The Impact of the Administrations Executive Funding Freeze

Background

On January 28, 2025, the federal administration signed an executive order freezing certain federal spending in an effort to curb government spending and enforce budget controls. The Office of Management and Budget (OMB) memo proposed a broad pause to vital services such as Medicaid, Head Start, rental assistance, and health and education initiatives, creating concern and confusion for states and organizations reliant on federal funds. The uncertainty surrounding the pause also created anxiety among healthcare providers and social service organizations, creating concern that they might have to cut services or lay off staff if the freeze persisted.

Following the lift of the funding freeze, the OMB released a follow-up Q&A document to clarify that the pause is not intended to stop all funding. The office additionally clarified that the order did not apply to programs providing direct benefits to individuals, such as Social Security, Medicare, Medicaid and SNAP.

Impact on State Programming

A federal judge temporarily blocked the spending pause and it was subsequently rescinded. To better understand the impact of the proposed funding freeze, the Tax Policy Center (TPC) gathered data from funding requests by several major federal agencies for the fiscal year 2025. These figures included in the graphs below represent the requested amounts; please note the amounts ultimately appropriated by Congress may differ.

The dataset covers over three-quarters of all projected federal funding to state and local governments, highlighting key patterns and trends, and thus the values that would have been affected by the pause.

 Source: Office of Management and Budget, Executive Office of the President, “Budget FY 2025 – Table 12.3 – Total Outlays for Grants to State and Local Governments by Function, Agency, and Program.” 

Sources: Centers for Medicare and Medicaid Services, Justification of Estimates for Appropriations Committees, FY 2025 

Below are key areas to consider regarding the impact of a pause on federal funding allocations: 

Community Health Centers (CHCs):  Many CHCs depend on federal grants to offer primary and preventive care to over 32.5 million patients nationwide.  

Medicaid Reimbursement:  Reports of technical disruptions to Medicaid reimbursement portals following the proposed freeze raised concerns about continuity of care for millions of enrollees. On average, about one in four Americans is enrolled in Medicaid, and the federal government provides about $7,500 per enrollee in funding.   

Mental Health, Substance Use Disorder Treatment Services, and Public Health Programs: Funded programs provide mental health counseling, crisis intervention, and addiction recovery services. Also at risk were programs addressing homelessness, food insecurity, and other public health issues. 

Commercial Health Insurance Stability: Nearly half of states currently leverage federal Section 1332 Waiver funding to support state-based reinsurance programs that help to lower premiums in the individual health insurance market. Insurers set premiums based on expectation of retroactive reimbursement for eligible claims; putting the stability of state insurance markets at-risk if those payments cannot be made.