Gov. Josh Stein (center) discusses Hurricane Helene recovery during visit to Asheville. HUD Secretary Adrianne Todman (left) and Asheville Mayor Esther Manheimer (right) and other officials look on. A new order from the Trump administration endangers federal funding for Helene relief. (Photo: Office of the Governor)
North Carolina’s economy is bracing for a hold on billions in funding to the state government, universities, businesses, and hospitals after the Trump administration announced a sweeping freeze on federal grant and loan programs that took effect at 5 p.m. Tuesday.
In a memorandum issued by the Office of Management and Budget’s acting director, Matthew Vaeth, the Trump administration said it would halt “all activities related to obligation or disbursement of all Federal financial assistance” that could be impacted by the President’s executive orders, singling out foreign aid, nongovernmental organizations, diversity, equity, and inclusion programs, “woke gender ideology,” and environmental protection.
In 2024, North Carolina’s state government received $32.6 billion in federal funding, including more than $3 billion in federal disaster relief that largely addressed the debilitating impact of Hurricane Helene — representing 43.2% of the state’s total revenue last year. That figure does not include the billions in federal grants and loans that boost the private sector, providing critical funding to hospitals, private universities, and North Carolina businesses — particularly those depending on loans to survive the Helene recovery.
Officials across the state are left to contemplate a two-week freeze on federal funding with little additional instruction that could have immediate and far-reaching impacts on virtually all aspects of North Carolina’s economy and public services.
[Note: Politico reported at 5:10 p.m. that “A federal judge has halted President Donald Trump’s freeze on federal aid programs, ruling that the courts need more time to consider the potentially far-reaching ramifications of his order.”]
Fate of aid to western North Carolina uncertain
Some of the most crucial federal funding in limbo is earmarked for western North Carolina, a region still struggling to bounce back from the devastation wrought by Helene. Critical aspects of that recovery may be placed on hold as a list of programs circulated by the OMB Monday encompassed a variety of disaster-related relief programs aimed at housing, small businesses, and recovery.
Federal grant and loan programs listed included disaster assistance to families and households through the Department of Homeland Security; housing grants for those whose homes were destroyed through the Department of Housing and Urban Development; and disaster assistance loans from the Small Business administration. A variety of programs managed by the Federal Emergency Management Agency, which Trump has repeatedly taken aim at, were also among the list of programs that may have to cease funding by the end of Tuesday.
In a statement Tuesday, Governor Josh Stein said his office was still working to understand the extent of the disaster relief funding set to be suspended.
“Like many of you, I am concerned that freezing federal funding will hurt North Carolinians, especially those recovering in WNC,” Stein wrote. “My office is currently reviewing and seeking clarity about what OMB’s order to freeze federal grants means for our state. We are also working with federal partners to ensure people in WNC get the support they need.”
Democratic U.S. Rep. Valerie Foushee of the fourth congressional district condemned the Trump administration for throwing disaster recovery efforts into uncertainty.
“This extreme order will not only pause countless federally funded research projects, but will also prevent our state from accessing emergency FEMA funds that are needed to help our neighbors in Western North Carolina rebuild and recover from Helene,” Foushee said in a statement. “I demand that the Trump Administration upholds the law and reverses this reckless directive to ensure millions of Americans have access to the federal resources they are counting on.”
In a memo Tuesday, the OMB seemed to walk back the extent of the freeze, clarifying that “the pause does not apply across-the-board” and instead would apply only to programs related to Trump administration executive orders such as “ending DEI, the green new deal, and funding nongovernmental organizations that undermine the national interest.”
Republican Rep. Tim Moore of Kings Mountain said in a statement that “the White House has assured” him that FEMA relief will continue uninterrupted, despite those programs’ inclusion in the list distributed by the OMB on Monday.
“President Trump’s leadership is focused on ensuring resources are prioritized for the Americans who need them most, and not for the previous administration’s woke and wasteful policies that diverted funds away from their intended purpose,” Moore said.
But the extent to which disaster relief and resilience grants — many of which link climate preparedness to disaster recovery — would be frozen remained unclear as of Tuesday afternoon.
Asheville Mayor Esther Manheimer said in a statement that the city had not yet been able to clarify whether they would continue to receive federal aid for Helene recovery.
“The City and its residents continue to have a great need for critical federal assistance for disaster response and recovery, and anticipate that the federal funding aimed at recovery will be exempted from the pause on federal financial assistance, however, the City will seek further clarity on this issue.”
A freeze on North Carolina’s research economy
Health and science grants, crucial to the biomedical industry that helps anchor the economy of the Research Triangle and the state at-large, are also in peril. North Carolina research companies and universities received about $2 billion from the National Institutes of Health alone in 2024, a spigot of funding that the Trump administration is now set to shut off.
According to the Economic Development Partnership of North Carolina, the state boasts the fourth largest life sciences industry in the U.S., with more than 800 life sciences companies based in the state. That accounts for around 75,000 jobs, many of which are funded through federal research grants.
Whether these grants will also stop flowing was left uncertain even after the OMB’s follow-up memo. The broadest category listed, NGOs that “undermine the national interest,” could be read to include health and life science groups that conservatives have attacked in the wake of the COVID-19 pandemic. Trump, for example, framed his decision to withdraw from the World Health Organization in national security terms, citing “inappropriate political influence” by other nations over health policy. Research aimed at eradicating diseases prevalent in developing countries could likewise come to a halt under cuts to foreign aid.
Among the programs named in the list circulated by the OMB were a variety of initiatives aimed at identifying cancer cures, including President Joe Biden’s “Cancer Moonshot” program; health programs aimed at treating deadly diseases in the U.S. and abroad, including AIDS, tuberculosis, sickle cell anemia, Alzheimer’s; and a vast array of biomedical innovation grants intended to spur research in the life sciences industry.
Foushee, whose district in Orange County is heavily dependent on biomedical research, warned of the potential for enormous damage to the state’s economy.
“My district is home to leading research institutions and universities, and this sweeping freeze will harm the livelihoods of researchers, federal employees, and students throughout the Triangle region,” Foushee said. “Our Constitution is clear, and Congress – not the President – has the power of the purse.”
In an email to affiliates, Duke University officials wrote that the pause on funding impacts “areas central to Duke’s mission and operations” — citing potential ramifications for research, healthcare, and education — but leadership recommended against any changes to policies and practices until further clarification came from federal officials.
“We are also working with our federal contacts and associations to determine potential next steps,” wrote Provost Alec D. Gallimore and several other administrators. “Over the coming weeks, we expect to receive further clarification from oversight agencies, which will better inform any adjustments that are needed.”
Among the largest potential impacts are to healthcare programs for North Carolinians — nearly 80% of the budget for the North Carolina Department of Health and Human Services comes from federal funding, and as of Tuesday afternoon, department officials had yet to determine which grants, loans, and assistance will be withheld.
While the initial memo exempted Social Security and Medicare, it made no mention of Medicaid, a government program that provides health insure for Americans from low-income backgrounds. Many states reported losing access to their Medicaid reimbursement portals Tuesday, including North Carolina, though the NC DHHS confirmed access was restored later in the afternoon and “at this time, there is not an impact to beneficiaries.” The subsequent question-and-answer memo issued by OMB Tuesday stated that mandatory benefits programs, including Medicaid and SNAP, would also continue to be paid.
Risk of ‘widespread and immediate harm’
What programs will cease to provide funding, when it will resume, and how many could be permanently shuttered remained unclear Tuesday afternoon. To add to the uncertainty, legal observers said the maneuver will almost certainly have its fate decided in a federal courtroom.
Steve Vladeck, a constitutional scholar at Georgetown University, opined that the block on funding will likely produce a “crisis of constitutionality” over the question of “impoundment” — whether the executive branch has the power to unilaterally refuse to spend funds appropriated by Congress, a proposition he anticipates the Supreme Court will be hostile toward, calling the OMB memo “transparently harmful, preposterous, and unlawful.”
Attorney General Jeff Jackson wrote in a statement that he will be “taking legal action” to stop the funding freeze, arguing that the Trump administration’s action violates the Constitution’s delegation of power over federal spending to the legislature.
“This sudden freeze in federal funding is so sweeping that it could cause widespread and immediate harm across our state — delaying disaster recovery in our western counties, undercutting law enforcement, and affecting children and veterans,” he wrote.
Amid backlash to the funding freeze, some North Carolina Republicans defended the policy. Rep. Richard Hudson of ninth district said Trump was stopping the flow of tax dollars to “abortion on demand,” “promoting a woke gender ideology,” and “criminal illegal aliens” among other social issues he and other conservatives have targeted.
Even if federal courts prevent the freeze on funding, the Vaeth directive appears to cement a set of programs the Trump administration will target in the years to come — those concerning foreign aid, NGOs, race and gender issues, and the environment.
Geoff Gisler, a program director at the Southern Environmental Law Center, said he anticipates a bullseye on environmental protections for the remainder of the Trump administration. He noted that where the memo targeted “Green New Deal” policies — a reference to a proposed bill that was not in fact passed into law — it likely references a much broader set of environmental regulations, ranging from orders issued by the Biden administration to aspects of the Inflation Reduction Act and other legislation.
“When you think of the amount of funding that comes from the federal government into state and local governments, this is has a potentially seismic impact on things that affect people’s everyday lives,” Gisler said. “This memo goes far outside the bounds of what the president can legally do.”