July 11, 2025
Written by Noelle Ellerson Ng, Associate Executive Director, Advocacy & Governance
On June 30, the U.S. Department of Education (USED) announced it would not release FY25 funds for several key federal education programs as appropriated by Congress. According to the Department:
“Given the change in Administrations, the Department is reviewing the FY 2025 funding for the [Title I-C, II-A, III-A, IV-A, IV-B] grant program(s), and decisions have not yet been made concerning submissions and awards for this upcoming academic year. Accordingly, the Department will not be issuing Grant Award Notifications obligating funds for these programs on July 1 prior to completing that review. The Department remains committed to ensuring taxpayer resources are spent in accordance with the President’s priorities and the Department’s statutory responsibilities.”
These programs represent over $6 billion in federal support that school districts across the country have already budgeted for and are depending on to provide essential services and supports to students.
More than a week later, we have key updates, technical clarifications, and additional context to share:
Updates
-
Funds remain unavailable. States and districts have not yet received FY25 allocations for the affected programs.
-
AESA’s position: We strongly oppose the withholding of funds. The Office of Management and Budget (OMB) is wrong to delay release of these Congressionally appropriated dollars.
-
Congressional response underway: AESA is working with a group of bipartisan Congressional offices interested in circulating a “Dear Colleague” letter urging USED and OMB to release the funds without delay.
-
Action needed soon: We anticipate calling on our members to contact OMB early next week.
Technical Clarifications
1. Supplement, Not Supplant (SNS)
We’ve received many questions from ESA leaders and affiliates about SNS provisions. Here’s what you need to know:
-
As long as a fiscal year remains open, fund movement is expected and permissible.
-
A 2013 USED letter remains on record confirming that if a local education agency (LEA) covers a federal program cost with local/state funds due to a federal delay, and then later replaces those funds once federal dollars arrive, this does not violate SNS rules.
-
While Title I under ESSA uses a methodology test rather than a cost test, the older SNS cost test still applies to other affected programs (Titles II-A, III-A, IV-A, IV-B).
-
This letter provides a defensible basis for LEAs to temporarily use local/state funds without triggering SNS violations—though it is unclear whether the current administration will uphold this interpretation.
2. Carryover Funds
-
USED and OMB have not frozen previously awarded funds, including carryover dollars.
-
States should still have access to unobligated funds from 2023–2025, including some COVID-era funds still under Tydings Act waivers.
-
If a state is not allowing districts to use carryover to offset this shortfall, that is a state-level problem—and it must be addressed by the state.
-
Bottom line: Legally, carryover funds can and should be used.
3. Applying for FY25 Dollars
-
Some states are delaying the release of 2025–26 grant application systems, which could limit an LEA’s ability to backdate expenditures when funds are eventually released.
-
LEAs should work with state affiliates to ensure their SEA allows districts to file “substantially approvable” applications (e.g., letters of intent or assurances) to protect their reimbursement eligibility.
-
If that’s not possible, LEAs should request pre-award cost approval to ensure expenses incurred prior to approval are still eligible.
Additional Context: What’s Behind the Withholding?
AESA is carefully using the term “withholding” to describe the current situation. It’s important to distinguish between:
-
Withholding: An executive branch action that delays or restricts use of Congressionally appropriated funds. Governed by the Impoundment Control Act, this is what USED/OMB is currently doing.
-
Impoundment: A refusal by the executive branch to spend funds. Also governed by the Impoundment Control Act and generally requires Congressional approval.
-
Rescission: A formal proposal from the President to cancel specific funds. If Congress does not act within 45 days, the funds must be released.
While there is currently a rescission package under review in Congress (with a July 18 deadline), these education funds are not in it—but we are monitoring closely.
So what’s the motive?
While we can’t say definitively, it appears the administration may be attempting to use the delay as leverage—possibly in response to how some districts planned to use FY25 funds in ways not aligned with the administration’s policy goals (e.g., inclusive after-school programming, bias-reduction training under Title II).
There is no legal basis for a permanent rescission or impoundment of these funds. In fact, a June 2025 GAO report reinforces that federal agencies must release Congressionally appropriated funds when statute requires it—which is the case here.
We will continue to monitor this developing situation closely and will keep you informed. In the meantime, we urge all members to stay engaged, work with your state affiliates, and be ready to act when the time comes.