Attorney General Nessel Challenges Trump Administration’s Illegal Attempts to Terminate Critical Federal Funding for States

LANSING – Michigan Attorney General Dana Nessel today announced that she has joined a coalition of 21 attorneys general in suing the Trump Administration (PDF) over its unprecedented and unlawful attempts to invoke a single provision buried in the federal regulations to strip away billions of dollars in critical federal funding for states and other grantees. The lawsuit seeks to limit the Trump Administration’s use of this regulation to indiscriminately and illegally terminate critical funding for combating violent crime, educating students, protecting clean drinking water, conducting life-saving medical and scientific research, safeguarding public health, addressing food insecurity, and much more. 

Since January 20, at the direction of President Trump and the Department of Government Efficiency (DOGE), federal agencies have stripped away thousands of grants they had previously awarded to states and other grantees. The Trump Administration has slashed this critical federal funding largely by invoking a single clause in the federal regulations of the Office of Management and Budget (OMB), which provides that agencies may terminate an award of federal funding if it “no longer effectuates ... agency priorities.”  Those five words have formed the basis for much of the Trump Administration’s indiscriminate campaign to unlawfully terminate critical funding expressly authorized by Congress and awarded to states, including several grants to Michigan.

“Whether or not Donald Trump and his administration believe it, our democracy is built on the separation of powers and the rule of law,” Nessel said. “That’s why my Democratic colleagues and I have been successful in securing 10 injunctions so far against the White House’s unlawful federal actions. The use of this mere five-word clause is just another example in a long pattern of how the Trump Administration believes they can illegally contort the law to slash billions of dollars in federal funding – funding that was authorized by Congress and that everyday Michiganders depend on. I will continue to fight, tooth and nail, against such harmful and unconstitutional policies.”

As today’s lawsuit explains, the Trump Administration’s decision to invoke this regulation as its basis for slashing billions of dollars of critical funding to states is a dramatic departure from past practice. Before the Trump Administration, federal agencies had not terminated grants on a whim merely because the agency’s priorities shifted midway during the use of the grant. That was not how they applied the regulation, either. 

However, since President Trump took office, federal agencies have shifted course and claimed unfettered authority to terminate grants on a whim and with no advance notice. In February, President Trump issued an executive order formally directing agencies—and the DOGE employees assigned to these agencies—to terminate grants en masse. Federal agencies have also carried out that directive by invoking the regulation as grounds for terminating entire programs based on a purported shift in agency priorities, without any notice to the states and in conflict with the federal statutes appropriating funding for these programs.

The lawsuit argues that the Trump Administration’s decision to invoke the regulation to terminate grants based on their changed agency priorities is unlawful. The lawsuit explains that the regulation does not authorize federal agencies to terminate grants based on changes in agency preferences that occur after a grant is awarded. The lawsuit also notes the importance of obtaining clarity regarding the scope of this regulation, as states collectively accept hundreds of billions of dollars a year that are at risk of termination pursuant to this regulation.  

The coalition is filing today’s lawsuit against OMB and a number of federal agencies that have unlawfully relied on this regulation to collectively slash billions of dollars in federal funding to states: the Departments of Agriculture, Commerce, Defense, Homeland Security, Justice, Labor, and State, as well as the Environmental Protection Agency, the Federal Emergency Management Agency, the National Endowment for the Humanities, and the National Science Foundation.

The coalition is filing suit in the District of Massachusetts and seeking a declaratory judgment that the OMB regulation and Defendants’ regulations do not independently authorize the Trump Administration to terminate funding based on agency priorities that were identified after the grant was awarded. In the alternative, the coalition is seeking to vacate the Trump Administration’s decision—reflected in its uniform practice across all of the Defendant agencies—to invoke the regulation as grounds for terminating billions of dollars of federal funding based on purported changes in agency priorities. 

To stay updated on key federal actions impacting Michigan, visit the Department of Attorney General’s Federal Actions Tracker webpage.

Attorney General Nessel joins the attorneys general of Arizona, California, Colorado, Connecticut, Delaware, the District of Columbia, Hawai‘i, Illinois, Maine, Maryland, Massachusetts, Minnesota, Nevada, New Jersey, New Mexico, New York, Oregon, Rhode Island, Vermont, Wisconsin, and the state of Pennsylvania in filing this lawsuit.

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