Updated: 14 Jul 2026
Federal funding instability affects the full Birth-20 continuum.
DEPARTMENT OF EDUCATION (USED) FUNDING DISRUPTIONS: It is common for new administrations to take office with different priorities from their predecessors. For good and sound reasons, it has also been best practice that current, approved contracts and appropriated funds are distributed as planned (and as counted on by agencies, schools, etc.). Canceling and/or delaying funds in mid-cycle creates unnecessary disruptions, gaps, and confusion for grantees, families, and students. Forward-looking budgets allow for new priorities to be incorporated, anticipated, and managed at the local level. Unfortunately, through recent budget proposals, investigations, rulemaking, and abrupt decisions, critical U.S. Department of Education (USED) funds have been cancelled, threatened and generally destabilized across the continuum. Funds that schools, districts, and states previously relied on have become uncertain.
129
USED contracts totaling $1.3 billion abruptly terminated in 2025
$28 mil.
In student mental health grants cancelled/recompeted
$18.5 mil.
Per year in Full-Service Community Schools grants cut
$5.2 mil.
ISBE’s replacement mental health grant, which restricts using funds for DEI-related activities
Impact
Programming: When funds are spontaneously withheld or cut, programs and school districts face difficult decisions. Some may be able to sustain their programing while others immediately reduce services for Illinois students. For example, when FSCS funds in Illinois were slashed, 150 programs across the state discontinued programming only a couple of weeks later.
Proposed Regulations: Agencies’ proposal of new rules would create new and unclear requirements for federal funds and as a consequence, deterring interested applicants. Namely, the General Service Administration (GSA) is proposing to require all applicants for and recipients of federal funds to certify they are not engaging in undefined DEI practices. Similarly, the Office of Management and Budget (OMB) and over 40 agencies and departments published proposed rules that would that call for each grant to be reviewed by political appointees and allow agencies to impose new grant requirements during an active grant period.
Illinois Response
- Illinois has been consistently involved in lawsuits to release impacted funds. However, the process is long, and courts do not always compel the administration to release funds during litigation, making it difficult for programs to continue uninterrupted.
Possible Federal Action:
- Congress could instruct USED to reverse the abrupt cancellation of critical education funds. Similarly, Congress and USED might consider assessing the impact of cancellations on students and school programming.
- The Government Accountability Office (GAO) could investigate the legality of the process undertaken by USED when cancelling these funds and assess the impact of these cancellations.
- Advocates should continue relaying to their Congressional representatives how the cancellation of various funds has impacted their communities. In turn, members of Congress might consider using their platform to speak out on behalf of their constituents.
- Members of Congress may consider sending a letter to Director Russell Vought voicing concerns over the NPRM and requesting that OMB rescind the NPRM.
Possible State Action:
- Advocates and the Illinois General Assembly should encourage relevant offices to ensure that their institutions are included in applicable lawsuits, and that they publicize how funding unavailability will impact them.
- With increasingly uncertain federal funding, the Illinois General Assembly should ensure state funding is robust, equitable, and stable across Early Childhood, K-12, and Higher Education.
- The Illinois General Assembly should maintain adequate funding for the Attorney General’s Office to pursue legal remedies.
DELAYED FUNDING: Despite the FY26 appropriations maintaining level funding for important education line items, recipients are seeing delays in funding disbursement. Before agencies can spend the funds appropriated to them by Congress, the Office of Management and Budget (OMB) must disburse the funds to each receiving agency. In previous budget cycles, OMB allocated all funds to agencies within two months of the budget being finalized. However, for FY26, many programs are still awaiting funds 6 months after the passing of the budget. On June 30th, 2026, the National Center for Learning Disabilities and other education organizations sued OMB and the U.S. Department of Education (USED) over the withholding of these appropriated funds.
$585 mil.
In IES funding withheld by OMB, stalling USED's research arm
$1.8 bil.
Across 35 USED competitive grants with little/no FY26 funding disbursed by OMB
$50 mil.
Of $139 million released for Magnet Schools Assistance Program
$1.3 mil.
Of $150 million released for Full-Service Community School grants
Impact
Oftentimes these programs and departments run on very tight budgets, so delays in funding can result in programming cuts that are crucial for students, families, and educators.
Possible Federal Action:
- Given the unusual number and level of gaps between appropriated funding and actual disbursement, the Government Accountability Office (GAO) might investigate the misalignment between Congressional intent and OMB’s disbursement of funds. Congress could also instruct the GAO to investigate both the legality and impact of delayed grant distributions, especially for Title III funds, which puts approximately $30 million funds intended to support English Learners in Illinois at risk.
- Members of Congress might send a letter to OMB Director Russell Vought urging him to respect Congressional intent and disburse the appropriated funds with the goal of (1) getting dollars where they are intended and approved to go, and (2) to ensure this backdoor way of circumventing financial and budgeting checks and balances and Congressional intent does not become normalized.
- Congress might consider creating additional protections to ensure students and districts receive current and future funding on time and in correct amounts.
Possible State Action:
- As federal funding becomes more uncertain, it is that much more important for state funding to be robust, equitable and stable across the continuum. The state should stay the course on key investment, including EBF.
- If funds are distributed late, agencies and district leads could support recipients to ensure that they can spend their funds before they expire.
- Illinois state leaders should identify programs vulnerable to federal delays, prioritize technical assistance for districts, and work with the Governor and the Illinois General Assembly to establish a pathway that minimizes disruptions to services for students, especially English Learners and other historically underserved populations, when federal funds are delayed.
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