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Round-Up for the Week of June 23-27, 2025

When President Donald Trump created the Department of Government Efficiency (DOGE) on the first day of his second term, he launched an initiative to reduce federal grants, contracts, and programs across Federal government agencies. As of June 3, 2025, DOGE was estimating $180 billion in "savings" as a result of these reductions. This estimate includes funding for national broadband and digital equity efforts that have been cut entirely or significantly revamped in the last two months alone. The Digital Equity Act grant programs were terminated on May 9, and the Broadband Equity, Access and Deployment (BEAD) Program received new rules from Commerce Secretary Howard Lutnick that change the direction of the program and require states to redo their broadband deployment plans.

This week, 22 state attorneys general and the Commonwealth of Pennsylvania joined together to file suit against these actions. On June 24, in a filing to the United States District Court for the District of Massachusetts, these state attorneys general and state officials sued a host of federal agencies––including the Departments of Agriculture, Commerce, Defense, Homeland Security, Justice, Labor, and State, as well as the Environmental Protection Agency, Federal Emergency Management Agency, National Endowment for the Humanities, and National Science Foundation––for aiding the Trump Administration in executing what they called "an unprecedented and unlawful campaign to terminate billions of dollars in critical federal funding appropriated by Congress."

The states say that under the direction of DOGE, federal agencies are engaging in an unlawful "slash and burn campaign." The arguments made in this lawsuit address the limitations on the executive branch to affect Congressionally approved funding.

What Federal Regulations Say About Terminating Federal Grants

The plaintiffs¹ center their argument around the language the Trump Administration has been using repeatedly to terminate federal grants.

This language lies in a clause of a section of federal regulation promulgated by the Office of Management and Budget (OMB) in 2020––at the end of the first Trump Administration––when the agency revised the Uniform Guidance’s Remedies for Noncompliance². The 2020 rule revised the allowable reasons for award termination in several ways.

The specific clause in question states that federal agencies may terminate grants “pursuant to the terms and conditions of the Federal award, including, to the extent authorized by law, if an award no longer effectuates the program goals or agency priorities.”³ According to the states involved in this lawsuit, each federal agency defendant has consistently invoked the words "no longer effectuates agency priorities" since January 20 to terminate federal grants.

In 2020, OMB found that the clause permitted federal agencies to terminate grants where “additional evidence reveals that a specific award objective is ineffective at achieving program goals,” or where “additional evidence...cause[s] the Federal awarding agency to significantly question the feasibility of the intended objective of the award.”⁴ 

Responding to concerns “that the proposed language will provide Federal agencies too much leverage to arbitrarily terminate awards without sufficient cause,” OMB clarified in its final guidance that, under the clause as written, agencies “are not able to terminate grants arbitrarily.”

In 2024, OMB further revised the clause to say that an award could be terminated “pursuant to the terms and conditions of the Federal award, including, to the extent authorized by law, if an award no longer effectuates the program goals or agency priorities.”

The 2024 rule also expressly clarified that a federal agency “must clearly and unambiguously specify all termination provisions in the terms and conditions of the Federal award.”⁵

In February 2025, President Trump issued an Executive Order directing each agency head, “in consultation with the agency’s DOGE Team Lead," to “review all existing covered contracts and grants and, where appropriate and consistent with applicable law, terminate or modify...such covered contracts and grants to reduce overall Federal spending or reallocate spending to promote efficiency and advance the policies of my Administration.”

What This Means, According to the States

In their lawsuit, the states argue that the actions by DOGE and the Trump Administration are unconstitutional as well as:

1. The agency defendants are grossly misinterpreting the pertinent clause and OMB's own interpretation, and
2. Their unlawful actions overstep the bounds of the executive branch and impede Congress's directive to allocate federal funds as established by the U.S. Constitution.

Concerning OMB's original interpretation of the clause in 2020, the states say that the agency made clear that federal agencies' authority to terminate grants was limited.

According to the states,

The states also said that they were not aware of a single instance before 2025 in which a federal agency relied on the clause to terminate a grant on the grounds that agency
priorities had changed after the award of the grant, suggesting that there is no precedence for the Trump Administration and DOGE's funding cancellations.

Through their actions, the states say, the agency defendants "now assert—for the first time—that the clause means something completely new: that the clause permits agencies to terminate grant awards when the agency simply changes its mind."

Importantly, the clause "makes no reference to terminations based on changes in agency preferences that occur after a grant is awarded." A new federal administration cannot act against prior Congressionally-approved funding because of newly identified priorities, the states say, which goes against Congress's "power of the purse."⁶

Further, under the Spending Clause⁷, no statute could authorize the imposition of grant conditions that allow agencies to terminate grants on a whim based on an agency’s own shifting priorities. The defendants "have failed to provide States with clear and unambiguous notice of the conditions that apply to their grants."

The states say that the "terminations have come during the period of performance, without prior opportunity for the grantee to obtain information about “agency priorities” that were the purported basis for the termination."

What the States Seek

The purpose of this legal action is not to rectify any one instance of grant funding termination. Rather, the aim is to "seek a declaration as to the legal meaning of the [OMB] Clause" and obtain a "legal declaration of their rights under the Clause and Agency Defendants’ regulations incorporating the Clause verbatim."

In the alternative...

The states are therefore seeking one declaratory judgement––clarifying the rights and obligations of the federal agencies in question⁸––and two counts of violating the Administrative Procedure Act. One is on the grounds that the agencies actions are "contrary to law,"⁹ and the other is that the agencies' actions are "arbitrary and capricious."¹⁰

How Broadband Funding is Involved

The termination of federal grant funding has "caused and will continue to cause immediate and significant harm" to the states, they say in the lawsuit. "Defendants have terminated thousands of grant awards made to Plaintiffs, pulling the rug out from under the States, and taking away critical federal funding on which States and their residents rely for essential programs."

For each defendant, the text cites both specific examples of federal funding programs that were terminated or revised using the clause's language––and the impacts of those funding changes––and also broader statements that account for numerous actions by various bureaus of the included agencies.

Included, of course, is the Department of Commerce, and Secretary Lutnick, who is responsible for all the federal broadband programs administered by the National Telecommunications and Information Administration (NTIA). Most prominent among these are the BEAD Program and the Digital Equtiy Act programs.

The states say that "Commerce adopted OMB’s Uniform Guidance...without any revisions" and that "prior to April 2025, [the states] are not aware of any grant terminated by Commerce pursuant to the Clause."

The BEAD Program is explicitly mentioned in the lawsuit, which highlights Wisconsin's funding allotment through the program:

Also mentioned in the text of the suit under the Commerce Department are "pending or future grant applications [that] are awarded and then subsequently terminated based on Defendants’ invocation of the [OMB] Clause," which seems to apply to the awarded and then terminated Digital Equity Act's Capacity Grant Program and Competitive Grant Programs.

According to the states, "The consequences of this indiscriminate campaign to terminate billions of dollars in federal grant awards to Plaintiffs have already been catastrophic."

To track this case and all developments on federal broadband programs, subscribe to the Benton Institute for Broadband & Society’s free, daily broadband news digest, Headlines. 

Notes

1. A group of state attorneys general and state officials that will be referred to as the states from here on out in the interest of brevity.

2. Guidance for Grants & Agreements, 85 Fed. Reg. 49,506-507 (Aug. 13, 2020) (2020 Final Rule).

3. 2 C.F.R. § 200.340(a)(4).

4. 85 Fed. Reg. 49,507-08 (Aug. 13, 2020).

5. 2 C.F.R. § 200.340(b).

6. City & Cty. of San Francisco v. Trump, 897 F.3d 1225, 1231 (9th Cir. 2018).

7. U.S. Constitution, Art. I, § 8, cl. 1.

8. 5 U.S.C. § 703; 28 U.S.C. § 2201.

9. 5 U.S.C. § 706(2) - Agency Action Contrary to Law.

10. 5 U.S.C. § 706(2) - Arbitrary and Capricious Agency Action.

Quick Bits

• Cruz Budget Reconciliation Language Leverages BEAD Funding to Ban State AI Laws for 10 Years
• Over 40 Members of the House and Senate to the Trump Administration: Reverse Course and Fully Implement Broadband
• Olivia Trusty Begins FCC Tenure June 23
• Federal damage to affordable, equitable broadband and digital inclusion

Weekend Reads

• A.I. Is Starting to Wear Down Democracy

ICYMI from Benton

• The New BEAD Policy Notice: Course Correction or RDOF 2.0?
• Three Questions About BEAD Non-Deployment Funding
• States Still Have a Path to Fiber with BEAD
• How Digital Navigation Can Transform Healthcare

Upcoming Events

Jul 7—Hurricane Season Resiliency Roundtable (Federal Communications Commission)

Jul 23—Navigating E-Rate Federal Policy (Libraries for Digital Equity)

Jul 24—July 2025 Open Federal Communications Commission Meeting

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