City attorney, finance director brief committee on federal grant litigation and budget changes; no city grants frozen

City of Madison legal and finance staff briefed the Finance Committee on May 27, 2025, about active federal litigation over executive actions pausing or terminating federal grants, related procedural arguments, and how a large federal budget package under consideration could affect federal grants and local budgets.

Laura Manella from the City Attorney’s Office summarized three categories of litigation she is tracking: (1) lawsuits directly challenging the executive branch’s suspension or termination of existing federal grants (several plaintiffs, including states and nonprofits, have obtained temporary restraining orders or preliminary injunctions in lower courts), (2) lawsuits challenging compelled changes to terms and conditions on existing grants (for example, King County’s suit over forced amendments from HUD and USDOT), and (3) challenges about the scope and authority of nationwide injunctions in federal court. Manella said many of these matters are in preliminary stages and are on appeal; she described the common legal claims being raised as separation‑of‑powers, Administrative Procedure Act (APA) violations and viewpoint‑based First Amendment claims in some nonprofit cases. She said courts so far have often granted temporary relief to plaintiffs to maintain the status quo while cases proceed.

Finance Director David (Dave) Schmidke provided background on the larger federal budget package passed by the House and now in the Senate, including the bill’s size (about $3.8 trillion in the House version), major components such as changes to SNAP (Supplemental Nutrition Assistance Program) and Medicaid, and that the municipal bond interest tax exemption remains an exposed option for pay‑fors in reconciliation discussions. Schmidke summarized potential local effects that would follow federal changes — for example, changes to SNAP and Medicaid could shift demand for county and city services and increase uncompensated care at hospitals — and noted that Moody’s recent U.S. sovereign downgrade and higher interest rates are relevant context for municipal borrowing costs.

Manella told the committee that, as of the briefing, there were no frozen or canceled federal grants affecting the city. Schmidke said the FEMA reimbursement for Madison stormwater flood mitigation had been disbursed to the state and that the city has been able to obtain reimbursements; an EPA portal that had been closed had reopened and the city was submitting costs and receiving reimbursements. Committee members asked staff whether they could quantify local impacts of proposed federal SNAP or Medicaid changes; Schmidke said the city would try to prepare Madison‑specific estimates but noted many of the impacts operate through county or state programs outside direct city control.

Committee members raised concerns about broader, non‑health and non‑safety impacts in the federal package, including deep cuts to arts and cultural funding and other discretionary grant programs that support local institutions. Staff said they would continue to monitor litigation and injunction outcomes and advise city departments that receive federal grants about any legal developments that could affect their grants or reimbursement processes.