Written by Chriss W. Street
Jan 30, 2025
President Trump issued a directive late Monday night for a spending review of thousands of federal programs and hundreds of billions of dollars of spending. The move did not affect 49 states, but California within 36 hours was already defaulting.
Because California has not filed a timely Annual Comprehensive Financial Report (ACFR) since 2018, the state is unable to use banks for general obligation loans to stabilize cash flow. The only source of short term financing to makepayroll are 30-90 day borrowings against the $158 billion of federal funding deposits held by the state.
The Trump administration sent a followed-up with a memo to 3,200 federal spending programs demanding budgetary details about each program and answer a series of questions, including whether any programs might support illegal aliens, impose an undue burdens on domestic energy exploration or promote abortion, gender ideology, or are involved with “diversity, equity and inclusion” actions.
Many states and not-for-profits reported problems accessing grant and loan funds, but there was no payment suspension of Medicaid, SNAP, Medicare or Social Security bills.
CalMatters reported that California’s Democratic elected officials and agency heads were baffled as to the meaning of the suspension, but believed it was definitely illegal.
California Attorney General Rob Bonta joined 22 other Democratic state attorneys generals that filed a lawsuit challenging the ordered funding freeze and asking a court to block it from going into effect.
Bonta gave a speech claiming: “This directive is unprecedented in scope and would be devastating if implemented.”
The Trump Administration on Wednesday morning issued a memo that appeared to rescind the Monday spending review.
U.S. District Judge John McConnell, a President Obama appointee, on Wednesday morning issued a two-day “brief administrative stay” against implementing the funding freeze. Judge McConnell set a Friday morning hearing in Providence, Rhode Island.
CalMatters reported that managing director of public policy for the advocacy group GRACE and End Child Poverty in California stated: “In California the scale of these impacts is unimaginable.” He added that: “We’re looking at the intersection of cuts to programs in education, public benefits, health care, child abuse prevention, in ways that would unravel the fabric of our state.”
The City of Los Angeles issued a public statement that it is seeking confirmation that HUD rental assistance would not be canceled for the 60,000 households in the city, and how the freeze would impact homeless funding and disaster recovery funds.
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