City staff brief finance committee on federal funding freeze, court rulings and local budget risk

Madison city officials briefed the Finance Committee on March 20 about the status of federal executive orders that paused some grants and awards, recent court challenges that have blocked parts of those orders, and how the actions could affect city programs and the 2025 budget.

Mike Haas, City Attorney, summarized three federal lawsuits: a challenge by a nonprofit association in the U.S. District of Columbia resulting in a preliminary injunction against the administration’s funding freeze; a case filed by several state attorneys general in Rhode Island where a temporary restraining order was issued and a motion to enforce the TRO has been filed; and litigation in Maryland by an association of higher-education diversity officers that led to a preliminary injunction blocking parts of an executive order targeting certain diversity, equity and inclusion (DEI) requirements in grant contracts. Haas said courts have used strong language in blocking parts of the orders but cautioned litigation is ongoing and the administration may rely on other legal tools.

Dave (Finance Department staff) gave budgetary context: city agencies reported roughly $438,000,000 in federal grant awards for 2025, of which about $157,000,000 is program money flowing to roughly 16 city agencies and supporting about 75 full-time-equivalent positions. Major program areas named include housing assistance and Community Development Block Grant programs, emergency rental assistance, homeless services, major road reconstruction and safe-street projects, energy efficiency and sustainability programs, bus rapid transit and transit operating and capital (including electric buses), public health programs like immunizations and WIC, law enforcement assistance, and safe drinking water initiatives. Staff noted most federal grants operate on a reimbursement basis and that some awarded funds have already been received and thus are not necessarily at risk.

Staff described immediate guidance given to agencies: submit reimbursement requests more frequently, monitor funding portals and report access issues to finance, and review new Notice of Funding Opportunities for terms tied to executive orders (for example, DEI-related compliance) before applying. For subrecipient relationships where competitive federal funding was paused, some city subrecipients have been told to stop work or pause until the city can confirm access to funds; in some cases portals reopened after courts intervened and staff cautiously resumed activity.

Dave and Tom Lynch (transportation staff) offered a granular review of transportation-related grants and risk levels. Tom said the Capital Investment Grant (CIG) for the proposed North–South bus rapid transit (BRT) is at higher risk because the city has been recommended for funding but does not yet have an executed contract; the East–West BRT has largely been constructed and its federal money mostly captured, reducing risk. Ongoing formula transit funds (e.g., FTA formula grants) and some obligated grants such as certain 5337/5339 grants used for bus procurement were assessed as lower risk because funds are already obligated or reimbursement portals are open. Other grants such as Safe Streets for All, Reconnecting Communities (Perry Street), certain carbon-reduction grants and an ATTAIN technology grant were assessed at moderate-to-high risk depending on whether an agreement is executed or funds are obligated.

Committee members asked about broader federal budget processes that could further affect funding. Staff summarized congressional actions on reconciliation and possible program cuts and noted policy proposals under consideration (including changes to the tax exemption for municipal bond interest and the state and local tax deduction) that could indirectly affect local finance and infrastructure funding if passed.

No committee action was required; item 18 (Legistar 86,892) was a discussion item. Staff said they will continue to monitor litigation, federal portals and the congressional budget process and provide updates. The committee closed the meeting with a unanimous motion to adjourn.