What we know about the attempted freeze on federal spending — and what comes next

Even temporary interruptions in funding can negatively impact local governments 

By Brian Hendershot, Cal Cities Advocate managing editor, and Caroline Grinder, legislative affairs lobbyist  

The White House budget office has rescinded a memo ordering a temporary freeze on all grants, loans, and other financial assistance programs. Although it’s common for new administrations to review and pause spending as they organize their priorities, the order’s sweeping scope sparked a wave of confusion.

“Cities of all sizes rely on federal funding to provide essential services to residents, including disaster preparedness, homelessness services, and public safety,” said Carolyn Coleman, Cal Cities CEO and executive director, as she urged the federal government to honor its funding commitments. “Any extended delay in funding could threaten local economies, jobs, and essential city services.”

The pause was scheduled to start on Jan. 28 at 5 p.m. But a federal judge temporarily blocked the order until Feb. 3 moments before it went into effect. Although the Office of Management and Budget (OMB) has now rescinded the order, this is likely the first in a series of battles over federal purse strings.

Which programs would have been impacted? 

In a Monday morning memo, the OMB said that the administration is reviewing all financial assistance programs to prioritize spending aligned with its policy agenda. However, the freeze would not impact individual assistance programs, such as Medicaid.

Then on Tuesday, budget officials circulated a 52-page document indicating that the freeze would include funding for individuals and grantees like local governments. This, combined with the original memo, suggested that programs that provide funding for infrastructure, disaster preparedness and response, public safety, and more to cities were potentially at risk.

A few hours later, the OMB issued a Q&A document clarifying that individual assistance programs would not be affected. This flurry of communication created confusion about the scope of the freeze and was followed by reports of grant portals for several programs suddenly shutting down.

The spending memo drew immediate legal challenges, including from California Attorney General Rob Bonta and other state attorneys general. 

How long was the pause scheduled?

The original memo emphasized that agencies must submit a thorough analysis of their financial assistance programs by Feb. 10 and pause all obligations or disbursements. A second memo gave agencies until Feb. 7 to submit a report. It was not clear how long OMB would have had to review the analyses.

According to White House Press Secretary Karoline Leavitt, broader efforts to change federal spending priorities remain in effect, including reviews of federal grants. 

What can my city do?

The impact of this order was swift. Cities reported cancellations of their grant meetings before the memo came down. In the event of any federal pauses in spending, cities should consider the following questions while consulting with their legal teams.  

• A funding pause may cause delays or cancellations of projects and may result in economic uncertainty. Members should carefully review their grant agreements for payment obligations.
• For those who haven't signed grant agreements, reach out to the relevant agencies.
• Grantees should inform their agency contacts about any disruptions and document the related costs or losses.

If you have received an update from a federal agency on an infrastructure grant impacted by this pause or wish to receive updates as they are available, please complete this form. NLC will use this information to track the impacts to local governments. 

NLC also released a template letter that cities can use to start a dialogue with their congressional delegation about their local projects and the importance of federal partnerships on infrastructure.