Trump's gambit of withholding federal dollars will be ruled unconstitutional

The Hill

21-05-2025

Among the tools the Trump administration is using to get states, local governments, nonprofits and schools to agree with its directives is the withholding of federal dollars. Although the government can use the power of the purse to accomplish many things, the courts have also drawn lines on the limits of its use. There are, in fact, unconstitutional conditions that can be attached to spending power.
The power of the purse — or the ability to appropriate money, as located in Article One, Section Nine, Clause Seven of the Constitution — lies with Congress, not the executive branch. President Trump's efforts to withhold money may therefore encroach upon congressional powers and may also violate the 1974 Budget and Impoundment Control Act.
At one time, the courts upheld what used to be known as the 'right-privilege distinction.' Justice Oliver Wendell Holmes Jr. (then a judge on the Supreme Judicial Court of Massachusetts) stated in the 1892 case McAuliffe v. Mayor of the City of New Bedford that the city could fire an employee because while one 'may have a constitutional right to talk politics' there 'was no right to be a policeman.' Holmes argued that if you did not have some established constitutional right to something — such as government largesse — then the state could impose conditions on it. Receipt of public dollars or benefits was viewed as a mere privilege, and the government had broad leeway to attach stipulations. This right-privilege distinction became a central concept of American constitutional law for decades
But starting in the late 1960s and early 1970s, scholars such as Charles Reich argued that government largesse constituted a form of 'new property.' This new property came with certain conditional rights, thereby limiting the government's ability to do whatever it wanted.
The concept of new property gave rise to arguments about due process and the need to grant individuals rights when it came to the allocation and termination of public benefits. In effect, the government, once providing individuals with benefits, cannot simply terminate them at will. A hearing is required, for example, before the termination of Social Security benefits.
The significance of this shift is that the right-privilege distinction has been dramatically eroded over the last 50 years. The government no longer has unlimited authority to impose whatever conditions it wishes simply because someone receives public funding. Legal limits now exist to prevent the imposition of unconstitutional conditions, and this is especially the case when it comes to First Amendment rights of free speech or expression.
For example, in Legal Services Corp. v. Velazquez (2001), the Supreme Court ruled that Congress cannot prohibit legal aid lawyers, funded by the Legal Services Corporation, from challenging existing welfare laws. In Agency for International Development v. Alliance for Open Society International (2013), the court held that the government could not require U.S.-based non-governmental organizations to adopt an anti-prostitution policy as a condition of receiving HIV/AIDS-relief funding.
In FCC v. League of Women Voters of California (1984), a federal law that prohibited editorializing by noncommercial educational broadcast stations that received federal funds was struck down. Perry v. Sindermann (1972) held that a public college professor could not be denied contract renewal in retaliation for criticizing the college. In Speiser v. Randall (1958), California could not deny a tax exemption to veterans who refused to sign a loyalty oath.
All of these cases reach the same conclusion — the government cannot use its power of the purse to limit the free speech of individuals and organizations.
When it comes to states and local governments, the Supreme Court has consistently held that, except in a narrow set of circumstances such as civil rights and workplace issues, the federal government cannot commandeer or order them to carry out federal directives. While the Constitution's Supremacy Clause does establish federal authority over states, federalism places important limits on that power. For example, in South Dakota v. Dole (1987), the court upheld the federal government's right to link highway funds to states raising their drinking age — but only as an incentive, not a coercive mandate.
This incentive-versus-coercion distinction reappeared in National Federation of Independent Business v. Sebelius (2012). There, the Supreme Court ruled that the Affordable Care Act's attempt to incentivize states to expand Medicaid was unconstitutional. Because states would lose existing Medicaid funding if they refused to expand coverage, the court found that the federal government's action was coercive and violated principles of federalism. These decisions make clear that the U.S. government cannot coerce state and local governments into action by withholding money.
These cases and legal developments show that there are both procedural and substantive limits to what the federal government can do with its money. It cannot use funding as a blunt instrument to force states, nonprofits, schools or individuals into compliance.
Courts across the country are already placing limits on many Trump administration actions due to violations of federal law. We should expect the courts to continue enforcing the principle that unconstitutional conditions cannot be imposed as a prerequisite for receiving federal funds.