‘Blatantly unlawful’ federal spending freeze sends state scrambling

[January 29, 2025]  By Ben Szalinski and Peter Hancock

SPRINGFIELD — State agencies, nonprofit organizations and a host of other entities that rely on federal funding were thrown into chaos Tuesday following the release of a White House memo that froze – at least temporarily – the distribution of all federal grants, loans and other financial assistance programs.

Late Tuesday, however, the Associated Press reported that a federal judge in Washington, D.C., issued a ruling temporarily blocking the spending freeze.

Gov. JB Pritzker accused President Donald Trump’s administration of “trying to confuse the American people,” but said the state is nonetheless making contingency plans should tens of billions of dollars in federal funding disappear.

“The United States Constitution clearly states that Congress has the power of the purse and sets laws to obligate federal funding for all 50 states,” Pritzker said. “What Donald Trump tried to do in the last 24 hours is illegal.”

The initial memo, from the White House Office of Management and Budget, was released late Monday. It directed all federal agencies to “temporarily pause” the distribution of federal financial assistance funds by 4 p.m. Tuesday in order to “provide the Administration time to review agency programs and determine the best uses of the funding for those programs consistent with the law and the President’s priorities.”

It quickly became unclear, however, just how far the instructions were meant to go. The initial memo indicated it was not meant to apply to Social Security or Medicare payments. But the White House later clarified that it also was not intended to interrupt funding for Medicaid, SNAP benefits, aid to farmers and small businesses, Head Start, rental assistance, “and other similar programs.”

States including Illinois reported they had lost access to their Medicaid systems. But White House Press Secretary Karoline Leavitt later posted on social media that the website was down as part of a web outage. In a late-afternoon news conference, however, Pritzker said many programs beyond Medicaid had in fact been affected, at least for part of the day.

“Nothing that came in that memo last night would indicate that all of a sudden you’d have the systems going offline,” Pritzker said. “And yet, that’s exactly what happened because they intend — they intend — to make cuts to these programs. That’s why they went offline. Don’t let them fool you that there was some kind of website outage.”

Pritzker said he fears Illinoisians will suffer greatly with any sudden cutoff in federal funding, such as for programs that pay for critical services provided by nonprofits and health care for millions of Americans.

“This is a demonstration of cruelty against people who depend on us, working families who rely on federal assistance to pay their rent, people who need help paying their utility bills, parents who need critical programs like Head Start for quality affordable child care, and 3.5 million Illinoisans who get their health insurance through Medicaid,” Pritzker said.

Attorney General Kwame Raoul speaks at virtual news conference on Tuesday announcing a lawsuit against the Trump Administration’s federal spending freeze. (Screenshot of videoconference)

Trump’s administration also hasn’t communicated with states about the freeze.

“When our agencies reached out to the federal agencies, we literally were informed that they are not to speak with us,” Pritzker said.

Pritzker said possible major spending cuts or freezes by the federal government are being kept in mind as he prepares to introduce a budget on Feb. 19, but he said it’s challenging to prepare for unknown actions by the White House.

Illinois Attorney General Kwame Raoul and four other Democratic attorneys general announced they would file a lawsuit in Rhode Island to block the directive from the federal Office of Management and Budget.

Raoul said the unilateral action by the Trump administration was “another blatantly unlawful action” as the U.S. Constitution delegates spending decisions to Congress.

“Congress is given the power to appropriate the funding,” Raoul said in a news conference. “The executive branch cannot unilaterally disregard those appropriations passed by a separate and equal house of government. We will collectively fight this unconstitutional mandate.”

Federal funding plays a significant role in nearly everything state government does, including PreK-12 and higher education, Medicaid, public health services and highway maintenance.

In the last fiscal year, which ended June 30, roughly $34.4 billion in federal funds flowed through state agencies and programs, according to Comptroller Susana Mendoza’s office. Halfway through the current fiscal year, the state has received about $20.4 billion in federal funds.

One of the largest categories of federal funding for Illinois is Medicaid, the health insurance program for low-income and disabled individuals that covers about 3.5 million people in the state. The federal government pays about 52% of the cost of the Medicaid in Illinois.

In his initial memo Monday outlining the freeze, Matthew J. Vaeth, acting director of the Office of Management and Budget, said the action was intended to apply to “federal financial assistance” programs.

“The use of Federal resources to advance Marxist equity, transgenderism, and green new deal social engineering policies is a waste of taxpayer dollars that does not improve the day-to-day lives of those we serve,” Vaeth said in the memo.

Capitol News Illinois is a nonprofit, nonpartisan news service that distributes state government coverage to hundreds of news outlets statewide. It is funded primarily by the Illinois Press Foundation and the Robert R. McCormick Foundation.