A second federal judge indicated on Wednesday that he is inclined to issue an order blocking the Trump administration from withholding federal grants, loans and other disbursements, but exactly what shape that order might take is still unclear as confusion continues to surround the administration’s actions around the funding pause.

The issue first emerged on Monday, when the Office of Management and Budget issued a memo telling agencies they “must temporarily pause” all payments that might be implicated by a string of executive orders on federal funding the new president issued during his first week in office.

On Wednesday, OMB issued another two-sentence memo rescinding Monday’s directive without explanation. But the White House followed up minutes later with a social media post saying the new memo was not a rescission of the funding freeze and was only meant to “end any confusion created” by a federal court’s order the day before that temporarily barred the memo from taking effect.

But confusion was still very much present in federal Judge John McConnell’s Rhode Island courtroom hours later as the court heard arguments in a second lawsuit filed by 23 states that also seeks to stop the federal funding freeze.

As the hearing opened, the judge said he had initially been inclined to grant the states’ request for a restraining order against agencies carrying out the memo. But now that the memo technically no longer existed, he asked whether the issue is now moot.

“It’s not,” argued Sarah Rice, an attorney for the State of Rhode Island.

“The only thing that has changed since we filed our papers is whether or not there is a piece of paper called OMB Memorandum 25-13. There is no indication from the United States — and in fact, there’s contrary indication through these public statements — that the policy has not changed. And that policy, to sum it up, is freeze first, ask questions later,” she said. “That’s the gravamen of our complaint. That is the source of our harm. We cannot proceed in the regular order of normal agency decision because we are in some ways fighting a decision that has been purposefully obscured so that we can’t go program-by-program. We can’t bring to you the statute, bring to you the regulation, bring to you the grant agreement, bring to you all of the things that courts would normally look at, because that’s not what happened.”

States claim ongoing harm

In affidavits submitted with the lawsuit, numerous state officials said their federally-funded programs had already been affected by the freeze — even if they didn’t have any obvious connection to Trump’s executive orders.

Several states said they had been locked out of the federal government’s system for disbursing Medicaid funds; others said grants and other federal funding streams ranging from food assistance for needy families to public safety and cyber endpoint detection services appeared to be affected.

In Colorado, for example, officials said $11 billion in federal funding appeared to be at risk, including $1 million per month used specifically to pay public safety salaries.

“As of this morning, multiple divisions of (including the Department of Homeland Security and Emergency Management, the Colorado State Patrol, the Division of Criminal Justice, and the Department of Fire Prevention and Control) were notified by Payment Management Services, which processes grant payments for the federal government, that due to the OMB memo, grant payments would be delayed or rejected,” wrote Stan Hilkey, the director of the Colorado Department of Public Safety.

No impacts to individual beneficiaries, White House argues

Speaking to reporters on Wednesday, Karoline Leavitt, the White House press secretary, said the funding pause was not intended to affect programs that directly benefit individuals.

“It means no more funding for illegal DEI programs. It means no more funding for the green new scam that has cost American taxpayers tens of billions of dollars. It means no more funding for transgenderism and wokeness across our federal bureaucracy and agencies. No more funding for Green New Deal social engineering policies,” she said. “People who are receiving individual assistance — you will continue to receive that.”

And in court later that day, Daniel Schwei, an attorney for the Justice Department, argued the judge should not issue a restraining order with respect to the funding freeze, because the specific OMB memorandum the states are challenging had ceased to exist a few hours earlier. If they wanted the court to take any action, they would need to challenge President Donald Trump’s executive orders, he argued.

“The terms of the executive orders are not mentioned or are not part of the challenges in the temporary restraining order motion. If the plaintiffs here want to challenge the effect of either the executive orders or some subsequent agency decision taken at a later date pursuant to the executive orders, that’s just a fundamentally different claim than what is presently before the court,” he said. “I think the breadth of the relief that plaintiffs are seeking is extraordinary.”

By the end of the argument, Judge McConnell said he had been persuaded to block the funding freeze nonetheless — but that it was unclear how the order should be phrased, now that the OMB memo has been rescinded.

“The state has convinced me that the inappropriate effects [of the memo] are going to continue, based on comments by the president’s press secretary. And so I’m inclined to grant the restraining order, though I’m struggling with how it would be worded,” he said.

The judge put the ball back in the states’ court — directing them to draw up proposed language for a restraining order that would bar federal agencies from freezing funds. Once that language is drafted, the Justice Department will have 24 hours to respond.

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