This morning, staff from CalNonprofits led a 90-minute briefing for hundreds of listeners into the current status of rule changes proposed by the Federal Office of Management and Budget. Here is a summary of what was discussed.
Threats to Federal Grants and Nonprofits
Overview and Federal Funding Context
Public sector grants/contracts are second largest nonprofit revenue stream (~1/3 of total sector funding)
California is a donor state sending ~$80B more annually to Washington DC than received back
Subsidizes operating budgets of ~11 other states lacking state income taxes
May OMB proposal introduced sweeping changes across hundreds of pages governing federal fund flows
OMB Regulatory Proposals and Systemic Threats
Proposals introduce political screening into grant selection
Political appointees could reject proposals deemed inconsistent with vague “national interest” or agency priorities without explanation or appeals process
Considers organization memberships, affiliations, and activities unrelated to grant proposals
Discretionary funds could be withheld indefinitely if not advancing White House policy priorities
Mid-performance grant changes
Agencies could terminate/suspend grants without cause or notice, and alter terms/conditions mid-delivery without hearings
Restrictions on equity programming
Bars funding for “unlawful DEI” or immigration work despite legality upheld in court
Proposed SAM.gov certifications
Vague attestations required under penalty of civil/criminal law and perjury
Federal Oversight and Enforcement Trends
Broad federal pressure across executive actions
Approaching 300 executive orders and over 400 active investigations targeting nonprofits via White House, DOJ, FBI, and congressional committees
OMB Director Russell Vought testing Impoundment Control Act limits via executive fund halts and pocket rescissions
Legal and advocacy counter-offensives
Litigation win rate exceeds 80%; over 600 legal actions filed against unlawful administration measures
Nearly 500,000 public comments submitted against OMB rules
Bipartisan congressional action inserted a stay in the continuing resolution (CR) delaying implementation through December 11, 2026
California State Action and Legislative Efforts
California DOJ led by Attorney General Rob Bonta filed 80+ lawsuits, supported by $25M legislative funding
State legislation passed
AB 1318 (enacted October 2025): California will not recognize unilateral federal revocation of 501(c)(3) status
Permissive advance pay legislation authorizing up to 25% grant funds upfront to nonprofits
Stalled state measures
AB 1039 to mandate 25% advance pay vetoed/opposed by Governor Newsom over grant control concerns; targeting reintroduction under future Governor Becerra
Proposal to establish an Office of Nonprofit Empowerment modeled on GO-Biz stalled
Feasibility of state tax strike: impossible since individual citizens pay federal taxes directly, exposing residents to federal prosecution for tax evasion
Upcoming Deadlines and Action Items
December 11, 2026: Expiration of current continuing resolution and rule stay
November 10, 2026: National Day of Action for nonprofits
Key direct actions
Sign national opposition letter circulated by National Council of Nonprofits (~2,000 organizations signed to date)
Contact congressional representatives urging permanent blocks on OMB rule during the post-election lame-duck session
Continue applying for federal grants and documenting discriminatory or arbitrary agency actions for court records
Providence, R.I. – The U.S. District Court for the District of Rhode Island today ruled that the U.S. Department of Housing and Urban Development (HUD) and HUD Secretary Scott Turner violated the law through their “slapdash imposition of political whims,” when approving new funding restrictions that would have unlawfully conditioned access to federal housing grants on compliance with the Trump-Vance administration’s partisan agenda.
The decision issued today in National Alliance to End Homelessness v. Turner, et al., is a victory for The National Alliance to End Homelessness and Women’s Development Corporation, which filed a lawsuit last September challenging the grant restrictions. The groups are represented by Democracy Forward, National Homelessness Law Center, Lawyers’ Committee for Rhode Island, and ACLU Foundation of Rhode Island in the matter.
“This ruling is a victory for people across this nation who have overcome homelessness and stabilized in HUD’s permanent housing programs,” said Ann Oliva, CEO of the National Alliance to End Homelessness. “Today’s news reinforces a fundamental truth: that the work to end homelessness is not partisan, and never should be interfered with for political means. On behalf of the people and providers we serve, the National Alliance to End Homelessness pledges to continue fighting back against efforts to dismantle homeless response in America.”
“The solution to homelessness is stable, predictable, permanent housing,” said Frank Shea, Executive Director of Women’s Development Corporation. “Organizations providing this housing need fair, predictable programs that are free of politicized criteria. We are glad the court agrees. Our neighbors in need of housing deserve nothing less.”
The lawsuit, filed in the U.S. District Court for the District of Rhode Island, asserted that HUD’s newly imposed criteria for “Continuum of Care (CoC) Builds” grants were unlawful. This is the third time that HUD has issued this same grant opportunity, even after grant awards had already been announced to Congress. In so doing, HUD introduced extreme political criteria to the application. Under the new funding application rules, service providers and communities were blocked from applying for federal housing funds for new Permanent Supportive Housing for individuals and families experiencing homelessness if they operate in jurisdictions with policies the Trump-Vance administration disfavors. This includes states and cities with sanctuary protections and cities that criminalize public camping. The new funding criteria also would have disqualified organizations that provide services considered “harm reduction,” such as Safe Drug Use Criteria practices and those that have inclusive policies for transgender people.
Today’s ruling declares the notice announcing the funding opportunities, the new political criteria used by HUD when deciding to issue grants, and the one-week application period for the grants all to be unlawful and orders the policies vacated and set aside. The court additionally ordered the already-appropriated funding to remain available for award, consistent with the Court’s order.
“For more than three decades, the federal government has supported housing providers and communities through HUD’s programs to help people experiencing homelessness move into stable housing,” said Skye Perryman, President and CEO of Democracy Forward. “We are honored to have worked with these brave plaintiffs and co-counsel to hold this administration accountable for their unlawful actions, and we are pleased that the court has stopped the Trump-Vance administration from holding life-saving funding hostage to a political agenda.”
“Hundreds of thousands of unhoused people need housing and supports to survive. Instead of following Congress’ direction to increase that supply of supportive housing, this Administration unlawfully manipulated a grantmaking process that would have only made homelessness across the country worse,” said Antonia Fasanelli, Executive Director at the National Homelessness Law Center. “We were honored to represent the National Alliance to End Homelessness and to work with our esteemed co-counsel in preventing the Administration from forcing an ideological agenda on a program that is intended to save lives.”
“The Lawyers’ Committee for Rhode Island will continue to fight for Rhode Islanders whenever and however the Trump Administration threatens them with unlawful actions,” said Amy Romero, Chief Legal Counsel of Lawyers’ Committee for Rhode Island. “We are pleased with this court’s decision that recognizes that this Administration violated the law by imposing their political whims on federal funds intended to address the needs of individuals and families experiencing homelessness.”
“The federal government’s distortion of the grant process for blatant political and ideological gains put funding for life-saving services at risk,” said Steven Brown, executive director of the ACLU of Rhode Island. “We are extremely gratified that Rhode Island organizations like the Women’s Development Corporation will be allowed to receive federal funding thanks to the court’s decision.”
The plaintiffs are represented by Kristin Bateman, Yenisey Rodríguez, Kristen Miller, and Robin Thurston from Democracy Forward; Amy Romero and Kevin Love Hubbard for the Lawyers’ Committee for Rhode Island; Antonia Fasanelli from the National Homelessness Law Center; and Lynette Labinger for the ACLU Foundation of Rhode Island.
Read today’s order here and the original filing here.
We did it.
For the second time in two days, the courts have ruled against the Trump Administration’s efforts to illegally meddle in federal homelessness programs. Today’s ruling from the 1st Circuit Court of Appeals means the U.S. Department of Housing and Urban Development (HUD) cannot move forward with its plan to release the December 19th Continuum of Care (CoC) Program Notice of Funding Opportunity (NOFO) to hold an absurd partial-year competition. Our Preliminary Injunction remains in place.
This will bring immense relief to communities across the country who were faced with the prospect of running overlapping local CoC NOFO competitions. Most importantly, this means HUD must renew all awards expiring this year — which will keep people in their homes, program staff employed, and landlords paid their rent. The full opinion can be found here:Read the Full Press ReleaseAnd it’s not over yet. Preventing the December NOFO is just a part of our ongoing litigation. The full merits of our case remain before the U.S. District Court for the District of Rhode Island awaiting final judgment, and we trust our legal counsel has put forth a strong set of arguments for the Court to consider. Democracy Forward and the ACLU Foundation of Rhode Island represent the coalition of nonprofit organizations in the matter; the National Homelessness Law Center represents NAEH and NLIHC; Public Rights Project represents the cities of Boston, Cambridge, Nashville, and Tucson as well as King County; Santa Clara County and San Francisco are also plaintiffs. The Lawyers’ Committee for Rhode Island represents all plaintiffs.
Subsidizes operating budgets of ~11 other states lacking state income taxes
Political appointees could reject proposals deemed inconsistent with vague “national interest” or agency priorities without explanation or appeals process
Considers organization memberships, affiliations, and activities unrelated to grant proposals
Discretionary funds could be withheld indefinitely if not advancing White House policy priorities
Agencies could terminate/suspend grants without cause or notice, and alter terms/conditions mid-delivery without hearings
Bars funding for “unlawful DEI” or immigration work despite legality upheld in court
Vague attestations required under penalty of civil/criminal law and perjury
Approaching 300 executive orders and over 400 active investigations targeting nonprofits via White House, DOJ, FBI, and congressional committees
OMB Director Russell Vought testing Impoundment Control Act limits via executive fund halts and pocket rescissions
Litigation win rate exceeds 80%; over 600 legal actions filed against unlawful administration measures
Nearly 500,000 public comments submitted against OMB rules
Bipartisan congressional action inserted a stay in the continuing resolution (CR) delaying implementation through December 11, 2026
AB 1318 (enacted October 2025): California will not recognize unilateral federal revocation of 501(c)(3) status
Permissive advance pay legislation authorizing up to 25% grant funds upfront to nonprofits
AB 1039 to mandate 25% advance pay vetoed/opposed by Governor Newsom over grant control concerns; targeting reintroduction under future Governor Becerra
Proposal to establish an Office of Nonprofit Empowerment modeled on GO-Biz stalled
Sign national opposition letter circulated by National Council of Nonprofits (~2,000 organizations signed to date)
Contact congressional representatives urging permanent blocks on OMB rule during the post-election lame-duck session
Continue applying for federal grants and documenting discriminatory or arbitrary agency actions for court records
