As we have noted in recent client alerts, we have arrived at the end of a fiscal year in which there have been numerous policy-based program reductions and grant terminations across federally funded sectors. Furthermore, as of the issuance of this alert, we head into the end of federal fiscal year (FY) 2025 without appropriations statutes enacted for FY 2026 and with the likelihood that agencies will be operating under a continuing resolution for some portion of the fall or early winter months of calendar year 2025.
Against this backdrop, we reflect on the interplay observed this year between the specific language of appropriations statutes and grant terminations. In particular, we address the restrictions that specific statutory language can impose when an agency may otherwise be considering reductions in a grantee's funding. We start with background on earmarks, now generally referred to as "congressionally directed spending" or "community project funding," then turn to the utility of specific appropriation language in recent termination cases.
Congressionally Directed Spending (Earmarks)
In recent years, congressionally directed spending (CDS) designations have reappeared as a funding vehicle in healthcare, community development, disaster preparedness, and other federally funded areas. By way of example, long lists of earmarks are available in the House of Representatives' Congressional Record for March 22, 2024, which provides the Explanatory Statement accompanying the Further Consolidated Appropriations Act, 2024, Pub. L. No. 118-47, 138 Stat. 460 (2024). That particular appropriations statute funded agencies such as the Departments of Labor, Health and Human Services (HHS), and Education in fiscal year 2024, and in the Congressional Record's list of CDS designations, one can find mandatory funding for numerous workforce development projects (H1898-H1910), healthcare facilities projects (H1910-H1946), substance use disorder service delivery projects (H1947-H1955), and various innovative education projects (H1968-H1984). As can also be seen, specific amounts are designated for specific projects of named grant recipient entities.
Pertinent sections of the appropriations statute contain provisos that make the CDS designations in the explanatory statement mandatory. For example, for certain healthcare facilities projects, the Health Resources and Services Administration portion of the HHS appropriation states:
[O]f the amount made available under this heading, $890,788,000 shall be used for the projects financing the construction and renovation (including equipment) of health care and other facilities, and for the projects financing one-time grants that support health-related activities, including training and information technology, and in the amounts specified in the table titled 'Community Project Funding/Congressionally Directed Spending' included for this division in the explanatory statement described in section 4 (in the matter preceding division A of this consolidated Act)…
Further Consolidated Appropriations Act, 2024, 138 Stat. 652.
Generally, those desiring such funding seek designation by reaching out to their senators and/or representatives. If selected by any such legislator for funding, the project is specified in the explanatory statement and incorporated into the appropriation in a manner similar to what can be seen in the examples linked above. After the appropriation is enacted and the Office of Management and Budget apportions the funds, the funding agency will generally reach out to the designated entity to solicit submission of a non-competitive grant application similar to what is submitted for competitive awards, although often in an abbreviated form.
Some grantees work directly with their senators or representatives, and others may work with outside lobbyists or consultants. Note that when a prospective grantee works with outside lobbyists and consultants to conduct outreach to legislators on specific funding opportunities, it is possible they will trigger a later disclosure obligation in the form of a Standard Form SF-LLL that is to be filed with the funding agency as part of the later application package. See, e.g., 45 C.F.R. § 93.110 (1990) (implementing such requirements for HHS).
Recent Litigation Involving Grantees Named in Statutes
As noted in our recent posts on year-end considerations for grantees and anticipated changes to the Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), 2 C.F.R. Part 200, grantees have faced an uncertain funding environment in the latter half of FY25.
In the face of numerous grant terminations over the past seven months, grantees have brought various court actions. When doing so, grantees have alleged arbitrary and unlawful action under the standards of the Administrative Procedure Act and raised appropriations process and constitutionally based separation of powers arguments. In turn, they have faced arguments by funding agencies that termination cases are merely breach-of-contract actions that must be brought in the Court of Federal Claims (COFC) rather than federal district courts,[1] and arguments that private parties lack the ability to enforce separation of powers principles or the statutory appropriations process requirements of the Impoundment Control Act. See Nat'l Insts. of Health v. Am. Pub. Health Ass'n, 606 U.S. __ (2025) (addressing jurisdictional questions); see also Glob. Health Council v. Trump, No. 25-5097, 2025 U.S. App. LEXIS 20495, at *19-26 (D.C. Cir. Aug. 13, 2025) (addressing private causes of action for separation of powers and impoundment arguments).
Among the multiple decisions issued in these areas across numerous terminations and programs, two cases—one involving Radio Free Europe/Radio Liberty, Inc. (RFE/RL) and one involving Radio Free Asia (RFA)—have demonstrated that being named in an appropriations statute provides potentially significant additional arguments in a grant termination dispute.
In the RFE/RL case, when its funding agency, the United States Agency for Global Media (USAGM), refused to issue a new funding agreement, RFE/RL was successful in obtaining an injunction from the U.S. District Court for the District of Columbia (D.D.C.) that required USAGM to issue such an agreement under terms similar to those that had been set between the parties in prior years. RFE/RL, Inc. v. Lake, No. 1:25-cv-799-RCL, 2025 U.S. Dist. LEXIS 138057, at *26 (D.D.C. July 18, 2025). In ordering this relief, the court relied heavily on the fact that Congress had specified funding to RFE/RL by name and in a specific amount under the pertinent appropriations statute. Id. at *15-19.
In the RFA case, the D.D.C. similarly relied upon a specific funding mandate in the pertinent appropriations statute to hold that abrupt termination of RFA's funding by USAGM was improper. Widakuswara v. Lake, 779 F. Supp. 3d 10, 29-30, 34-37, 39-40 (D.D.C. 2025). Although that decision is currently on appeal, in late May the U.S. Court of Appeals for the D.C. Circuit declined to stay the District Court's order while the litigation proceeds. Widakuswara v. Lake, Nos. 25-5144, 25-5145, 25-5150, 25-5151, 2025 U.S. App. LEXIS 13040, at *3-4 (D.C. Cir. May 28, 2025) (citation omitted) (endorsing a prior dissenting statement by Judge Pillard that notably emphasized USAGM had disregarded the clear will of Congress in cutting RFA's funding).
Conclusion
With continued potential for funding instability in the near term, those seeking grant funds for critical projects may wish to consider whether congressionally directed spending is available. As one might expect, case law in recent months appears to be bearing out the assumption that being named specifically by Congress as an intended grantee may offer an additional degree of protection from grant termination.
For questions on federal grant or contract matters, contact Scott S. Sheffler, Diz Locaria, or Chris Griesedieck of Venable's Government Contracts Practice.
[1] This jurisdictional distinction is important, since district courts have broad injunctive powers that can be applied to require the reinstatement of a grant, whereas COFC can generally only award monetary damages.