The Trump administration is gearing up to challenge the 1974 budget law by potentially withholding congressionally mandated funds, according to senior federal officials. This move could significantly alter the balance of power between Congress and the White House. Current and former employees from multiple agencies have indicated that the administration is preparing to push the boundaries of a law designed to prevent the president from unilaterally overturning Congressional spending decisions.
Key aides within the White House have long contended that the budget law constitutes an unconstitutional limitation on presidential authority. Reports suggest that they may seek court rulings to invalidate the law, which could empower the White House to selectively determine which expenditures to authorize. The nonpartisan Government Accountability Office (GAO) has already issued rulings indicating that funds have been illegally withheld. In response, Congressional Democrats have asserted that a broader suspension of funding has violated the budget law.
While White House officials deny any funds have been “impounded” thus far, employees from several agencies have expressed deep concern regarding the significant slowdown, stoppage, or delay of fund disbursement, often lacking clear legal justification. The overall scale of the withheld funds remains unclear, but impending deadlines will soon reveal the administration's intentions regarding the law.
According to sources familiar with the situation, White House officials are planning to “defer” around 200 separate accounts across various federal agencies. These deferrals could potentially affect billions of dollars and may be illegal if they result in funds not being spent before the fiscal year concludes on September 30. Interviews with federal workers indicate that a wide array of government spending has already been postponed, with major scientific research grants terminated without public notice.
In one instance, staff at a federal agency were informed that contracts exceeding $250,000 could no longer be approved, while the General Services Administration (GSA) is attempting to cut costs by denying many requests for facility repairs. The legality of these rejections is being questioned internally, raising alarm among agency officials about potential violations of the budget law.
The impact of the frozen spending is particularly evident within the research community, where funding for science and health initiatives has come to a standstill. The U.S. DOGE Service has been criticized for failing to post numerous planned funding opportunities since taking control of a key federal grants website. Previously, agencies could directly post Notices of Funding Opportunities (NOFOs), but now, they must navigate a more cumbersome centralized process, causing significant delays in awarding grants.
For example, the Department of Health and Human Services is awaiting the publication of at least 30 planned funding opportunities worth tens of millions of dollars. These include critical funding for health and elder care initiatives, putting the future of these programs at risk as the fiscal year approaches its end. The backlog of funding opportunities has alarmed career officials, who warn it could lead to illegal impoundment of funds.
In a recent federal lawsuit filed in Rhode Island, 20 states have accused the Department of Health and Human Services (HHS) of unlawfully dismantling vital departments, primarily due to significant staff layoffs. The states argue that these layoffs prevent HHS from fulfilling its congressional mandates, effectively paralyzing the agency. Since the beginning of the Trump presidency, the National Science Foundation has awarded only about half as many grants compared to the same period in 2024, highlighting the administration's impact on scientific funding.
As the fiscal year nears its conclusion, the pressure is mounting on agencies like the National Institutes of Health (NIH) to expedite grant awards. Recent internal communications indicate that NIH could end the fiscal year with unspent funds unless new grants are approved quickly. The agency’s director emphasized the need to prioritize spending on projects that benefit public health, while raising concerns over ideological biases in funding decisions.
Additional reports indicate that the Army Corps of Engineers is facing a different kind of funding freeze, as employees were instructed not to award most noncommercial contracts over $250,000. This executive order has led to delays in critical projects, raising questions about whether these actions might constitute illegal impoundment. The GSA is also reportedly stalling requests for agency facility repairs, restricting progress to only those projects aligned with specific administration goals.
For federal officials who believe the administration is illegally withholding funds, the primary recourse is to report violations to the GAO. However, the GAO’s authority could soon be compromised by proposed budget cuts from House Republicans. These cuts could limit the GAO's ability to enforce budget law effectively, potentially allowing the Trump administration to further manipulate federal spending.
As the administration seeks to cancel roughly $9 billion in spending, including foreign aid and public broadcasting, it remains to be seen how the courts will interpret these actions. Legal experts warn that the stakes are high, with potential implications for presidential authority over federal spending. The situation is evolving rapidly, and the coming weeks will be crucial in determining the outcome of these unprecedented budgetary maneuvers.
