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Joint Letter – The California Endowment Joins Foundation Leaders Opposing Proposed OMB Ruling

Comment to Office of Management and Budget and Federal Departments and Agencies

The undersigned organizations submitted the following letter electronically in regards to the Office of Management and Budget proposed rule.

Re: Comment to Office of Management and Budget (OMB) and Federal Departments and Agencies Proposed Regulation for Federal Financial Assistance OMB Docket OMB-2026-0034 91 Fed. Reg. 32198-323051

Submitted electronically at www.regulations.gov

To Whom It May Concern:

As funders and philanthropic organizations serving the people of California (see full list and organizational descriptions in Appendix), we are committed to investments that advance the health and well-being of all Californians, both statewide, and in our respective local areas served. Collectively, we have invested hundreds of millions of dollars in expanding health insurance coverage, supporting public health and social services programs, and securing affordable housing for Californians. We also have supported increasing access to programs and services for all Californians, through expanded and inclusive policies, language access, and programs. Our community- based partners have worked with the California state government, and with local county and city governments, to establish and implement policies and practices that welcome and include all Californians and improve access to public resources and funding.

We strongly oppose the Office of Management and Budget (OMB) and Federal Department and Agencies proposed regulation for Guidance for Federal Financial Assistance, or Uniform Guidance. The proposed rule is inconsistent with numerous statutes and Congressional intent, and with decades of regulatory and administrative policies and practices. Its provisions move away from scientific, expert, and data-based decisions, and could instead authorize viewpoint-based decisions that are arbitrary and capricious. We strongly urge OMB to immediately withdraw this proposed regulation.

The Proposed Regulation Is Arbitrary and Capricious

This proposed regulation would impact and/or prohibit federal government funding for many essential programs and services that were designed to address the needs of underserved communities and populations by requiring compliance with overbroad and vague “Administration policies and priorities” that include restrictions on funding for “unlawful diversity, equity, and inclusion” activities, for support for ”illegal immigration,” that deny a strict “sex binary,” or “promote anti-American values” (sections 200.202, 200.205, and 200.300). The preamble to the proposed regulation describes the policies to be prohibited as “woke,” “left-wing,” and “far-left” (91 Fed. Reg. at 32199-32200). The proposal would also limit the translation of grant award documents and reports in languages other than English (section 200.11). Other provisions in the proposed regulation would eliminate requirements for representation of underserved communities in grant reviews (section 200.205) and would eliminate community engagement requirements in the design of federally funded programs (section 200.202).

Numerous federal programs and services were created by Congress to address the needs of specific populations and communities, such as Offices of Minority Health or the National Institute on Minority Health and Health Disparities at the Department of Health and Human Services (HHS), or support for Historically Black Colleges and Universities and other Minority-Serving Institutions at the Department of Education. Other federal programs support immigrants and refugees, including programs at the Office of Refugee Resettlement at HHS and for English Language Learners at the Department of Education.

Under the proposed regulation, federal funding may not be used to “fund, promote, encourage, subsidize, or facilitate” any activities interpreted to be contrary to the current Administration’s policies and priorities. Many of these Administration policies and priorities only have been promulgated through executive orders, and almost all of them have been challenged, and many have been temporarily or permanently enjoined by numerous federal courts. Several continue to be the subject of active litigation in federal district and appellate courts. Accordingly, it is not clear which of these Administration policies and priorities are currently in force, and to be applied as current grant conditions. This lack of clarity, and the potential for inconsistent interpretations of these shifting policies and priorities, makes the proposed regulation arbitrary and capricious.

Moreover, the proposed regulation removes evidence-based science and data-driven decision-making from much of the federal funding processes, including requiring “pre- issuance review” of every discretionary grant by political appointees (section 200.205), eliminating expert peer review processes by making them non-binding and only advisory (section 200.205(d)), authorizing the denial of federal funding because of an applicant’s membership or affiliation with any organization deemed to “undermine public safety or national security” without clear definitions regarding how this determination is reached (section 200.206), and expanding the authority to terminate grants at any time if found to be “inconsistent with program goals or agency priorities” rather than any finding of non-compliance with grant terms and conditions, misconduct, or fraud (section 200.340). Such terminations cannot be challenged or appealed (section 200.342). It is arbitrary and capricious to move away from decades of federal government policy and practice to rely on experts, both internal career federal department and agency staff with content knowledge and experience, and external experts who are peers in the relevant field or work or research, and to politicize grant decisions and terminations.

Finally, as funders and philanthropic organizations, we are very familiar with the importance of rigorous, scientific evaluation of the effectiveness of any program or service we fund, and the ability to replicate and scale outcomes for all populations, to achieve equitable results. We individually and collectively invest significant resources in such evaluation and learning, and then the sharing and dissemination of such learning with other grantees, other funders, and the fields in which our grantees work. We often work with academic institutions and researchers in supporting our evaluation, learning, dissemination and other implementation science activities. Accordingly, it is particularly concerning to see the restrictions on public communications and outreach (section 200.241), disallowance of publication costs, especially fees to make publications open access (section 200.461), and requirements for pre-approval for attendance at any conference (section 200.432) in this proposed regulation. As funders, many of us sponsor conferences and other meetings both directly and through our grantees, that benefit from the attendance of federally funded participants, who both provide content expertise and experience as speakers and presenters, and who can learn from and build vital working relationships with other conference attendees, including with our staff and our grantees. Without such publication and dissemination, federal funding will become inefficient, with duplication of past efforts and failure to learn from past investments. There is no evidence that any of these routine publication and conference expenses are unreasonable or excessive, and these expenses have been routinely included in federal grant budgets for decades. There is no rational justification for the blanket disallowance and restrictions of such expenses, which makes the proposed regulation arbitrary and capricious.

OMB Fails to Consider the Adverse Human and Economic Impacts from This Proposed Regulation

California is home to one of the nation’s most diverse populations in the country. As funders and philanthropic organizations serving all the people of California, we have prioritized grantmaking, engagement, and support for all Californians, in part to improve access and reduce longstanding systemic and structural inequities that have impacted economic, educational, and social opportunities. However, we recognize that philanthropic investments are dwarfed by government funding, especially federal government funding, for housing, education, employment training and supports, health care, public health, food and nutrition programs, economic and business development, community development, and a wide range of other vital social services.

Many of our grantees, as well as state and local governments throughout California, receive and rely on federal funding to sustain their programs and services. The arbitrary and capricious conditions and restrictions in this proposed regulation would threaten much of that federal funding, creating long-term instability and financial pressures on our grantees and on California state and local government entities. Our non-profit grantees may be forced to obtain and pay for expensive legal advice and representation to help them interpret this proposed regulation, how it may or may not apply to their current and future federal funding, and take actions to challenge or defend against the potential application of the proposed regulation to deny, restrict, place conditions on, or terminate their federal funding. The legal risks and liabilities of recipients of federal funding also would dramatically increase from the proposed regulation’s new private cause of action, authorizing any individual or organization to challenge compliance with the regulation (section 200,339(b)), which could lead to legal actions against federally- funded research, programs, and services that anyone disagrees with. In turn, as funders, we would face increased challenges to fill and respond to the enormous gaps in federal funding from this proposed regulation. Because philanthropy cannot make up for this loss in federal funding, many Californians would lose housing, education, employment, health, and social services.

In its Regulatory Impact Analysis,2 OMB ignores the potential economic and human impacts of this proposed regulation on recipients of federal funding and all Americans served by organizations that receive federal funding. OMB does note that hospitals are among the most numerous of the types of organizations that would be impacted by the proposed regulation. If any hospital loses federal funding because of the proposed regulation, there would be impacts on patients, as well as its employees, including nurses, physicians, other hospital staff, and those conducting business with the hospital, such as affiliated physicians, clinics, laboratories, and pharmacies.

The Regulatory Impact Analysis fails to discuss any of these potential economic and human impacts, noting only that compliance with the “policy reform” provisions of the regulation may have “composition effects on the types of grants and entities” that receive federal funding, while not affecting the “overall level” of federal funding. This conclusion is internally contradictory because if there are such widespread violations of the current Administration’s policies and procedures that justifies the “policy reform” being proposed, then a significant number of current federal grants would be impacted and threatened with termination, which would in turn cause significant economic and human impacts on recipients of federal funding. On the other hand, if there is no impact on federal funding, then the rationale for policy reform is significantly weakened. OMB’s failure to appropriately identify and consider these economic and human impacts in the development and promulgation of this proposed regulation makes the proposal arbitrary, capricious, and contrary to law.

For more information, please contact comms@calendow.org. Thank you for your consideration of our comment.

Signed,

Alliance Healthcare Foundation

Archstone Foundation

Arlene & Michael Rosen Foundation

Blue Shield of California Foundation

California Community Foundation

California Donor Table Fund

Community Foundation of the Valleys

Dr. Bronner’s Family Foundation

Fund for Housing and Opportunity

Grove Foundation