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not sure how it's gonna go exactly, but there is some resiliency built into systems where the state / organization reliant on the federal grant is operating in good faith.
while federal grants fund all sorts of activities actually provided by state governments, those state governments basically front the money for salary and materials based on the agreement, then yearly bill the feds via reporting and invoicing.
so what this really is, in my analysis, is a signal to bad faith actors in state governments to come down hard on federally funded projects by insisting the bill won't be paid in the future, so they need to furlough state workers on whatever federally funded projects they don't want to happen.
so you'll have some states that will continue to do the work and then bill the feds and take them to court if they don't pay, because the agreement to pay (the grant award) is a legal contract. and you'll have some states that let some local politicians take a wrecking ball to the place and gut whatever capacity they feel like targeting.
this move is basically trump giving the statehouse jackals some free shots to fuck with state government.