Democratic AGs, Nonprofits Sue Over OMB’s Freeze on Federal Grants, Loans

New York Attorney General Letitia James speaks at announcement on opioids in New York City on Jan. 23, 2025. (Oliver Mantyk/The Epoch Times

Several Democratic state attorneys general will file a lawsuit on Tuesday challenging the Office of Management and Budget’s (OMB’s) freeze on federal grants, loans, and other financial assistance, New York Attorney General Letitia James said on Jan. 28.

James’s lawsuit, joined by California and Massachusetts, is directed at OMB Acting Director Matthew Vaeth, who carried out the Trump administration’s sweeping policy change in a memorandum on Monday.

“The president does not get to decide which laws to enforce and for whom,” James said on a press call with reporters.

Hours earlier, the National Council of Nonprofits, the American Public Health Association, Main Street Alliance, and SAGE, a New York LGBT nonprofit, filed a similar lawsuit challenging OMB’s directive, arguing it would “have a devastating impact on hundreds of thousands of grant recipients.”

The group is seeking a temporary restraining order on the freeze, which was scheduled to take effect at 5 p.m. ET on Tuesday. They are alleging that the Trump administration violated the Administrative Procedure Act, which established procedural rules for how executive branch agencies implement policy.

“The Memo fails to explain the source of OMB’s purported legal authority to gut every grant program in the federal government,” the lawsuit states.  

They also argued that the OMB’s directive violated the First Amendment based on grant recipients’ rights to free expression and association, particularly SAGE, as it is an LGBT organization.

“SAGE reasonably fears that its future receipt of federal financial assistance will depend on SAGE’s past and future exercise of its First Amendment rights of free speech and association rather than on neutral criteria,” the lawsuit states.

A federal judge called a 4 p.m. ET conference to consider the group’s emergency lawsuit.

“The actions taken yesterday are a callous disregard for the rule of law and a drastic abuse of power that will harm millions of Americans across the country,” said Skye Perryman, head of Democracy Forward, which is representing the plaintiffs in their lawsuit.

Main Street Alliance Executive Director Richard Trent called the freeze catastrophic.

“Federal funding serves as the backbone of many community programs and initiatives that small businesses rely on to thrive,” Trent said in a statement.

“Without it, essential services like infrastructure development, workforce training, and childcare programs—services that allow small businesses to operate and grow—will crumble, and the ripple effects will hit Main Street hard.”

While the Constitution gives Congress the power of the purse, Trump had said on the campaign trail that he believes the president has the authority to withhold money if he disagrees. The Impoundment Control Act of 1974 created procedures to restrict a president from refusing to spend money that Congress appropriates.

The OMB directive will also likely affect state and local governments that rely on federal aid for everything from transportation infrastructure to school lunches and foster care.

Reuters contributed to this report.