. . .The action plan states that "the Federal government should not allow AI-related federal funding to be directed toward states with burdensome AI regulations that waste these funds, but should also not interfere with states' rights to pass prudent laws that are not unduly restrictive to innovation."

It's a nod to what Senate Commerce Chair Ted Cruz tried to do via reconciliation, but faced too much backlash.
The administration will put out a request for information on federal regulations it views as impeding AI innovation.

Per the report, any state laws that the Trump administration deems in conflict with the federal standards set out in the Communications Act could be used as the basis to deny funding.

OMB will work with all federal agencies with AI-related discretionary funding to ensure "they consider a state's AI regulatory climate" when making funding decisions.

AI and free speech: At the federal level, the plan calls to change procurement standards for AI deemed too liberal or "woke" and to update the AI risk management framework to delete mentions of DEI, misinformation and climate change.