The Trump Administration Seeks to End Nonpartisan Grantmaking

Federal grantmaking processes are designed to be open, fair, reliable, and free of political influence, favoritism, or retaliation.^[1] But since the first days following President Trump’s inauguration, his Administration has upended every stage of the federal grantmaking process. That effort began with an unprecedented (albeit short-lived) government-wide grant freeze, followed by a set of presidential directives, ad hoc cancellations, and delays seeking to politicize the grantmaking process.

Then on May 29, the Office of Management and Budget (OMB) released a proposed rule that seeks to modify government-wide grants guidance to operationalize and enforce the Administration’s approach to grantmaking across federal agencies.^[2] The proposed rule would radically transform how grant award decisions are made, allowing them to be based on purely political calculations — including who receives funds, what is required of grantees, and when grants can be cancelled — introducing an enormous risk of capriciousness, abuse, and corruption.

There are a host of harmful provisions in the rule intended to advance the President’s policy and political agenda, at the expense of the quality and reliability of federal services that support everything from scientific research to public health to clean energy. This report focuses in particular on two ways the proposed rule would fundamentally alter the relationship between the federal government and would-be grantees by:

• Replacing competitive, merit-based grantmaking with awards that can be based purely on the executive branch’s political and policy considerations, including policy considerations unrelated to the grant itself; and
• Placing all grantees (including formula grants) under constant threat of penalty or termination, increasing the coercive power of the executive branch over its grantees.

Taken together, these two changes would allow a grantmaking process so political as to render it unrecognizable and unfit to effectively deliver for our nation’s needs. 

Of course, offering the appearance of an orderly legal framework through a new regulation does not make the Administration’s approach to grantmaking legal. Indeed, many of the Administration’s actions to date have been successfully challenged in court — and serious questions exist about whether OMB even has the authority to issue its guidance on grantmaking as a rule at all.^[3]

Even setting aside the corruption and weaponization this politicization of the grantmaking process would invite, the consequent unreliability of federal funds that would result from this proposed rule will severely harm the effectiveness of federal dollars. With the ability to freeze or terminate grants for reasons wholly unrelated to service delivery performance, the federal government would no longer be a reliable public-private partner. Other project funders — whether philanthropic, state and local governments, or businesses — would not be able to safely rely on committed federal funds actually being delivered. Businesses and nonprofit organizations will face higher risks of doing business with the federal government, and fewer of them will be willing to compete to carry out that work, hurting the quality and breadth of potential applicants and the return on tax dollars. Smaller entities unable to withstand episodes where awarded funding is withheld for long periods or canceled altogether may decide that working with government is not viable. Terminations and suspensions can also lead to funds going to waste altogether, as the time and resources already invested in a project lose their value when it is canceled midway — as has been seen with stalled clinical trials.^[4]

The proposed rule is one of the clearest articulations to date of the Trump Administration’s assertion that the U.S. government is meant to serve the President and his interests, rather than the public good. While the proposed rule reflects many extreme policies that the Administration has already attempted to implement in some programs and agencies, what may be most radical is the attempt to codify the view that grantmaking should serve to advance the President’s political and policy preferences whether or not those align with congressional intent, the public good, or merit – and that it should be wholly subject to the unreviewable and unaccountable whims of political actors in the executive branch. It is designed to create an open invitation for corruption and abuse.

The Administration should withdraw this rule, and Congress should recognize the way this rule could subvert congressional intent and stop it. While courts may ultimately find the rule or elements of the rule unlawful, it can wreak havoc in the near-term.

New Rulemaking Reflects Administration’s Ongoing Effort to Politicize Grantmaking

Federal grants are an essential source of support to state and local governments, nonprofits, and education and research institutions nationwide. Federal agencies have obligated an average of over $1.1 trillion annually in recent years through grant transactions. Much of this funding — an average of more than $900 billion in transactions annually over the past four years — goes to state and local governments through formula and block grants for purposes such as law enforcement, education, and social services, while roughly $200 billion has flowed through competitive grants for specific projects, such as research and infrastructure.^[5]

The Trump Administration has sought to upend the federal grantmaking process since entering office. After first trying to impose a government-wide grant freeze, which was blocked in federal district court after a judge found that it “fundamentally undermine[d] the distinct constitutional roles of each branch of our government,” the Administration has repeatedly tried to cancel or delay a wide range of grants.^[6] These cancellations have been accompanied by a series of executive orders (EOs) that both seek to change how federal grants are made and identify specific targets for the Administration’s interference — including immigrants, transgender people, and entities that support diversity, equity, and inclusion.^[7]

The Administration’s disruption of the grant process has harmed communities, hampered critical services, and caused damaging uncertainty for grantees. This includes illegally withholding scientific research funding from particular institutions, including leading research universities, over disagreements unrelated to the purpose of the grants; cancelling grants in a manner that one Reagan-appointed judge found amounted to “racial discrimination;” and grant-termination decisions for clean energy projects that another judge found were “primarily…based on whether the awardee resided in a state whose citizens voted for President Trump in 2024.”^[8]

The proposed rule — introduced on a rushed timeline — is consistent with both the policies reflected in the President’s EOs and the efforts, sometimes successful, the Administration has made to cancel existing funding. In issuing this proposed rule, the Administration is seeking to standardize this extreme politicization of grantmaking across agencies — even among those agencies that may be reluctant to pursue this path given the significant legal issues it raises. The proposed rule seeks to achieve this politicization through two major changes in the grantmaking process.

First, the Proposed Rule Seeks to Replace Competitive, Merit-Based Awards With Political Preferences

Competitive grantmaking is a critical tool for ensuring that the strongest proposals — those most likely to effectively meet the purpose for which Congress provided funds — are selected. While the nonpartisan expert review process that normally guides competitive grant selection may be best known in the context of “peer” scientific review, competitive grantmaking is used to award roughly $200 billion of federal funding each year across government, in areas ranging from housing and economic development to education and job training to clean energy deployment.

The Administration’s proposal lays out an approach that gives the President and his political appointees unprecedented discretion to choose winners and losers in grant competitions based on their own policy and political preferences, including policy preferences unrelated to the purpose of the grant. It would require that senior political appointees (or their designees) conduct a review of all would-be awards and determine that each one “demonstrably advance the President’s policy priorities” — among other subjective tests based on vaguely defined terms.^[9] These terms allow for awards to be denied based on, for example, unsubstantiated concerns that an applicant’s use of federal dollars could facilitate what the Administration considers the “promotion of anti-American values” or a determination that an applicant is somehow affiliated with an organization that engaged in activities that “undermine public safety.”^[10] Even worse, a political appointee could block an application as unlikely to advance the President’s policy priorities even if the real concern was the applicant’s insufficient support for one of the President’s unrelated policy interests, leaving applicants uncertain as to the reason for the decision.

This creates a system ripe for abuse, where political actors can select or reject applicants on the basis of their own subjective judgment and unreviewable motives, rather than based on what best fulfills the purposes for which Congress provided funds. Reporting in May 2026 showed that the Administration was still withholding funding from particular universities in what was described as “targets of a White House pressure campaign” on issues generally unrelated to the purpose of the withheld grants; under this rule, researchers at those universities could similarly find themselves excluded from new opportunities for awards.^[11] With the possibility that awardees will be politically determined rather than based on merit, applicants will no longer compete on quality. Instead, connected and allied organizations will compete for the favor of decision-makers, while applicants unwilling to do so, or who fear that they have no hope of being selected, may avoid competing at all. This would weaken the pool of applicants and the quality of services provided. Where such corrupt systems have taken hold in other countries, research has shown that it has led to worse government services and economic drag, as merit is replaced with cronyism.^[12]

Second, the Proposed Rule Places Broad Range of Grantees Under Constant Threat of Penalty or Termination, Subject to Coercion

Traditionally, federal grant awards could only be terminated if a recipient failed to live up to the terms and conditions of their award, an agency decided that the grantee would not accomplish the purposes for which the award was made, or funding for the grant was cut by Congress — determinations that were bounded by rules of the road grantees understood and that (in the case of the first two reasons) could, at least notionally, be appealed.

By contrast, under the Administration’s proposed rule, even after grants are awarded, grantees will face a continual threat that they will be penalized or have their grant award terminated subject to the changing whims of the President and his political appointees – regardless of performance. As an Administration official bragged to the New York Post, “If a grant — even after it went through all these checks, even after it was qualified, even after money was going out the door — veers off from the commitment to stick with presidential policies, then … we’re able to turn it off.”^[13]

The proposed rule would create an environment of constant threat for grantees by:

• Allowing for the cancellation or suspension of discretionary grants with no justification, warning, or appeal;
• Unilaterally changing the agreed-to terms and conditions of any grant award after grant-funded work has already begun to be performed; and
• Imposing new burdens and tests on all grant recipients based on their subrecipients.

Each of these issues is discussed in more detail below.

Cancellation or suspension of discretionary grants with no justification, warning, or appeal

For many grant programs, Congress creates an entitlement to funds for particular recipients such as through a formula (like a block grant to states and territories).^[14] But in some grants, known as “discretionary grants,” the federal government has leeway to determine who receives federal funds either through a competition or other awards process. The proposed rule would allow an agency to terminate discretionary grants at any time so long as a federal agency decides it’s in their “interest,” or the “national interest,” “as they exist at the time of the termination” to do so.^[15] These undefined terms are left purely to the discretion of political appointees, meaning cancellations can occur even when grantees are successfully meeting the goals and requirements of a program established in law.

The opportunity for abuse — and the environment of uncertainty it creates — is not hypothetical: the Administration has already engaged in such abuse even without the window-dressing of a regulation. In January, the Administration briefly attempted to cancel over 2,000 public health grants, providing each grantee a form letter saying their projects were no longer aligned with the priorities of the Substance Abuse and Mental Health Services Administration, before reversing the action in response to public outcry.^[16] Moreover, by explicitly reserving the right to change what reflects “agency priorities” or the “national interest” midstream without justification, the Administration is effectively establishing a permanent threat of cancellation if a grantee upsets the President for any reason, and a potential avenue for the coercion of grantees around unrelated political or policy matters.

In addition to requiring that this open-ended opportunity for termination be put in all discretionary grant awards — denying federal agencies the option to forgo the termination provision, unless explicitly prohibited from including it by statute — the proposed rule makes clear that agencies need not “allow for objections, hearings, and appeals” unless the termination was on grounds of noncompliance.^[17] In other words, terminations related to agency priorities or the national interest — terminations that are highly susceptible to political influence and corruption — can be made without providing any opportunity for recourse.

The proposed rule also allows agencies to immediately “temporarily suspend” any award activities and funding, in whole or in part, for up to 90 days if it is “in the interest of the federal agency.”^[18] Mirroring the illegal across-the-board funding pause ordered in the first days of the Trump Administration, this new provision would allow agencies to put targeted grantees into limbo for virtually any reason, making grantees particularly subject to coercion — even on unrelated matters that go beyond the federal program in question or congressional intent — as they seek to avoid having their award terminated. This new process seems designed to allow disfavored grantees to be quickly targeted with a suspension in their funding and threatened with cancellation as the Administration seeks concessions, weighs political blowback, or waits to see the intensity of any public outcry. Smaller grantees may not be able to remain operational with their funding suspended.

Unilaterally changing the agreed-to terms and conditions of grant awards — including formula grants to states and localities — even after grant-funded work has already begun

While only discretionary grant recipients and subrecipients would be affected by the new threat of cancellation or temporary suspension described above, all grant recipients will be at risk of increased interference under the proposed rule. One such change that could affect all grantees would be the newly claimed ability for federal agencies to change the terms and conditions of an award after a grant agreement has already been signed, without the agreement of the grantee.^[19]

Even when a grantee, like a state or local government, is entitled to a share of a grant awarded by formula, the ultimate receipt of that funding is conditioned on its being spent on permissible uses, in compliance with the terms and conditions of the award. Particularly when grantees receive awarded funds as a reimbursement of allowable expenses, having those rules be clear from the outset is critical. However, the Administration’s proposed rule takes away that clarity by providing agencies with a legally dubious ability to unilaterally add onerous new conditions after a grant has already been awarded and agreed to. It also creates the risk that these new terms and conditions could be added for reasons unrelated to ensuring successful service provision or meeting the purpose for which the grant was provided.

While this provision is confusingly written, the Administration appears to be claiming an ability to — on the basis of its own changing judgment — put grantees out of compliance (and perhaps put grant activities on hold) based on new demands. Under this arrangement, grantees appear to run the risk of jeopardizing their remaining grant funds in the case of discretionary grants subject to termination, or the actual receipt or timely delivery of awarded funds in the case of grants structured like reimbursements, if they do not or cannot comply with the altered terms.

As with other elements of the newly proposed rule, the Administration’s shift in long-standing grant policy must be understood in light of its behavior to date. In the abstract, the idea of an agency having flexibility to take necessary action to revise a previously issued grant award in light of new information about risks the grantee presents might be defensible, with the appropriate safeguards and transparency.

But the Trump Administration has already demonstrated how it selectively uses the pretext of risk mitigation to coerce grantees or punish political opponents. For example, last year, the Agriculture Department threatened to illegally withhold SNAP administrative funds from any states that did not share detailed, highly sensitive personal information — including Social Security numbers, addresses, and income and asset information — about applicants, recipients, and non-recipient household members with the Administration on the pretext of stopping fraud, but likely to aid its aggressive immigration detention and deportation apparatus.^[20] Similarly, in May, the Administration announced it was deferring approval of $1.3 billion in requested Medicaid reimbursement funding from California — the largest ever such action —based in part on unproven links to services for people who do not meet the immigration requirements for Medicaid.^[21]

Imposing new burdens and tests on recipients based on their subrecipients

The proposed rule would also impose new burdens and risks for grantees through its treatment of subrecipients — organizations that grantees provide federal funds to in order to successfully meet the purposes of a grant. The use of subrecipients is common to many federal grant programs, particularly when federal funding is awarded to states, localities, territories, and Tribes. For example, federal funds provided to a state by formula are often then distributed to local organizations or government agencies who deliver direct services in their communities.

Rightfully, grantees are already held accountable for the performance of their selected subrecipients, ensuring they abide by the terms of a grant. But the Administration’s proposed rule would extend those responsibilities well beyond prudent management, risking weaponizing the grantee-subrecipient relationship to harass or penalize particular grantees or subrecipients for reasons unrelated to the successful performance of the grant-funded work.

For example, under the proposed rule, grantees would be newly required to ensure that their subrecipients have not, or do not, “take actions that could significantly damage” the “reputation” of the grantee or the federal government.^[22] If grantees are determined to have violated this requirement, their own funds would be at risk of cancellation. With those reputational risks ultimately decided unilaterally by the Trump Administration and without mechanisms for appeal, it is ripe for abuse and weaponization, selectively wielded to harm or harass recipients or subrecipients disfavored by the President or his appointees. For example, it could be abused to punish grantees for their political or policy views on other issues, based on spurious claims of reputational damage.

The Administration’s behavior to date — explicitly targeting particular organizations or state and local governments that have upset it in some way — has clearly demonstrated the threat of abuse this provision poses. In May, OMB reportedly ordered a cross-government accounting of all funds going to a list of 49 nonprofit organizations, seemingly in an effort to identify how to politically target them.^[23] In January, the President explicitly said he would seek to block payments to “sanctuary cities or states having sanctuary cities” or “anybody that supports sanctuary cities.”^[24] In February, the Administration attempted to terminate public health grants to organizations and local governments operating in four states, and only four states, that had a range of political disagreements with the President, and it similarly tried to stop child care funds from going to five states also for political reasons (both efforts have at least temporarily been halted by courts).^[25]

The Administration’s proposed rule attempts to formalize a means of punishing particular entities and threatening any recipient or subrecipient who may wish to work with them. Grantees would also have to worry that any subrecipient they may select could — even if in good standing at the time a subaward is made — upset the Administration in the future and then be accused of creating subjective reputational risk concerns, putting the main grant recipients’ funding at risk. The result would be an unavoidable, ongoing risk hanging over grantees — and one that could harm their ability to select subrecipients solely on their ability to best meet the purposes for which funding has been provided.

Proposed Rule Will Result in Severe, Long-Lasting Harm to Federal Grantmaking if It Is Not Withdrawn or Stopped

The proposed rule includes many provisions beyond the ones described in this paper that would serve to further harm and politicize grantmaking and undermine the effective use of federal funding. For example, it would bar the use of federal dollars to “support” even the assessment of “disparate impact,” including conducting “statistical or demographic analysis” even for purposes of internal program evaluation. In plain language, this last provision would bar grant recipients from collecting data to understand whether their services are not just effective overall, but are also effective for particular groups, like women or Black families.

It would also require burdensome and unnecessary written justifications for every payment request made by non-state grantees, as well as encouraging federal agencies to cooperate with private lawsuits against federal grantees and subrecipients to help outside parties enforce the Administration’s political agenda.^[26] And, as many science groups have raised, it includes a series of consequential and damaging changes to how cutting-edge research and development is funded.^[27] As a whole, it would mark a fundamental alteration, and politicization, of federal grantmaking that would result in severe ongoing harm far into the future.

Ultimately, communities and taxpayers will suffer from the effects of this systematized politicization of grantmaking — including higher costs, lower quality services, and less effective investments — as grants are increasingly made on the basis of political considerations rather than merit or cost-effectiveness and fewer entities want to — or are able to afford to — take on the risk of doing business with the federal government. The innovative medical breakthroughs missed, the families who are poorly served, the infrastructure that goes unbuilt will have a human, as well as a financial, cost.

Despite the radical, and legally questionable, nature of the changes included within the lengthy, and sometimes confusingly written, proposed rule — one that involves over 40 agencies joining with OMB in its issuance — the Administration is attempting to rush its implementation. (Public comments on the proposed rule are being accepted through July 13, 2026.)^[28] The Administration should withdraw this rule in light of what has already been a broad outcry from the scientific community, key service providers, and states and cities — and absent that, both the courts and Congress should prevent its implementation to stave off further damage to the grantmaking process.