What could happen in Minnesota under a Trump federal funding freeze

Minnesota agencies, nonprofits, local governments and health care organizations were all scrambling Tuesday to understand the ramifications of a national federal assistance freeze before it was temporarily blocked by a federal judge.

By Wednesday afternoon, the Trump administration issued a one-page memo saying it was dropping plans for the funding pause for now.

The swirl sparked a panic that funding could be on hold for weeks while the federal government did a massive ideological review of how taxpayer dollars were being spent. Minnesota quickly joined a legal effort against the directive and Gov. Tim Walz said it jeopardized $1.8 billion the state receives each month in “funding for law enforcement, farmers, schools, veterans and health care.”

“Most folks were up all night last night as we dealt with this being thrown on there with no guidance. I know you have a lot of questions. I have a lot of questions because not one damn person thought this through,” Walz said Tuesday from the St. Paul Eastside YMCA.

“My words on this are going to be simple to the Trump administration: We’ll see you in court.”

While the effort is paused for now, here’s what we know about how the administration’s memo could affect state services:

The memo cites the more than $3 trillion spent in 2024 on federal financial assistance, such as grants and loans. Grants that have been awarded but not sent yet could also be frozen. Nonprofits, higher education institutions, state and local governments and health care organizations all receive federal funding.

There are some major programs that would be excluded from the pause in assistance. Medicare and Social Security benefits will be unaffected by the freeze, as well as any federal assistance “received directly by individuals,” such as student loans and scholarships.

Both the University of Minnesota and Minnesota State said there will be no impact to Pell grants or direct loans.

White House press secretary Karoline Leavitt said food stamps are also exempt. However, she was unable to say whether Medicaid benefits would be affected by the pause. She also would not say whether the Low Income Home Energy Assistance Program (LIHEAP) would be affected. The program provides heating assistance to millions of households across the country.

Asked directly whether the pause would impact Head Start, Meals on Wheels or disaster aid Leavitt said: “Again, it does not affect individual assistance that’s going to Americans.”

The memo said the freeze was slated to start at 5 p.m. EST on Tuesday, or 4 p.m. CST, but the judge issued an injunction minutes earlier.

The pause was intended to be temporary pending a review from federal agencies to identify “all Federal financial assistance programs and supporting activities consistent with the President’s policies and requirements,” according to the memo.

Asked Tuesday how long the pause would last, Leavitt would not provide a timeline, reiterating that it’s a “temporary pause” as OMB reviews the federal funding that’s been “going out the door.”

According to Minnesota Management and Budget, the state is receiving about $39 billion in federal grants in 2024-25. Minnesota receives financial assistance to pay for education, infrastructure and health care programs. The federal government is projected to spend about $11.3 billion in the current budget year on Minnesota’s Medicaid program, called Medical Assistance, according to state reports.

A number of state agencies contacted by the Minnesota Star Tribune were still reviewing the directive and trying to figure out what it meant for their programs.

“The federal order was only published last night and was ambiguous in terms of all the specific grants and other federal monies impacted, which complicates matters,” said Patrick Hogan, a spokesman for the state’s budget office. “We will continue to work collaboratively with federal, state, and local partners to understand this order and identify how this impacts state services.”

The Minnesota Department of Human Services said in a statement Tuesday that DHS was “unable to access the Medicaid payment system for part of today; however, access appears to have been restored. The impact on other DHS programs, including other funding supporting Medicaid program administration, remains unclear.”

U.S. District Judge Loren L. AliKhan blocked the action minutes before it was set to go into effect. Democratic state attorneys general are also filing a lawsuit targeting Trump’s directive, which Minnesota joined.

“Every day that Donald Trump violates the law, we’re going to sue him on it,” Attorney General Keith Ellison said. “We’re going to see him in court.”

Minnesota Senate Finance co-chair John Marty, DFL-Roseville, said Minnesota’s projected $5.1 billion deficit in the next two-year budget could spike if the freeze resumes.

“If they do half the stuff they are thinking of people will be hurting,” Marty said. “A few things at the federal level could double our problems.”

His GOP counterpart, Sen. Eric Pratt, R-Prior Lake, said they need more clarity to be sure that vital programs are uninterrupted, which “should be a fairly easy task to meet within the timeline given.”

Unclear. City officials were trying to figure out Tuesday how the pause might affect their operations.

“These executive actions are broadly worded and have potential far-reaching impacts for cities across the state,” said Daniel Lightfoot, intergovernmental relations representative and federal relations manager for the League of Minnesota Cities.

The league was encouraging cities to share examples of projects funded by the Infrastructure Investment and Jobs Act, so it can help advocate against a pause or reduction in funding. Many city officials will also be watching to see if the federal funding pause has ripple effects on other funding they receive.

The funding freeze was threatening to quickly force layoffs, service closures and even clinic shutdowns across the state’s network of community health centers, said Jonathan Watson, chief executive of the Minnesota Association of Community Health Centers. Sixteen of these safety net clinics operate across Minnesota and collectively receive each year about $45 million in federal grants.

Republicans are embracing Trump’s new directive, including Minnesota Rep. Tom Emmer, the No. 3 Republican in Congress, who told Politico the president is “doing exactly what he was elected to do.”

“You’re going to see things like this, and your first reaction is going to be, ‘Well, this isn’t the way it’s been done,’” Emmer told Politico of the new policy. “You need to understand, he was elected to shake up the status quo.”

Rep. Pete Stauber also applauded the freeze, noting that it would be lifted “on worthy projects,” though his office did not immediately elaborate.

But across the aisle, Democrats expressed outrage and questioned the legality of the directive. Democratic Rep. Betty McCollum called the move “brazenly illegal and unconstitutional.”

Sen. Tina Smith’s D.C. office fielded at least 150 calls on Monday from constituents asking about the freeze, which she called “an illegal action.” In the last 24 hours, she’s heard from domestic violence nonprofits that don’t know if they can continue operating and community health centers in Minnesota who are worried they may have to lay off providers.

“This has real impacts on people who count on these services to be able to make their lives work,” Smith said.

Sen. Amy Klobuchar said the freeze is likely to have an impact on everything from small businesses to local law enforcement and child care.

Klobuchar stressed that it’s up to Republicans in Congress to push back on Trump’s new directive. “They must join us in stopping this unconstitutional power grab by the Trump administration,” she said of Republicans.

Ranking Democrats on the U.S. House and Senate Appropriations Committees said the freeze could block hundreds of billions in funding that’s already been approved and affect at least two dozen areas including public safety, biomedical research, veterans affairs and child care.

Liz Navratil, Ryan Faircloth, Jessie Van Berkel, Erin Adler and Christopher Snowbeck of the Minnesota Star Tribune contributed to this story.