During the initial years of the Biden Administration, significant funding for major long-term projects was allocated by the U.S. Congress outside the standard annual process. Key examples include the Infrastructure Investment and Jobs Act (IIJA), the Inflation Reduction Act (IRA), and the CHIPS for America Act. While some of these funds have been committed and distributed by the relevant agencies, others are still in the process of being allocated.
Former President Donald Trump and his policy advisors have suggested that, if elected again, they intend to cut funding for initiatives within these legislative acts, including clean energy funds from the IIJA and IRA, and contributions to the World Health Organization (WHO). This analysis explores the various options available to the executive branch to potentially curb funds that have been previously approved, considering the complexities of governmental finance and the control of Money In Holland, metaphorically speaking, representing the intricacies of managing and potentially redirecting allocated finances.
Understanding the Basics: How Appropriated Funds Are Managed
Congressional Law and Guidance on Appropriations
When the U.S. Congress appropriates funds, it sets out three core elements: 1) the amount of funding, 2) the intended purpose and limitations of these funds, and 3) the period during which the funds are available for use. Typically, funds are designated for a specific fiscal year, but sometimes Congress allows for multi-year use or specifies availability “until expended.” The actual appropriation legislation, once approved by Congress and signed by the President, becomes law. While appropriation legislation often provides broad account categories with limited specific instructions, detailed guidance is usually found in committee reports accompanying the legislation. Although these reports are not legally binding, they offer significant direction, and agencies generally follow the congressional intent outlined within them.
Executive Branch’s Role in Obligating Funds
Once funds are appropriated by Congress and enacted into law, the Department of the Treasury allocates these funds to designated accounts. The White House Office of Management and Budget (OMB) then apportions these funds to various agencies, which in turn allot them to different offices. These allotments authorize agency officers to “obligate” funds according to the terms of the allotment. It’s important to note that obligation is not the same as spending. The U.S. Government Accountability Office (GAO) defines obligation as “some action that creates a legal liability or definite commitment on the part of the government, or creates a legal duty that could mature into a legal liability by virtue of an action that is beyond the control of the government.”1 When an agency obligates federal funds, it must formally record this action. Federal law outlines nine situations requiring an agency to record funding as an obligation based on written evidence. Three key scenarios relevant here include: 1) binding agreements between an agency and another party meeting specific criteria, 2) loan agreements detailing amounts and repayment terms, and 3) grants or subsidies payable under legally authorized agreements.2 If an agency fails to obligate funds before their period of availability expires, the funds lapse and can no longer be obligated.3
While a binding grant, contract, or loan agreement obligates funding, such agreements may contain clauses allowing the government to terminate them. For instance, Part 49 of the Federal Acquisition Regulation (FAR) details the process for “termination for convenience” of a federal contract. In such cases, contractors are compensated for work performed, including reasonable profit, but cannot claim anticipated profits on the terminated portion.4 For grants, federal regulations allow termination under various conditions, including when an award no longer aligns with program goals or agency priorities, or as per termination provisions within the federal award itself.5
It is crucial to remember that while funds must be obligated within their availability period to prevent expiration, the Antideficiency Act prohibits agencies from spending beyond their appropriated amounts in a fiscal year.6 Consequently, multi-year grants and contracts typically include clauses making funding contingent upon appropriations.
Fund Transfers and Reprogramming
Under specific conditions, appropriated funds can be “transferred” or “reprogrammed.” Transferring funds involves moving them from one congressionally designated appropriation account to another, which requires legislative action. Some statutes, such as the annual National Defense Authorization Act (NDAA), permit agencies to transfer funds within certain limits (e.g., up to a total dollar amount, with congressional notification). Reprogramming, on the other hand, involves shifting funds between different activities within the same appropriation account. The executive branch can reprogram funds without congressional involvement unless other laws stipulate otherwise, such as requirements for congressional notification or limitations on proposed reprogramming actions. Furthermore, procedures for seeking and obtaining approval from relevant committee leaders for reprogramming are often outlined in appropriations committee reports. Although not legally binding, agencies commonly adhere to these procedures.7
Impoundment: Withholding Funds
As previously noted, appropriated funds that are not obligated within their period of availability expire and become unavailable for spending. Historically, presidents have occasionally declined to use appropriated funds—a practice known as “Impoundment”—leading to congressional actions to limit this practice.
The GAO defines impoundment as “any action or inaction by an officer or employee of the federal government that precludes obligation of expenditure of budget authority.”8 While presidents have used impoundment sparingly in the past—Thomas Jefferson, for example, impounded funds for gunboats after the Louisiana Purchase, deeming them “unnecessary”9—the Nixon Administration in 1973 employed impoundment on an unprecedented scale, refusing to obligate funds for environmental assistance, public housing, and disaster relief programs.10 Courts ruled against Nixon’s authority, and Congress responded by enacting the Congressional Budget and Impoundment Control Act of 1974 (ICA)11, establishing a process for presidents to temporarily withhold or propose permanent cancellation of appropriated funds under specific conditions.
The ICA provides two mechanisms for the executive branch: rescission and deferral.12 To rescind funds, the president must propose a cancellation of budget authority to Congress in a “special message,” citing “fiscal policy or other reasons.” However, this rescission only takes effect if Congress approves it through legislation.13 Congress has 45 days to consider the rescission request. If Congress does not affirmatively approve, the funds must be released.14 The president can also temporarily withhold funds by proposing a deferral in a special message to Congress. However, deferrals cannot extend beyond the period of fund availability; while obligation can be delayed, deferral cannot cause funds to expire.15 Crucially, unlike rescissions, deferrals cannot be for policy reasons but must relate to practical considerations.16
The Trump Era: Past Actions and Future Intentions Regarding Federal Spending
The Trump campaign and former administration officials have recently indicated a desire to reduce federal spending if they return to office. As the 2024 election approaches, they are questioning the constitutionality of the ICA, raising concerns about the future of appropriated funds and the control of money in Holland, or rather, federal funds.
Trump Administration (2017-2020): Actions on Appropriations
In 2020, the Trump Administration temporarily withheld congressionally appropriated funds to Ukraine. The GAO determined this action to be illegal, specifically citing a violation of the ICA because the OMB did not transmit a special message to Congress requesting rescission or deferral before withholding the funds.17, 18 The administration eventually released the funds.19
Budget negotiations between the Trump Administration and a Democratic-controlled Congress were often contentious, particularly over funding for the southern border wall. While the administration ultimately conceded on border wall funding in legislation, it later authorized the use of Department of Defense (DOD) funds for construction.20
Toward the end of the Trump Administration, officials like OMB Director Russ Vought and OMB General Counsel Mark Paoletta questioned the ICA’s operation and whether it unduly restricted presidential authority.21 They promoted “pocket rescission,” proposing rescissions within 45 days of fiscal year-end to avoid spending funds.22 The GAO deemed this a violation of the ICA, stating that the Act does not allow withholding funds to cause expiration and that presidents must ensure appropriations are prudently obligated within their availability period.23, 24, 25
Current Trump Stance on Impoundment
The Trump campaign and advisors now suggest that the ICA may unconstitutionally infringe on the president’s Article II duty to “take Care that the Laws be faithfully executed” (the Take Care clause).26 Former President Trump has stated his intention to “use the president’s long-recognized Impoundment Power to squeeze the bloated federal bureaucracy for massive savings,” asserting a 200-year history of presidents using impoundment to halt unnecessary spending.27, 28 His campaign website argues that the Take Care clause historically permits impoundment to enforce laws more effectively and efficiently.29
Arguments For and Against Trump’s View on Impoundment
In a June 2024 The Hill opinion piece, Paoletta and Daniel Shapiro argued that the ICA is unconstitutional, calling impoundment “common sense” and asserting that the ICA unconstitutionally limits presidential authority by not allowing unilateral impoundment without congressional rescission.30, 31 They, like the Trump campaign, cite historical precedents for impoundment, such as Jefferson’s and Truman’s actions.32, 33 They also argue that the ICA’s enforcement mechanism, vesting authority in the GAO Comptroller General, is unconstitutional, citing Bowser v. Synar regarding the Comptroller General’s removal only by Congress and the unconstitutional assignment of executive functions.34
Opponents of this view argue for the ICA’s constitutionality, often citing the same Take Care clause, asserting that the president’s duty to execute laws faithfully requires releasing congressionally appropriated funds.35, 36 A 1969 DOJ memo by then-Assistant Attorney General William Rehnquist criticized the position now taken by Trump, stating that the idea of a broad presidential power to decline spending appropriated funds is unsupported by reason or precedent.37
Potential Implications for Unspent Funds Under a New Trump Administration
If Trump is elected in 2024, the Biden Administration could obligate funds within their availability period until Inauguration Day. Many IRA funds, for instance, were appropriated for fiscal year 2022 and remain available through 2031. There are no legal barriers to obligating these funds before the period ends, though practical challenges may exist. Conversely, IIJA funds are often appropriated in specific amounts for fiscal years from 2022 to 2026. Funds for fiscal year 2026, becoming available on October 1, 2025, cannot be obligated by the outgoing Biden Administration.
A new Trump Administration could pursue several options regarding these funds.
Actions Requiring Legislative Steps
- Formal Rescission Request: Requesting Congress to rescind funds. This is unlikely in a divided Congress but possible with GOP control, or through budget deals.
- Fund Transfer Proposal: Proposing fund transfers to different accounts, exceeding existing statutory transfer powers, requiring congressional approval.
Actions Permissible Under Current Law
- Deferral of Obligation: Deferring fund obligation, limited by the requirement to obligate within the availability period and not for policy reasons, though motive assessment can be complex.
- Reprogramming Funds: Reprogramming funds within the same account, subject to statutory limitations. The administration might disregard non-binding congressional notification or committee approval practices.
- De-obligation: De-obligating funds for projects not legally committed.
- Contract/Grant Termination: Utilizing early termination clauses in contracts and grants to the extent legally and contractually possible.
Actions of Questionable Legality
Declining to obligate or expend appropriated funds through deferral beyond availability, impoundment, or pocket rescission. This would rely on arguments that the ICA is unconstitutional and infringes on executive authority, and/or that GAO enforcement is unconstitutional.
A Trump Administration taking this path would likely face GAO illegality declarations and potential constitutional challenges. However, a Trump OMB might disregard GAO opinions, as indicated by a 2019 OMB Circular asserting GAO opinions are non-binding on the executive branch.38 Legal battles would likely ensue.
The Trump Administration might revive the Nixon-era “political question” argument, previously rejected by courts who viewed impoundment disputes as statutory interpretation issues.39, 40 Ultimately, decisions would hinge on whether the Take Care Clause grants inherent presidential authority beyond the ICA’s limits, and if this authority extends to policy-based spending decisions beyond practical prudence. The complexities of managing money in Holland, in the sense of controlling and directing federal funds, will likely be at the forefront of these potential conflicts.
Summer Associate Elizabeth Perry contributed to this article.
Notes
1 U.S. Government Accountability Office (GAO), GAO-05-734SP, A Glossary of Terms Used in the Federal Budget Process (2005), at 70.
2 31 U.S.C. §§ 1501 (a)(1), (2) & (5)(B).
3 See generally, GAO, Principles of Federal Appropriations Law, 3rd ed. Vol I., Chapter 2 (GAO RedBook).
4 FAR 49.104; GAO RedBook, Chapter 6, Page 71.
5 2 C.F.R. 200.340(a)(2)&(5).
6 31 U.S.C. §§ 1341(a).
7 See Taylor N. Riccard & Dominick A. Florentino, “Transfer and Reprogramming of Appropriations: An Overview,” Cong. Rsch. Serv. R47600, 2023.
8 GAO, GAO-330330.1, Impoundment Control Act—Withholding of Funds Through Their Date of Expiration (2018).
9 See Jeff Stein & Jacob Bogage, “Trump Plans to Claim Sweeping Powers to Cancel Federal Spending,” The Washington Post, June 7, 2024.
10 See Andrew Glass, “Budget and Impoundment Control Act Becomes Law,” Politico, July 12, 2017 (“to a larger extent than his predecessors, [Nixon] took it upon himself to impound funds that Congress had appropriated for programs that he considered unwise or unnecessary.”).
11 Congressional Budget and Impoundment Control Act of 1974, Pub. L. No. 93-344 (codified at 2 U.S.C. §§ 681-688).
12 Impoundment Control Act, Report, supra note 8
13 Id.
14 Id.
15 Id.
16 Id.
17 GAO, GAO-331564, Office of Management and Budget (OMB), Withholding of Ukraine Security Assistance (2020).
18 Id.
19 These events were the basis for President Trump’s first impeachment.
20 See Christopher T. Mann, “An Update on Military Funding for the Border Wall,” Cong. Rsch. Serv. IN11675, 2021, at 1-2.
21 Paul M. Krawzak, “Trump Budget office slams 1974 ‘impoundment law’ on way out,” Roll Call, Jan. 19, 2021; Impoundment Control Act, GAO report, supra note 8.
22 OMB, Exec. Off. of the President, Response to House Budget Committee Investigation, 2019.
23 Impoundment Control Act, GAO report, supra note 8.
24 Id.
25 Id.
26 See “Agenda47: Using Impoundment to Cut Waste, Stop Inflation, and Crush the Deep State,” Trump Campaign Website, June 20, 2023; Mark Poaletta and Daniel Shapiro, “Trump is Right About the Impoundment Control Act – It’s Unconstitutional,” The Hill, June 24, 2024.
27 See Agenda47, supra note 26.
28 Id.
29 Id.
30 See Paoletta & Shapiro, supra note 26.
31 Id.
32 Id.
33 Id.
34 Id.
35 See Catherine Rampell, “Trump Thinks He Should Hold Congress’s Purse Strings,” The Washington Post, June 12, 2024; Impoundment Control Act, GAO report, supra note 8.
36 GAO, GAO-135564, Letter to Sam J. Ervin Jr., Chairman of the Subcommittee on Separation of Powers on the Judiciary, U.S. Senate, 1973.
37 Id.
38 OMB, Exec Off. of the President, Memorandum for Agency General Counsels, Reminder Regarding Non-Binding Nature of GAO Opinions, 2019.
39 State Highway Commission v. Volpe, 479 F. 2d 1099 (8th Cir. 1973).
40 Id.
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