Federal Education Funding 101: Everything You Need to Know


Published on June 16, 2023 and updated on November 9, 2023

How the Debt Ceiling Deal Could Impact Future Federal Education Funding

The U.S. Congress passed, and President Biden signed legislation to avoid defaulting on the U.S. government’s loans. Congress nearly failed to raise the debt limit, which is the amount of money the government can borrow. The U.S. actually reached the debt limit in March; however, the U.S. Treasury had been doing some fiscal juggling to avoid defaulting on the U.S. debt. If the U.S. were to have defaulted on its debt (not pay its bills), it could have had a devastating impact on both the U.S. and the world economy.

The debt ceiling deal, called the Fiscal Responsibility Act, raises the debt limit until January 2025. This effectively avoids another debt ceiling battle until after the 2024 presidential elections.

The Biggest Concerns About the Debt Ceiling Deal

The battle in the U.S. Congress to pass a debt ceiling deal raised significant concerns in other areas. Even though the U.S. didn’t default on its debt, because breaching the debt limit was used as a bargaining tool to push political priorities, organizations that issue credit ratings for governments may lower the U.S. Government credit rating. This is because they don’t feel that threatening the global economy for political purposes is a wise course of action.

Included in the deal that avoided a U.S. default were other provisions affecting government funding and measures intended to help reduce government spending. The measures to reduce spending in the deal include rescinding (taking back) $391 million in American Rescue Plan education funding that the U.S. Department of Education (USED) didn’t give to States, districts, or institutes of higher education. No education agency saw their ARP funds reduced so there will be no impact on the remaining funds States and districts have received. The funds being rescinded were funds that were never given out.

Future Spending Caps on Education Funding

The deal that avoided a U.S. default included other provisions affecting government education funding for the next couple of years. Spending caps for the next two years will freeze education funding at current levels for funding for the 2024-2025 school year (fiscal year 2024 or FY24), with a 1% increase in FY25 for the 2025-2026 school year. In addition, if the U.S. Congress fails to pass all required appropriations by January 1st of the FY 2024 fiscal year, there would be automatic spending cuts of 1% across all programs. The 1% cuts would mean that all States and districts would see 1% less funding for all their ESSA Title programs. For example, if your district receives $1 million in Title I funds, a 1% cut would reduce that by $10,000.

Given the difficulty in reaching a debt limit deal, it is very possible that we’ll see a fight to pass FY24 appropriations, which could result in a breach of the January 1st deadline and automatic cuts of 1%. Districts should be planning now by looking at their ESSA federal funds budgets and considering how they might make adjustments if there is a 1% cut.


The History of Federal Education Funding in the United States

April 19, 2017

U.S. Congress Urged to Retain Federal Funding for 21st Century Community Learning Center After-School Programs

On April 6th, 1,456 local, state, and national organizations sent a letter to Congressional leaders urging them to fund the 21st Century Community Learning Center (21CCLC) program (ESSA Title IV, Part B) at no less than the current funding level ($1.167 billion). The letter was sent to members of the U.S. House and Senate appropriations subcommittees that handle education funding. It highlighted that every State and almost every Congressional District has an organization supported by 21CCLC funding.

The letter was posted by the Afterschool Alliance, one of the signers, and provides evidence that afterschool programs prepare students for college and the workforce. Evidence included improved academic performance, greater likelihood to be promoted to the next grade, reductions in disciplinary incidents, and reductions in school-day absences. The letter said, “Students who regularly participate in 21st Century Community Learning Centers improve their school attendance, class participation and behavior, homework completion, and reading and math achievement scores and grades.

In addition to the letter from the 1,456 organizations, 81 members of Congress sent a separate letter to the top two members of the U.S. House appropriations subcommittee that handles education funding. That letter also urged subcommittee members to fund 21CCLC programs at no less than the current funding level. The congressional letter indicated that cutting funding to 21CCLC programs would be “devastating to families across the country who rely on afterschool and summer learning programs.”

It also provided evidence that students who participated in 21CCLC programs “showed improved behavior and performed better academically than students who did not participate in the program. Students who regularly attend these programs have better grades and behavior in school, better peer relations and emotional well-being, and lower incidences of drug-use, violence, and pregnancy.

July 27, 2017

House Appropriations Bill Retains Significant Funding for 21st Century Community Learning Center Programs

Congress worked on the appropriations bill for Fiscal Year 2018 (FY 2018, which runs from Oct. 1, 2017 until Sept. 30, 2018). The U.S. House of Representatives draft appropriations bill included retention of approximately $1 billion for the 21CCLC program. While this wasn't what advocates would have liked to see, because it includes a slight reduction in funding, it was a significant statement in support of the program. This was especially true when one considers that another major program slated for elimination by the Trump administration, Title II funding for teacher training, was eliminated in the draft House bill (a $2 billion reduction, see the EdWeek article here).

The House held hearings on the bill before bringing it to a vote. The Senate also needed to go through a similar process before a FY 2018 budget bill could be passed. It was hoped that a bill can be passed and signed by Trump before the need for another continuing resolution (CR) to keep the government running, and especially before a government shutdown if no bill or CR is passed.

About TransAct

TransAct is a strong supporter of after-school programs, including support for providers of these programs through K-12 After School Program Management Software. If you have any questions or would like more information about TransAct's After School Management software, please contact us at 425.977.2100, Option 3 or email at support@transact.com.

Dr. David Holbrook

About The Author

Dr. David Holbrook is a nationally recognized leader in federal programs administration and monitoring with expertise in Title I, Title III, Native American Education, and Federal Programs. Dr. Holbrook has also worked as a consultant with Title III of the US Department of Education and now serves as Executive Director, Federal Compliance and State Relationships with TransAct.