Federal Judge Bars Trump Administration From Using 'Termination Clause' to Cut Federal Grants

U.S. District Judge Indira Talwani in Boston ruled Friday, July 17, 2026 that the Trump administration cannot rely on a grant "termination clause" tied to "agency priorities" to cancel billions of dollars in federal funding, granting summary judgment to 23 states that sued over the practice and denying the administration's motion to dismiss the case. The clause, first introduced in 2020 and revised in 2024, allows agencies to end a grant if it no longer "effectuates the program goals or agency priorities"; the states argued the Office of Management and Budget used it to justify a "nationwide slash-and-burn campaign" affecting crime-prevention, food-security, disaster-preparedness, and scientific-research funding already awarded to states.

Talwani wrote that the administration's "interpretation of the Termination Clause is not clearly supported by the text of the provision, runs counter to the regulatory scheme, receives no support in the rulemaking history, and would violate the Spending Clause's requirement that conditions be imposed unambiguously." New Jersey Attorney General Jennifer Davenport, one of the plaintiffs, said the ruling confirmed the administration "defied the law" in its funding cuts. The ruling is one of several recent court decisions rejecting administration arguments for unilateral control over previously appropriated or awarded federal funds.

The ruling bars future use of the clause to justify grant terminations. A spokesperson for OMB did not respond to a request for comment, and it was not immediately clear whether the administration would appeal.