A federal judge on Friday blocked the Trump administration from canceling billions of dollars in previously awarded federal grants based on new agency priorities, ruling that shifting political goals cannot justify retroactive cuts to funding already committed to states and universities.
U.S. District Judge Indira Talwani, in Boston, found that the Office of Management and Budget cannot invoke a regulation allowing grant terminations to cancel awards simply because the administration’s priorities have changed since the grants were approved. The 32-page decision came after 23 Democratic-led states and the District of Columbia sued OMB and 11 federal agencies last year, challenging the administration’s aggressive use of what is known as the “termination clause.”
The clause, embedded in federal regulations (2 C.F.R. § 200.340), allows agencies to terminate grants if funding “no longer effectuates the program goals or agency priorities.” The regulation was first adopted by OMB in 2020 during Trump’s first term and was revised in 2024 under President Joe Biden. Since Trump returned to office in January 2025, his administration has weaponized the clause to revoke funding for thousands of projects, targeting universities, diversity and inclusion initiatives, climate science research, school lunch programs, and crime prevention efforts.
Talwani rejected the administration’s interpretation, writing that the clause “does not permit agencies to terminate grants based on program goals and agency priorities identified after grants were awarded.” She emphasized that grantees are told an agency’s priorities before they apply, and allowing the government to change those terms afterward would be fundamentally unfair. “It would be contrary to any reasonable interpretation of the Termination Clause to allow the termination of grants based on new priorities, including priorities not disclosed to the grantees,” Talwani wrote.
The stakes of the ruling are substantial. During court proceedings, the states warned that more than 1,100 active grants worth at least $5.39 billion could be affected if the administration succeeded. New Jersey Attorney General Jennifer Davenport, a Democrat and one of the lead plaintiffs, called the decision a vindication: “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.”
Talwani upheld the government’s right to terminate grants when they no longer serve their original purpose, but she made clear that purpose cannot be retroactively redefined. The judge’s reasoning rested on a constitutional principle: when Congress appropriates money for a specific program and grantees rely on that commitment, the executive cannot unilaterally change the rules after the fact. “Such an interpretation would obviate any need to notify parties of program goals and priorities, given that agencies could change goals and priorities at any time,” she wrote.
The Trump administration has already begun exploring workarounds. Two days before Talwani’s ruling, the Department of Health and Human Services ended funding for more than 70 research projects by announcing it would not award “continuation grants” to ongoing projects, a semantic distinction from termination that lawyers and grant watchdogs say amounts to the same thing. Scott Delaney of Grant Witness, which tracks federal grants, called the move “termination in different clothes.”
Claudia Polsky, a University of California, Berkeley law professor who won a separate suit on behalf of UC faculty whose grants were terminated, said the ruling gives institutions a powerful tool. “It is essentially a declaration of liability that institutions can take to the Court of Federal Claims and ask to have their grants reinstated,” Polsky said. She noted that the states made a strategic choice to seek clarity on the termination clause itself rather than demanding immediate reinstatement of specific grants, a decision that could unlock broader relief.
The administration has not announced whether it will appeal. If the ruling stands, it will constrain one of the Trump administration’s most effective levers for redirecting federal spending without congressional approval. However, the decision does not address whether agencies can achieve similar goals through other mechanisms—such as refusing to renew grants, imposing new conditions on future awards, or restructuring programs entirely.
Sources
- Science Magazine — Judge Indira Talwani’s ruling that OMB cannot cancel grants based on post-award priority shifts; details on the termination clause and the states’ lawsuit
- AP News — Federal judge in Boston ruling the Trump administration cannot use the obscure OMB clause to make funding cuts
- MEAWW — Judge Talwani’s 32-page decision, the states’ lawsuit details, and the dollar amounts at risk ($5.39 billion in 1,100+ grants)
