Boston – A federal appeals court on Monday largely upheld a ruling blocking a “sweeping and unprecedented” freeze on federal financial assistance instituted by the Trump administration in early 2025.
The 1st U.S. Circuit Court of Appeals sided with Democratic officials from 23 states and the District of Columbia, finding that the Office of Management and Budget (OMB) improperly directed agencies to halt funding without assessing the legal and practical implications for recipients.
Chief U.S. Circuit Judge David Barron noted that agencies failed to consider “the reliance interests of the recipients of the obligated federal funds” when executing the freeze. The ruling largely upheld a lower court injunction issued by U.S. District Judge John McConnell of Rhode Island, which barred the administration from enforcing the freeze.
California Attorney General Rob Bonta called the decision a “clear rebuke” of a policy he described as “deeply harmful, reckless, and wholly unreasoned.” However, the appeals court partially overturned the injunction’s requirement for agencies to disburse funds immediately, citing a U.S. Supreme Court precedent that mandates money claims be pursued through a separate legal route.
The legal challenge arose after the OMB issued a memo in January 2025 directing federal agencies to pause spending on grants and loans while reviewing alignment with Trump’s executive orders, including those affecting diversity, equity, inclusion programs, and climate-related projects. The freeze affected up to $3 trillion in federal funding.
Although the OMB later withdrew the memo amid litigation, the states argued that the administration’s policy effects persisted, prompting continued legal scrutiny. The White House did not respond to requests for comment.