By Nate Raymond
BOSTON, July 17 (Reuters) - A federal judge on Friday ruled that U.S. President Donald Trump's administration cannot rely on a White House budget office regulation to terminate billions of dollars in grants because they no longer align with the president's priorities.
U.S. District Judge Indira Talwani in Boston agreed with a group of Democratic-led states that the administration was wrongly using a U.S. Office of Management and Budget regulation to revoke grants after they had been
awarded.
The Trump administration has relied on a clause in the regulation to cancel grant funding it views as supporting causes such as diversity, equity and inclusion initiatives and climate change preparedness programs, prompting a wave of litigation over specific grant cuts.
Talwani, who was appointed by Democratic President Barack Obama, said the states were correct that the clause "does not permit agencies to terminate grants based on program goals and agency priorities identified after grants were awarded."
She said the administration's interpretation had no basis in law and that agencies could not impose such a condition on spending without violating the U.S. Constitution. The regulation, she said, "demands only that grantees be apprised of those goals and priorities before grants are awarded."
The White House had no immediate comment.
The lawsuit was filed last year by Democratic attorneys general and governors in 23 states and the District of Columbia led by Massachusetts, New York and New Jersey.
The dispute centers on a provision added to OMB regulations in 2020 during Trump's first term that allows agencies to terminate a grant if it "no longer effectuates the program goals or agency priorities."
Numerous federal agencies have invoked that provision since Trump returned to office to cancel billions of dollars in grants.
The Democratic-led states argued the administration was misinterpreting the clause, which was revised further under Democratic President Joe Biden and had not previously been viewed as granting agencies such broad authority to terminate grants.
The states said that federal agencies had already terminated billions of dollars in funding used to support universities, initiatives to combat crime and school lunch programs.
They also said 1,100 active grants worth over $5 billion remained at risk absent a ruling in their favor.
New Jersey Attorney General Jennifer Davenport, a Democrat, in a statement said the ruling "confirms that the Trump administration defied the law when it embarked on its campaign to gut critical federal funding to the states."
(Reporting by Nate Raymond in Boston; Editing by Sanjeev Miglani)
