Seven states sued the Trump administration late Wednesday over an attempt to cancel $810 million that Congress had already appropriated, opening a new constitutional test of whether a president can run out the fiscal-year clock on spending lawmakers directed the executive branch to make.
The 36-page complaint, filed in the U.S. District Court for the Northern District of California, was brought by California, Maine, Maryland, Michigan, Nevada, New Mexico and Oregon. The states seek declaratory and injunctive relief against President Donald Trump, the United States, Office of Management and Budget Director Russell Vought and OMB. They argue that withholding the money violates the Constitution’s separation of powers and appropriations requirements, as well as the Administrative Procedure Act.
The filing is materially broader than a dispute over any single grant. It asks a federal court to define how the 1974 Impoundment Control Act operates when a president sends Congress a rescission request just days before the affected money expires. The administration calls that maneuver a “pocket rescission.” The states call it an unlawful way to cancel spending without the legislation the Constitution ordinarily requires.
How the $810 million dispute developed
On September 25, the White House sent House Speaker Mike Johnson a special message proposing 11 rescissions across the departments of Commerce, Education, Health and Human Services, Homeland Security, Housing and Urban Development and Justice, plus international assistance programs. The largest item was $567.4 million for refugee and entrant assistance. Other proposed cuts included $69.6 million for international education programs, $56.1 million for housing counseling and $27.7 million for the Agency for Healthcare Research and Quality.
The administration’s position is that the money supports programs it considers wasteful, duplicative or inconsistent with its priorities. In its public explanation, the White House highlighted immigration services, minority-business programs, international education, climate-related assistance and health research. The rescission package itself gives a program-by-program justification and asks Congress to cancel the budget authority.
Congress did not enact those cancellations before the fiscal year ended September 30. Under the Impoundment Control Act, Congress generally has 45 days of continuous session to act on a presidential rescission proposal. The legal dispute is whether the executive branch may withhold the funds during that review period when doing so carries the money past its expiration date.
The nonpartisan Government Accountability Office concluded that it may not. In a September 29 decision, GAO said the special message did not authorize the president to withhold the appropriations beyond the end of fiscal 2026. GAO’s determination is an important interpretation from Congress’s auditing arm, but it is not itself a judicial order. The newly filed lawsuit asks a court to provide enforceable relief.
The constitutional arguments
The states contend that appropriations laws are binding commands, not suggestions that the president may decline for policy reasons. Their complaint says OMB’s apportionment power exists to manage the rate of spending and prevent deficiencies, not to reverse congressional choices. It also alleges that other appropriated funds for emergency services, education and health programs remained unobligated as the deadline arrived.
The administration’s legal theory relies on the statutory window that allows funds proposed for rescission to be withheld while Congress considers the request. Because the September 25 package arrived only five days before the fiscal year closed, the money could expire long before the 45-day review period ended. The states and GAO argue that the statutory review period cannot be used to make a cancellation permanent without congressional approval.
The question has not been conclusively resolved by the Supreme Court. Last year, the justices allowed a different pocket rescission involving foreign assistance to proceed while litigation continued, but the emergency order did not settle the underlying legality of the practice. That distinction will matter as the administration argues that recent litigation supports broader executive flexibility and the states argue that Congress alone can make the cancellation permanent.
What the lawsuit could change
The immediate dispute is about whether the seven plaintiff states can recover access to funds that expired at midnight. The broader stakes are much larger. If a president can lawfully delay appropriated spending until it expires, any administration could gain a practical line-item veto over programs it opposes, even when Congress declines to approve a rescission. If courts reject the maneuver, OMB would face tighter limits on withholding money near fiscal deadlines.
Independent reporting by Reuters confirmed the filing and said the White House had not issued a new response to the lawsuit early Thursday. A separate Washington Post report described an unsuccessful Senate effort to block the cancellation and noted bipartisan concern over the maneuver, including from Senate Appropriations Chair Susan Collins of Maine.
The court will now have to determine whether the states have standing, whether the claims are reviewable and what remedy remains possible after the fiscal year has ended. Those procedural questions could shape the case before judges reach the central constitutional issue. But the conflict is now squarely before the judiciary: whether a last-minute timing strategy can accomplish a spending cut that Congress never enacted.
