Gov. Shapiro says Trump’s federal funding freeze is creating ‘havoc,’ as Pa. and N.J. officials scramble

Update: The White House budget office on Wednesday rescinded a memo on freezing federal grants after the move provoked widespread backlash.

Pennsylvania state and local officials were sent scrambling after President Donald Trump’s administration ordered a temporary pause on federal financial assistance, a halt that could affect trillions of dollars and disrupt hundreds of programs.

Amid panic over the intended funding freeze, a federal judge blocked the order shortly before it would have gone into effect Tuesday evening. The administrative stay pauses the funding halt until Monday, the Associated Press reported.

Across Pennsylvania and New Jersey, lawmakers tried to decipher which programs were in jeopardy as Trump’s White House stressed that programs that contradict recent executive orders related to diversity, equity, and inclusion (DEI) initiatives and environmental efforts would be the targets of the intended spending crackdown.

But the initial order’s impact was immediate. Pennsylvania’s governor told reporters that several computer systems that run federally funded programs like Medicaid, workforce development database CareerLink, or preschool provider Head Start were inaccessible in Pennsylvania and other states as of Tuesday evening.

“We literally can’t access the payment systems that are used to run these programs every single day. That’s incredibly concerning to us,” Gov. Josh Shapiro said.

More than 6,000 state workers funded by the federal government are at risk of being furloughed, depending on which programs are being frozen, Shapiro added, and he looks forward to a more detailed directive from the federal government.

“The president of the United States won the election, and he’s got a Congress there to support his agenda. He certainly has the right to be able to put forth his ideas and his views. I don’t deny him that,” said Shapiro, a Democrat. “But in an appropriations process where these dollars were legally allocated to a particular purpose, pulling that back in this manner creates lots of havoc in our communities.”

White House press secretary Karoline Leavitt said on X that the White House was aware the Medicaid portal was down. “We have confirmed no payments have been affected — they are still being processed and sent. We expect the portal will be back online shortly.”

Federal funding makes up approximately 40% of Pennsylvania’s annual spending, totaling nearly $49 billion in the current fiscal year. These funds are often used by state governments or pass through to local governments to pay for essential services, such as highway repairs, food programs, public education, and much more. Nonprofit organizations, colleges, and universities also rely on federal funding for everything from cancer research to providing community welfare services.

The funding pause, ordered in a memo from the Office of Management and Budget leaked Monday, is directed toward federal grants and loans — even those already granted by Congress — that run afoul of Trump’s recent swath of executive orders.

“The use of Federal resources to advance Marxist equity, transgenderism, and green new deal social engineering policies is a waste of taxpayer dollars that does not improve the day-to-day lives of those we serve,” wrote Matthew Vaeth, the acting director of the Office of Management and Budget, in the memo. The memo laid out a plan to disrupt spending that doesn’t comply with broadly worded executive orders targeting transgender rights, environmental justice, and diversity, equity, and inclusion programs.

It explicitly exempts Social Security and Medicare, two programs relied on by seniors. And at her first White House press briefing, Leavitt said the exemptions also covered anyone who gets “direct assistance” from the government.

“This is not a blanket pause on federal assistance and grant programs from the Trump administration,” she said. “Individual assistance that includes, and I’m not naming everything that’s included … Social Security benefits, Medicare benefits, food stamps, welfare benefits, assistance that is going directly to individuals, will not be impacted by this pause.”

But later, when asked to clarify if Medicaid recipients would be protected, Leavitt said she had to get back to reporters. Asked about indirect assistance that flows through organizations like Meals on Wheels, which provides food to seniors, Leavitt did not answer. Asked about colleges and universities serving marginalized communities, Leavitt said: “I have not seen the list.”

Some of those answers were provided later in a Q&A from OMB that said that any program not “implicated” by Trump’s executive orders is not subject to the pause. The document says mandatory programs like Medicaid, which provides health coverage to low-income Americans, and SNAP, which provides food assistance, will continue uninterrupted.

“Funds for small businesses, farmers, Pell grants, Head Start, rental assistance, and other similar programs will not be paused, unless such funding is implicated by the President’s Executive Orders, such as funds for DEI, environmental justice, or wasteful green new deal programs,” a senior administration official who declined to be named said in an email.

But how Trump’s administration will determine if a program is “implicated” was already causing confusion and could be difficult to ascertain.

The scope of the review appears massive. NBC News reported Tuesday that the agency asked federal agencies that provide financial assistance for details on a range of more than 800 programs, including school meals for low-income students and WIC, the nutrition program for pregnant women and infants.

The constitutionality of Trump’s move was immediately questioned by Democrats in Washington and several state attorneys general, including New Jersey Attorney General Matt Platkin, who joined a multistate lawsuit seeking an injunction against Trump’s order.

Democratic lawmakers reported getting flooded with worried calls from parents whose children are in cancer treatment studies, from Head Start preschool operators, community health centers, and college research institutions. Sen. Andy Kim (D., N.J.) read an email from an organization that provides disability services in New Jersey at a morning news conference held by Democrats in Washington.

“This is going exactly as they want it to go. Their goal is to sow chaos,” Kim said.

The order follows an unprecedented first week in office for Trump in which he pardoned Jan. 6 rioters, fired inspectors general, and signed a slew of executive orders meant to reshape the focus and scope of the federal government.

“What we see right now, it’s showing that the defining phrase of President Trump’s administration isn’t the ‘golden age,’” Kim said, quoting Trump’s inaugural address. “It’s a phrase he used during the campaign: fighting ‘the enemy from within.’”

Democratic lawmakers said the order violated the Constitution, which broadly gives Congress control of government spending.

“In the dark of night, Donald Trump has shut off billions, perhaps trillions, of dollars that support small businesses, that support families, that support police officers and firefighters,” Senate Minority Leader Sen. Chuck Schumer (D., N.Y.) said in Washington. “This decision is lawless, destructive, cruel.”

Trump’s allies rushed to his defense. “We are going to question, we’re going to review, and, yes, we’re going to be disrupters, but we’re going to be constructive disrupters,” U.S. Rep. Dan Meuser (R., Pa.) said on Newsmax.

Kate Flessner, a spokesperson for Pennsylvania’s state Senate Republicans, said it seemed “reasonable that any new administration would want to take a moment and review matters such as these.”

As concerns over the order grew, Mayor Cherelle L. Parker was still reviewing the memo as of Tuesday evening. There is unlikely to be an immediate impact on Philadelphia’s city services such as policing and trash collection, since essential services are mostly supported by city-generated revenues.

Federally funded social services that are administered locally, however, could be affected. The Philadelphia Department of Behavioral Health and Intellectual disAbility Services gets about 43% of its budget from the federal government, according to its most recent annual report. Additionally, many city agencies receive one-off grants from Washington, and it was unclear if the memo would affect ongoing projects.

While much of the operating budget has little exposure to federal cuts outside of social services, the same can’t be said for the capital budget, which leverages city bonds to fund infrastructure, construction and one-time projects. About $1.1 billion, or 18%, of the city’s $6 billion capital budget for the current year is federally supported.

At the state Capitol in Harrisburg, lobbyists and lawmakers took phone calls, trying to make sense of the memo. Meanwhile, confusion and concern reverberated from county boards to nonprofit organizations.

Josh Maxwell, chair of the Chester County Board of Commissioners, said that $68 million in the suburban county’s budget came from federal funds, with much of that money being spent on health and human services.

He said the pause could affect farm preservation work, highway expansions, public transportation, and public universities.

“Our region could be in for a lot,” Maxwell, a Democrat, said.

The county’s Republican commissioner, Eric Roe, said in a statement he had “mixed emotions” about the funding freeze.

“On one hand, I appreciate the commitment to eliminating fraud, waste, and abuse. Taxpayers deserve to know that their hard-earned tax dollars are being spent on worthwhile projects and core government functions,” Roe said. “At the same time, millions of Americans depend on federal grants every single day.”

Montgomery County Commissioners Neil Makhija and Jamila Winder, both Democrats, said the freeze could hurt thousands of county residents. Trump, they said in a statement, appeared to have frozen more than $140 million in funds headed to the county for emergency shelter operations, rental assistance, an anti-terrorism task force, and county parks projects.

But the Republican on the board, Tom DiBello, insisted the freeze was unlikely to have a long-term effect on the county. ”There’s a lot of money that goes to a lot of different groups at the federal level, and there’s money from the state that gets funneled to a lot of different groups,” he said. “I think it’s always good to have a review. I don’t think it’ll be a long pause.”

Shapiro is scheduled to deliver his budget address next week. Pennsylvania was already on track to face a budget shortfall this year, as spending is set to outpace state-earned revenue by $4.5 billion.

Ahead of Trump’s inauguration last week, Shapiro’s administration had been trying to draw down as many federal dollars it was relying on from former President Joe Biden’s tenure. Shapiro — who previously served as a foil to Trump during his first term while serving as Pennsylvania attorney general — has been minimally critical of Trump thus far, as Democratic governors around the country balance their politics and a need to deliver federal funds for their states.

Staff writers Thomas Fitzgerald and Fallon Roth contributed to this article, which contains information from the Associated Press.