The lawsuit was supported by a sizable coalition of 23 states and Washington, D.C., including governors from Kansas, Kentucky, and Pennsylvania, as well as Massachusetts, New York, and New Jersey. Together, they contended that the administration was terminating active grants on the grounds that they were no longer in line with presidential priorities by using a provision hidden in Office of Management and Budget regulations. In actuality, this meant that grant funding associated with clean water initiatives, food security, public safety research, climate preparedness, and DEI programs was vanishing, frequently without prior notice. More than 1,100 active grants totaling more than $5 billion were either canceled or in jeopardy.
Lawyers refer to Judge Talwani’s decision as summary judgment because it was a declaratory judgment in favor of the states. She discovered that the administration’s termination clause only allows agencies to cancel grants when program objectives aren’t being met, not when a new administration decides it no longer supports those objectives. For a legal document, her wording was remarkably straightforward. Allowing agencies to alter priorities after the fact “would obviate any need to notify parties of program goals and priorities, given that agencies could change goals and priorities at any time,” the author wrote. To put it another way, the rules are completely meaningless if the government can change them after the contract is signed.
This wasn’t an abstract spending dispute, so it’s worth taking a look at some of the details. Nearly $25 million in Department of Labor grants, which had previously been set aside to update the state’s unemployment insurance program, were terminated in Maryland alone. A program that purchased food from nearby farmers and gave it to food banks cost the Maryland Department of Agriculture nearly $5 million. The state’s own agricultural resiliency grant program was suddenly receiving $12 million in requests against a $200,000 budget when those federal funds vanished. They are not abstractions of policy. There are actual gaps there.
Talwani tackled a constitutional aspect of this. The Spending Clause of the U.S. Constitution, which mandates that conditions on federal spending be clear and disclosed prior to the money being accepted—not created or reordered afterwards—was found to be violated by the administration’s interpretation. Money is appropriated by Congress for particular uses. Grants are given by agencies according to predetermined standards. Grants that have already been awarded cannot be used by an administration as leverage or as a tool to change political priorities after the fact. Talwani discovered that Congress, not the OMB or the White House, was responsible for that.
None of the grants that were previously reduced are restored by the ruling. It’s important to note that. This decision does not automatically make up for families, researchers, and community organizations that lost funding in the middle. The ruling does, however, establish that it is illegal to cancel active grants in the future using the same regulatory justification that the administration has been using. That distinction is important for programs that are already in place as well as for states that are attempting to plan their budgets over several years.
It’s difficult to ignore how much of this case revolved around a fairly straightforward question: is it possible to modify an agreement once someone has accepted payment and begun work? The answer would seem clear in any other situation. The fact that it took months of litigation, 23 states, and a federal judge to establish that answer in this case speaks volumes about the state of federal court over the past year or so.