School district leaders nationwide are bracing to lose annual federal formula funding that they consider essential for serving students, even as financial pressures at the local and state levels limit potential sources of alternative revenue.
That’s an unavoidable takeaway here from the annual conference of the Association of School Business Officials International, a membership group for school district finance chiefs. It reinforces findings from a nationally representative survey of education administrators conducted by the EdWeek Research Center in June.
More than 3 in 4 school and district leaders who answered that survey are expecting federal funding for education to drop in the coming years. Those changes are playing out as federal policy changes stand to drain tens of millions of dollars out of state coffers; annual investments in private school choice top $1 billion in some states; and proposals to slash or even eliminate property taxes threaten the foundation of most local school district budgets.
Widespread K-12 enrollment declines, meanwhile, have many districts eyeing staff reductions and school closures, even as student achievement sags and special education needs grow.
“You have to have a plan B of some sort just lingering somewhere because you have no idea whether the state or the federal government are going to do anything that might negatively impact what we’re trying to accomplish,” said Ricky Hernandez, chief financial officer for the Tucson school district in Arizona.
Some districts are preemptively assuming federal money won’t come
Between 8 and 10% of the nation’s overall investments in public K-12 schools typically come from the federal government. That share pales in comparison to the roughly 45 percent apiece that comes from state and local sources.
Even so, more than 85% of school and district leaders who answered the survey rated Title I for students from low-income families, Individuals with Disabilities Education Act grants for students with disabilities, and National School Lunch Program reimbursements as “very important” or “essential.” Those three programs are the three largest federal funding streams for schools.
Seventy percent of respondents said the same for Title II for professional development; 60% labeled Title III for English-learner services very important or essential; and a similar share, 63%, said the same for the smaller McKinney-Vento program for supporting students experiencing homelessness.
The survey, conducted between June 5 and 26, includes responses from 90 district leaders and 133 school leaders.
The Trump administration in May proposed level year-over-year funding for Title I and IDEA while reducing overall federal K-12 investments and eliminating Titles II and III, and McKinney-Vento altogether.
It remains unclear whether Congress will ultimately enact those proposals. But some district leaders are already operating as if it will.
Sharie Lewis, director of business services for the 2,800-student Parkrose district in Oregon, plans to allocate zero dollars next school year for key federal funding streams like Title II, Title III, and Title IV-A. (Title IV-A fuels a wide range of student support and academic enrichment initiatives.)
The Parkrose district received about $300,000 from those programs this year. But the Trump administration temporarily froze all three of those funding streams when money was due to flow to states in July, only releasing the money after two dozen states sued and lawmakers from both parties pushed back. House appropriators have since advanced a budget bill that nixes investments for all three starting next school year.
“Because of the uncertainty coming from the White House about next year’s appropriation, it’s too risky for a district to budget something and then not get it,” Lewis said. “Especially if you have staffing associated with that federal funding, it’s not fair to those staff.”
More than one-third of school and district leaders who answered the survey said dimming prospects for federal support have already led them to delay new academic initiatives, planned technology investments, and major building improvements.
Others, however, see little to gain from forecasting for the worst-case scenario. Shashank Aurora, chief financial officer for the 30,000-student Des Moines district in Iowa, typically starts each year’s budget planning process by penciling in a 10% reduction in federal funds, creating a cushion in case such reductions later come to pass.
Even as the House version of the federal budget bill proposes slashing Title I funding nationwide by 27%, Aurora is reluctant to craft a district budget around such a sharp decrease. The only solution if funding drops by that much, he said, is to lay off hundreds of staff members—a move administrators don’t want to telegraph to employees and the public before knowing it will be necessary.
Layoffs and program cuts could be unavoidable
Aurora would hardly be alone in resorting to layoffs if federal funding drops. Close to two-thirds of the survey respondents said they’ll compensate for potential federal funding reductions by cutting staff positions, and 53% said they’ll cut academic initiatives like tutoring and summer school.
Those aren’t the only options, though. Hernandez, CFO of the Tucson district, scrambled in early July to reassign employees rather than lay them off after President Donald Trump abruptly withheld funding that was set to cover their salaries.
An elementary reading specialist suddenly moved to an alternative education program. A researcher transitioned to a special education administrator role. All told, more than 30 affected employees changed roles—only to return to their original duties a few weeks later when the administration announced money would flow after all.
“It was such a mess because it was so inefficient,” Hernandez said.
Close to two-thirds of respondents to the EdWeek Research Center survey reported discussing federal funding more this year during budget conversations than in previous years.
Hernandez has spent recent weeks pitching colleagues on a plan to rearrange the district’s approach to doling out its annual supply of Title I dollars—roughly $22 million a year, or $478 for each of the district’s 46,000 students.
Hernandez wants to keep a larger share of Title I money at the district level, rather than releasing 70% of the unrestricted portion of the funds for school principals to spend how they wish. District leaders would then have an easier time, Hernandez said, advancing big-picture priorities with investments like math coaches or reading tutors for every school.
“If there’s a silver lining, it’s that this is an opportunity to say, ‘Is this the best way? What does it need to look like, given that these dollars are no longer going to be available at the level we’re receiving them?’” Hernandez said. “It is an opportunity to rethink how we do business—but that’s not always popular.”
School finance administrators have plenty of experience navigating sudden policy changes from their disparate funding sources, and finding creative solutions to perennial problems.
One CFO at this year’s ASBO conference told attendees her district generated revenue to cover a massive budget deficit with strategies like selling naming rights to buildings and stadiums, raising student parking fees for the first time in 15 years, and charging more for outside organizations to use district facilities. Another conference session pitched streamlining employee health-insurance costs by offering a stipend worth thousands of dollars to employees who opt out of district plans.
Still, the pressures of this year are weighing on many. Two-thirds of the survey respondents said federal funding has gotten less reliable since Trump took office in January.
The picture has hardly improved since that survey was conducted: Trump for much of July withheld nearly $7 billion in congressionally appropriated education funding; hundreds of recipients of ongoing federal grants saw their expected funds abruptly discontinued; and Education Department layoffs announced during the protracted federal government shutdown have raised doubts about future funding for dozens of K-12 and higher education programs, as staffers slated to lose their positions oversee the distribution of key funding streams.
The core challenge remains the same, though.
“We need to make sure we’re funding [district priorities] with sources of dollars that are safe and not soft,” Hernandez said. “We don’t want to fall into a position where we’re directly affecting student services. That’s the No. 1 priority.”
