Nate Raymond
BOSTON, March 16 (Reuters) – A federal appeals court on Monday largely upheld a ruling that blocked a “sweeping and unprecedented” multi-trillion-dollar freeze on government financial aid imposed by President Donald Trump’s administration early last year.
A three-judge panel on the Boston-based 1st U.S. Circuit Court of Appeals sided with Democratic attorneys general from 22 states and the District of Columbia, finding that the White House Budget Office had directed federal agencies to impose an absolute freeze on funding that may have been inappropriate.
Chief U.S. Circuit Judge David Barron said the Office of Management and Budget “directed agency defendants to freeze such funds without considering an obvious aspect of the problem, namely, the dependent interests of recipients of the frozen obligated federal funds.”
The judge, who like other panelists was appointed by a Democratic president, pointed to lower court judges’ conclusions that agencies failed to implement OMB’s directives and to evaluate whether such payments met legal requirements or were appropriate on a case-by-case basis.
While the appeals court largely upheld a March 2025 injunction by U.S. District Judge John McConnell in Rhode Island banning the policy, it overturned parts of it, requiring agencies to pay the states that filed the lawsuit.
It cited a U.S. Supreme Court ruling last year in a separate Trump-era case that said lawsuits seeking to recover funds owed by the government under contracts and grants must proceed in another specialized court.
The White House did not respond to a request for comment.
In January 2025, shortly after Trump returned to the White House, OMB issued a memorandum directing federal agencies to temporarily suspend federal financial aid program spending, and state attorneys general sued.
The freeze is necessary while the administration reviews grants and loans to ensure they comply with Trump’s executive orders, which include ending diversity, equity and inclusion programs and directing a moratorium on spending on projects to address climate change, the memo said.
The freeze involves up to $3 trillion in federal funds.
The Office of Management and Budget later withdrew the memo after it became the subject of two lawsuits, including one before McConnell. But states argue that the withdrawal of the memo does not mean the end of the policy itself.
(Reporting by Nate Raymond in Boston; Editing by Lincoln Feast.)
