After agreeing to release COVID-era school funding, feds freeze new ed funds for 2025-26 school year

July 2, 2025 | By Lisa Scagliotti 

Just three days after an announcement that federal COVID-era funding for schools would be released to school districts across the nation, including $17 million for Vermont, the federal government notified state education agencies that it would not be distributing more than $6 billion intended for several key education programs for the 2025-26 school year as anticipated. 

So just after Vermont education officials learned that $2.5 million previously on hold would be released, they were put on notice that another $26 million for the coming school year is now frozen.

The announcements have amounted to whiplash of sorts for Vermont education leaders in less than a week. On Friday, June 27, Sen. Bernie Sanders, I-Vt., announced that the federal Department of Education had agreed to release $17 million intended for 19 Vermont school districts that had been tied up since new rules were announced in March. 

That news came as a relief to school officials who were counting on the funding promised several years ago but had recently been told of new hurdles to clear, making it uncertain whether the districts would be paid what they had been expecting. 

Sanders and his staff this spring went to bat for Vermont school districts to help untangle new red tape imposed by the Trump administration. Sanders serves as the ranking Democratic-caucus member on the Senate Health, Education, Labor, and Pensions Committee. His announcement on Friday said that the Department of Education reversed its decision to cancel nearly $17 million in federal K-12 COVID-19 funding for Vermont school districts, part of $2.5 billion promised to schools across the nation. 

The decision came after 16 states and the District of Columbia filed a lawsuit in federal court to prevent the administration from revoking the funding previously promised. Vermont was not one of the states in the suit. 

According to Sanders’ announcement, his staff worked with Secretary of Education Linda McMahon to restore the funding for the Vermont school districts, an effort that involved 88 appeal applications that were cancelled in March. 

“I am very happy to announce that the U.S. Department of Education has reversed its decision to deny $17 million of COVID-19 funding to schools in Vermont and billions across the nation. This means that 19 school districts in our state will receive funding that had been denied so that they can go forward with a variety of projects — summer programs, afterschool programs and school renovation,” Sanders said in a video message. “At a time when so many of our school districts are suffering and struggling economically, this is an important step forward.”

The funding was part of the Elementary and Secondary School Emergency Relief Fund (referred to in short as “ESSER”). That money was directed to the nation’s K-12 schools as part of the American Rescue Plan Act approved by Congress and the Biden administration for economic recovery from the COVID-19 pandemic. In March, a new appeal process was announced, essentially requiring school districts to reapply for the final installments of the funding that they had previously been notified they would receive. 

In meetings with the Harwood School Board this spring, district Finance Manager Lisa Estler said she was working with Sanders’ staff to submit new documentation of the district’s use of $502,000 of the anticipated round of ESSER funds. She shared concern that if the federal government rejected Harwood’s request, the district would need to cover expenses already incurred with unallocated funds from the 2024-25 fiscal year that otherwise would be directed to the district’s Maintenance Reserve Fund. 

Sanders said he had several conversations with the education secretary to urge her to change course on the decision to withhold the promised $2.5 billion. As a result of the discussions, the federal Education Department is now expected to provide the funding to the states.

“It’s nice to have a senator who will fight for his state and for public schools,” said Harwood Superintendent Mike Leichliter upon hearing the news that the ESSER funding will be forthcoming. He said the Harwood district is “deeply appreciative of Sen. Sanders’ advocacy and work” to get the Vermont districts the funding they were promised.

“As soon as the funds were in question, he had his office reach out,” Leichliter said. “They helped [Estler] redraft our application and simultaneously, I was aware that Sen. Sanders was aggressively working in D.C. on our behalf.”

Harwood officials explained that the funds owed to the district had already been spent and the final step was to document those expenditures for reimbursement. The Biden administration in late 2024 had extended a deadline for filing the final requests to allow for the funds to be used during the 2024-25 school year. But the Trump administration reversed that decision and in March, it notified districts with applications pending that they were not guaranteed the remaining funds and they would have to follow an appeal process. 

Leichliter explained that the money had already been spent according to the federal guidelines. Harwood funded staff for instructional interventions and summer school prior to 2025 to address learning loss that came as a result of the pandemic, he said. 

In a letter to local newspapers, Harwood School Board Chair Ashley Woods and Vice Chair Cindy Senning also extended thanks to Sen. Sanders for unlocking the promised ESSER funds. “These COVID-era funds, which were authorized by Congress, were spent by the school district on various programs that improved the quality of education we offer our students, yet the new administration refused to reimburse us and school districts all across the country for these expenses, instead employing delay tactics for months,” they wrote.

Following the announcement from Sanders’ office on June 30, the Vermont Agency of Education said it would be in touch with the school districts regarding the funding, which would be distributed to state education agencies to then pass on. However, on Wednesday, a spokesperson for the agency said that the letter from Secretary McMahon on the subject did not provide a timeline or details related to when states and school districts might receive the promised ESSER funds. 

June 30: federal funding freeze announced  

But just as the ESSER funding block appeared to be resolved, education leaders got a new round of bad news from the federal Department of Education late Monday pertaining to $26 million in education funding Vermont schools were banking on for the coming school year. 

According to the Vermont Agency of Education, the federal Department of Education received word at 5:15 p.m. on Monday, June 30, that “a series of federal funding allocations for fiscal year 2025 would not be made available to Vermont public schools on July 1. Statewide, these allocations amount to $26 million in congressionally approved funding that Vermont school districts have included in their budgets for the 2025-2026 school year,” according to a Vermont Agency of Education news release on Wednesday. 

The state said that the federal department’s notification to the state advised that “Given the change in Administrations, the Department is reviewing the FY 2025 funding for [multiple] grant program(s), and decisions have not yet been made concerning submissions and awards for this upcoming academic year.” No federal funds for six programs listed will be awarded, the federal communication said, before more review is done. However, “The Department remains committed to ensuring taxpayer resources are spent in accordance with the President’s priorities and the Department’s statutory responsibilities.”

It’s unclear what this will mean for Vermont school districts that were expecting to receive federal funding and included that revenue in their 2025-26 budgets. The federal Education Department has not given any timeline of when states might expect to receive the Congressionally approved funding, “or an assurance that funds will be allocated,” the Vermont Agency of Education said. “Without this information, it is unclear when or if these funds will be available. The Agency is actively seeking clarity and continues to coordinate with our congressional delegation and national partners,” the state agency’s statement says. 

Vermont Education Secretary Zoie Saunders commented in the statement on the importance of the federal funds to the programs they support. 

“Federal education dollars support our most vulnerable students,” Saunders said. “Withholding these funds, even temporarily, disrupts districts’ ability to staff critical positions and provide a wide range of programming, including efforts to reduce chronic absenteeism and improve literacy outcomes. This decision also contributes to a culture of uncertainty that takes away from the important work our schools need to focus on to support our students.”

State education agency staff will work with school districts to assess and potentially mitigate the impacts of the federal decision, the state agency said, although it’s not clear what those steps might involve. 

The decision to withhold what amounts to between $6 and $7 billion from schools across the nation impacts funding in six specific programs. These programs provide instruction and support services to migrant children, for mentoring programs, professional development programs for teachers, as well as for English learners, mental health services, summer and after-school educational programs, as well as adult education services in literacy and civics education. 

In the Harwood district, this latest federal decision affects just over $122,000, a fraction of the funds that the ESSER freeze involved. Superintendent Leichliter said the district was expecting to receive $100,408 in the Title II program another $21,818 in Title IV funds. 

“We've been following along very closely and were afraid of this,” Leichliter said. 

According to the Vermont Education Agency, Title II funds support instructional coaches and mentoring programs, as well as professional development for teachers in subjects such as the science of reading. Title IV funding pays for summer academic programs and mental health services outside of school hours, according to the state. 

Shannon Lessley is the Harwood district’s director of curriculum and technology. She said the district was planning to use Title II funds for teacher professional learning in math, classroom training practices, and for stipends for teacher leaders who meet in “professional learning communities.” Title IV funds were to pay for outdoor learning in elementary schools, curriculum resources for school counselors, and a district committee focused on student well-being, she said.

Vermont districts have already received some of that anticipated funding from the state based on anticipated federal funding, a typical process, she pointed out. “With these recent developments, we’re hopeful that carryforward from the previous year will help us cover many of these investments, but we won’t know for sure until we complete our fiscal year closeout later this summer. In the meantime, we’re keeping a close eye on the situation and will adjust if needed,” Lessley said.

For now, both local and state education officials in Vermont are scrambling to understand the new federal funding freeze in order to decide how to respond. “The Agency is also actively seeking clarity and will continue coordinating with our congressional delegation and national partners,” the state’s announcement says, noting that it will post information on its federal updates page when it learns more.