A broad and sweeping order by President Donald Trump’s administration to pause all federal grants and loans is causing widespread confusion and concern among many stakeholders dependent on what could be trillions of dollars in funds, including in Kentucky.
While the order specifically excludes Medicare and Social Security spending, as well as “direct” aid to individuals, the funding freeze could have broad and dramatic impacts on local and state governments, public schools and universities, nonprofits, disaster assistance, infrastructure projects and small business loans.
“There are hundreds of ways in which this federal money flows through our economy, creates jobs, provides benefits to people, and Kentucky is among the states most vulnerable, if this memo is interpreted in the very broad way that stops this funding for long periods of time,” said Jason Bailey, director of the progressive think tank Kentucky Center for Economic Policy.
Federal records show Kentucky received nearly $23 billion of federal grants in the last fiscal year.
The acting director of the president’s Office of Management and Budget (OMB) issued a two-page memo Monday ordering all federal agencies to “temporarily pause all activities related to obligations or disbursement of all Federal financial assistance.” A federal judge temporarily blocked the freeze minutes before it was set to take effect late Tuesday afternoon, but only until Monday, Feb. 3.
The agencies are now required to review and analyze which financial assistance programs align with Trump’s priorities, such as fighting inflation, promoting efficiency in government and “ending ‘wokeness’ and the weaponization of government.” According to the memo, targeted programs would include those using funds “to advance Marxist equity, transgenderism, and green new deal social engineering policies,” as well as “foreign aid, nongovernmental organizations, DEI (and) woke gender ideology.”
There is widespread uncertainty about how long the freeze will be in place, exactly which federal spending is paused and which spending will continue after the freeze is lifted. The memo specifies that it would not pause assistance “provided directly to individuals,” as well as the mandatory spending involving Medicare or Social Security benefits.
Congressional Democrats quickly criticized the freeze, calling it a blatantly illegal violation of the Impoundment Control Act of 1974, which prohibits a president from unilaterally choosing to withhold funding appropriated by Congress.
Congressman Morgan McGarvey of Louisville, the only Democrat in Kentucky’s federal delegation, said Trump’s “unconstitutional power grab jeopardizes billions of community grants already authorized by Congress, relied on by millions of Americans — including Louisvillians.”
“I know Louisville organizations and members of our community are extremely concerned by this chaos and uncertainty,” McGarvey said. “We will keep providing updates and will fight tooth and nail to protect these critical programs that were enacted into law to help people.”
A spokesperson for GOP Sen. Mitch McConnell said new presidential administrations “typically take steps to review federal funding allocated to grant recipients,” and the senator “will continue to advocate for the economic interests of Kentucky, and ensure that every tax dollar is spent responsibly.”
Kentucky Gov. Andy Beshear, a Democrat, said in an emailed statement that he has “concerns about both the legality of the President attempting to stop or freeze laws explicitly passed by Congress, as well as the damage this action will cause to farmers, small-business owners and struggling families who are receiving important job training or health care services to improve the lives of their children.”
Asked about Trump’s funding freeze, Sen. Chris McDaniel, the GOP chairman of the Kentucky Senate budget committee from Ryland Heights, said “there will be a lot that has to play out to truly know” what impact it could have on Kentucky.
“We’re starting to compile a list so we can start to gauge the scenarios,” McDaniel said.
Some Kentucky stakeholders are waiting to comment until there is more clarity on Trump’s order, but others are already voicing grave concerns about the negative effects this could have on the state and its residents.
Danielle Clore, the CEO Kentucky Nonprofit Network, said in an email that the association of charitable nonprofits is “deeply concerned” about the pause, working with national partners to gain clarity and seeking guidance from members of Kentucky’s federal delegation.
“While there are many unknowns, we are certain that a pause impacts the work of thousands of nonprofits — from their ability to meet payroll to providing critical services,” Clore said. “The real risk is to the Kentuckians and communities served by nonprofits.”
The National Council of Nonprofits announced Tuesday it joined other plaintiffs suing to block the OMB from pausing all grants and loans, with its CEO Diane Yentel stating the administration’s “reckless action” would be “catastrophic for nonprofit organizations and the people and communities they serve.”
“From pausing research on cures for childhood cancer to halting housing and food assistance, shuttering domestic violence and homeless shelters, and closing suicide hotlines, the impact of even a short pause in funding could be devastating and cost lives,” Yentel said. “This order must be halted immediately before such avoidable harm is done.
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Bailey, the director of the Kentucky Center for Economic Policy, said the funding pause could have an outsized effect on the state, considering how dependent it is on federal funding compared to other states.
He noted that the impacted federal grants could include those to research institutions and universities, financial aid for college students, nonprofit organizations serving domestic violence victims or resettled refugees and infrastructure projects.
Bailey also added that Medicaid was not specifically excluded from the freeze, which covers the health insurance of 1.4 million Kentuckians.
“(Medicaid) is a grant to the state government that they have to match with a certain amount of funds, and then it goes through to pay providers,” Bailey said. “So it’s really unclear. That’s not a direct benefit to an individual, like a Social Security payment would be.”
White House Press Secretary Karoline Leavitt was asked several times by reporters Tuesday if Medicaid was excluded from the freeze, answering that she was unsure and would get back to them on their questions.
The New York Times and a Democratic senator reported Tuesday that the online portal where state Medicaid departments receive federal funding stopped working in all 50 states. Spokespersons for the Beshear administration have not responded to questions about their ability to access the portal, while Leavitt said the outage was only temporary.
Bailey also noted the large impact it could have on public K-12 schools, from Head Start to Title I funding.
“About three-fourths of public schools are Title I schools in Kentucky, so they’re getting that money,” Bailey said. “I’m not sure when those disbursements happen and how long this will be in place, but that’s an issue.”
KDE records show Kentucky K-12 schools received $539 million of federal grants in the last fiscal year, including $260 million in Title I funding.
Jennifer Ginn, a spokeswoman for the Kentucky Department of Education, said they were informed Tuesday afternoon by the U.S. Department of Education that the funding pause would only apply to discretionary grants from the agency, but not Title I or other formula grants, nor federal Pell grants of direct loans under Title IV.
Many Head Start programs around the country say they are already blocked from accessing the portal used to draw down their federal grant funding. Elea Mihou Fox, president of the Family and Children’s Place in Louisville, said they had trouble accessing the portal all of Tuesday.
The Kentucky Council on Postsecondary Education did not have an immediate comment on the impact of the federal funding freeze.
Catherine McGeeney, a spokeswoman for the Coalition for the Homeless nonprofit serving Louisville, said federal grants have allowed agencies to “move thousands of Louisvillians out of homelessness every year, and support them in staying housed” — which could now be in jeopardy.
“We don’t yet know the impact of Donald Trump’s abrupt and chaotic order to pause federal grants, as we don’t know how long it will keep us from accessing funds approved by Congress to meet the basic needs of American citizens,” McGeeney said. “But the impact could be catastrophic for thousands of Louisville individuals and families at risk of homelessness without them.”
McGeeney said her organization and others across the country were locked out of the U.S. Housing and Urban Development portal on Tuesday, sharing screenshots as proof. The portal lets groups withdraw their federal funds.
Louisville Mayor Craig Greenberg said at a press conference Tuesday that his team began studying the magnitude of Trump’s freeze early that morning, and that the city’s housing priorities are heavily dependent on federal funds.
“Ninety percent of Louisville Metro Housing Authority is funded by the federal government,” Greenberg said. “They serve 30,000 residents in our community. They have 90 days of cash available, that’s the standard that they have for their operations.”
Greenberg said they are advocating for the federal freeze to end, as “maintaining the flow of federal funds into our city to help individuals is critically important.”
Kentucky Democratic Party spokesman Jonathan Levin said in a statement that Trump “just made an unprecedented and reckless move that will inflict unimaginable pain across our Commonwealth.”
“This sweeping freeze jeopardizes basic programs that Kentuckians depend on to survive. Programs like LIHEAP, which keeps families warm during the winter, and SNAP, which helps them put food on their tables, as well as FEMA relief for our communities still recovering from tornadoes and flooding, are all at risk,” Levin said. “Kentuckians deserve stability and compassion, not this Republican-driven chaos that will inflict pain on our families.”
White House Press Secretary Karoline Leavitt told reporters Tuesday afternoon that “food stamps” of the federal SNAP program would not be paused, along with Social Security and Medicare payments.
The White House OMB released an additional document Tuesday afternoon attempting to clarify which funding was frozen. It stated that “mandatory programs like Medicaid and SNAP will
continue without pause,” as well as “funds for small businesses, farmers, Pell grants, Head Start, rental assistance, and other similar programs.”
The OMB guidance then added: “If agencies are concerned that these programs may implicate the President’s Executive Orders, they should consult OMB to begin to unwind these objectionable policies without a pause in the payments.”
This is a breaking story and has been updated with additional details. KPR Reporter Justin Hicks contributed to this story.
This story is republished with permission from Kentucky Public Radio. Read the original.
Joe Sonka is Kentucky Public Radio’s first enterprise statehouse reporter. He joined the team in October 2023.
Joe has covered Kentucky government and politics for nearly two decades. He grew up in Lexington and moved to Louisville in 2011, covering city and state government at LEO Weekly and then Insider Louisville. He became state government reporter for the Courier Journal in 2019 and was a lead reporter for the newspaper's 2020 Pulitzer Prize-winning series on former Gov. Matt Bevin's controversial pardons just before leaving office.
You can email Joe at jsonka@lpm.org and find him at non-Twitter apps such as Threads (@joesonkaky) and BlueSky (@joesonka.bsky.social).
