by Mindy Klowden, Managing Director, and Tym Rourke, Managing Director for Advisory Services
On August 7, 2025, President Trump signed a sweeping Executive Order (EO) titled Improving Oversight of Federal Grantmaking. This directive places more political control over federal grants by centralizing review under agency heads or political appointees, granting midstream termination authority, and requiring strict alignment with administration priorities. This is more than a procedural update – it could reshape how federal discretionary grants are designed, awarded, and distributed.
This EO could have implications for state and local government agencies, behavioral health providers, and beneficiaries of grant-funded mental health and substance use disorder (SUD) services. The EO alters not just who gets funded but also how programs must be designed and sustained in an increasingly politicized environment.
Increased Political Scrutiny Across All Behavioral Health Programs
Under the EO, senior political staff must review all discretionary grants to ensure they serve “national interests” as defined by the administration. This creates an additional layer of political gatekeeping for agencies like the Department of Health and Human Services and its operating divisions the Substance Abuse and Mental Health Services Administration (SAMHSA) and Health Resources and Services Administration (HRSA), as well as other federal agencies that make funds available for behavioral health-related efforts. This shifts decision-making away from subject matter experts toward appointees with political accountability and would create a dynamic that would potentially alter the core functions of discretionary grant programs between transitioning administrations.
The EO doesn’t operate in isolation. It parallels other recent administration actions, such as the Ending Crime and Disorder on America’s Streets EO, which promotes criminal penalties for public drug use and specific manifestations of mental illness in public spaces. In line with the EO, SAMHSA issued a “Dear Colleague” letter that curtails support for “housing first” approaches and tightens restrictions on the use of federal funds for certain harm reduction activities.
Behavioral health programs that rely on evidence-based practices but address politically sensitive populations could face heightened scrutiny or outright rejection. Established initiatives could be terminated mid-stream if deemed inconsistent with the administration’s evolving priorities.
The most recent EO focuses on discretionary funding—federal resources that are often put out to competitive bid, such as SAMHSA’s Certified Community Behavioral Health Clinic expansion grant program, Drug Free Communities Support Program, and the HRSA Bureau of Primary Care health center expansion grants. Taken together, the EO’s focus on discretionary funding and its midstream-termination authority increase the likelihood of delayed, rescinded, or nonrenewed awards, putting additional pressure on state and local budgets to backfill lost funds and avoid service disruptions.
Effects on Innovation and Equity-Oriented Care
The EO explicitly prohibits the use of federal grant funds to support activities that:
- involve “racial preferences or other forms of racial discrimination”
- “deny the sex binary in humans or the notion that sex is a chosen or mutable characteristic”
- support “illegal immigration”
- promote what the order defines as “anti-American values”
For behavioral health, these exclusions threaten the viability of programs designed to close well-documented disparities in access and outcomes. They could harm vulnerable communities that depend on tailored, inclusive interventions.
For example:
- Behavioral health equity programs targeting communities of color could lose eligibility if they are perceived as “race-conscious.”
- LGBTQ+ mental health support groups—already under political attack in some states—may be defunded.
- Trauma-informed care for asylum seekers could be deemed ineligible, despite strong evidence of its necessity.
- Tribal communities may see further administrative and other resource barriers, limiting their capacity to support their communities.
Without explicit funding for these communities, disparities in behavioral health outcomes are likely to widen.
Disruptions to Service Continuity and Workforce Stability
Many behavioral health providers operate on tight funding schedules, often braided together from multiple short-term federal, state, or local grants. The EO’s new review and approval process is expected to pause or delay new funding announcements until new oversight mechanisms are implemented, potentially creating delays in contract procurements, renewals, and reimbursements for work on existing contracts.
The EO’s authorization to cancel or otherwise claw back funding already awarded may also create a chilling effect that will deter organizations from seeking federal dollars, or to forgo workforce or capacity efforts out of fear that existing revenue streams may be unexpectedly taken away. This could hinder the expansion of capacity and workforce stability, particularly in underserved communities.
Strategies for State and Local Governments, Providers, and Community Leaders
Agencies that utilize federal funds to fund and implement behavioral health services should act now to audit their risk, diversify funding, and prepare for rapid changes. Early engagement with policymakers and funders will be key to safeguarding services and making clear impacts of these decisions to community supports and patient care. Below are four specific steps agencies should consider.
- Inventory existing grants and flag programs at risk of being terminated or not renewed. Strengthen compliance where feasible and not in conflict with the agency’s mission.
- Monitor and adapt to language changes in Federal Notices of Funding Opportunity (NOFOs). Watch for shifts in eligibility criteria that might signal risk to the agency’s funding stream.
- Diversify funding sources. Reduce reliance on discretionary federal grants by cultivating state, philanthropic, and other funding. Explore opportunities to enter in-network arrangements with commercial and employer-sponsored health plans, and negotiate value-based care contracts.
- Document outcomes rigorously. Collect robust data demonstrating cost savings, improved health outcomes, and reduced system burden, and share results with key stakeholders.
President Trump’s Executive Order on Improving Oversight of Federal Grantmaking represents a profound shift in the administration of discretionary federal funds, particularly for behavioral health. Providers and agencies must act quickly to assess vulnerabilities, diversify funding sources, and engage with policymakers to safeguard essential services—recognizing that in this newly politicized funding environment, the ability to adapt will determine the survival of critical behavioral health programs.
Scenario planning can assist behavioral health providers, government agencies and community leaders in preparing for an uncertain future. The process of scenario planning helps decision-makers identify potential outcomes and impacts, build a nimble response strategy, and manage for both positive and negative possibilities. Third Horizon specializes in strategic and sustainability planning, with expertise in landscape reviews, policy analysis, facilitation and evaluation methods, quantitative data analysis, and qualitative data collection. Contact us if we can help your organization, governmental entity, or community better understand and plan to mitigate the potential ramifications of changes in the federal funding and policy landscape.