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CHICAGO – Attorney General Kwame Raoul and a coalition of 24 states won a key ruling today declaring the Trump administration illegally misused its regulatory authority to unlawfully pull billions of dollars in federal funding that Congress had set aside for crucial state programs and services.
The decision explained that five words in U.S. Office of Management and Budget (OMB) regulations, referencing situations where a grant “no longer effectuates … agency priorities,” did not silently give federal agencies unfettered authority to revoke grants nationwide just because the federal administration claims it is shifting its focus.
“I applaud this decision, reminding the Trump administration that it is not above the law, and federal regulations cannot be misinterpreted to support its political agendas,” Raoul said. “I will continue to stand beside my colleagues to oppose the unlawful termination of federal funding that is authorized by Congress to support life-saving state programs, which directly impact communities in Illinois and across the county.”
Without providing any lawful justification, advance warning or explanation, the Trump administration relied on this regulation to gut funding across the entire federal government. Prior to the second Trump administration, federal agencies never terminated grants merely because the agency’s priorities shifted midway through the grant period.
In response to misuse of regulatory authority, Raoul and a multistate coalition sued to stop the unprecedented attack in June 2025, arguing the Trump administration’s decision to invoke the regulation to terminate grants based on changed agency priorities is unlawful. The lawsuit explained the regulation does not authorize federal agencies to terminate grants based on changes in agency preferences that occur after a grant is awarded. The lawsuit also notes the importance of obtaining clarity regarding the scope of this regulation, as states collectively accept hundreds of billions of dollars a year that are at risk of termination pursuant to this regulation.
Today the court granted the states a declaratory judgment that the OMB regulation and the agencies’ regulations do not independently authorize the Trump administration to terminate funding based on agency priorities that were only identified after the grant was awarded.
Joining Raoul in filing the lawsuit are attorneys general of Arizona, California, Colorado, Connecticut, Delaware, the District of Columbia, Hawaii, Maine, Maryland, Massachusetts, Michigan, Minnesota, Nevada, New Jersey, New Mexico, New York, Oregon, Rhode Island, Vermont and Wisconsin, as well as the governors of Kansas, Kentucky and Pennsylvania.
