The U.S. Court of Appeals for the First Circuit ruled on March 26 that a court order blocking the Trump administration’s plans to freeze trillions of dollars in government financial assistance will remain in place for now.
In its 48-page decision, the panel of three appeals court judges found the funding freeze would cause states an array of harms, including leaving them unable to make existing financial obligations and forcing them to take on additional debt.
“Even if we were to set aside the harms to the Plaintiff-States’ residents, the District Court still found a number of harms that the Plaintiff-States themselves would irreparably suffer. These harms included the obligation of new debt; the inability to pay existing debt; impediments to planning, hiring, and operations; and disruptions to research projects by state universities,” Chief Judge David Barron wrote in the ruling.
“And the Defendants do not contend that these harms are not ‘substantial’ or ‘irreparable,’ except by asserting that ‘[the Plaintiff-States] will receive any funds that agencies are legally obligated to disburse.'”
The judges unanimously rejected the administration’s argument that a lower court ruling handed down by U.S. District Judge John McConnell on March 6 was too broad.
McConnell found that the Office of Management and Budget (OMB) overstepped its authority when it issued a memo on Jan. 27 directing all federal agencies to pause $3 trillion in federal grants, loans, and other financial assistance, pending a review.
He further found that the Trump administration had “put itself above Congress” and that its funding freeze “fundamentally undermines the distinct constitutional roles of each branch of our government.”
The Trump administration rescinded the OMB memo just days after it was issued “to end any confusion on federal policy created by the court ruling and the dishonest media coverage,” White House press secretary Karoline Leavitt said in a statement.
But by then, a coalition of nearly two dozen attorneys general from Democratic-led states had filed a lawsuit seeking to end the freeze, arguing that it unlawfully infringed on Congress’s exclusive power to designate government funds.
In their legal challenge, the attorneys general argued the funding suspension violates the Administrative Procedure Act (APA), which established procedural rules for how executive branch agencies implement and enforce policies, and that the move is unconstitutional.
They further argued that the funding would cause “devastating” harm and leave states “unable to provide certain essential benefits for residents, pay public employees, satisfy obligations, and carry on the important business of government.”
In issuing its March 26 decision, the appeals court found that the coalition of states would likely prevail in the lawsuit, and opted to leave McConnell’s order in place.
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