Some 48 hours after the Trump administration ordered a freeze on federal grants and loans, the U.S. Office of Management and Budget rescinded its directive on Wednesday, leaving both the administration and its dissenters here and around the country to declare victory at the same time.
On Monday, the OMB issued a memo directing all federal agencies to pause financial assistance offered under their auspices so they could be reviewed for compliance with the administration’s new initiative to purge progressive programs supportive of diversity, equity and inclusion, LGBTQ+, environmental justice and other causes that do not align with the president's priorities.
A subsequent clarification noted that the pause would not affect core assistance programs, such as Social Security, Medicare or Supplemental Nutrition Assistance Program.
At a news briefing on Tuesday, White House press secretary Karoline Leavitt said the pause was proof of the Trump administration being “good stewards of taxpayer dollars.”
News of the intended pause was quickly met with a pair of lawsuits, one by the National Council of Nonprofits, the American Public Health Association, the Main Street Alliance and the LGBTQ+ elders advocacy group SAGE and another by a coalition of 22 state attorneys general, including Hawaii Attorney General Anne Lopez.
U.S. District Judge Loren AliKhan issued a stay in response the first suit just minutes before the OMB directive was to have taken effect at 5 p.m. Tuesday.
On Wednesday, OMB officially withdrew the directive without further explanation.
The administration contends that the issuance of the initial order achieved its greater purpose in making sure federal agencies were aware of their obligation to understand and adhere to hundreds of executive orders Trump issued in the first week of his return to the White House.
And while many federal, state and local leaders remained chagrined at the widespread confusion wrought by the OMB directive, some viewed the action as a necessary shock to the system in line with Trump’s campaign promise to remake the federal government.
“This is Donald Trump,” Sen. Kevin Cramer, R-N.D., told The Associated Press. “He throws hand grenades in the middle of the room and then cleans it up afterwards. I just think the guy’s a genius.”
Democrats and others opposed to Trump’s wide-net action celebrated OMB’s cancellation of the order, which some attributed to public outcry.
“Yesterday, we all woke up to chaos, uncertainty, and confusion as the Trump administration freezes federal funding,” state Rep. Adrian Tam posted on his social media accounts. “This funding is critical to infrastructure, healthcare, education, and wildfire recovery. While I’m happy that the Trump Administration backed off, I want to remind you that he wouldn’t have backed off had it not been for our community leaders raising the alarm on how this funding will hurt us. Pressure works; pushing back when we see bad policies is essential. Thank you to everyone for uniting and voicing their concerns. Today is a win for Hawaii.”
Initial news of the intended freeze drew a sharp rebuke from Hawaii's political leaders and prompted state agencies, under the direction of Gov. Josh Green, to mobilize quickly to assess the potential impact and draw alternative plans for maintaining critical programs and services.
In a speech on the Senate floor Tuesday, U.S. Sen. Brian Schatz, D-Hawaii, decried the freeze and the violation of the Constitution he said it represents.
“The government shutdown that Donald Trump just ordered is illegal and unconstitutional,” Schatz said. “He is not a king and we do not live in a monarchy."
Schatz said the freeze would result in “real pain” for many Americans.
“If you’re a disaster survivor in North Carolina or Louisiana, or California or Texas or Florida or Maui, you don’t know what happens next,” he said. “If you’re a low-income family that relies on the Women, Infants, and Children Program to get healthy meals for your kids, if you live in a remote area like Waianae or Lanai in Hawaii and you go to a community health center to fill your prescriptions or to get a checkup, this freeze on funding means you don’t get help.”
U.S. Sen. Mazie Hirono and U.S. Rep. Jill Tokuda issued a joint statement Wednesday shortly after the order was temporarily blocked.
“Eight days into his dictatorship, President Trump has mandated a federal funding freeze that will cost Hawaii hundreds of millions in federal support,” they wrote. “Even a ‘temporary’ freeze will create a lapse in funding for disaster relief efforts in Lahaina, as well as crucial programs like Medicaid, Head Start, nutrition assistance programs like SNAP, WIC, school lunch programs and many more.
State Attorney General Anne Lopez, along with a coalition of 21 other attorneys general, filed suit to immediately stop enforcement of the OMB policy and preserve essential funding.
“The impacts of this policy withholding federal funds have already been realized in our state," Lopez said. "Neither the president of the United States nor an acting federal budget official can unilaterally upend federal law and cause such mass uncertainty in the Hawaii and our sister states by withholding federal funds authorized by law. The Department of the Attorney General will stand up for the rule of law in this nation.”
The coalition argued that jeopardizing state funds will put Americans in danger by depriving law enforcement of much-needed resources and interrupting support for U.S. Department of Justice initiatives to combat hate crimes and violence against women, stop drug interdiction, support community policing and provide services to victims of crimes. The AGs also noted that the OMB policy would halt essential disaster relief funds to places like California and North Carolina, where tens of thousands of residents are relying on FEMA grants to recover after devastating wildfires and floods.
In a statement released after the District Court ruling but before the order was rescinded, Gov. Josh Green said the Trump administration’s effort to freeze federal funding “cannot stand.”
“My administration is currently assessing the impact of this pause on essential state programs and services, including education, health care, social services and wildfire recovery,” Green said. “For those programs that are found to be impacted, the state of Hawaii will work to develop alternate plans to ensure that key services for local residents are continued.”
Hawaii’s legislative leaders also spoke out against the freeze and expressed concern for those who rely on services and programs funded by federal grants and loans.
“This latest directive from the federal level comes at a time when many communities are already facing hardships, and it threatens to disrupt the distribution of critical resources to individuals, businesses, and organizations that rely on federal financial assistance,” said Senate President Ronald Kouchi. “These programs — spanning health care, education, infrastructure, housing and more — are lifelines for our Hawaii residents as well as millions of Americans and the temporary suspension of these funds will only exacerbate challenges that are already straining our communities.”
House Speaker Nadine Nakamura said legislators were closely monitoring the situation.
“This freeze is deeply concerning as it could jeopardize critical services that Hawaii’s communities depend on, including education, healthcare, social services, wildfire recovery and essential federally funded programs,” she said. “Furthermore, it undermines the progress we have made in ensuring representation and support for our Asian American, Native Hawaiian, and Pacific Islander communities.”
And while the funding pause did not materialize, officials said the long-term threat to programs and services that do not meet Trump’s approval remains real.
In a news briefing after the OMB order was rescinded, Leavitt emphasized that while the freeze will not move ahead, federal agencies are still required to comply with Trump’s mandate to review all financial assistance programs to ensure that they follow his executive orders.
In that regard, the state’s hurried efforts to assess the potential impact federal grant and loan cancellations would have on its myriad programs and services may have given it a head start in preparing for cuts yet to come.
Green said his administration is assessing the impact the funding pause would have on essential state programs and services, including education, health care, social services and wildfire recovery and work to develop alternate plans for keeping key services available.
State Comptroller Keith Regan confirmed that the Department of Accounting and General Services has several divisions or attached agencies that would be affected should it lose federal funding.
“The main impact would be to our public arts initiatives in the State Foundation of Culture and the Arts,” he said. “Indirectly, it is possible the Archives may need to halt projects funded by its federal grants and our State Procurement Office’s Surplus Property Program may be affected by the pause in funding.”
State Department of Labor and Industrial Relations director Jade Butay said his department is “deeply concerned” about potential impacts to its ability to deliver essential services.
“A significant portion of our operations, including workforce development, unemployment insurance, job training and workplace safety through our Occupational Safety and Health division, is supported by federal funds,” Butay said. “Any disruption to these critical programs could affect workers, employers and communities statewide. We are actively monitoring the situation and are awaiting further guidance from the U.S. Department of Labor to understand the full scope of the impacts and next steps. We remain committed to serving the people of Hawaii and ensuring the continuity of essential programs.”
The Hawaii Department of Defense, which includes the Hawaii National Guard, Hawaii Emergency Management Agency, Office of Veterans’ Services and Civilian Military Programs, is heavily reliant on federal funding, receiving approximately $88 million for its annual operating budget; about $350 million to administer its Hazardous Mitigation Program Grant; and nearly $25 million for its Emergency Management Program Grant. The department further anticipates approximately $56 million in Federal Emergency Management Agency reimbursement for Maui wildfire disaster response and recovery. It also receives federal grant funding for the High Intensity Drug Trafficking Areas program to coordinate its counter-narcotics efforts with federal, state and county law enforcement agencies.
“While these federal programs are being reviewed by OMB, there’s no immediate impact to operate, retain qualified personnel, and continue to protect the citizens of the state of Hawaii,” said Maj. Gen. Stephen Logan, the state adjutant general.
The Hawaii State Public Library System could also be significantly impacted by the freeze.
HSPLA receives about $1.5 million in Library Services and Technology Act funding that enables it to provide access to library materials, technology to connect to the internet, and online databases.
“The suspension of this funding will cause our communities to face limited access to information that supports their health, business, education and ability to connect to the world,” HSPLA reported on Tuesday. “Specifically, students will not have free access to test preparation and families will not have easy access to legal forms to support their needs.”
HSPLS also is a recipient and partner for two digital equity projects, one that offers basic digital literacy classes statewide and another, funded via the Federal Broadband Equity Access Development program, that supports digital literacy navigators in all public libraries.
Meanwhile, the Hawaii Department of Transportation is seeking clarification regarding potential impacts on obligated formula projects and discretionary funds.
Likewise, the state Department of Law Enforcement reported that it is still seeking a final determination of the impacts from its federal partners.
Michael Tsai covers local and state politics for Spectrum News Hawaii. He can be reached at michael.tsai@charter.com.