A Pause on Federal Grants and Loans: Everybody Take A Long,
Deep Breath

January 28, 2025

The White House's Office of Management and Budget sent a shockwave across the Federal Grants Management industry on Monday by releasing a memorandum calling for a complete pause on federal funds disbursements from grants and loans. This unexpected move, outlined in Memorandum M-25-13, puts a temporary halt on issuing new awards, disbursing funds for current awards, and processing open grant applications. The stated purpose is to give federal agencies time to align their programs with the administration's new priorities, leaving many recipients and subrecipients in a state of uncertainty.

We've Been Here Before

Before diving into what the recent White House memo might mean for all of us, I wanted to share some outtakes from conversations my colleagues and I have been having about how we got here and how this is perhaps just the latest chapter in what I call the "Federal Partnership Experiment", that in which the US government leverages grants and loans to re­ distribute taxpayer collected funding back to State and Local Governments. So saddle up and let's take a quick trot back down memory lane:

Let's start with the American Recovery and Reinvestment Act (ARRA) of 2009. This was a huge stimulus effort after the Great Recession, pumping nearly $800 billion into the economy for infrastructure, education, energy, and more. The need for the stimulus was obvious; the country and global economy were in a free fall and needed immediate intervention to limit a recession from being a prolonged economic depression. So enters massive federal stimulus. But the challenge facing federal grant-making agencies wasn't just about the scale of the money-it was about how the money was to be tracked. The federal government enacted new transparency rules through the Recovery Accountability and Transparency Board (RATB). For downstream recipients, this meant quarterly reports on spending, submitted for everyone to see on Recovery.gov. The idea was to ensure every dollar was spent wisely, but it also meant more work for state and local governments to build systems and staff up for compliance. While this seems commonplace now, it was a pivotal departure from prior grants management practices. It challenged not just the federal agencies disbursing the funds but even more so the State and Local Governments receiving them. Just as we should now, the collective federal grants community took a deep breath and worked through the process to build systems and processes that aligned with the new policy and agenda.

But that example was caused by a policy change fueled by significant financial investment, and a desire for greater transparency. What about when funding wasn't so abundant and there was a strong desire to cut back on federal funding? That happened in 2013, when federal budget sequestration and a government shutdown happened almost at the same time. Sequestration was essentially automatic budget cuts, and they hit both mandatory and discretionary spending. Then, the government shutdown added another layer of chaos, halting funding flows and causing programs to freeze. Agencies like the Department of Health and Human Services had to temporarily close Head Start programs, and researchers funded by the National Science Foundation saw their projects stall. It forced everyone to get creative with contingency plans, like diversifying funding sources or building reserves, so they'd be ready for future surprises. And so, while downstream recipients of these types of funding are feeling a strong sense of de-ja-vu, there is existing precedent on how to adjust programs to ensure continuity that can be studied and largely replicated should the current administration make long-term funding modifications to these programs.

"The Art of the Deal"

This pause also reflects a hallmark of the Trump administration's negotiation style-what some might call deploying "The Art of the Deal." By pausing these programs, the administration is essentially asking federal agencies to take a step back and focus on the bigger picture. Instead of staying lost in the weeds of managing countless federal funding streams ($750B annually spread across 1600 programs), agencies are being pushed to reevaluate their core missions. This strategy forces agencies to commit resources only to the programs that are critical to their goals, creating a sharper focus on what truly matters and a leaner, more targeted use of federal dollars.

This isn't a new strategy, but rather a new tactic for accomplishing it. In 2003, the famed 0MB Circular No. A-76 also pushed federal agencies to take a hard look at what programs and policies truly supported their missions. This circular, aimed to improve efficiency by encouraging agencies to identify functions that could be outsourced or reorganized to better serve their goals. Agencies were required to determine whether their activities were inherently governmental or if they could be performed more effectively by private contractors. This approach forced agencies to clarify their priorities and focus their resources on what mattered most.
While controversial, this initiative drove significant introspection within federal agencies, compelling them to critically evaluate how they allocated funding and resources to support their core missions. It showed how moments of recalibration can lead to clearer priorities and better alignment with long-term goals.
 
What This Means Now

So here we are in 2025, and this pause feels like another moment of uncertainty. According to the memo, federal agencies must immediately stop awarding and disbursing funds for certain grants while they review how these programs fit into the administration's priorities. Agencies have until February 10 to identify programs affected by new executive orders. These orders focus on things like domestic manufacturing and energy independence while dialing back DEi and environmental justice initiatives.

The temporary pause suggests a paradigm shift in federal grantmaking priorities, particularly for FY25-29 programs funded by major legislative initiatives such as the IIJA, BIL, and IRA. Likely changes include:

• Reduced Emphasis on DEI: Equity-related provisions, which were central to many programs under prior administrations, may be deprioritized or removed entirely.
• Greater Focus on Economic Impact: Programs may prioritize funding applicants that demonstrate measurable economic benefits, such as job creation, domestic production, or infrastructure modernization.
• Energy and Infrastructure Priorities: Grants aligned with the administration's focus on energy independence, domestic manufacturing, and infrastructure development may gain favor.
• Streamlined Approvals: Applications emphasizing regulatory efficiency and expedited timelines for project implementation may score higher in revised evaluations.

Some IRA programs, particularly those tied to renewable energy and environmental justice, could face immediate risk of funding rescission. However, Congress would need to intervene to rescind appropriated funds, which would likely result in significant legal challenges.

Guidance to State and Local Governments and other Federal Fund Recipients

I don't have a magic 8 ball to help everyone understand what could happen next, BUT as a Federal Funds expert, here is what I'm telling clients:

In the next 30 days, recipients must examine their existing grant portfolios closely to identify areas of concern and build risk mitigation strategies.

• This means streamlined reviews of current grants and grant agreements to identify any flexibility provisions that could allow you to amend or adjust the scope of projects, or the terms of grant agreements.
• Simultaneously, it's critical to maintain open lines of communication with subrecipients. Issuing clear and transparent memos that explain the potential impacts of the pause will go a long way toward setting realistic expectations and reassuring stakeholders.
• In addition, now is the time to start crafting alternative messaging to future-proof grant applications and agreements, shifting away from DEI-focused narratives to priorities like infrastructure, economic growth, and regulatory efficiency.

If the pause stretches into the next 90 days, recipients will need to turn their attention to reassessing current programs. This includes working
 
closely with sub-recipients to identify ways to adjust programmatic goals and activities to not just align with a new set of priorities at the Federal level, but also to level-set project timelines to accommodate any disruptions associated with the pause.

In the long term, State and Local Governments should shift toward strategic realignment. This involves updating grant application templates to emphasize metrics like job creation and energy independence. Federal fund recipients should also take a moment to define what equity means to your community - access to primary healthcare, higher education, food deserts, and clean potable water. Pursuing or repositioning existing grant funds does not have to include changing projects or subrecipients, but instead can rescope existing projects to terminology and performance metrics that are more likely to resonate with the administration's priorities.

Eyes Up and Out the Windshield

Over the next week, we'll see a flurry of additional guidance coming not just out of 0MB but also from agencies that manage the portfolio of funds that are currently impacted. Taking a deep breath and keeping an eye out for additional memos and communication will be crucial to staying ahead of the curve and understanding when paused activities might resume.
Advocacy also becomes vital during this phase. Engaging with policymakers at both federal and state levels can help push for consistent guidance and prevent confusion or unnecessary disruptions. Congress can be a critical ally in re-emphasizing the importance of these federal investments, so continued engagement through Government Affairs groups leveraged by fund recipients can help carry the water back to key decision-makers within the new administration on the real-time impacts of pause and which programs need to be broken free from the moratorium.

These are interesting times, but I have no doubt that the last three decades of bolstering federal grants management capability will mean disruptions can be limited and we'll all navigate this as just another storied chapter of the "Federal Partnership Experiment."

To learn more about the dedicated resources we have and gain valuable insights on grants management, please visit our Center for Grant Excellence page.

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