Michigan Attorney General Dana Nessel announced a key ruling declaring that the Trump administration illegally misused its regulatory authority to unlawfully pull billions of dollars in federal funding that Congress had set aside for crucial state programs and services. Twenty-three states and the District of Columbia sued the administration in June 2025, claiming the federal agencies are not authorized to terminate grants based on changes in agency preferences that occur after a grant is awarded.
In her decision, U.S. District Judge Indira Talwani in the District of Massachusetts wrote that five words in U.S. Office of Management and Budget (OMB) regulations — referencing situations where a grant “no longer effectuates … agency priorities”— did not give federal agencies effectively unfettered authority to revoke grants nationwide just because the federal administration claims it is shifting its focus.
"The Trump administration has been consistent in one thing: abruptly stripping funding from states and other federal grantees,” said Nessel. “I am deeply relieved by Judge Talwani’s decision. It sets a crucial precedent that the federal government cannot just cancel entire programs on a whim, putting an end to these unlawful and rampant grant terminations and protecting money that rightfully belongs to Michigan programs and residents.”
Without providing any lawful justification and without any advance warning or explanation, the Trump administration relied on this regulation to gut funding across the entire federal government.
Nessel and a multistate coalition sued to stop the unprecedented attack. Prior to the second Trump administration, federal agencies never terminated grants merely because the agency’s priorities shifted midway through the grant period.
The multistate complaint, filed last year, argued that the Trump administration’s decision to invoke the regulation to terminate grants based on their changed agency priorities is unlawful. The lawsuit also noted the importance of obtaining clarity regarding the scope of this regulation, as states collectively accept hundreds of billions of dollars a year that are at risk of termination pursuant to this regulation.
Judge Talwani granted the states a declaratory judgment that the OMB regulation and the agencies’ regulations do not independently authorize the Trump administration to terminate funding based on agency priorities that were only identified after the grant was awarded.
The attorneys general of Arizona, California, Colorado, Connecticut, Delaware, the District of Columbia, Hawaii, Illinois, Maine, Maryland, Massachusetts, Michigan, Minnesota, Nevada, New Jersey, New Mexico, New York, Oregon, Rhode Island, Vermont, and Wisconsin, were joined by the governors of Kansas, Kentucky, and Pennsylvania on this case.
In her decision, U.S. District Judge Indira Talwani in the District of Massachusetts wrote that five words in U.S. Office of Management and Budget (OMB) regulations — referencing situations where a grant “no longer effectuates … agency priorities”— did not give federal agencies effectively unfettered authority to revoke grants nationwide just because the federal administration claims it is shifting its focus.
"The Trump administration has been consistent in one thing: abruptly stripping funding from states and other federal grantees,” said Nessel. “I am deeply relieved by Judge Talwani’s decision. It sets a crucial precedent that the federal government cannot just cancel entire programs on a whim, putting an end to these unlawful and rampant grant terminations and protecting money that rightfully belongs to Michigan programs and residents.”
Without providing any lawful justification and without any advance warning or explanation, the Trump administration relied on this regulation to gut funding across the entire federal government.
Nessel and a multistate coalition sued to stop the unprecedented attack. Prior to the second Trump administration, federal agencies never terminated grants merely because the agency’s priorities shifted midway through the grant period.
The multistate complaint, filed last year, argued that the Trump administration’s decision to invoke the regulation to terminate grants based on their changed agency priorities is unlawful. The lawsuit also noted the importance of obtaining clarity regarding the scope of this regulation, as states collectively accept hundreds of billions of dollars a year that are at risk of termination pursuant to this regulation.
Judge Talwani granted the states a declaratory judgment that the OMB regulation and the agencies’ regulations do not independently authorize the Trump administration to terminate funding based on agency priorities that were only identified after the grant was awarded.
The attorneys general of Arizona, California, Colorado, Connecticut, Delaware, the District of Columbia, Hawaii, Illinois, Maine, Maryland, Massachusetts, Michigan, Minnesota, Nevada, New Jersey, New Mexico, New York, Oregon, Rhode Island, Vermont, and Wisconsin, were joined by the governors of Kansas, Kentucky, and Pennsylvania on this case.
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