A courtroom in Boston turned into a sharp examination of federal power on Wednesday as a U.S. judge openly questioned whether the Trump administration can simply pull the plug on billions in federal grants whenever political priorities change in Washington.
At the center of the dispute is a little-known budget rule the administration says gives federal agencies broad authority to terminate grants if they no longer align with agency goals. States challenging the policy argue the White House is stretching that rule far beyond its original meaning.
U.S. District Judge Indira Talwani appeared unconvinced by the administration’s defense during the hearing. At one point, she raised a pointed concern about the stability of long-term government funding.
“If you were applying for a two-year grant,” Talwani asked government lawyers, “are you saying you better be careful not to do it during an election year?”
The lawsuit was brought by Democratic attorneys general and governors from 22 states along with Washington, D.C. The coalition, led by states including Massachusetts, New York and New Jersey, argues the administration’s interpretation of the rule threatens thousands of federally funded projects already underway.
Government attorney Stephen Pezzi told the court the regulation — first introduced during Trump’s earlier term in office — permits agencies to end grants that no longer support evolving agency objectives. According to the administration, that discretion is lawful and necessary.
Talwani, however, signaled concern that the government was treating signed grant agreements too casually.
“There is a way that a grant is a contract,” she remarked from the bench. “And the United States honors its contracts.”
Lawyers for the states warned that the administration’s actions have already thrown programs into uncertainty nationwide. New Jersey Deputy Solicitor General Stephen Ehrlich argued that billions of dollars tied to public programs could suddenly vanish based on shifting political agendas, creating what he described as widespread chaos.
The broader fight reflects the administration’s effort to cut funding connected to initiatives involving diversity programs, climate resilience planning and other policies viewed by Trump allies as inconsistent with Republican priorities. Those moves have sparked multiple legal battles across the country.
The states contend the disputed budget rule was never intended to authorize sweeping grant cancellations and note that even after revisions during former President Joe Biden’s administration, it had not previously been interpreted so aggressively.
According to the coalition, more than 1,100 active grants worth upwards of $5 billion remain vulnerable unless the court steps in.
Talwani did not issue a ruling Wednesday but indicated a decision would arrive soon.
