Update on FY25 Funding Freeze
July 10, 2025
Author
On June 30, USED announced that they would not be releasing FY25 funds for certain programs as appropriated by Congress.
Specifically: 鈥�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鈥檚 priorities and the Department鈥檚 statutory responsibilities.鈥�&苍产蝉辫;
The programs in question represent more than $6 billion that schools districts have already budgeted for and are relying on to provide vital supports and services for students.
Now, more than a week later, after more than 200 school superintendents and business officials advocated in DC and on Capitol Hill as part of the annual 51萝莉/ASBO Legislative Advocacy Conference, we have some updates, technical clarifications, and additional
context we want to share with you:
UPDATES: The money is still not available to states and school districts. 51萝莉鈥檚 advocacy position on this issue opposes the overall act of withholding the funds. OMB is wrong to continue to withhold funds. As a result
we are trying to coordinate with a handful of Congressional offices who have expressed an interest in circulating a 鈥楧ear Colleague鈥� letter among their peers addressed to USED/OMB, urging them to act expediently to release all funds. We
are optimistic the letters can be bipartisan and we will be asking our members to also put pressure on the OMB early next week. Check your inbox and this blog for the call to action on Monday July 14.
TECHNICAL CLARIFICATIONS: Last week, we received a handful of inquiries from superintendents and state affiliate directors about what鈥攊f anything鈥攄istricts need to be considering as it relates to 鈥�supplement, not supplant鈥�
provisions and use of carryover funds as they look to address the federal shortfall stemming from the withholding of FY25 funds. The information below is gleaned from a legal update provided at this
week鈥檚 51萝莉 advocacy conference and from conversation with outside counsel with whom 51萝莉 coordinates on technical policy issues.
- Supplement, Not Supplant: SNS is a very situation specific analysis, but generally, ED presumes supplanting when an LEA uses Title II-A, Title III-A, Title IV-A, and Title IV-B funds to pay for costs that were supported with state or local funds the prior year. This presumption, however, can be overcome in certain circumstances. ED advised that it would not constitute supplanting to use local funds to maintain ED program services during a time of federal funding cuts and then move the costs of those services back to ED funds if they were restored in a subsequent year. While there is no guarantee this remains ED policy, districts may wish to review the attached 2013 guidance given current funding delays. Please note the attached letter is about Title I-A. At the time the letter was written, Title I-A was subject to the same 鈥減rior year鈥� supplanting presumption as currently applies to Title II-A, Title III-A, Title IV-A, and Title IV-B. Title I-A鈥檚 supplanting test changed in 2015, but the reasoning in this letter may still be relevant to other ESEA programs that use the 鈥漰rior year鈥� supplanting presumption.
- Carryover Funds: At this point, all USED/OMB has done is refuse to award 2025-26 school year funds. They have NOT frozen already awarded funds, and as such, the withholding of new (25-26) awards
shouldn鈥檛 effect carryover. States, to the best of our knowledge, still have access to the money that would/could be carried over.
- Some states may have specific processes in place that blur/blend/lump together old and new awards that would complicate the use of carryover funds to cover the shortfall stemming from the FY25 withholding, but that is a state issue that the state needs to fix.
- Bottom line, legally, use of carryover is there and can be used. To the extent that any LEA is being told 鈥榥o鈥� or the state is not allowing carryover, that is something the state can/must remedy.
- Applying for FY25 Dollars: We are hearing that some states may be acting out of precaution as it relates to the FY25 withholding and have not yet made their 25-26 school year grant application system available. This gives us pause: if/when the money becomes available, LEAs can only use the money as far back as the date by which they receive approval or 鈥榮ubstantial approval鈥� to their application to the state. (NOTE: The state defines what 鈥渟ubstantial approval鈥� is, which means the application needn鈥檛 be complete or fully approved; rather, it needs to be on record/file, something the LEA can point back to as their 鈥榟ere鈥檚 our reimburse back to鈥� date.) If you are an LEA in a state that has yet to open submissions/applications, you should work with your state affiliate to advocate with the state for them to act to accept a letter or set of assurances, something that can be deemed to be 鈥榮ubstantially approvable鈥�. If that does not happen, consider requesting pre-award cost approval for the expenses incurred prior to the application approval date to cover those expenditures.
ADDITIONAL CONTEXT: What does the current withholding tell us about what the administration may be trying to do, if anything, in terms of rescinding or impounding FY25 dollars?
- 51萝莉 is being very intentional to accurately describe the current FY25 funding situation as a 鈥榳ithholding of funds鈥�.
- Withholding vs rescission vs impoundment: the three terms are related, but distinct and the main differences between these three actions on federally appropriated funds stem from who initiates the action, if Congress approves it, and any legal authority
behind it.
- WITHHOLDING: This is a broader term for action taken by the executive branch that delays, restricts or otherwise refuses to spend/make available money that Congress has already appropriated for specific purposes. Withholding is governed by the Impoundment Control Act, which was passed to help ensure the executive branch can鈥檛 unilaterally control federal funding after Congress鈥攚ho has constitutional 鈥榩ower of the purse鈥� 鈥攈as allocated funds. Withholding is a broader term that can include impoundment and rescission.
- IMPOUNDMENT: This is a general term for not spending, in this instance, federal funds. A simple definition for impoundment is when the executive brand withholds/delays the spending of funds appropriated by Congress. Impoundment is governed by the Impoundment Control Act and (in theory) the president cannot unilaterally refuse to spend Congressionally-appropriated funds.
- RESCISSION: This is more formal, whereby the President would have an explicit proposal to cancel specific funds already appropriated by Congress. This process is also governed by the Impoundment Control Act. In a nutshell, the president sends a rescission proposal to Congress who then has 45 days to act. If Congress approves the proposal, the funds are rescinded. If Congress does NOT act, the funds are made available as Congress intended. There is a current rescission package under consideration (Congress has to act by July 18; these funds are not CURRENTLY in the rescission package, but we are monitoring to make sure they aren鈥檛 added.)
- What does this mean in the context of the current FY25 withholding?
- We have no definitive indicator of the administration鈥檚 intent: cutting the funds permanently? Causing confusion or concern for program viability at the local level?
- There is skepticism about whether these funds are the strongest case the administration could make for impoundment over a mandatory appropriation. There is a growing sense that these funds would be very hard for the administration to access via rescission.
- At a 30,000 foot level, this isn鈥檛 likely the impoundment fight the administration wants to have.
- It is likely that the administration has determined it is sitting on enough data demonstrating that LEAs are intending to use these FY25 funds in ways that don鈥檛 align with the administration鈥檚 priorities (LEAs using funds on inclusive after care programs, or Title II reducing bias in teaching); and they are interested in how they can leverage their access to FY25 funds to make in-roads on their values/priorities in education funding.
- There is a general recognition that impoundment/rescission faces a solid legal challenge; there is wider berth for the administration to consider holding the funds and releasing them with additional conditions/strings.
- A GAO report issued in June 2025 provides a possible glimpse at what may be to come. more or less laid the ground work for affirming that when Congress appropriates funds and has underlying statute that says agency must award funds, those funds must be awarded.
- By extension, the USED funding currently being withheld must be awarded.
