Potential Implications of a Trump Presidency for Unspent Out-Year Federal Appropriations

During the first two years of the Biden Administration, U.S. Congress appropriated significant amounts of funding outside the regular annual process for several major multiyear initiatives. Major examples include the Infrastructure Investment and Jobs Act (IIJA), Inflation Reduction Act (IRA) and the CHIPS for America Act. Since then, some of these funds have been obligated and disbursed by administering agencies, but others are somewhere in the process of being committed.

Former President Donald Trump and some of his policy advisors have indicated that, if elected, it would be their intent to defund some of the initiatives in these major pieces of legislation. Some initiatives mentioned include clean energy funds appropriated in the IIJA and IRA, as well as funding for the World Health Organization (WHO). This Holland & Knight alert seeks to identify and evaluate the various options available to the executive branch in curbing previously appropriated funds.

Primer: Disposition of Appropriated Funds

Congressional Appropriation Law and Report Guidance

When Congress appropriates funds, they articulate three basic parameters: 1) the amount of funds, 2) the purpose/limitation of those funds and 3) the period of availability of those funds. The period of availability is ordinarily for a specified fiscal year, but sometimes Congress allows the money to be utilized over multiple fiscal years or made available "until expended." The actual appropriation legislation – once passed by Congress and signed by the executive – is statutory law. Appropriations text usually provides money in broad accounts and is often light on direction to the recipient agencies. Congress provides significant spending instruction in the committee reports that accompany the appropriation legislation. Although the reports are not signed into law – and thus are not legally binding – three basic parameters offer persuasive guidance, and agencies generally adhere to congressional direction within the committee reports.

Executive Branch Obligation of Appropriations

Once funds are appropriated by Congress and signed into law by the president, the U.S. Department of the Treasury allocates the corresponding funds to certain accounts. The White House Office of Management and Budget (OMB) then "apportions" funds to the various agencies that, in turn, "allot" those funds to different offices. The allotments provide the authority for agency officers to "obligate" those funds pursuant to the terms of the allotment. Obligation is not synonymous with "spend." The U.S. Government Accountability Office (GAO) has generally defined 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 is required to make a record of this action. Federal law identifies nine situations where an amount of funding must be recorded as an obligation by an agency based on documentary (written) evidence. Three of these situations are particularly relevant to this discussion: 1) binding agreements between an agency and another person meeting certain requirements, 2) a loan agreement showing the amount and terms of repayment and 3) a grant or subsidy payable under an agreement authorized by law.² If an agency does not obligate the appropriation prior to the expiration of the period of availability, those funds expire and cannot be obligated.³

Although a binding grant, contract or loan agreement does act to obligate funding, there may be operative language in the agreement that would enable the government to terminate the agreement. For example, Part 49 of the Federal Acquisition Regulation (FAR) sets out the process for "termination for convenience" of a federal contract award. Under a termination for convenience, the contractor is entitled to be compensated, including a reasonable profit, for the performed portion of the contract but may not recover anticipatory profits on the terminated portion.⁴ With respect to grants, federal regulations establish several bases for terminating the award, including "to the greatest extent authorized by law, if an award no longer effectuates the program goals and agency priorities" and "pursuant to termination provisions included in the Federal award."⁵

It should be noted that the flip side of the requirement that appropriated funds must be obligated during their period of availability in order to avoid expiration is the prohibition contained in the Antideficiency Act that agencies cannot spend funds in a fiscal year in excess of the amount appropriated to them for that fiscal year.⁶ Accordingly, multiyear grants and contracts typically contain language that such funding is contingent on appropriations.

Transfers and Reprogramming

Appropriated funds may be "transferred" or "reprogrammed" under certain circumstances. A transfer occurs when funds are moved from one congressionally prescribed appropriation account to another. This can only be done through the legislative process. Some authorizing statutes – such as the annual National Defense Authorization Act (NDAA) – provide authority for an agency to transfer funds within certain limitations (e.g., not to exceed a total dollar amount; with notification to Congress). Reprogramming involves moving funds from one activity to another within an appropriation account. The executive branch has the authority to reprogram funds without involving Congress unless another law affects that authority (for example, requirements to notify Congress or substantive limitations on what can be proposed to be reprogrammed). In addition, procedures for requesting and receiving signoff by the leadership of relevant committees for reprogramming is often contained in appropriations committee reports that, as previously discussed, are not legally binding but are commonly adhered to by agencies.⁷

Impoundment

As mentioned above, appropriated funds not obligated during their period of availability will expire and cannot be spent. There is a long and interesting history of presidents declining to utilize appropriated funds – a practice known as "Impoundment" – and of congressional legislation to restrict the practice.

The GAO defines an impoundment as "any action or inaction by an officer or employee of the federal government that precludes obligation of expenditure of budget authority."⁸ Presidents have occasionally used impoundment in specific situations. Thomas Jefferson impounded funds meant for the purchase of gun-boats after he negotiated the Louisiana Purchase and deemed the obligation "unnecessary."⁹

In 1973, the Nixon Administration impounded funds in an unprecedented manner, refusing to obligate funds for programs related to environmental assistance, public housing, disaster relief and other programmatic activities.¹⁰ The courts at the time ruled against Nixon's authority to do so, and Congress followed by enacting the Congressional Budget and Impoundment Control Act of 1974 (ICA)¹¹ to create a process under which the president may, under limited circumstances, temporarily withhold or propose to permanently cancel appropriated funds.

The ICA provides two different tools for the executive branch: rescission and deferral.¹² To rescind appropriated funds, a president must propose in a "special message" to Congress an actual cancellation of budget authority for "fiscal policy or other reasons." However, this does not become effective unless Congress includes the rescission in legislation.¹³ The law provides Congress with 45 days to consider the rescission request. If Congress does not affirmatively approve the rescission request via statute, the funds must be released.¹⁴ The president can also temporarily withhold funds by proposing a deferral in a special message to Congress. However, this deferral cannot extend beyond the end of the period of availability; i.e., obligation of the funds can be delayed to a later part of the period of availability, but a deferral cannot be used to cause the funds to expire.¹⁵ And, unlike a rescission, a president cannot defer funds for policy reasons – the reason for the delay in obligation must relate to some practical consideration.¹⁶

Trump Administration Past and (Perhaps) Future

In recent months, the Trump campaign and former Trump Administration officials have expressed an intention to cut federal spending if returned to office. And, as the 2024 election nears, the Trump campaign and individuals who could have high-level positions in a second Trump administration are arguing that the ICA is unconstitutional. There are past practices and statements regarding future intent to be considered.

Trump Administration 2017-2020

In 2020, the Trump Administration withheld the distribution of congressionally appropriated funds to Ukraine for a period of time. GAO concluded that, in so doing, the administration violated the law.¹⁷ GAO specifically noted that the OMB violated the ICA when it did not transmit a special message to Congress requesting either a rescission or deferral before withholding those funds.¹⁸ The Trump Administration ultimately released the funds.¹⁹

The Trump Administration also engaged in protracted budget negotiations with a then-Democratic-controlled Congress over a variety of issues, with a central sticking point being funding for construction of a wall on the U.S. southern border. Ultimately, the Trump Administration conceded on the inclusion of border wall funds. However, subsequent to the enactment of the legislation, the administration authorized the use of other U.S. Department of Defense (DOD) funds for the construction.²⁰

Toward the end of the Trump Administration, high-level officials – including OMB Director Russ Vought and OMB General Counsel Mark Paoletta – were questioning how the ICA operated and whether it excessively constrained presidential authority.²¹ Vought and Paoletta championed a technique known as "pocket rescission" where they would propose a rescission within 45 days of the end of the fiscal year to avoid spending a portion of the appropriated funds for that year.²² GAO regarded this as a violation of the ICA: "The ICA does not permit the withholding of funds through their date of expiration."²³ GAO stated, "[u]nless Congress has enacted a law providing otherwise, the President must take care to ensure that appropriations are prudently obligated during their period of availability."²⁴ They further noted that "[r]egardless of whether the 45-day period for congressional consideration provided in the ICA approaches or spans the date on which funds would expire, section 1012(b) requires that budget authority be made available in sufficient time to be prudently obligated."²⁵

Current Trump Posture

As the 2024 election nears, the Trump campaign and advisors have suggested that a second Trump Administration could consider the ICA to be an unconstitutional infringement on the president's authority under Article II of the U.S. Constitution to "take Care that the Laws are faithfully executed" (the Take Care clause).²⁶ Former President Trump has stated that, if re-elected, he would "use the president's long-recognized Impoundment Power to squeeze the bloated federal bureaucracy for massive savings."²⁷ He asserts that "for 200 years under our system of government, it was undisputed that the president had the Constitutional power to stop unnecessary spending through what is known as Impoundment."²⁸ The Trump campaign website further posits that the Take Care clause "has historically been understood to mean that the president can impound funds when doing so allows him to enforce the law more effectively and efficiently."²⁹

Arguments for and Against Former President Trump View

In a June 2024 opinion piece for The Hill, Paoletta, along with Daniel Shapiro, who previously served as a law clerk for Justice Clarence Thomas, argue that the ICA is unconstitutional.³⁰ Paoletta and Shapiro assert that "Impoundment is common sense…" and "[t]he [ICA] does not contemplate that the president can unilaterally impound funds without going back to Congress to have a new law enacted to rescind such funds. This is an unconstitutional limitation on the president's Article II authority and responsibilities."³¹

Like the Trump campaign, Paoletta and Shapiro argue that impoundment is deeply rooted in "centuries of bipartisan, cross-branch history and tradition."³² They cite historical examples like Jefferson's cancellation of shipyard construction expenditures and Harry Truman's impoundment of appropriated funds for the U.S. Air Force.³³ Paoletta and Shapiro further argue that the ICA's provision that gives GAO enforcement authority is also unconstitutional: 

The Impoundment Control Act relies on an unconstitutional mechanism for its enforcement. The law vests enforcement authority in the comptroller general, head of the [GAO]. This arrangement is unconstitutional for several reasons. For one, the comptroller is appointed for a 15-year term and is removable only by Congress. For this reason, in Bowser v. Synar, the Supreme Court held that it was unconstitutional to assign executive functions to the comptroller. Yet the act expressly tasks the comptroller with the executive function of enforcing the act's provisions by audits and vests the comptroller with the right to sue the executive branch to force expenditure of appropriated funds.³⁴

Opponents of the Trump campaign's impoundment theories argue that the ICA is indeed constitutional, often citing the same Article II Take Care clause for support.³⁵ The president's duty to "take Care that the Laws are faithfully executed" requires him to release funds obligated by congressional appropriation.³⁶ In a 1969 U.S. Department of Justice (DOJ) memorandum, then-Assistant Attorney General William Rehnquist criticized the position that former President Trump is taking now: "[w]ith respect to the suggestion that the president has a constitutional power to decline to spend appropriated funds, we must conclude that existence of such a broad power is supported by neither reason nor precedent."³⁷

Implications for Appropriated But Unspent Funds in a New Trump Administration

If former President Trump is elected in November 2024, the outgoing Biden Administration would have up until Inauguration Day to obligate any funds that are in their appropriations period of availability. For example, in many parts of the IRA, funds were appropriated for fiscal year 2022 "to remain available" through fiscal year 2031. There is no legal bar to obligating all of the funds prior to the end of that period of availability. However, there could be practical impediments to obligating and expending these funds. Conversely, in many parts of the IIJA, funds were appropriated in specified amounts for specified fiscal years from 2022 to 2026. As the period of availability for fiscal year 2026 funds would not commence until Oct. 1, 2025, an outgoing Biden Administration would not have the authority to obligate those monies.

Below are some options a newly elected President Trump might take.

Requires Legislative Action

1. Formally request to Congress that some (or all) of these funds be rescinded. This would be unlikely to happen in a divided Congress but could happen if there is GOP control of the federal government. Even in a split Congress, some amount of rescissions could be included in a future budget deal or negotiated appropriations package.
2. Propose to Congress that previously appropriated funds be transferred from one account to another for a different purpose and in an amount or manner that exceeds any existing statutory transfer power.

Allowed Under Settled Law

1. Defer the obligation or expenditure of appropriated funds. This would be limited by the statutory requirement to obligate deferred funds prior to the expiration of their period of availability, although the expenditure of obligated funds would depend on when they need to be expended. Under the ICA, such deferrals are not permitted for policy reasons, but ascertaining whether that was the real motive for a particular deferral proposal might be difficult.
2. Reprogram appropriated funds to different activities or objects within the scope of the account in which they were provided. This action would need to be consistent with any statutory limitations on reprogramming. As mentioned previously, many reprogramming procedures involving notification of Congress or approval of committees have developed as agreed practices and through appropriations committee report direction. It is possible the executive could decide not to adhere to these practices.
3. De-obligate funds for activities or projects previously identified and awarded but not legally committed.
4. Exercise contract or grant early termination processes to the extent allowed by law and the terms of the awarding documents.

Questionable Legality

Decline to obligate or expend funds already appropriated either by deferring beyond the end of the period of availability, impounding or through a pocket rescission. As discussed previously, this would be based on an argument that the ICA violates the Constitution by infringing on the executive's authority to not spend appropriated funds and/or that the authority of the comptroller of the GAO to sue to enforce the law is a violation of separation of powers.

If a Trump Administration followed this path, the GAO would likely declare the action illegal under the ICA and perhaps further argue that it is unconstitutional. However, a Trump OMB would likely simply ignore GAO. In November 2019, OMB updated and distributed OMB Circular A-11, asserting that although OMB "respects GAO's opinions as those of an agency of a coequal branch of government … a legal opinion by a Legislative Branch agency cannot bind the Executive Branch."³⁸ In this scenario, legal proceedings would inevitably ensue.

The Trump Administration might try to dust off an argument that the Nixon Administration used: the controversy in question is a nonjusticiable political question. In the first case where an impoundment was successfully overruled,³⁹ the U.S. Court of Appeals for the Eighth Circuit rejected this argument, holding that the controversy was an issue of statutory construction instead.⁴⁰ Barring success with that argument, a decision would ultimately turn on whether the "Take Care" clause of the Constitution provides the president with some inherent authority beyond the limits of the ICA and, irrespective of Congress' power to appropriate, if such executive authority is limited to situations where such expenditures would be imprudent for practical reasons or could extent to policy-based decision-making.

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.

Information contained in this alert is for the general education and knowledge of our readers. It is not designed to be, and should not be used as, the sole source of information when analyzing and resolving a legal problem, and it should not be substituted for legal advice, which relies on a specific factual analysis. Moreover, the laws of each jurisdiction are different and are constantly changing. This information is not intended to create, and receipt of it does not constitute, an attorney-client relationship. If you have specific questions regarding a particular fact situation, we urge you to consult the authors of this publication, your Holland & Knight representative or other competent legal counsel.