As President Donald Trump’s temporary freeze on federal funding to state and local governments seeded disruption and panic throughout the country Tuesday, state officials reported that Medicaid funding in Illinois had shut down.
Trump’s administration announced the pause in federal grants, loans and other financial assistance as they embarked on a sweeping review of spending — a measure aimed at “ending ‘wokeness’ and the weaponization of government,” according to a memo from Matthew Vaeth, acting director of the Office of Management and Budget.
The funding freeze could affect trillions of dollars and cause widespread disruption in health care research, education programs and other initiatives. Grants that have been awarded but not spent are also halted, according to the Associated Press.
Although the White House in a memo stated that Medicare and Medicaid would not be affected by the freeze, Illinois on Tuesday reported that state agencies could not access federal funding sites that included Medicaid.
State agencies started reporting issues to Gov. JB Pritzker’s office Tuesday morning with accessing federal funding sites and disbursement systems, including Medicaid systems, his office said. Pritzker has been in communication with the state’s federal delegation, local elected officials, nonprofits and other governors about the matter.
“The governor has directed his senior team to assess the detrimental impacts of this unlawful action on the state’s budget and services,” governor’s office spokesman Matt Hill said.
Nearly 4 million lower-income Illinoisans had their health care covered in 2023 by Medicaid, a system in which the federal government reimburses the state about half of every dollar in medical costs.
Roughly a quarter of the state population is eligible for Medicaid coverage, including many children, pregnant women and people with disabilities.
Illinois Comptroller Susana Mendoza said the state processed all $518 million in Medicaid bills last week and received its federal match on Monday, before the Trump administration apparently shut down access to the system. “However, I am very concerned about how long this ‘freeze’ may last,” Mendoza said in a statement.
In the federal memo, Vaeth wrote: “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.”
Vaeth said each agency must complete a comprehensive analysis of all federal financial assistance programs.
“In the interim, to the extent permissible under applicable law, Federal agencies must temporarily pause all activities related to obligation or disbursement of all Federal financial assistance, and other relevant agency activities that may be implicated by the executive orders.”
Impact on Chicago
Mayor Brandon Johnson questioned Trump’s authority to withhold funding appropriated by Congress, even temporarily.
“These are unprecedented attempts to defund child care or to defund infrastructure projects. This is something that is well outside the purview of the executive office,” a defiant Johnson told a City Hall news conference.
After conferring with U.S. Senators Dick Durbin and Tammy Duckworth, Johnson said the Illinois Democrats have “assured me that they are gonna continue to fight on behalf of the residents of Chicago.
“These appropriations have been mandated by the legislative branch. These are laws. As a country of laws and democracy, we prefer when we have leaders who actually are committed to upholding that law,” the mayor said.
Corporation Counsel Mary Richardson-Lowry said she is now in the process of analyzing what impact the freeze would have on the city’s $17.1 billion budget and on “any existing projects and initiatives.”
The potential impact of even a temporary freeze could be staggering.
Budget Director Annette Guzman said an analysis of all federal grant funding received by the city last year as well as future appropriations enacted by Congress showed that roughly $4 billion hangs in the balance.
“We’re analyzing our analysis again, based on what OMB put out…We don’t know the full implications of what OMB’s actions will mean and we don’t know what potentially Congress will do based on the letter that came out,” she said.
The $4 billion figure is total grant funding to Chicago, with some portion of that total subject to being withheld, if Trump’s edict is allowed to stand.
“We have large grants in infrastructure. We have grants from a lot of departments on the federal level. There’s varying degrees of what we think could be impacted based on pronouncements from the Trump administration both before coming into office as well as since they’ve taken office,” Guzman said.
“We need some time to analyze the letter … what does it exactly mean to pause federal funding. But, we’re doing that work now and we’ll have more to say later.”
Guzman was asked how long it would take before uncertainty turns into consequences. How soon will the city decide not to hire to fill grant-funded positions or not award a federally-funded contract?
“We are reviewing those things right now. We have to talk directly with our departments to understand exactly what programming is at risk,” she said.
“We are hopefully going to be making those determinations sooner rather than later.”
Johnson urged city employees and delegate agencies not to hit the panic button just yet.
“I just want to underscore as I’ve spoken with our senators—we’re not entirely sure if he’s working within the framework of his authority,” the mayor said.
“So, it’s a legitimate question in terms of what this so-called `pause’ means. No one has been able to determine whether or not an executive branch has the ability to…rescind a law that has been specified in terms of appropriations.”
Durbin called the freeze unconstitutional and “above all else, it’s inhumane.”
“Every American relies on federal funding — from public safety, disaster relief, medical research funding, and small business loans to Head Start and child care programs, veterans care, nutrition assistance, food inspections, and so much more,” Durbin said in a statement. “Denying critical funding for our families will not make America great.”
Cuts to research, violence prevention and more
While Chicago-area officials grappled with what the federal funding freeze might mean, researchers at the University of Chicago were already being directed to rein in any work that relies on dollars from Washington.
In a faculty memo, University of Chicago Provost Katherine Baicker told faculty to not to “purchase new supplies or equipment, start new experiments, embark on funded travel, etc.”
“This is not a request that I make lightly. The research enterprise is at the core of our University’s mission and is of profound importance to the daily work of our faculty, researchers, staff, and students. I also know that this is insufficient guidance and that you must have many questions (as do I),” Baicker wrote.
“I wish that I had more information to share now, but will continue to be in touch as we learn more. But we must for now proceed under the assumption that grant expenditures incurred after today while this memorandum is in effect may not be covered by federal funding.”
Community activists also sounded the alarm on federal dollars being cut off for violence prevention programs.
“We must stand up and resist this fascism that is taking over our country. And we must do it now,” South Side pastor Rev. Michael Pfleger said.
Ald. Scott Waguespack (32nd) chaired the City Council’s Finance Committee before being deposed by Johnson.
He was among those warning top mayoral aides during budget hearings that they had “better be prepared for major cuts or shifts” in federal spending under Trump.
Now that his earlier warning has turned into a harsh reality, Waguespack said the Johnson administration should be “cautious about spending any federal dollars” going forward until the legality of Trump’s federal funding “pause” is determined.
His conservative estimate is that “tens of millions of dollars” is at risk, potentially threatening Chicago’s ability to bankroll, what he called “the basics like our road infrastructure, our sewers, our overall safety net of infrastructure that we build in every city in the U.S.”
“I would think that every mayor, every village mayor around Illinois not to mention the whole U.S. is looking at their budget this morning wondering how they’re gonna make ends meet if even a small portion is withheld,” Waguespack said.
