Proposed Bill Threatens to Claw Back Federal Grants from Cities That Cut Police Budgets

This proposed legislation, officially titled the “Defund Cities that Defund the Police Act of 2025,” aims to yank federal funding from any state or local government that significantly reduces its law enforcement budget. Essentially, it creates a mechanism to penalize cities and states that decide to cut police funding by blocking their access to major economic development and community improvement grants.

The Federal Funding Tripwire

Here’s how the bill defines a problem area: A jurisdiction becomes a “Defunding State” or “Defunding Locality” if it gets rid of a law enforcement agency or “seriously cuts” its budget. There’s one crucial exception: if the budget cut is due to a “significant decrease in its income” (meaning a major revenue slump), the jurisdiction doesn’t get penalized. This is the bill’s attempt to distinguish between budget cuts made for policy reasons versus those made because the tax revenue simply dried up, but the language around “significant decrease” is vague enough to cause major headaches down the line (Section 2).

If a city or state trips this wire, they immediately lose access to two major streams of federal cash: Economic Development Administration (EDA) grants and Community Development Block Grants (CDBG). For the average person, these aren't just bureaucratic acronyms—they are the money used for local infrastructure projects, revitalizing downtowns, job training programs, and essential services like fixing local streets or supporting affordable housing initiatives. If your city is labeled a “defunding locality,” all those projects come to a screeching halt (Section 3).

What Happens When the Funds Stop?

This bill doesn’t just stop future funding; it demands a refund. If a state or city is already receiving EDA or CDBG money and then decides to cut its police budget, the Secretary must demand the immediate return of those funds. Imagine a city that just started building a new community center using CDBG funds, only to have the federal government demand the money back mid-construction because they reallocated $5 million from the police department to mental health services. That project dies instantly, leaving taxpayers with an unfinished building and a huge financial liability.

Crucially, the bill dictates that any returned funds are then reallocated only to eligible, non-defunding localities within that same state. This creates a clear incentive structure: local governments that maintain or increase police funding get a shot at the money taken away from their neighbors who chose a different funding path. For residents of urban areas—where these police budget discussions often take place—this means their access to vital community development funds could be cut off entirely, even if they desperately need the housing or infrastructure improvements CDBG funds provide (Section 3).

The Real-World Cost of Local Control

For local officials and budget analysts, this bill is a massive federal intrusion into local fiscal autonomy. It essentially forces local governments to prioritize police spending over other needs, regardless of local policy preferences or voter demands. If a city council decides that its public safety needs are better served by investing in social workers or violence interruption programs rather than hiring more officers, this bill says: that’s fine, but you lose your federal money.

This also creates a massive administrative risk. If a state faces a genuine revenue shortfall and makes cuts across the board—including the state police—it would have to prove to the federal government that the revenue loss was “significant” enough to justify the cut. If the federal agency disagrees with the accounting, the state loses millions in development aid. The bill ties local decisions about public safety budgets directly to the funding for everything from small business loans (EDA) to senior services (CDBG), making a local budget decision suddenly a high-stakes federal gamble.