, reflected in its uniform practice across a wide range of federal agencies, to invoke the Clause as grounds for terminating billions of dollars of federal funding to Plaintiffs.”

This has been done “without any advance notice, without any explanation to the State recipients, and in direct contravention of the will of Congress,” according to the complaint.

The lawsuit further argues that the administration’s decision to invoke the clause as the purported basis for slashing the funding marks a dramatic departure from past practice and the OMB’s interpretation of the clause, which was first promulgated in 2020.

Protesters at a rally held by the American Federation of Government Employees of District 14 at the Office of Personnel Management in Washington on March 4, 2025. Alex Wroblewski/AFP via Getty Images

“OMB never suggested, in either the 2020 or 2024 rulemaking, that a grant could be terminated even though the grant was continuing to serve the very goals for which the monies had initially been awarded, merely because the agency’s priorities shifted midway during the use of the grant—let alone with no advance notice,” the complaint states.

The attorneys general are seeking a declaratory judgment stating that the OMB regulation does not permit the Trump administration to terminate funding that doesn’t align with its priorities.

Alternatively, the coalition is seeking to vacate the administration’s decision to invoke the regulation as grounds for terminating the funding.

The Trump administration has argued that it acted within its authority to freeze and cancel grant awards that did not reflect its priorities, including those supporting diversity, equity, and inclusion, and climate programs. 

The latest lawsuit is one of several that the coalition of mostly Democratic-led states has filed over the funding cuts.

White House spokesperson Harrison Fields said in a statement that Democrats pursuing the case “should focus on serving their constituents, not their party bosses, and work with the president and this administration to enact the agenda the American people overwhelmingly supported.”

The Epoch Times has contacted the White House’s Office of Management and Budget for comment.