Districts Brace for the Unexpected as Federal Funding Troubles Linger

Last summer, when the Trump administration abruptly withheld nearly $7 billion in formula funding for K-12 schools nationwide, school district leaders in Gwinnett County, Ga., were concerned but not panicked.

The 183,000-student district—Georgia’s largest—had enough cash on hand to weather at least three to four months of federal delays. Ultimately, the White House bowed to bipartisan backlash and released the withheld funds within a month of their original due date.

Even so, memories of that chaotic period haven’t faded. Masana Mailliard, the Gwinnett district’s chief financial officer, recently helped identify $18 million worth of district-level administrative programs and vacant positions that could be cut without harming student learning. The county’s school board approved new oversight procedures that make it easier for the district to tap into emergency reserves.

Mailliard has also been lobbying the Georgia legislature to pass a bill that would require the state education agency to issue an “impact study” 90 days after the federal government takes any action to reduce the “scope, workforce, or budget” of the U.S. Department of Education by more than 20%.

The bill didn’t pass during the most recent legislative session, but Mailliard hopes it comes back—ideally with a shorter timeline and a lower threshold of federal budget reduction that requires the state to act.

All of these moves, Mailliard said, reflect a shifting attitude toward federal funding among district leaders—particularly those with lower enrollment and more tenuous finances than hers.

“We’re truly seeing it as supplemental funding, and not a mandate that you’re going to get it every single year,” Mailliard said. “No one wants to be caught in that position again.”

More assurance of on-time federal funds this year

By some metrics, that level of preemptive concern may seem overblown.

When Congress finalized its fiscal 2026 education budget in February, most education advocates breathed a sigh of relief. The Trump administration had proposed billions of dollars in cuts and program eliminations, but lawmakers from both parties rejected virtually all of them.

That budget law also specified what had been slightly more ambiguous in recent years: Formula grants for programs like Title I (for low-income students) and the Individuals with Disabilities Education Act (for special education) must begin their trip from the U.S. Treasury to states and ultimately to districts no later than July 1.

The U.S. Department of Education in recent weeks has delivered preliminary funding allocation tables whose absence at this time last year foreshadowed the eventual disruptions. The agency has repeatedly assured districts and state leaders that this year’s July 1 installment of federal funding for schools—more than $20 billion in total—will flow to states on time, through the same grant portal as in previous years rather than the grant portal for the U.S. Department of Labor, to which the Education Department has offloaded many of its K-12 programs.

Close observers of federal politics believe the Trump administration’s decision last year to voluntarily release the withheld funding—rather than waiting to see if a court compelled the reversal—suggests White House officials were spooked by the volume of the outcry, particularly from some allies in Congress.

Some school administrators went through their budget process this year without changing their typical approach.

The Pittsgrove district in New Jersey, for instance, budgeted as in previous years with the assumption of a 15% reduction in federal funding.

“Last year there was, ‘Beware, beware, you might not receive your money,’” said Darren Harris, the 1,700-student district’s business administrator. “This year it’s been more silent.”

A U.S. Department of Education spokesperson reiterated the agency’s commitment that July 1 funding will flow on time. As for the Oct. 1 allocation, “ED is working with DOL to determine the best timeline for transition to DOL’s systems to ensure smooth implementation for states,” wrote Savannah Newhouse, the agency’s press secretary, in an email to Education Week.

Federal funding uncertainty persists for a variety of reasons

Even with positive indications to expect business as usual, surprises could still be in store.

The White House Office of Management and Budget, under the direction of Trump appointee Russell Vought, has been using the typically obscure and routine apportionment process to delay or cancel federal funding that they contend clashes with the president’s policy priorities.

For current-year appropriations, OMB is withholding from the Department of Education more than $2 billion for competitive grants. By contrast, the office appears to have apportioned all of the education formula grants according to the typical procedure.

There’s one caveat, though: Many of the apportionments for formula grants have a legally binding footnote that says the department must spend the money in compliance with Trump’s January 2025 executive order that aims to ban federal investment in “illegal DEI” initiatives.

It’s unclear whether or how OMB plans to enforce that stipulation. Earlier this year, the office called for a review of all federal spending in 14 Democrat-led states. The Education Department has threatened funding for dozens of states and school districts under investigation for policies that conflict with Trump priorities. Other federal agencies in recent months have blocked funding from flowing to certain states for childcare, Medicaid insurance, and public health.

Meanwhile, the Education Department last November announced that it would begin transferring day-to-day responsibilities for education formula grants to the Department of Labor, even as oversight of the programs remains the Education Department’s responsibility.

The implications of these changes remain unclear to many across the education field. The agencies haven’t said which agency’s grant portal they’ll use to send out the second and final round of 2026-27 formula funding for schools ($22.6 billion), which is due to states on Oct. 1.

ASBO International, the national association of school business officials, has been closely monitoring the program transitions from Education to Labor, hoping to make sure both rounds flow smoothly to states, said Elleka Yost, the association’s director of advocacy and research.

“We recognize these are complex processes that take time, and hope for a seamless transition with no issues for states or districts,” Yost said.

Some districts take a more conservative approach to budgeting

Funding for future school years is also unsettled.

President Donald Trump has twice proposed to slash billions of dollars in annual federal investment in education. Earlier this week, the House appropriations committee advanced a fiscal 2027 budget proposal that cuts $1.6 billion in annual funding for Title I; eliminates more than $3 billion combined in formula grants for teacher professional development and English-learner services; and threatens to yank federal funds from schools that allow transgender girls to play women’s sports.

That proposal is unlikely to reach the president’s desk as written. The U.S. Senate has yet to weigh in, and typically takes a more modest approach to education funding cuts, no matter which party controls the chamber.

But that may not stop district leaders from second-guessing long-term investments or holding back planned spending to brace for possible cuts that come later.

Some districts are already opting for a more conservative approach to budgeting this year than usual. Ricky Hernandez, chief financial officer for the Tucson school district in Arizona, asked school principals to plan for two federal funding scenarios: a 10% cut and a 30% cut. He’s hoping the final allocation tallies mean schools ultimately cut closer to the smaller amount.

“This is assuming that the bottom doesn’t fall out, like it did last year,” Hernandez said.

These concerns aren’t playing out in a vacuum. Pressures from federal changes, for many districts, are mounting atop projected enrollment downturns, emerging restrictions on property tax revenue growth, new competition from state-funded programs for private school choice, and rising costs for essential line items like employee health insurance.

Anticipating those pressures, Mailliard is forming an internal budget committee to review potential opportunities for the Gwinnett County district to tweak its student-based funding formula to maximize the reach of its local dollars.

“I think we have an opportunity to not rely [as much] on the Title funding in the future,” Mailliard said. “Then you have the opportunity to look at diverse needs and manage them within your own discretionary funding sources.”