Federal grant freeze could impact tribal programs, treaty obligations

The Office of Management and Budget has directed all federal agencies to temporarily pause their grant, loan and financial assistance programs, a move that could affect tribal nations receiving billions in federal funding for economic development, housing, infrastructure, and other initiatives.

In a January 27 memorandum, Acting OMB Director Matthew J. Vaeth ordered federal agencies to halt "all activities related to obligation or disbursement of all Federal financial assistance" starting January 28 at 5:00 PM.

The pause affects approximately $3 trillion in federal financial assistance programs, which represents nearly one-third of the federal government's $10 trillion in spending during fiscal year 2024. This includes grants and loans across multiple agencies and programs.

For Indian Country, the OMB directive calls for pausing both new awards and disbursements under existing grants, affecting funding streams through multiple federal agencies including the Bureau of Indian Affairs, Indian Health Service, Housing and Urban Development’s Office of Native American Programs, and others. While the OMB memo states Medicare and Social Security benefits are exempt from the freeze, there’s no explicit exemption for funding tied to treaty obligations or federal trust responsibilities to tribes. 

Tribal financial experts are advising nations to take immediate action ahead of today’s deadline. “Today, everyone’s focus should be on cash,” Lacey Horn (Cherokee), former chief financial officer of the Cherokee Nation and owner of Native Advisory, wrote in an email to Tribal Business News. She recommended tribes assess their available cash resources and consider implementing financial contingency plans similar to those used during government shutdowns.

Sources across Indian Country told Tribal Business News that tribes were actively working to access already-approved federal funding ahead of the 5 p.m EST deadline, with multiple tribes reportedly successful in securing substantial drawdowns — millions of federal grant dollars in some cases — throughout the day Tuesday.

The stakes are significant: The federal government provided $32.6 billion in direct funding last year to federally recognized tribes through various programs and agencies. This funding, mandated by treaties and federal law, supports essential services including healthcare through the Indian Health Service, education, housing, infrastructure, and economic development programs.  

"It's hard to read what the impact will be … the immediate concern is that our funding is at risk,” said Dr. Aaron A. Payment (Sault Ste. Marie Tribe of Chippewa), former 1st VP of the National Congress of American Indians and federal Indian policy expert. “Even if just temporary, tribal nations depend on the federal government fulfilling the treaty and trust obligations.  We prepaid for every penny we get with nearly 2 billion acres of land.  Treaties do not expire when we change presidents, so we expect the federal government to be good to their word and not interrupt our funding. Our funding should be fully funded, mandatory, and multiples of what it is today."

The Native American Rights Fund warned that tribal nations would be “disproportionately affected” by the funding freeze. “The United States has a unique government-to-government obligation to Tribal Nations,” NARF Executive Director John Echohawk said in a statement, adding that the organization is investigating potential legal action to protect tribal rights and citizens.

Tribal nations across Indian Country are assessing the potential impacts. For the Cherokee Nation, many programs, including health facilities and housing, are “generally forward funded and operating as normal,” Chief of Staff Corey Bunch wrote in an email, though the tribe continues to monitor developments.

The ranking members of the Senate and House appropriations committees immediately pushed back against the funding freeze in a letter to Vaeth, calling the scope of the order “unprecedented” and “devastating” and arguing it undermines Congress’s constitutional power of the purse. 

“This Administration’s actions will have far-reaching consequences for nearly all federal programs and activities, putting the financial security of our families, our national security, and the success of our country at risk,” House Appropriations Committee Ranking Member Rosa L. DeLauro (D-Conn.) and Senate Appropriations Vice Chair Patty Murray (D-Wash.) wrote. The lawmakers demanded that Vaeth “reverse course to ensure requirements enacted into law are faithfully met and the nation’s spending laws are implemented as intended.”  

Some key Republicans are supporting the administration’s move.  House Appropriations Committee Chairman Tom Cole (R-Okla.), an enrolled member of Chickasaw Nation, defended the freeze. "I think it's probably a pretty appropriate thing to do. There was a lot of money flying out the door right at the end of the Biden administration," Cole told Bloomberg Government.

With the freeze set to take effect on Jan. 28, a coalition of nonprofit organizations filed a lawsuit in federal court to challenge it. The National Council of Nonprofits, American Public Health Association, Main Street Alliance, and SAGE asked the U.S. District Court for the District of Columbia to immediately block implementation of the OMB memo, arguing it is “arbitrary and capricious” and exceeds OMB’s authority. The lawsuit claims the freeze would have “devastating” impacts on grant recipients who depend on federal funding to provide essential services and meet payroll obligations.

According to the memo, the temporary suspension will allow the administration to review agency programs and align them with President Trump's priorities. Federal agencies must submit detailed information by February 10 about programs subject to the pause, including new awards, disbursement of funds under existing awards, and other agency actions affected by recent executive orders. OMB also directs federal agencies to pause all activities associated with open notices of funding opportunities (NOFOs), such as conducting merit review panels.

The memo specifically targets several categories of federal spending for review, including foreign aid, programs related to diversity and inclusion initiatives, environmental projects, and assistance to non-governmental organizations.

The OMB may grant exceptions allowing agencies to issue new awards or take other actions on a case-by-case basis. Agencies may continue certain administrative actions required by law, such as closing out federal awards.

The memo also requires agencies to assign oversight responsibility to senior political appointees, review pending assistance announcements, and investigate "underperforming recipients." Agencies have authority to modify unpublished announcements and, "to the extent permissible by law, cancel awards already awarded that are in conflict with Administration priorities," according to the document.

The pause comes as part of a broader set of executive orders issued in the administration's first days, including directives on foreign aid, environmental agreements, and government programs related to diversity initiatives.

Federal agencies offered limited information about how the pause would affect tribal programs and funding. In emails, the Department of the Interior said only that it was “reviewing a number of actions to implement President Donald J. Trump’s Executive Order” while the Environmental Protection Agency (EPA) confirmed that it was “temporarily pausing all activities related to the obligation or disbursement of EPA federal financial assistance.” 

The Indian Health Service responded that its parent agency, the Department of Health and Human Services, had issued a “pause on mass communications and public appearances.” 

Tribal Business News also reached out to the Departments of Treasury, Energy, Housing and Urban Development, Commerce, and Transportation about the impact of the pause on tribal nations, but had not heard back when this story was updated.