A federal judge ruled Friday that the White House Office of Management and Budget (OMB) cannot cancel active research grants solely because of a shift in the administration’s priorities, as it has done to billions of dollars in projects since President Donald Trump took office. But his administration may have already come up with another way to accomplish the same goal.
Last year, 23 states sued OMB and 11 federal agencies over their use of what is called the termination clause, part of the rules that govern how trillions of federal dollars are managed. The clause, which dates to the first Trump administration, allows the government to pull the plug on any award that “does not effectuate program goals, agency priorities, or the national interest as they exist at the time of the termination.” Since Trump took office again in January 2025, his administration’s attacks on universities and his antipathy to diversity, equity, and inclusion; climate science; and other topics have led to thousands of grant cancellations.
The 17 July ruling by U.S. District Court Judge Indira Talwani focused on the clause’s last phrase, which appears to let the government change the terms under which the grant was awarded. And although she upheld the government’s ability to terminate grants, she said applying after-the-fact conditions is illegal. “The court agrees with Plaintiffs and finds that the Termination Clause does not permit agencies to terminate grants based on program goals and agency priorities identified after grants were awarded,” Talwani wrote in her 32-page decision. At press time the administration had not said whether it would appeal.
The states did not ask for any grants to be reinstated. But Claudia Polsky, a University of California (UC), Berkeley law professor, says the ruling makes it much easier for universities that have lost grants to ask another federal court to do exactly that.
“It is essentially a declaration of liability that institutions can take to the Court of Federal Claims and ask to have their grants reinstated,” says Polsky, who won a suit last year on behalf of UC faculty whose grants had been terminated. “These states made a really smart strategic decision to seek clarity on the termination clause because it has been invoked so often by the Trump administration.”
The ruling also seeks to reassure institutions that they won’t lose future awards because of subsequent policy shifts, a practice that state governments see as an unwarranted power grab by the Trump administration. “The president and his allies cannot hold critical programs hostage to their personal whims and political ideologies, destabilizing the country by yanking essential federal funding,” said Attorney General Jennifer Davenport of New Jersey, one of the states that sued.
Even if the ruling is upheld on any appeal, however, the administration may attempt other ways to yank funding. Two days before Talwani’s ruling, for example, the Department of Health and Human Services ended funding for more than 70 research projects from its Agency for Healthcare Research and Quality (AHRQ). A spokesperson for the department said agency officials “determined that certain noncompeting continuation grants and jointly funded grants would not receive continuations awards.” That means the grants “were not terminated,” the spokesperson said, but rather that the scientists “were not awarded continued funding.”
Scott Delaney of Grant Witness, which tracks federal grants, calls AHRQ’s actions “termination in different clothes.” And Polsky notes a decision by the same federal judge who ruled the government had illegally terminated her clients’ grants. Ruling in a different case involving UC grants, the judge rejected the government’s argument that it could legally cut off funding because the grants had only been suspended, not terminated. “It sounds to me now like they’re just trying the same thing with some third verbal formulation,” she says.
The clause underlying the government’s claim that it can terminate a grant because the president’s priorities have changed was inserted into a revision of a massive document, called Regulation for Federal Financial Assistance, in the waning months of Trump’s first term. It was preserved despite tweaks to the document made in 2024 by then-President Joe Biden and remains in the most recent version proposed by OMB in late May that has attracted so much criticism from scientists and professional societies.
In ruling for the plaintiffs, Talwani said canceling a grant because of shifting priorities amounts to unfairly moving the goal posts because grant applicants are told in advance about an agency’s priorities and the goals of the program for which they are seeking funding. “It would be contrary to [any reasonable interpretation of] the Termination Clause to allow the termination of grants based on new priorities, including priorities not disclosed to the grantees,” she wrote.
It also defies logic. “Such an interpretation,” Talwani wrote, “would obviate any need to notify parties of program goals and priorities, given that agencies could change goals and priorities at any time.”
Facts Only
* A federal judge ruled that the White House Office of Management and Budget (OMB) cannot cancel active research grants solely due to a shift in administration priorities.
* The ruling concerns the Termination Clause, which governs federal dollar management.
* The Termination Clause permits the government to terminate awards if they "do not effectuate program goals, agency priorities, or the national interest as they exist at the time of termination."
* The ruling focused on the clause's last phrase concerning changing the terms under which a grant was awarded.
* The court found that applying after-the-fact conditions is illegal.
* The court agreed that the Termination Clause does not permit agencies to terminate grants based on program goals and agency priorities identified after the awards were made.
* Claudia Polsky stated the ruling makes it easier for universities to ask federal courts to reinstate lost grants.
* The government action sought to reassure institutions against losing future awards due to subsequent policy shifts.
* The Department of Health and Human Services ended funding for over 70 research projects from its Agency for Healthcare Research and Quality (AHRQ) two days before the ruling.
* A spokesperson stated that noncompeting continuation grants were not terminated, but rather scientists were not awarded continued funding.
* The Termination Clause was inserted into a revision of Regulation for Federal Financial Assistance during the first Trump administration.
Executive Summary
A federal judge ruled that the White House Office of Management and Budget (OMB) cannot cancel active research grants solely due to shifts in the administration’s priorities, distinguishing this action from past practices under the Trump administration. The ruling focused on the Termination Clause, which allows the government to end awards if they "do not effectuate program goals, agency priorities, or the national interest as they exist at the time of termination." The judge determined that applying conditions after the fact, based on priorities identified later, is illegal. Although the court upheld the government's ability to terminate grants, it found that doing so based on post-award priorities is unlawful.
The ruling impacts institutions by suggesting they can seek reinstatement of lost grants through federal courts, creating a declaration of liability against the government regarding prior terminations. This decision is framed as protecting institutions from losing funding due to subsequent policy shifts, which state governments view as an unwarranted power grab. Furthermore, even if the appeal is unsuccessful, the mechanism for withdrawing funding remains open, as demonstrated by actions taken by the Department of Health and Human Services.
Full Take
The dispute centers on the tension between executive authority and established contractual or procedural guarantees regarding federal funding. The core implication is that the mechanism intended to manage agency priorities—the ability to adjust funding based on evolving political landscapes—is being legally constrained by judicial review, particularly when applied retroactively. This forces a confrontation between the administrative desire for policy flexibility and the institutional need for stable long-term planning in research and public health sectors.
The pattern observed is the attempt to use retroactive application of evolving priorities as a tool for systemic disruption. The administration's stated goal of ensuring funding aligns with current political objectives appears to be structurally undermined by the judiciary’s insistence that pre-existing conditions must govern the termination process. This suggests that the system, intended to provide stability, is being weaponized to create instability through shifting subjective criteria.
The context reveals a semantic strategy: actions like ending funding for continuation grants (AHRQ) versus outright termination represent different operational methods used to achieve similar exclusionary outcomes, suggesting an evasion tactic where formal termination is avoided while practical funding cessation is enacted. The judicial focus on the language of "program goals and agency priorities" highlights how the precise definition within legal texts shapes real-world outcomes for those who rely on predictable regulatory frameworks. The ultimate consequence for institutional autonomy rests on whether future administrative actions, even if carefully worded to avoid explicit contradiction, will survive scrutiny under this new judicial standard.
BRIDGE QUESTIONS:
If courts establish that shifting priorities cannot justify retroactive termination, what mechanisms can institutions develop internally to proactively negotiate funding adjustments with agencies before political shifts occur? How does the distinction between "termination" and the cessation of "continued funding" affect accountability when administrative bodies attempt to obscure policy changes? What are the long-term effects on public trust when essential research is subject to arbitrary realignment based on shifting ideology rather than established criteria?
Sentinel — Human
The text presents a detailed analysis of a specific federal court ruling concerning grant termination clauses, synthesizing legal context with policy implications and expert commentary.