State Agencies Face Limited Access to $3.1 Billion in Federal Grants

HARRISBURG, Pa. – February 18, 2025 – Pennsylvania Governor Josh Shapiro has taken legal action against the Trump administration, filing a lawsuit over the federal government’s freeze on grant funding allocated under the Inflation Reduction Act (IRA) and the Infrastructure Investment and Jobs Act (IIJA). The lawsuit, filed in the U.S. District Court for the Eastern District of Pennsylvania, alleges that federal agencies are unlawfully blocking state access to more than $3.1 billion in committed funds, restricting key environmental and infrastructure programs.

Pennsylvania Challenges Funding Suspension

Governor Shapiro contends that federal agencies began restricting Pennsylvania’s access to these grants on January 27, 2025, after President Donald Trump issued his first-day executive order, Unleashing American Energy, which directed agencies to pause the disbursement of funds appropriated under the IRA and IIJA.

“Since around January 27, 2025, federal agencies have restricted Pennsylvania agencies’ ability to access funding for grant programs that, in total, obligated over $3.1 billion to Pennsylvania for fiscal years 2022 to 2026,” the lawsuit states.

The funding in question includes $156 million for the IRA’s Solar for All program. The lawsuit highlights an executed agreement with the Philadelphia Green Capital Corporation to subaward approximately $70 million from this grant, demonstrating the state’s prior commitments to deploying the funds.

“Many of these grant programs have deadlines by which Commonwealth agencies must use their grant award,” the lawsuit continues. “Nevertheless, federal agencies are now unilaterally and arbitrarily suspending or restricting Commonwealth agencies’ access to the congressionally appropriated grant funds that have been committed to them.”

Legal and Constitutional Arguments

Governor Shapiro and Pennsylvania state agencies argue that the Trump administration’s funding freeze violates the U.S. Constitution by unilaterally suspending funds already appropriated by Congress. The lawsuit names as defendants the U.S. Department of the Interior, the U.S. Environmental Protection Agency (EPA), the U.S. Department of Energy (DOE), the U.S. Department of Transportation, and the Office of Management and Budget (OMB), along with the heads of each agency.

Shapiro is the first governor to independently file suit against the Trump administration over the funding suspension. However, Kentucky Governor Andy Beshear has joined a separate lawsuit filed by attorneys general from 22 states, signaling broader state-level opposition to the executive order.

Impact on Pennsylvania Programs

The funding freeze has affected a range of critical programs, including:

Energy Efficiency and Low-Income Housing

‍The DOE is withholding reimbursement for two Pennsylvania Department of Environmental Protection (DEP) grants totaling $127 million to improve energy efficiency in low-income homes.

‍Weatherization Assistance

Pennsylvania’s Department of Community and Economic Development (DCED) has been unable to access $186 million for weatherization assistance programs meant to improve home insulation and energy efficiency.

Orphaned Well Remediation

DEP is restricted from receiving reimbursements for $76 million in IIJA funding allocated to plugging and remediating orphaned well sites, which emit greenhouse gases and pose environmental risks.

The lawsuit claims that federal agencies have further threatened not to reimburse Pennsylvania if the state distributes funds to subrecipients whose activities are not explicitly supported by the federal government.

“The Commonwealth thus either violates its obligations to subrecipients by withholding money, or it risks being denied reimbursement later by the federal government,” the complaint states.

Federal Government’s Justification

An internal OMB document issued on January 28, 2025, stated that the administration’s pause on federal funding applies to “programs, projects, and activities implicated by the President’s Executive Orders,” which include those associated with what President Trump has referred to as “the Green New Deal.” This phrase has been used by the administration to describe both the IRA and portions of the IIJA.

Despite “two temporary restraining orders requiring federal agencies to restore access to suspended funds,” the lawsuit asserts that Pennsylvania agencies still cannot access the funding appropriated to these programs.

Seeking Relief

The lawsuit calls on the court to declare the funding freeze unlawful and to block federal agencies from continuing to restrict Pennsylvania’s access to the appropriated funds.

Shapiro’s administration has emphasized that these grants are essential for advancing Pennsylvania’s climate, infrastructure, and energy initiatives. The legal challenge represents a significant test of executive authority over congressionally approved funds and may set a precedent for how state governments navigate federal funding disputes in the future.

Broader Implications

The outcome of this lawsuit could have far-reaching consequences for states relying on IRA and IIJA funds to finance critical projects. Should the courts side with Pennsylvania, other states affected by similar restrictions may pursue legal challenges of their own.

Governor Shapiro has called on other state leaders to stand against what he describes as an overreach of executive power. “These funds were allocated by Congress for the benefit of Pennsylvanians, and we will not stand by as they are unlawfully withheld,” Shapiro stated.

For more updates on this case and other policy developments, visit Pennsylvania.gov.

Originally reported by Diana DiGangi in Construction Dive.