Trump’s plan to freeze federal spending causes widespread chaos, confusion in Colorado

A federal judge has temporarily halted a Trump Administration freeze on federal grants and loans that could total trillions of dollars. 

U.S. District Judge Loren L. AliKhan blocked the action Tuesday afternoon, minutes before it was set to go into effect. The administrative stay pauses the freeze until Monday.

The ruling comes as the spending freeze threatens to cut into Medicaid operations, education, transportation, law enforcement and other areas in Colorado and across the U.S.

Colorado Attorney General Phil Weiser said Tuesday that he will join other state attorneys general in suing over the freeze.

“The Trump White House freeze on congressionally mandated federal aid is reckless and unprecedented,” Weiser said in a statement. “This action takes the power of the purse away from Congress, violates the separation of powers, and is already causing massive harm in Colorado.”

Colorado Gov. Jared Polis echoed Weiser’s comments in a statement of his own.

“Governing is about delivering real results for the people we serve, not sowing chaos,” Polis said. “This indefinite pause in Congressionally appropriated federal funding hurts children and hardworking families, jeopardizes American jobs and businesses, harms hospitals and safety net health providers, threatens road and bridge repairs, and impacts countless other programs.”

Colorado government agencies and programs receive billions of dollars every year in federal dollars — roughly $13 billion in this year’s budget, for instance, making up nearly one-third of the state’s total revenue.

The Trump administration ordered an indefinite pause on all forms of federal grants, loans and assistance, excluding Medicare and Social Security starting at 5 p.m. Tuesday. 

Administration officials said the decision was necessary to ensure that all funding complies with President Donald Trump’s executive orders, which are intended to undo progressive steps on transgender rights, environmental justice and diversity, equity and inclusion, or DEI, efforts.

They also said that federal assistance to individuals would not be affected, including Social Security, Medicare, food stamps, student loans and scholarships.

However, the funding freeze could affect trillions of dollars, at least temporarily, and cause widespread disruption in health care research, education programs and other initiatives. Even grants that have been awarded but not spent are supposed to be halted. State agencies and early education centers appeared to be struggling to access money from Medicaid and Head Start, stirring anxiety with answers hard to come by in Washington.

The issue dominated the first briefing held by White House press secretary Karoline Leavitt. She said the administration was trying to be “good stewards” of public money by making sure that there was “no more funding for transgenderism and wokeness.”

“The use of Federal resources to advance Marxist equity, transgenderism, and green new deal social engineering policies is a waste of taxpayer dollars that does not improve the day-to-day lives of those we serve,” wrote Matthew Vaeth, the acting director of the Office of Management and Budget.

Vaeth said all spending must comply with Trump’s executive orders. “Each agency must complete a comprehensive analysis of all of their Federal financial assistance programs to identify programs, projects and activities that may be implicated by any of the President’s executive orders.” He also wrote that the pause should be implemented “to the extent permissible under applicable law.”

But the order’s exact parameters remained unclear, leading to confusion across federal and state governments. 

Is Medicaid impacted?

That confusion hit Colorado’s Medicaid agency early, leading to 24 hours of uncertainty over whether the program’s federal funding had been cut off.

Medicaid is a joint program between the state and the federal government to provide health coverage to people who have low incomes or who are disabled. Typically, the state and the feds split the cost of medical care for Medicaid members 50/50, though the federal government picks up a larger share in some cases.

All Medicaid payments are directed through state agencies — doctors and hospitals do not get paid directly by the federal government. To collect the feds’ share of the spending, states use an online portal to submit requests for funding.

On Monday, state officials noticed that a previously submitted funding request did not hit the agency’s bank account as expected, said Marc Williams, a spokesman for the state Department of Health Care Policy and Financing, which runs Medicaid in Colorado. Then, on Tuesday morning, state Medicaid officials were unable to access the federal payment portal.

“It would crash,” Williams said. “We would get a system error or message.”

Shortly after 1 p.m., the system came back online, Williams said. That coincided with the White House Office of Management and Budget issuing a memo stating that Medicaid was not to be affected by the freeze. The memo said the SNAP food assistance program was also excluded.

Williams said the state is now able to submit funding requests as normal.

“We have nothing to suggest right now that we’re not going to get paid,” he said.

Leavitt wrote in a post on X that Medicaid payments “are still being processed and sent.”

Medicaid enrollees were not affected by the stop, and Williams said the state should still be able to get payments out to medical providers on time.

Though Medicaid and Medicare appear to be exempt by the freeze, other forms of funding that hospitals and medical clinics receive directly from the federal government may be impacted, said Cara Welch, a spokeswoman for the Colorado Hospital Association. This includes medical education programs, programs that help hospitals prepare for emergencies, programs to battle substance use disorders and certain funding for clinics that serve predominantly lower-income and disadvantaged populations.

Welch said the hospital association is preparing a survey to send to its members to get a better picture of all the areas impacted.

Impact on research funding

The freeze also potentially affects funding for research through the National Institutes of Health.

The NIH is a powerhouse biotech funder in the United States, issuing more than $37 billion in grants to more than 2,800 entities in the 2024 federal fiscal year, which ended in September. Of the 47 grant recipients in Colorado, the University of Colorado Anschutz Medical Campus — officially part of CU-Denver — receives by far the most.

The campus took in nearly $350 million in NIH grants last fiscal year, about 60% of the total NIH funding that came to Colorado. CU-Anschutz ranked 27th nationally for NIH funding — though far behind the roughly $860 million that first place Johns Hopkins University received.

In a statement, a campus spokesman said: “The University of Colorado Anschutz Medical Campus is evaluating relevant executive orders in coordination with CU system, other CU campuses and higher education groups.

Other major recipients of NIH funding in Colorado included CU-Boulder, Colorado State University, National Jewish Health, the University of Denver and two private companies: Denver-based software company Palantir Technologies and Crestone Inc, a Boulder-based biopharmaceutical company.

The freeze could also affect oil and gas research at universities like CSU, which earlier this month announced a $326 million grant from the Environmental Protection Agency and the U.S. Department of Energy to help oil and gas companies improve their methane emissions nationwide. 

“This is new territory” for schools

The state education department said it does not believe that Trump’s freeze of federal funding will impact programs that serve Colorado’s most vulnerable students, including kids from low-income families, students with disabilities and children learning English.

In an email Colorado Education Commissioner Susana Córdova sent to district superintendents and other education leaders Tuesday morning, she relayed information the state education department received earlier in the day from the Council of Chief State Schools Officers.

“Our best understanding is that the Office of Management and Budget’s memo ordering federal agencies to ‘temporarily pause’ activities related to obligations or disbursement of federal financial assistance will not impact federal formula funds that have already been obligated and awarded,” Cordova’s email stated. “Our interpretation is formula funds such as ESSER, ESEA, and IDEA would be exempt from this pause.”

ESSER refers to the Elementary and Secondary School Emergency Relief Fund, a federal program launched during the pandemic to support schools in continuing to educate students throughout COVID and aid them with academic recovery efforts.

ESEA, or the Elementary and Secondary Education Act, is the federal K-12 education law, which requires states to measure how students perform in reading, math and science and develop a state report card that informs parents of test outcomes in reading, math and science, among other requirements.

And IDEA — Individuals with Disabilities Education Act — is a federal law guaranteeing children with special needs a public education along with additional support and services they need to succeed in school.

In a separate statement, the state education department acknowledged that it is aware of Trump’s intention to temporarily freeze activities backed by federal funds.

“We are working to understand potential implications of this ‘pause’ and will share more information as soon as we have it,” department spokesperson Jeremy Meyer wrote in the statement.

Meanwhile, it’s unclear what could happen to other education programs that rely on federal funding, including Head Start, a federal program that helps families living in poverty access early childhood education.

Head Start funding does not flow to schools through the Colorado Department of Education, said Tracie Rainey, executive director of the nonprofit Colorado School Finance Project.

Schools have yet to understand whether that program funding will be interrupted by Trump’s aim to freeze federal funds, Rainey said.

Another program clouded by uncertainty is the National School Lunch Program, which is run by the U.S. Department of Agriculture. That program ensures children have access to free or low-cost, nutritional school meals.

The pause “has the potential to impact families, which then impacts education secondarily,” Rainey said. “And also at this point, we don’t really know what that’s going to look like, but any services that are being provided to families dependent on it have a rippling effect when it comes to schools.”

“This is new territory,” she added.

Van Schoales, senior policy director at the Keystone Policy Center, called Trump’s plan to temporarily halt federal funding “outrageous and irresponsible and careless.”

“I think that there are commitments that the federal government has made to serve kids, students and so I don’t think that a president should have the right to unilaterally deny those services after having made commitments to provide those services,” Schoales said. “These were not programs that were ever debated or discussed in the election. They are not partisan programs.”

“Irresponsible” disruption in a challenging housing market

Tuesday morning, staff at Colorado Coalition for the Homeless found themselves locked out of both the U.S. Health and Human Services and Housing and Urban Development systems, which are needed to help clients with health care and shelter. 

They were able to get back into the health services system by mid-afternoon to “draw down some of our previously awarded funds which will hopefully ensure we have the money to pay for health care supplies and staff,” said Cathy Alderman, a coalition spokesperson.

But the chaos continues. They haven’t been able to access HUD, which is vital around this time of the month in order to tap funding to help clients pay rent and utility bills due on Feb. 1. 

“This is extremely unsettling for us and our clients and could lead to eviction notices and additional housing instability if not resolved,” Alderman said in an email. “It also doesn’t speak well of the federal government who now appears to be an uncertain payor to landlords across the country. And, in the long term, it could lead to fewer landlords being willing to partner with the federal government on the acceptance of housing vouchers which could be devastating for lo- income households who already face significant barriers to accessing affordable housing — especially in high-cost housing markets like Colorado.”

The organization distributes 1,800 tenant vouchers, which cover single residents and households. As of 3:30 p.m. Alderman said HUD confirmed that project-based vouchers, or those attached to a specific building, are not impacted. But HUD hasn’t yet said whether individuals can still use their vouchers. 

She called the disruption “irresponsible” because the impacts are immediate. 

“Governments can certainly make changes to their priorities and funding parameters but they should do so in a thoughtful and planned manner so as not to disrupt entire systems and put people’s lives and stability at risk,” she said.

The Associated Press contributed to this story, which is developing and will be updated.