Grant Awards Insulated From Termination Based On New Policy Changes

A District Court in Massachusetts ruled that federal agencies cannot use the termination clause in federal grant regulations (2 C.F.R. § 200.340(a)(4)) to cancel grants based on policy priorities identified after the grants were awarded. In State of New Jersey v. U.S. Office of Management and Budget (No. 1:25-CV-11816, D. Mass.), the court granted summary judgment to a coalition of 20 states, three governors, and the District of Columbia that sought a declaratory judgment to prevent the government from terminating at least USD5.4B in active grants. The decision insulates grant awardees from shifting political priorities and confirms that the “program goals and agency priorities” are established at the time of grant award, not at the time of termination. Below is what grant recipients need to know.