Many nonprofits in the community and economic development space are concerned about federal funds and grants being temporarily withheld or permanently canceled via an executive action known as rescission. The Trump Administration has been using rescissions to withhold funding from nonprofits supporting low- to moderate-income communities. This article explains the rescission process, its political implications and how the future of community and economic development work could be impacted more broadly.
Overview of the rescission process
Rescission is an executive action that withholds the use of federal funds appropriated by Congress. The President may rescind appropriated funding with Congressional approval as authorized by the Impoundment Control Act (ICA) of 1974.
The ICA requires the President to first send a request to Congress. Congress has 45 days to approve the request, with the Office of Management and Budget (OMB) withholding the funds until a decision is made on the President’s request.
The request is then sent to the House and Senate Appropriations committees, which have 25 days to either approve, disapprove or amend the request. After this period has lapsed, it goes to the full floor of both chambers for a simple majority vote. If the rescissions bill does not pass both chambers, the OMB must release the funds.
The rescissions process has been a regular mechanism of executive power, with it becoming a popular option for the current administration to expand its influence. President Trump proposed one of the largest rescission packages in recent US history, totaling $9 billion, which was passed by Congress in July. The package cancelled appropriated funding for foreign aid programs and the Corporation for Public Broadcasting, which includes NPR and PBS.
Congress is ultimately responsible for serving as a check on the president’s authority to rescind federal funds, as Article 1 of the Constitution confers the “power of the purse” upon the legislative branch. A president withholding funds without Congressional approval to advance their own political or policy objectives is fundamentally unlawful.
What are pocket rescissions?
A president can bypass the Congressional approval process to rescind funds that are set to expire within 45 days of the end of the fiscal year, which are known as pocket rescissions. The OMB Director Russell Vought has endorsed the use of pocket rescissions to advance President Trump’s policy agenda.
“The very Impoundment Control Act itself allows for a procedure called pocket rescissions to be able to bank some of these savings later in the year without the bill actually being passed,” Vought told CNN in June. “It’s a provision that has been rarely used. But it is there. And we intend to use all of these tools.”
President Trump recently announced on August 25 that he would be canceling $4.9 billion in foreign aid, giving Congress very little time to approve the request before the funding expires on October 1, which is less than the required 45-day review period.
The Government Accountability Office (GAO), an independent watchdog agency of the federal government, has made it clear via a 2018 decision that pocket rescissions are illegal. However, this decision is not legally binding, with the power to challenge and strike down acts of impoundment resting with the federal courts.
A federal district judge ordered the Trump Administration to spend the $4.9 billion in foreign aid funding appropriated by Congress, declaring the unconstitutionality of pocket rescissions. The administration responded by submitting an emergency application to the Supreme Court. The Supreme Court blocked the federal judge’s ruling and allowed President Trump to temporarily freeze the foreign aid funds until it reviews the emergency application.
The Trump Administration appears to be winning the legal battle over the use of pocket rescissions, which they can leverage to further restrict and cancel equity-focused federal programs without Congressional checks.
The impact of rescissions and funding freezes on NCRC members
Many nonprofits have been impacted by the Trump Administration’s withholding of federal funds due to their missions being centered on pursuing racial and economic equity through community development programs and initiatives. In February, President Trump’s freeze on federal grants related to DEI, environmental sustainability and foreign aid put several NCRC members at financial risk. While the freeze has been lifted, the Trump Administration will likely continue using rescissions as a tool to curb the power and influence of economic justice-focused nonprofits.
The OMB has already withheld significant pots of FY2025 funding for the Community Development Financial Institutions (CDFI) Fund under the Department of the Treasury by abusing the apportionment process. As of now, the OMB has apportioned only $35 million for the CDFI Fund’s administrative costs out of the $324 million that was originally allotted in FY2025.
The remaining $289 million was intended to go towards CDFI Fund programming, such as the Financial and Technical Assistance grants that are awarded to CDFIs supporting underserved small business owners. Several of NCRC’s CDFI members applied for this funding but may not receive it, which will impact their capacity to financially support small business growth in their communities.
The OMB may also begin to withhold funding from other departments and agencies that support the community development work of NCRC members, such as the Housing and Urban Development (HUD) and the Small Business Administration (SBA), particularly if their work focuses on advancing equity and inclusion.
NCRC has developed a rescissions tracker to help NCRC members keep tabs on which funds have been temporarily withheld or completely rescinded. NCRC encourages our members to work with us to protect funding for major community and economic development projects. Lastly, our philanthropic partners – financial institutions and community foundations – should support NCRC members by providing funding to fill in the gaps left by the federal government.
Manan Shah is a Policy & Government Affairs Associate with NCRC’s Policy & Government Affairs team.
Photo credit: Ian Hutchinson via Upsplash.
???????????????????????????????????????????????????????????????????????????????????????????????????????????????? rescission?????????????????????????????????????????????????????????????????????????????????????????????????? rescission??????piupiu star ship