Federal court blocks Trump administration route for cutting state grants

A federal court has issued a final ruling blocking a major avenue the Trump administration used to terminate or withhold federal grants from states, California Attorney General Rob Bonta announced July 17, 2026.

California and 23 other states challenged federal agencies’ use of a regulatory subclause to end grant funding based on agency priorities. The coalition argued that the agencies’ interpretation conflicted with the Office of Management and Budget’s own interpretation of the relevant regulations.

California said the ruling blocks the challenged route for withholding or terminating federal money used for violent-crime prevention, law-enforcement equipment, education, public health, clean drinking water, medical and scientific research, food-insecurity programs and unemployment benefits. The decision limits the federal government’s ability to use grant funding as leverage over state policy, but the public announcement did not quantify the total value of grants covered by the ruling.

The ruling follows earlier disputes over conditions attached to Department of Homeland Security and Federal Emergency Management Agency grants. The broader conflict is continuing in separate litigation over requirements tied to emergency funding, including immigration-enforcement and election-related conditions.