Judge Blocks Trump’s Use of Obscure Clause for Grant Cuts
A federal judge in Boston has ruled that the Trump administration cannot use an obscure regulatory clause to terminate billions of dollars in federal grants that had already been awarded to states, delivering a significant legal setback to the administration’s fiscal agenda and reaffirming Congress’s constitutional authority over federal spending.
U.S. District Judge Indira Talwani granted summary judgment on July 17 to 23 Democratic-led states and the District of Columbia, who had sued the administration in June 2025 over what they described as an “unprecedented and unlawful” campaign to cut critical federal funding. The ruling blocks the administration from relying on a termination clause in Office of Management and Budget (OMB) regulations to cancel active grants based on policy priorities adopted after the grants were awarded, according to AP News.
The Legal Dispute
At the center of the case is a provision added to OMB regulations in 2020 and revised in 2024, which states that a federal award may be terminated if it “no longer effectuates the program goals or agency priorities.” The Trump administration had invoked this clause to cancel funding for programs it viewed as misaligned with its agenda, including diversity, equity, and inclusion (DEI) initiatives, climate change programs, gender-related initiatives, crime prevention, food security, scientific research, disaster preparedness, and clean water projects.
The states held at least 1,180 active grants worth more than $5.39 billion from the defendant agencies at the time of the ruling, according to court documents cited by The Epoch Times.
The Judge’s Rationale
Judge Talwani, appointed by President Barack Obama, wrote in her memorandum and order that the administration’s interpretation “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.”
She concluded that the termination clause applies only to the goals and priorities in place when a grant was awarded, not to new priorities adopted later. The regulatory framework, she noted, requires agencies to disclose their goals and priorities when announcing a funding opportunity, allowing applicants to “make an informed choice” about whether to accept the terms.
“The regulation, as declared by this court, demands only that grantees be apprised of those goals and priorities before grants are awarded,” Talwani wrote.
Reactions and Implications
New Jersey Attorney General Jennifer Davenport praised the decision, saying in a statement that it “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,” Davenport said.
The administration’s legal team had argued that the lawsuit was “extraordinarily unusual” and should be dismissed because some grants had already been terminated and the states’ claims about future grants were speculative. Government attorneys also contended that policy changes following an election are a normal part of democratic governance.
“A change in administration brought about by the people casting their votes is a perfectly reasonable basis for an executive agency’s reappraisal of the costs and benefits of its programs and regulations,” they wrote in court filings.
Broader Context
The ruling is one of more than 150 cases where courts have at least partially halted Trump administration policies. According to a New York Times lawsuit tracker, the administration faces over 750 lawsuits across multiple policy areas, with funding cuts representing the largest category at approximately 190 cases.
What’s Next
The ruling does not restore funding that has already been terminated, nor does it require the government to return withdrawn funding. It only protects active grants from future termination based on new priorities. The administration is expected to appeal the decision to the U.S. Court of Appeals for the First Circuit, and potentially to the Supreme Court.
Judge Talwani also acknowledged that presidents and federal agencies remain free to establish new priorities when awarding future grants, meaning the administration can still reshape federal spending going forward — as long as it does so before the funds are committed.
The case is State of New Jersey v. U.S. Office of Management and Budget, 1:25-cv-11816 (D. Mass.).