Trump’s Attempted Federal Funding Freeze Causes Panic for Local Nonprofits, Essential Services
A week into his new term, President Donald Trump’s budget office issued a memo to pause federal grants and loans, an order that sent shockwaves through the world of nonprofit organizations and essential government services.
While the order was temporarily blocked by a judge and later rescinded, the directive could have impacted trillions of dollars, and left health services, schools, homeless shelters, food service programs and many more wondering how they would continue to offer vital services. Confusion around the order even brought short-lived mass layoffs to local early learning centers.
The implications of the order quickly became apparent to the family homeless shelter Haven House’s Executive Director Meghan Palma. On Tuesday, when Palma tried to log into the site federal grants are distributed to the shelter through, she found she was locked out.
“It says you’re trying to access it outside of normal business hours,” Palma said. “I’ve logged in on the weekend before and been able to get in. That’s the first time I’ve ever seen that message.”
Palma discovered she was locked out of the site around 1 p.m. on Tuesday, Jan. 28, four hours before the order was even set to go into effect. She regained access to the site the next day.
The order put a scare into Palma and other Haven House staff members, but the organization continued to offer its regular services. The same can’t be said for local Head Start early learning facilities.
Capital Area Community Services (CACS) is a Community Action Agency that serves Ingham, Shiawassee, Clinton and Eaton counties. Many programs fall under the CACS umbrella, including several Head Start early learners locations.
Head Start is for children five and younger, many from low income families. Head Start programs rely on federal funding, so when CACS Executive Director Miguel Rodriguez received word early Tuesday morning that CACS was locked out of the payment management system that funds Head Start, he was immediately concerned about the program.
“If you don’t have money to pay staff or pay bills, you can’t expect them [staff members] to work,” Rodriguez said.
As Rodriguez went in and out of meetings throughout the day, he knew he could not ask his staff to work when he was unsure if he could pay them. Late Tuesday afternoon, he sent a tentative layoff email to Head Start staff who were funded through the payment management system, around 180 or 190 employees, he said.
Families with children in the program were also notified Head Start would be closed indefinitely.
Shortly after Rodriguez sent the layoff email, he received word that the White House sent out a directive that Head Start would not be impacted by the freeze. However, it took until the next morning for CACS to verify funds from the payment management system were being transferred to its bank account.
Rodriguez sent a recall email to employees on Wednesday, though most area Head Start locations canceled classes due to the debacle. Adding to the confusion for Head Start families, five Head Start locations in the area remained open because they were funded by local school districts, Rodriguez explained.
Head Start programs restarted on Thursday, and all staff returned after the short layoff. Staff will be paid for the day off.
“The biggest impact is the anxiety and the worry that people had of being laid off and our partners wondering how long this was going to last,” Rodriguez said.
The way grants are paid out would leave nonprofits in a bind if funding is not guaranteed.
The Michigan Nonprofit Association’s (MNA) Chief Communications Officer Tammy Pitts said that had the Trump administration been allowed to follow through with its order, it would impact all types of nonprofit organizations.
“This is a reckless action by the Trump administration that can have devastating consequences for nonprofit organizations and the people they serve,” she said.
Pitts said that MNA has heard reports of agencies not being able to access portals federal grants are paid through, but that the impact is deeper than that. She explained that because 42% of Michigan’s budget is made up of federal dollars, a freeze would also impact state grants.
The bind a pause on federal spending would put on local agencies can be seen through Haven House.
Haven House receives about half its funding from grants. Shortly after the planned freeze was announced, Palma received an email from a representative from Salvation Army, which partners with the Michigan Department of Health and Human Services to distribute emergency shelter program grants. This fiscal year, Haven House is slated to receive about half of its grant funding through the program (a quarter of total funding).
The email said that MDHHS is uncertain how the pause on federal spending will impact its emergency shelter program. The email states MDHHS will provide guidance later on.
Palma explained that Haven House’s fiscal year starts in October, and contracts for the grants are signed prior to the start of the fiscal year. These grants are included in the shelter’s carefully curated budget. Grants reimburse Haven House for the many services it provides, with reimbursement payments usually coming in monthly or quarterly
If suddenly the funding isn’t guaranteed, it could leave Haven House and other nonprofit organizations barreling towards financial catastrophe.
“If that [federal] money doesn’t come in, in a timely manner as it normally would, or at all, that would just significantly impact our ability to stay open, pay the staff,” Palma said. “Hopefully it doesn’t get to that point.”
MNA is now asking nonprofit organization leaders to fill out a form from the National Council of Nonprofits that gauges how nonprofit organizations have been impacted by federal actions, and if they received notice that their funding would have been impacted by the federal spending freeze.
Schools, local governments and health departments may have been impacted.
Federal funding touches the most vital entities in the community.
East Lansing Public Schools Superintendent Dori Leyko initially responded to an email requesting comment about the freeze saying the district was “carefully tracking” the situation. However, Leyko did not respond to further requests for comment.
Requests for comment sent to City Manager Robert Belleman and the city’s media portal did not receive responses. The city receives millions of grant dollars annually to pay for everything from road projects to parks improvements and infrastructure repair.
The Ingham County Health Department (ICHD) was unsure if the Executive Order would impact its funding. ICHD Health Communications Director Ireland Ingram said no one from the health department was available for an interview, but provided a statement on Jan. 28, before the order was rescinded.
“The Ingham County Health Department acknowledges the ongoing uncertainty surrounding recent developments regarding Medicaid and healthcare funding,” the statement reads. “At this time, it is difficult to ascertain which specific healthcare resources or funding streams will be impacted and how this will affect our community in the immediate future. We want to reassure our community that we are actively monitoring the situation and working to understand the full scope of these potential budget changes. We remain fully committed to providing high-quality healthcare to the residents of Ingham County. Our focus will remain on planning for the future to ensure that essential services and care continue to be available to everyone who relies on us.”