Federal Funding Freeze Frenzy!
The White House Office of Management and Budget (OMB) created a great deal of confusion this week by issuing a memo to all federal agencies late on Monday, January 27th, to “pause” payments of all federal grants, loans, and financial assistance (excluding payments to individuals) as of 5:00 pm on Tuesday, January 28th, roughly 24 hours after the memo was sent. An exhaustive list of federal agencies, including the National Endowment for the Arts, National Endowment for the Humanities, and the Institute for Museum and Library Services, were to report on all scheduled payments by February 10th to be reviewed by political appointees to ensure they aligned with recent Executive Orders and the administration’s position on “foreign aid, nongovernmental organizations, DEI, woke gender ideology, and the green new deal.”
This caused massive confusion across state and local government, the entire healthcare industry, education systems across the country, most nonprofits, and entities involved in almost every aspect of American life. The National Council Nonprofits joined with other organizations to file a lawsuit on Tuesday, which resulted in a federal judge blocking implementation of the memo mere minutes before it was to take effect, delaying its implementation until Monday, February 3rd at 5:00 pm after a hearing on the issue could be held. By Wednesday morning, North Carolina had joined more than 20 other states in filing another lawsuit against the order, and by Wednesday afternoon, the OMB rescinded the order.
While OMB has not yet indicated its next steps, it is quite likely they may issue new guidance requiring federal agencies to make changes to, cancel, and/or stop payments. These federal grants are deemed inconsistent with recent presidential Executive Orders and the Trump administration’s position. Future orders and guidance from OMB will likely be drafted more clearly and narrowly than the January 27 memo to increase the likelihood that it would be upheld in court. At this point, it is unclear when or if OMB will issue further direction to federal agencies or precisely what that guidance would be.
Nonprofits with federal grants should contact their grant administrators to better understand their granting agencies’ plans for any future guidance from OMB that could pause the federal grantmaking process. Organizations that rely heavily on federal government funds may want to ensure that they have adequate funds in reserve or available from other funding services to weather any disruptions in federal grant funding that could arise from future grant pauses.
Arts NC will continue to monitor this situation and work with state and national partners such as the NC Center for Nonprofits and the National Council of Nonprofits to work for the interest of the arts and arts education and update the entire creative community about this and other relevant government issues.