Santa Clara County court victory keeps millions in federal funds

Millions of dollars will be preserved for Santa Clara County after an appeals court backed the county-led lawsuit against President Donald Trump’s administration for imposing politically motivated restrictions on federal grants.

The Ninth U.S. Circuit Court of Appeals on Tuesday affirmed a lower court decision that temporarily suspended the federal government from tying conditions onto grants to align with Trump’s policy agenda. That includes the federal government trying to prohibit programs from supporting immigrants, abortion and diversity, equity and inclusion initiatives. Santa Clara County, San Francisco and more than 70 local governments sued the Trump administration on May 2, 2025.

The decision blocks the U.S. Department of Transportation (DOT) and Housing and Urban Development (HUD) from imposing these requirements in the case known as Martin Luther King, Jr. County v. Scott Turner. The county received approximately $140 million in DOT grants and $45 million from HUD in fiscal year 2024-25. These grants preserve funding for transportation projects, community development, homelessness and more.

County Counsel Tony LoPresti said this ruling confirms the Trump administration cannot use federal grants to impose its ideological preferences on local governments.

“By preserving the lower court’s injunction, the ruling allows the county to continue to access and use federal HUD and DOT funding to provide critical housing, homelessness prevention and infrastructure services without a sword hanging over its head that the administration might cancel the grant or take enforcement action against the county based on supposed non-compliance with illegal requirements,” LoPresti told San José Spotlight.

Jill Habig, founder of Public Rights Project which represents the coalition of local governments involved in this case, said this is a victory for the people. The ruling shows the limits of the government’s authority to circumvent congressional procedures.

“Our win shows what local governments can do when they push back together,” Habig said in a statement. “The federal government can’t hold funding hostage to force local governments to abandon lawful policies. We’re talking about taxpayer dollars that provide housing, transportation, public health and other essential services.”

This is one of a dozen lawsuits the county has filed against the Trump administration. In June, the county sued the government to stop the planned U.S. Immigration and Customs Enforcement (ICE) facility in Gilroy. The lawsuit alleges the federal government illegally bypassed environmental laws, local zoning rules and other statutes in advancing the project. Federal officials agreed to temporarily halt the work until the Sept. 8 hearing takes place.

Last December, the county, San Francisco and other local governments and nonprofits sued the federal administration in its attempt to upend grants dedicated to permanent housing programs. A judge halted HUD from stripping permanent housing funds and moving it to temporary housing programs. On Aug. 7, the courts ruled the administration’s actions were unlawful.

Other actions the county has initiated against the Trump administration include a lawsuit to block an executive order ending birthright citizenship and suing Trump after he issued executive orders to deny federal funding to “sanctuary” cities, which protects immigrants by limiting local cooperation with federal immigration agents. The county has won favorable rulings in multiple cases.

Trump’s actions are putting $3.6 billion of federal funding at risk in the county every year, according to estimates previously provided by county officials. One case has protected $48 million in federal homeless funds, keeping more than 1,800 county residents housed.

“The court’s decision this week confirms that the federal administration cannot put housing and transportation services at risk by holding hostage funding that doesn’t align with their agenda,” Santa Clara County Supervisor Betty Duong told San José Spotlight. “That is not how American democracy works and our county will continue upholding our values, protecting the critical services our residents depend on, and ensuring every community can live with dignity.”

Contact Joyce Chu at [email protected] or @joyce_speaks.