Updated: 4 Nov 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.). Forward-looking budgets allow for new priorities to be incorporated, anticipated, and managed at the local level. During this period, however, through recent budget proposals, investigations, rulemaking, pocket recissions, 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: Canceling and/or delaying funds in mid-cycle creates unnecessary disruptions, gaps, and confusion for grantees, families, and students. When funds are spontaneously withheld or cut, programs and school districts face difficult decisions. Some may be able to sustain their programming 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. Similarly, in 2025, the Department canceled or withheld approximately $1 billion in appropriated funding including $350 million for Minority Serving Institutions and $600 million for teaching training grants like Supporting Effective Educator Grant (SEED) and Teacher Quality Partnership Program (TQP). In a recent report put out by the National Council on Teacher Residencies, American Association of Colleges for Teacher Education, and Deans for Impact, they found that the cancellation of teacher preparation grants placed significant operational costs on districts and increased financial strain on teacher candidates, with some grantees finding decreased enrollment in preparation programs.
Legality: The sudden cancellation, withholding, or re-disbursement of funds also calls into question the legality of these actions. For example, on September 25, 2026, the White House announced a "pocket recission" to block $810 million in congressionally appropriated funds, two days before the funding expired on September 30th. The blocked funds included nearly $100 million in education funds: $70 million for International and Foreign Language Education and $25 million for the High School Equivalency (HEP) and College Assistance Migrant (CAMP) programs. Since 2025, there have been over 30 lawsuits challenging the funding disruptions. In September 2026, a federal court ruled that USED’s cancellation of over $600 million in teacher preparation grants was unlawful.
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.
- In 2025, the Department of Education rescinded millions of dollars from the Magnet School Assistance Program (MSAP) intended for Chicago Public Schools (CPS) over alleged violation of civil rights laws presented by CPS’ Black Student Success Plan and transgender student policies. CPS proceeded to sue, and in August 2026, the lawsuit was settled in CPS’ favor, granting them the return of millions of dollars in MSAP funds. The details of the settlement—including any potential changes to programming—have not been made public.
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.
- Myriad federal pressures and funding uncertainties underscore the need for the Illinois General Assembly to ensure state funding is robust, equitable, and stable across Early Childhood, K-12, and Higher Education. The state should stay the course on key investments, including EBF, and adopt a reliable funding model, such as the Adequate & Equitable Funding (AEF) formula.
- The Illinois General Assembly should maintain adequate funding for the Attorney General’s Office to pursue legal remedies.
GRANTMAKING DISRUPTIONS: In recent months, multiple agencies have proposed rules that would significantly alter the federal grantmaking process. The General Service Administration (GSA) has proposed requiring all applicants and recipients of federal funds to certify they are not engaging in undefined diversity, equity, and inclusion (DEI) practices. Separately, the Office of Management and Budget (OMB) and over 40 agencies and departments published proposed rules that would call for each grant to be reviewed by political appointees and allow agencies to impose new grant requirements during an active grant period. In September 2026, a bipartisan continuing resolution (CR) bill halted the implementation of OMB’s proposed rule until December 11, 2026. Most recently, the Department of Education (USED) published a proposed rule that would allow the agency to terminate grants "for convenience” and remove provisions designed to promote educational equity in grant opportunities.
$48.73
billion provided by the Department of Education in grant funding
6,964
new USED awards in 2026
11.9%
of Illinois’ education funding comes from federal sources
Impact
Predictable and transparent grantmaking processes and regulations are crucial for states, schools, higher education institutions, and other stakeholders to plan their programs, hire staff, and provide consistent services to students. Frequent changes to grant requirements and uncertainty about awarded funds can discourage programs from applying for federal funding, particularly for rural school districts, smaller non-profit organizations, and first-time applicants. The recent freezes, delays, and cancellation of federal funds mid-cycle for Student Mental Health and Full-Service Community School grants demonstrates how these actions can cause diminished programming and layoffs, severely impacting our students and restricting critical resources for communities.
Penalizing grantees that may not align with current administration priorities creates uncertainty around grant stability and increases barriers in ensuring all students have the resources they need to thrive. It may also reduce the number of grantees able to work on evidence-based strategies aimed at improving educational outcomes for all students. For example, research finds that increasing teacher diversity improves student outcomes across attendance, academic achievement, graduation, and level of educational attainment, especially for students of color. Under the OMB proposed rules, an organization working to diversify the educator pipeline may be at risk of losing funds, consequently harming our students’ academic outcomes.
Possible Federal Action:
- Congress might consider holding hearings with agency heads on the implementation of proposed grantmaking regulations and the impact of grant cancellations, delays, and disruptions on programs.
- 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 letters to OMB Director Russell Vought, GSA Director Edward Forst, and USED Director Linda McMahon voicing concerns over the Notice of Proposed Rulemakings (NPRM) and requesting that they rescind their agency’s NPRMs.
- Congress might consider passing legislation blocking the implementation of the GSA, OMB, and USED NPRMs, replicating and extending the current pause in the bipartisan Continuing Resolution passed by Congress.
Possible State Action:
- The myriad federal pressures and funding uncertainties underscore the need for the Illinois General Assembly should ensure state funding is robust, equitable, and stable across Early Childhood, K-12, and Higher Education. The state should stay the course on key investment, including EBF and adopt a reliable funding model, such as the Adequate & Equitable Funding (AEF) formula.
- The Illinois General Assembly should maintain adequate funding for the Attorney General’s Office to pursue legal remedies should grants become frozen or delayed.
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 experienced delays or 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 and in September 2026, a federal judge ruled that OMB must apportion withheld FY25 IES funds by the end of the month.
$465 mil.
In FY26 IES funding withheld by OMB, stalling USED's research arm
$1.8 bil.
Across 35 USED competitive grants with delayed/no FY26 funding disbursed by OMB
$539 mil.
Delayed for 10 programs until August 2026
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:
- Myriad federal pressures and funding uncertainties underscore the need for the Illinois General Assembly to ensure state funding is robust, equitable, and stable across Early Childhood, K-12, and Higher Education. The state should stay the course on key investments, including EBF, and adopt a reliable funding model, such as the Adequate & Equitable Funding (AEF) formula.
- 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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