When ascending to the Office of New York State Governor following the resignation of Andrew Cuomo, Kathy Hochul's very first Executive Order cemented New York as a "Sanctuary State."
That stroke of a pen could cost the Empire State billions of dollars in federal funds.
New York State could be at risk of losing federal dollars under a new directive issued by the Trump administration’s Office of Management and Budget, which is demanding a detailed accounting of all federal funding flowing into so-called “sanctuary states.”
The OMB memorandum, dated Jan. 20, 2026, instructs every federal agency to provide a complete spending report on grants, loans, and contracts benefiting New York and other states identified in an attached list.
According to the memo, “the purpose of this BDR is to collect a detailed spending report on Federal funds provided to entities in a select list of States.” Officials say the data will be used to understand the “scope of funding in certain States and localities” and to support potential efforts aimed at reducing “the improper and fraudulent use of those funds.”
Although the administration insists the request is only informational, critics fear the effort could lay the groundwork for future cuts. The memo states that the information could help “facilitate efforts” to reduce spending “through administrative means or legislative proposals to Congress.”
Federal agencies are being ordered to identify all forms of support, including “all grants… cooperative agreements, loans, contracts… and other monetary awards,” covering state government, localities, universities, and nonprofits operating in New York.
OMB stressed the report “does not involve withholding funds,” adding that it “therefore does not violate any court order.” Still, New York leaders have warned that federal dollars supporting education, transportation, health care, and emergency services could be at stake if the state’s sanctuary policies become a target.
Agencies must have submitted their findings by January 28th, with OMB review due on January 30th. The directive covers actual obligations in fiscal year 2025 and estimated obligations for 2026, including “potential obligations arising in the near future.”
For New York, the memo marks a new escalation in the administration’s scrutiny of states that limit cooperation with federal immigration enforcement.