The Trump Administration, the Supreme Court, and the 119th Congress have significantly changed the federal grant funding landscape since the start of 2025. Atrómitos has written a new policy brief to help nonprofits stay informed about funding freeze lawsuits, presidential executive orders, and new legislation. The brief offers strategies for health and human service providers to protect their organization’s long-term sustainability and mission.
All three branches of the federal government – the executive (President), judicial (Supreme Court), and legislative (Congress) – have fundamentally reworked the federal grant landscape. Below is a summary of their actions (see the policy brief for more information and greater detail):
Executive Branch Actions
- The President issued several executive orders related to federal spending, foreign aid, immigration, transgender rights, and diversity, equity, and inclusion (DEI).
- The Office of Management and Budget (OMB), which oversees federal spending, issued two memorandums temporarily pausing all federal financial assistance (i.e., grants, loans, and contracts) to nonprofits and other non-government organizations (NGOs) to ensure all federal funding aligned with the President’s executive orders.
Federal Court Rulings and Decisions
- National nonprofit, public health, and advocacy organizations challenged the funding freezes outlined in OMB’s memos as 1) arbitrary, or unreasonable, 2) a violation of free speech rights, and 3) an overreach of authority by terminating funding previously appropriated by Congress. The U.S. Court of Appeals in Washington, D.C., is awaiting appeal briefs from both litigants.
- The District of Columbia and 22 states filed a lawsuit challenging the funding freezes as 1) beyond the executive branch’s authority to withhold funds appropriated by Congress, 2) arbitrary and capricious, or unreasonable, 3) a violation of the separation of powers by refusing to disburse funds appropriated by Congress, 4) a violation of the Constitution by changing the terms of established grant agreements and 5) a violation of the Constitution’s Presentment, Appropriation and Take Care clauses, meaning unilaterally cancelling congressional appropriations exceeds the executive branch’s authority. While a judge dismissed an appeal in May, the case remains pending before the U.S. Court of Appeals in Boston.
- In Trump v CASA (an immigrant rights organization), the Supreme Court ruled that federal courts cannot issue nationwide or universal injunctions to stop government policies affecting the entire country. If an organization is not directly involved in litigation (such as being listed as a plaintiff in a class action lawsuit), there is no guarantee of legal protection, even if the impact of the government policy is similar or the same.
- The Supreme Court ruled that the National Institutes of Health (NIH) could cancel $783 million in grants linked to DEI initiatives. The Court heavily relied on a prior decision establishing that challenges to grant termination challenges must be filed in the U.S. Court of Federal Claims, instead of district courts.
Legislative Actions
- The Rescissions Act of 2025 cut $9.4 billion in federal funding (including $7.9 billion in foreign aid programs and $1.1 billion for public broadcasting) that Congress had already appropriated.
Real-World Impacts
These actions and rulings will have wide-ranging and long-lasting consequences for nonprofits. Court victories now offer fewer automatic protections to organizations not directly involved in litigation. Plus, those organizations that do challenge the funding freezes in the future must pursue simultaneous litigation: 1) in the U.S. Court of Federal Claims to restore specific terminated grants and 2) in the district court to challenge the policy basis of funding cuts. This two-pronged legal strategy will cost more and delay funding restoration for months if not years, leaving many nonprofits without the necessary revenue to achieve their mission.
In response to this new reality, nonprofits must strengthen their capacity and long-term sustainability by:
- Staying informed about ongoing grant-related litigation and federal policy changes.
- Planning and budgeting for potentially extended legal battles and joining existing class-action suits whenever possible.
- Documenting and reporting the effects of federal funding freezes, including financial and human impact, service disruptions, and community consequences.
- Reducing dependence on federal grant funding by diversifying funding streams.
- Fortifying financial reserves and developing contingency plans to operate with reduced or eliminated federal funds for 18-24 months.
- Engaging in federal legislative advocacy by building relationships with members of your congressional delegation, participating in advocacy coalitions, and responding to proposed budget cuts quickly.