Last week, the Seattle school district received a check for close to $8 million from the Internal Revenue Service. That money represents 40 percent of the total cost of the recently-completed installation of energy-efficient geothermal heating systems in three school buildings.
The district was eligible for that money because of a combination of two Biden-era programs. One is a series of federal tax credits for individuals and businesses that install clean-energy systems or purchase electric vehicles. The other created a direct-pay program that allows school districts and other governments and organizations to apply for those tax credits, even though they don’t pay taxes.
The Seattle district had previously outfitted 16 other schools with similar systems, and is hoping to do the same for four more of its 150 school buildings in the next two years. But the prospects for getting reimbursed again are not as strong as they were up until recently.
“We’re not counting on the revenue we’re going to get for these next four projects until we actually have the revenue in hand like we do today,” said Richard Best, director of capital projects and planning for the Seattle schools.
That’s because both programs are now in jeopardy. The incoming Trump administration and Republican majorities in both houses of Congress are gearing up to undo at least some of the Inflation Reduction Act, the sweeping package Congress approved in 2022 to help the country fight climate change.
Another Inflation Reducation Act program at risk of an early exit is the Clean School Bus program, a series of grants and rebates offered to school districts to help mitigate the steep upfront cost of purchasing electric school buses. Congress allocated $5 billion in total for that program; the Environmental Protection Agency so far has awarded $2.8 billion to more than 1,000 school districts.
That money won’t all be wiped out. Once a recipient of federal funds, like a school district, has committed to spending the money, the federal government has fewer tools at its disposal to claw those funds back.
Still, districts that have been eyeing these programs and working them into their long-range plans are now feeling jittery about the possibility that access to those federal funds may go away.
“We think this is a generational funding opportunity for school districts, and is poised to be the largest federal investment ever in school facilities,” said Sara Ross, co-founder of UndauntedK12, a nonprofit that helps schools invest in clean energy. “We’re not going to sit by idly and let that be taken away from us.”
Here’s a look at some of the key programs for school facility upgrades, and how they’re expected to fare during Donald Trump’s second term.
Tax credits through direct pay
Trump and a Republican-dominated Congress are hoping to pass a tax policy package in the early months of the new year. Some of that package will likely include a wide range of tax cuts, including the extension of tax cuts passed during the first Trump presidency that are set to expire soon.
In order to pay for those tax cuts, Trump and his party have signaled a desire to roll back at least some of the clean-energy tax credits in the Inflation Reduction Act. In particular, the president-elect’s team is already looking to eliminate the tax credit for consumers purchasing electric cars, Reuters reported.
So far, though, they haven’t publicly targeted any of the credits that affect school districts. Earlier this month, top lawmakers on Capitol Hill said they haven’t yet decided which tax credits they want to keep. Some House Republicans have urged leaders to maintain many clean-energy tax credits so they continue to spur investment in their home districts.
Direct pay, sometimes known as “elective pay,” hasn’t come up in Republican lawmakers’ public comments about the Inflation Reduction Act. The program currently has no funding cap and is set to continue through 2032.
All districts can currently apply to receive 30 percent of the cost of systems like solar panels and geothermal heat pumps in the form of a check from the IRS. Some districts are eligible for bigger reimbursements if they’re located in a low-income community and if the project uses materials manufactured in the United States.
In recent weeks, a handful of school districts and private schools have begun receiving checks from the program, in some cases only weeks after filing with the IRS, Ross said. Those recipients are helping pay for solar panels in a Wisconsin school district and heat pump HVAC systems at schools in Iowa and Kentucky, among others.
Some districts are also applying for tax credits to further reduce the cost of electric school buses they purchased with funding support from the EPA.
Any changes to the tax code that pass next year likely wouldn’t take effect until Jan. 1, 2026. Clean-energy advocates are urging school districts to start construction as soon as possible on projects for which they hope to secure federal funds through direct pay.
Undaunted K12 has identified more than 400 projects currently underway in school districts nationwide that are eligible for direct pay reimbursements. Just last week, the Menasha school district in Wisconsin announced a solar energy storage project it hopes to pay for in part with direct pay tax credits.
Funding support for electric school buses
Several states in recent years have mandated that school districts transition to fully electric bus fleets in the next decade or two. Districts in many other states have begun investing in electric school buses, which emit fewer toxic fumes and unpleasant odors, but cost significantly more upfront than traditional diesel buses.
Since the passage of the Inflation Reduction Act, the EPA has been accepting applications in several rounds for schools to collect grants and rebates for electric school buses.
So far, the agency has announced awards totaling $1.8 billion in rebates and $965 million in grants for clean-energy school transportation. Most of the money has gone toward electric school buses, while a little bit has gone toward electric-vehicle charging infrastructure as well as buses that run on natural gas.
Districts that intend to accept those dollars should prioritize signing the paperwork and finalizing their purchases as soon as possible, Ross said.
The federal government is unlikely to target projects that are already underway because such a move could prompt a political backlash, said Julia Martin, legislative director for the Bruman Group, a law firm that represents K-12 school districts.
“If your community knows you’re getting XYZ, and all of a sudden we’re not getting that, it doesn’t play quite as well when the sign is already up,” Martin said.
Indeed, Sen. Shelly Moore Capito, R-W.V., last month called the notion of clawing back EPA money that’s already been allocated to particular expenses “a ridiculous thought.” Capito will chair the Senate committee on the environment starting in January.
Still, the EPA has yet to dole out slightly less than half the funding allocated for the clean school bus program—which means the incoming Congress could nix it.
The EPA is currently accepting applications for another round of rebates, with a submission deadline of Jan. 9. The agency will award just shy of $1 billion to districts next May.
Districts can apply for funding to support purchases of up to 50 buses—double the number of buses eligible for EPA rebates during previous rebate cycles.
Meanwhile, a lesser-known source of federal funding support for electric buses looks more secure.
The Inflation Reduction Act gave the EPA $27 billion for a “green bank” program, with funds going to nonprofits and governments that in turn offer low-cost loans to help accelerate investment in clean-energy projects.
One of those loans consists of $75 million that will flow to Highland Electric Fleets, which the company will use in concert with other money to ramp up production and distribution of electric school buses in several states.
Because that money has already been committed for a particular purpose, the federal government under Trump likely won’t be able to pull it back.
Federal support for school infrastructure
Applying for federal funds is no easy task. The direct pay program, for instance, requires districts to submit invoices and other documentation that clearly show how they financed the project.
A lesser-known feature of the Inflation Reduction Act was a new grant program called Supporting America’s School Infrastructure. This past January, the U.S. Department of Education offered $37 million in grants to seven states and the Commonwealth of the Northern Mariana Islands, a U.S. territory, that will expand technical assistance and support for school districts looking to upgrade their facilities, with a particular focus on modernization and sustainability.
Several other states applied for those grants and didn’t receive them, and several more wanted to apply but didn’t pull together the materials in time to submit, Ross said.
The Trump administration has signaled a desire to dramatically scale back federal investment in K-12 education, and one of Trump’s campaign promises was to close the U.S. Department of Education. Whether these proposals will come to pass, and whether funding that currently flows through that agency would survive a transition to another agency, remains to be seen.
A reduction in federal funding for technical assistance would result in more districts—particularly smaller districts and those in rural areas—struggling to move forward with necessary improvements to their buildings and energy output, Ross said.
“Not all districts have the capacity that they have at Seattle Public Schools,” Ross said. “States can play a key role in supporting districts, especially districts that are resource-constrained and capacity-constrained.”
