US: Democratic state AGs to file lawsuit over Trump's freeze on grants, loans

A group of Democratic state attorneys general plan to file a lawsuit on Tuesday challenging the Trump administration's sweeping directive to temporarily freeze federal loans, grants and other financial assistance, New York state Attorney General Letitia James said.

The lawsuit, which will also include California and Massachusetts, will take aim at the directive issued by the acting head of the US Office of Management and Budget on Monday, James said.

Earlier on Tuesday, advocacy groups representing non-profits and small businesses filed a similar case in Washington, DC federal court, arguing the freeze "will have a devastating impact on hundreds of thousands of grant recipients."

That lawsuit asked a court to halt the freeze, which was set to take effect at 5 pm ET (2200 GMT) on Tuesday.

Matthew Vaeth, OMB's acting director, said the money would be put on hold while the administration of Republican President Donald Trump reviews grants and loans to ensure they are aligned with the president's priorities, including executive orders he signed ending diversity, equity and inclusion programs.

The groups -- National Council of Nonprofits, the American Public Health Association, Main Street Alliance and SAGE -- said in the lawsuit that OMB lacked authority to unilaterally terminate all federal financial assistance programs across the government.

The groups argued that OMB's directive targeted grant recipients based in part on recipients' rights to free expression and association under the U.S. Constitution's First Amendment.

"The actions taken yesterday are a callous disregard for the rule of law and a drastic abuse of power that will harm millions of Americans across the country," said Skye Perryman, the head of the liberal-leaning legal group Democracy Forward, which is representing the plaintiffs.

The US Department of Justice, which would defend the policy in court, did not respond to a request for comment.

The US Constitution gives Congress control over spending matters, but Trump said during his campaign that he believes the president has the power to withhold money if he disagrees.

A 1974 law called the Impoundment Control Act established procedures designed to restrict a president from not spending money appropriated by Congress.

The freeze marked the latest in a flurry of actions by the Trump administration since the Republican's return to office on January 20 to dramatically reshape the federal government.

Trump's order not only impacts a broad swath of nonprofits but could lead to turmoil in state and local governments that depend on federal aid for everything from highway construction to school lunches to foster care.