The federal government supplies roughly $1 of every $10 that pays for America’s public K-12 schools each year. That’s been true for much of the 21st century, and it’s still true today.
Even so, for many school district leaders, recent experiences with federal money, no matter how small a share of their overall budget, have been tumultuous.
That’s because the second Trump administration has moved aggressively to implement its policy agenda, at times apparently defying the law and the Constitution in the process.
In less than half of President Donald Trump’s second four-year term, the administration has canceled hundreds of grants and contracts worth billions of dollars, dismantled agencies, delayed formula fund payments, frozen research spending, floated major changes to rules and regulations, and launched politically motivated investigations.
(The administration has defended these moves by saying it’s no longer disbursing federal funds on “autopilot,” that previously awarded funds represented Biden administration priorities, and that it’s reviewing funds to ensure they don’t “subsidize a radical left-wing agenda.”)
All of these moves are significant on their own, and I’ve covered them extensively. But the federal turbulence also has helped shine a brighter spotlight on the perennially precarious structures underlying school finance at all levels.
The state and local shares of K-12 investments nationwide are roughly 45 percent each. At those levels, too, school funding is complicated and volatile, which means school district leaders will likely have to confront lots of unknowns for the 2026-27 school year, making planning difficult.
State education budgets face new pressure
States—regardless of the political party in power—are facing unprecedented pressure to greenlight new investments that support private educational alternatives to traditional public schools.
Republican-led states have launched or expanded programs in recent years that supply public dollars for private school tuition and other related expenses.
And all states will have to decide by the end of the year whether to allow their residents to take advantage of new federally subsidized tax-credit scholarships for public and private school students alike. Public schools will have to contend with nearly all of their students being eligible for scholarships funded through this program—and, in some cases, with the possibility that they too will be able to set up structures to benefit from those funds.
At the same time, states’ public education funding formulas need continual reworking. Some haven’t been updated in decades, and others are falling well short of policy mandates and court orders to supply adequate funding for all K-12 students.
It’s not enough, scholars and advocates say, to invest a sufficiently large dollar amount per student. Targeting investments to the schools and students in greatest need can be far more effective for boosting student achievement—but repeatedly honing new formulas requires time and, yes, even more resources, no matter how scarce they might be.
But as the work of refining education investments continues, state revenue is tightening in many places. That trend looks likely to continue, as ripple effects from last summer’s passage of the One Big Beautiful Bill Act in Congress shift more funding responsibilities for key social service programs like Medicaid and SNAP onto state ledgers.
At the local level, enrollment declines and pressure to cut property taxes
That brings us to the local piece of the vexing school finance puzzle. There, too, the outlook is dicey.
K-12 enrollment is dropping precipitously in many places. Federal projections suggest even greater drops ahead as the effects of declining birth rates and immigration continue to play out.
Yes, fewer students mean fewer state dollars, but the decline also can mean less community buy-in for costly school projects that require voter approval. The decline of the commercial-property industry, meanwhile, is shifting more of the tax burden to homeowners, a phenomenon that’s caused no small amount of consternation.
Indeed, pressures on property taxes—the foundation of local investments in the nation’s 13,000 public school systems—aren’t just coming from the local level. Responding to a surge in gripes, a growing number of governors and state lawmakers—mostly, but not exclusively, Republicans—have implemented or pushed policies to stem the explosive growth in property tax bills many homeowners have endured in recent years.
Those tax cuts often come with promises that state investments will make up the revenue difference and help avoid disruption in public services like schools. But many experts see those promises as hollow—there’s no guarantee legislators will uphold those commitments, especially if broader economic forces take a dent out of future revenue. That might help explain why no state in the nation’s history has ever seen its residents approve a ballot measure that would eliminate property taxes altogether.
Federal funding turbulence highlights financial turbulence at all levels
Considering all of these pressures together, it’s little wonder why federal turbulence has played an outsized role in alerting the public to schools’ shaky financial fortunes.
Of course, not all of the federal disruptions of the last year and a half have stuck. With the help of court rulings and bipartisan backlash, education advocates have helped revive some canceled projects, slow some efforts to shrink the federal workforce, and block some abruptly announced policy changes.
Still, uncertainty looms large. Only one chamber of Congress has even begun drafting its federal education budget for the 2027-28 school year, and that bill—from House Republicans—includes billions of dollars in cuts. Conventional wisdom suggests the Senate’s version will look more similar to current-year levels—but that version may not emerge until after the deadline for lawmakers to either reach a short-term agreement or shut down the federal government (again).
It also remains to be seen how much the Department of Education’s ongoing effort to scatter most of its programs across six other federal agencies will affect the delivery of funding and the implementation of programs nationwide. Depending on which party controls Congress after this November’s midterms, lawmakers skeptical of the Education Department’s dismantling might be emboldened to slow down those changes or the department’s critics may feel empowered to codify the agency’s fragmentation.
Another wild card is the White House Office of Management and Budget, run by Trump appointee Russell Vought. Under Trump, OMB has asserted unprecedented control over federal spending, and has withheld billions of dollars for education at various points for vague reasons. Congressional decisions only hold so much weight when executive branch leaders override lawmakers’ intent.
What does all of this mean for schools?
It means the uncertainty and instability they regularly experience is magnified.
District leaders in Tucson, Ariz., for instance, asked schools to prepare two budgets for this school year: one with a 10% reduction year over year, and another with a 30% reduction.
“We took a fairly conservative approach with everyone,” said Ricky Hernandez, the district’s chief financial officer.
It means their short- and long-term decisions about where and how to direct resources are getting tougher.
“Even when ESSER [pandemic-relief] funds were tapering off, we were planning and evaluating a year before to know exactly what programs would be beneficial to the district, that would be ones we would want to consider sustaining because of their impact,” said Masana Maillard, the chief financial officer for the Gwinnett County schools in Georgia.
That kind of forward-looking planning, while time-consuming, is essential now, she said.
And it means that the state and local pressures schools are facing nationwide are poised to become even more central to districts’ planning and strategy—because the slice of their budgets funded by the federal government is no longer as predictable as it once was.
As of now, the Tucson schools are operating with a budget that’s 10% lower than last year, while individual departments within schools have experienced cuts of 30%.
Hernandez cautions, though, that those numbers could change again: “This is assuming that the bottom doesn’t fall out, like it did last year.”
