Trump administration axes $1.5B in blue-state grants over reported waste and mismanagement concerns

The Trump administration’s budget office told FOX Business Wednesday that it is canceling $1.5 billion in blue-state grants, citing concerns about how funds are being managed in California, Colorado, Illinois and Minnesota.

The Office of Management and Budget (OMB) said it will target projects at the Department of Transportation (DOT) and the Centers for Disease Control and Prevention (CDC), cutting $943 million and $602 million, respectively.

An OMB spokesperson told the New York Post that the states were being targeted due to "waste and mismanagement" of taxpayer funds.

The announcement follows OMB launching a sweeping review of federal funding for several Democratic-led states in January, which required states to submit detailed receipts proving no funds were being mishandled, CBS News reported.

TRUMP'S ENERGY DEPARTMENT AXES BIDEN-ERA PROJECTS, SAVING TAXPAYERS $7.56B

The initiative reflects a shift in fiscal policy toward "America First" priorities by withholding funds from states that maintain sanctuary policies or projects the administration deems wasteful. 

Concerns cited include tax support for illegal immigrants, green initiatives and alleged fraud in certain states, such as the $250 million COVID-era scam in Minnesota uncovered in the "Feeding Our Future" case.

Several DOT and CDC programs in blue states could be affected by the funding cuts, including equity-focused infrastructure projects and public health initiatives the OMB previously criticized as "social engineering" rather than legitimate public health efforts. 

"The use of Federal resources to advance Marxist equity, transgenderism, and Green New Deal social engineering policies is a waste of taxpayer dollars that does not improve the day-to-day lives of those we serve," the OMB previously said in 2025. 

TREASURY SECRETARY ANNOUNCES CASH REWARDS FOR MINNESOTA FRAUD WHISTLEBLOWERS

In January, Trump halted more than $10 billion in federal childcare and social services funding to four states, as well as New York, over concerns that some benefits had been fraudulently funneled to noncitizens, the Post reported. 

In California, San Francisco was slated to receive $15 million to expand its electric vehicle charging network, with a focus on "disadvantaged communities that are marginalized by underinvestment and overburdened by pollution," city officials said in 2025. 

Similarly, the California Reducing Disparities Project, an equity-focused public health program serving marginalized communities, including racial minorities and LGBTQ+ populations, was awarded $60 million over six years.

Chicago has drawn scrutiny for its initiatives focused on diversity, equity and inclusion. 

The Biden-era Red Line Extension and the Red and Purple Modernization Programs, which together total approximately $2.1 billion, were paused in 2025 pending a review of "race-based contracting" practices.

DEMS' DHS SHUTDOWN THREAT WOULD HIT FEMA, TSA WHILE IMMIGRATION FUNDING REMAINS INTACT

Additionally, funding for CDC research on sexually transmitted diseases affecting "adolescents and young adults, gay, bisexual, and other men who have sex with men" may be subject to potential cuts. The project, which listed Chicago as a recipient, was in line to receive $7 million, The Post reported.

In October 2025, the Trump administration labeled federal funding for various climate and renewable energy initiatives as a "Green New Scam" and subsequently terminated or paused $7 billion in grants, with Colorado among the primarily affected states, according to local media CPR News. 

The Trump administration may expand grant cancellations in the future amid concerns about systemic failures in sanctuary city leadership, which surfaced prominently following Minnesota’s fraud schemes.

The governors of California, Colorado, Illinois and Minnesota did not immediately respond to FOX Business' request for comment.

Fox News Digital's Greg Norman contributed to this report.