A federal judge in Boston has ruled that the Trump administration is prohibited from using an obscure contract provision to justify billions of dollars in cuts to federal grant funding, dealing a significant legal blow to the administration’s efforts to reduce spending.
The decision came after 23 states joined together last year in a lawsuit claiming the administration had been relying on the clause to slash funding across a wide range of programs, including crime prevention, food security, and scientific research. The states also feared the clause could be used to cancel both existing and future grants.
U.S. District Judge Indira Talwani issued a summary judgment blocking the administration from using the clause as a basis for cuts, and also turned down the federal government’s request to have the lawsuit dismissed.
In her written ruling, Talwani stated: “Defendants’ interpretation of the Termination Clause is not clearly supported by the text of the provision, runs counter to the regulatory scheme, receives no support in the rulemaking history, and would violate the Spending Clause’s requirement that conditions be imposed unambiguously.” Talwani was nominated to the bench by Democratic President Barack Obama.
The states’ lawsuit contended that the Office of Management and Budget had promoted the use of the clause to carry out what they characterized as a “nationwide slash-and-burn campaign” against federal grant programs.
The clause at the center of the dispute was first introduced in 2020 and later revised in 2024. It allows federal officials to end a grant if the award “no longer effectuates the program goals or agency priorities.” The states argued that while the language was put in place during the Biden administration, it was only now, for the first time, being used to actually terminate grants.
New Jersey Attorney General Jennifer Davenport issued a statement sharply criticizing the administration’s actions. “Instead of working with us to keep the public safe and lower costs for hardworking New Jerseyans, the Trump Administration has recklessly and illegally gutted federal funding for public safety, disaster preparedness, scientific research, clean water, and more,” she said.
Davenport continued: “Today’s decision is an important win for all New Jerseyans and confirms that the Trump Administration defied the law when it embarked on its campaign to gut critical federal funding to the states. The President and his allies cannot hold critical programs hostage to their personal whims and political ideologies, destabilizing the country by yanking essential federal funding that was already awarded to the states.”
Attorneys representing the federal government described the case as an “extraordinarily unusual lawsuit” and pushed for dismissal, arguing that many of the grants in question had already been terminated and that the states’ concerns about future grants were too speculative. They also accused the states of making broad, sweeping objections to the cancellation of thousands of grants without asking the court to reinstate any single specific grant.
In their dismissal motion, government lawyers wrote: “That mismatch between the allegedly unlawful agency ‘decision’ on one hand, and the amorphous relief requested in this suit, on the other, creates a set of jurisdiction and justiciability defects that doom this lawsuit at the threshold.”
A spokesperson for the Office of Management and Budget did not respond when asked for comment.
