If you work in U.S. education, you can feel the ground moving under your feet. The pandemic-era federal lifeline is gone, the compliance load isn’t, and state budgets are starting to drive the conversation again. The question leaders ask me most is simple and uncomfortable: Where will the new funding come from—and what do we cut if it doesn’t?
This post looks squarely at that moment. I’ll explain how the federal-to-state rebalancing really works, where K-12 and higher-ed are most exposed, how states are (and aren’t) responding, the near-term outlook, and where data-driven tools—K12 Data, College Data, and Peertopia—can actually help districts and institutions protect classrooms and capacity while money gets tighter.
First, a sanity check on the role of Washington. Even before COVID-era relief, federal funds typically made up a relatively modest slice of K-12 revenue nationally—roughly one in nine dollars—while states and localities supplied the rest. In school year 2020–21, about 11% of public school revenue came from federal sources, 46% from states, and 44% from locals, per NCES’s “Public School Revenue Sources.” National Center for Education Statistics
What changed in 2020–2024 was the size and speed of federal emergency money and how districts used it. In FY22 alone, $38.1 billion in current expenditures were paid from COVID-19 federal assistance funds, with $22.1 billion touching instruction directly, according to NCES’s Revenues and Expenditures for Public Elementary and Secondary Education (FY22). That temporarily masked structural budget issues. When those dollars sunset, the underlying math reappears. National Center for Education Statistics
Deadlines mattered. ESSER III funds had to be obligated by September 30, 2024 and, generally, liquidated by January 2025 (some states initially secured extended liquidation options and then saw reversals, which created uncertainty for afterschool/summer programs). The funding cliff is no longer theoretical. Ellevation+1
Higher ed tells a similar story in reverse: state support dipped during the last decade and partially recovered. In FY2024, state and local government support for higher education totaled $139.1 billion, with federal stimulus dollars falling sharply as a share of that pie, according to the 2024 State Higher Education Finance (SHEF) report. The overall appropriations ticked up 0.8% in 2024 and sit about 18% above pre-pandemic 2019 levels—but that’s before inflation and before enrollment softness at many institutions. shef.sheeo.org+1
Bottom line: federal aid was a buoy. Now we’re back to the boat: state and local funds.
There isn’t one faucet to turn. States are assembling patchwork solutions:
General-fund prioritization. K-12 is a large claim on state general funds (often ~⅓). NASBO’s 2025 state-of-the-state summaries show governors pitching targeted K-12 increases (teacher pipelines, youth services, mental health), while warning that slower revenue growth forces tradeoffs elsewhere. That means some states will add money; others will protect baselines. Few can afford expansive new commitments. nasbo.org+1
Formula tweaks and “hold harmless.” Expect more adjustments to school-aid formulas: poverty weights, sparsity/rural weights, special-education cost recognition. Some states will use short-term stabilization or “hold harmless” provisions to soften the ESSER cliff and protect districts from sharp one-year drops. (We’re already seeing states experiment with Title I distribution mechanics; even modest shifts can create winners and losers.) Congress.gov+1
Selective tax changes and earmarks. A few states will nudge income/sales taxes, revisit caps, or expand dedicated revenues (lottery, sin taxes) for education. It’s politically fraught in an election cycle, but it will happen at the margins.
Capital via bonds; operating via efficiencies. Bonds can cover facilities, buses, HVAC, and safety—freeing operating dollars. Meanwhile, regional service sharing (transportation co-ops, joint SPED services) and procurement reform can move real money.
Private, philanthropic, and federal program “braids.” While the giant ESSER pipe is off, smaller federal streams (Title I, IDEA, CTE, competitive grants) remain—and can be braided with state, local, and philanthropic dollars to sustain narrower initiatives. (For context, the FY2024 Title I appropriation was roughly $13 billion across forward and advance funding components; mechanics matter because state adjustments shift how much actually reaches each LEA.) Congress.gov+1
None of this is as clean as “new funding.” It’s re-prioritization, formula surgery, and stamina.
Three pressure points come up in every superintendent’s notebook:
1) People costs outpacing revenue. Salaries, health benefits, substitute coverage, and stipends for hard-to-staff roles have escalated faster than state aid in many places. Special education costs, transportation, and energy also outpace baseline growth. Wisconsin is illustrative: revenue limits have lagged inflation for years, eroding real purchasing power even when nominal aid rises. wasbo.com
2) Program cliffs. ESSER paid for tutoring, counselors, summer learning, HVAC, devices—investments that districts don’t want to unwind. As the Afterschool Alliance notes, many states had lined up liquidation extensions through March 2026 for obligated funds, only to see reversals—an administrative whiplash that leaves programs stranded mid-stream. Afterschool Alliance
3) Equity gaps widen when local capacity drives outcomes. NCES shows the federal share is small nationally but large for specific states/LEAs. An Axios map underscores how federal K-12 revenue per person varies—Alaska, Mississippi, and North Dakota at the top; states like Colorado much lower. If federal pressure reduces those flows or adds more strings, the variance widens unless states backfill deliberately. Axios+1
There’s also the compliance load. Federal money now tends to carry more paperwork, not less. When grants shrink or slow but the administrative spine stays, districts eat the overhead.
Higher education faces a different geometry:
Enrollment softness + price ceiling. Many regional publics and small privates feel a demographic dip and price sensitivity. When headcount stalls, the math breaks—no matter what the legislature does.
Fixed costs keep climbing. Student services (mental health, safety), compliance (Title IX, accreditation), IT/security, and deferred maintenance don’t get cheaper. SHEF reports small nominal gains in appropriations, but federal stimulus to higher ed dropped steeply in 2024 (down over 60% from 2023), shrinking the cushion. shef.sheeo.org
Debt and capital. Buildings financed at yesterday’s rates hit today’s operating budgets. Capital dollars help, but operations need reliable annual support.
Labor structure. Heavy adjunct reliance was a pressure valve; now recruitment and retention costs are rising even for contingent faculty in some markets.
Expect continued program consolidation, mergers, more dual-enrollment and non-degree credentials—and pressure to prove labor-market relevance.
Boring but necessary: embed inflation or cost-driver recognition (transportation fuel, special-ed placements, energy) into the aid formula so districts aren’t forced into annual crisis politics. Pair that with targeted equity weights—poverty, EL, SPED, and sparsity—so rural/urban high-need districts don’t fall behind.
A 2–3 year stabilization fund helps unwind ESSER-era positions without whiplash. It’s cheaper than mass layoffs and rehiring cycles.
States are experimenting with apprenticeship models, tuition support for shortage fields, and paid residencies. NASBO’s roundup shows governors pushing apprenticeship expansion and male teacher recruitment—promising, provided programs are funded at scale and tied to real vacancies. nasbo.org
Transportation co-ops, shared OT/PT services, and joint procurement aren’t glamorous, but the savings compound—especially in small districts.
If states want to tie dollars to outcomes, do it with care: focus on measures districts actually control (attendance, on-time credit accumulation, CTE credential attainment) and provide the data infrastructure to track them without duplicative reporting.
Reward completions, Pell-student success, and workforce alignment—but guard against incentives that push institutions to enroll fewer high-need students.
Be explicit with communities: the ESSER-funded extras (low class sizes, extra counselors) were emergency-era choices. If the state isn’t replacing those funds, something gives. The most successful districts communicate the tradeoffs early and show the ROI of what they keep.
What I expect over the next 24–36 months:
Uneven fiscal weather. Some states are already tightening general funds, and Education Week’s analysis of the NASBO data warns that 24 states expect lower overall general-fund spending year-over-year—meaning K-12 must fight to stand still. Marketbrief
K-12 per-pupil spending remains high—but lumpy. The Census data show continued nominal increases in per-pupil spend through 2023, with D.C., New York, and Vermont at the top. But those are averages; many districts see costs outrun revenue, particularly after inflation. Axios
Higher-ed modest gains, bigger gaps. SHEF suggests slight growth in state appropriations, but the real story is institutional divergence: flagships and well-positioned regionals can tread water; others must restructure aggressively. shef.sheeo.org
Federal streams persist, but uncertainty lingers. Title I and IDEA remain, but appropriations politics are volatile; the Department of Education’s priorities, compliance expectations, and potential top-down conditions will continue to shift distribution and planning risk. (For mechanics, see CRS notes on FY2024 Title I timing). Congress.gov
The throughline: outcomes will depend less on any single appropriation and more on how well leaders deploy scarce dollars with precision.
When budgets tighten, the temptation is to cut “non-classroom” spend first. But there’s a difference between overhead and operating leverage. Smart data and targeted outreach create leverage—cutting time-to-hire, reducing vacancy costs, and making every grant or general-fund dollar do more.
Here’s the pragmatic playbook I recommend to superintendents, HR chiefs, and provosts—and how our tools fit:
Problem: Unfilled roles create hidden costs (overtime, substitutes, course caps, burnout).
Response: Use Peertopia Connect to run proactive candidate outreach—targeted email campaigns into the 4.9 million-contact K-12 universe by job title and region—rather than waiting for applications on a passive listing. Every job post can push to up to 4,000 relevant contacts, with responses landing directly in your account and inbox. It is the one lever that reliably shrinks vacancy time without raising base salaries. (And it’s an operating expense you can justify with campaign reports.)
Why it matters now: If state dollars are flat, filling roles faster is equivalent to gaining budget capacity because you stop paying the “vacancy tax.” (This is precisely the kind of data-backed ROI legislators understand.)
Problem: Districts and colleges are reactive to churn.
Response: With K12 Data and College Data, you can forecast hiring needs by role cluster (SPED, STEM, CTE, student services) and prioritize outreach in geographies with known surplus candidates. Pair this with program partnerships (teacher prep residencies, grow-your-own) where the demand signal is indisputable.
Why it matters now: It justifies targeted stipends and tuition supports to the board because you can show the pipeline math, not just the anecdote.
Problem: One-size HR email doesn’t convert.
Response: Build candidate lists by specific job titles and seniority. In Peertopia, adjust your message to the segment (e.g., “CTE health sciences instructor—San Diego County stipend + clinical partners”), schedule deployments to hit mid-week, and A/B the subject lines. Use the campaign report to cut what doesn’t work next week, not next year.
Why it matters now: When budgets shrink, iteration speed is a strategic asset.
Problem: Budget debates demand receipts.
Response: Summarize campaign performance (opens, replies, interviews, hires), vacancy days reduced, and estimated cost-per-hire vs. historical. If you’re a system or large district, show cross-campus benchmarks. When you brief the legislature or state budget office, this is evidence that marginal dollars will buy real outcomes.
Why it matters now: States are moving toward outcome-aware funding. Transparent metrics are a competitive advantage.
Problem: Tuition and enrollment are fragile.
Response: Use College Data to map regional employer demand by SOC/CIP, then target adult learners and near-completers with Peertopia-style outreach for certificate and stackable programs. The best defense against flat state support is program-market fit that pulls enrollment without expensive marketing.
Why it matters now: Legislatures increasingly favor workforce-relevant expansions; this data makes the case.
No magic wand. If a state cuts general funds in real terms, you can’t “optimize” your way to parity. But you can protect student-facing services by taking the slack out of recruiting and reducing chronic vacancy costs.
Equity requires policy, not just tools. Data can help aim funds, but states must still choose to equalize.
Compliance isn’t free. Build reporting into your process. If you use Title I or CTE dollars to support outreach or pipeline efforts, match your invoices and backup to the grant rules from day one.
Lock in a 12-month pipeline plan for your top five hard-to-staff roles. (Name the roles and numbers.)
Stand up segmented candidate lists now; don’t wait until positions are posted.
Schedule monthly micro-deployments via Peertopia Connect to those lists, with tight A/B learning loops.
Publish a simple recruiting dashboard to your cabinet and board: vacancy days, cost-per-hire, time-to-fill, and program coverage risk.
Take a formula position to your statehouse: what you need in weights, hold-harmless, or inflation logic—and why it protects students. Bring your recruiting ROI slides; show the dollars-to-outcomes link.
If you’re a college, replace “roles” with “programs,” and replace “vacancy days” with “seat yield and adult-learner conversions.” The logic is identical.
We’re entering an era where the winning districts and institutions won’t be the ones with the shiniest press releases. They’ll be the ones that can prove they placed the right educator in the right role, faster and at lower cost, while protecting student support—even as appropriations flatten. That’s not a slogan. It’s an operating model.
Peertopia, K12 Data, and College Data won’t conjure money from nowhere. But they will help you use the funds you have with precision—and that’s the difference between a cliff and a bridge.
NCES (U.S. Dept. of Education) — Public School Revenue Sources (distribution of federal/state/local revenue, SY 2020–21). National Center for Education Statistics
NCES (FY 2022) — Revenues and Expenditures for Public Elementary and Secondary Education (COVID-related expenditures detail). National Center for Education Statistics
CRS (Congressional Research Service) — Estimated ESEA Title I-A FY2023 & FY2024 State Grants (R47732) (funding mechanics and timing). Congress.gov
ED Budget Summaries — FY2024/FY2025 DOE budget context (Title I request, priorities). U.S. Department of Education+1
SHEEO — State Higher Education Finance (SHEF) FY2024 (state/local support totals; stimulus decline). shef.sheeo.org+1
EdWeek Market Brief summarizing NASBO — State general-fund softening; implications for K-12. Marketbrief
CBPP — Expiration of Federal K-12 Emergency Funds Could Pose Challenges (ESSER cliff). Center on Budget and Policy Priorities
Afterschool Alliance — Reversal of ESSER liquidation extensions and program impact. Afterschool Alliance
Census/press coverage — Recent per-pupil spending trends by state (context for uneven growth). Axios
Axios maps — Federal revenue per person variability by state; Colorado example. Axios+1
WASBO brief — Revenue limits vs. inflation example (Wisconsin). wasbo.com
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