Block Grants

Federal Education Aid: Formula-Driven Versus Block-Granted

The largest pots of federal funding for K-12 school districts are formula-driven grants, with specifics about their allocation and use directed by foundational laws like the Elementary and Secondary Education Act (ESEA) and the Individuals with Disabilities Education Act (IDEA). The largest federal formula grants target students from low-income families and students with disabilities — but these funds also come with statutory and regulatory requirements on how states and local schools can allocate and spend funds. Proponents of this more regulated approach to federal education funding argue that it is the best way to improve outcomes for the student groups those funding streams are intended to support.² Critics argue it does not account for the varying needs of different communities and that “block granting” federal funding would allow states and districts to better align spending with local educational needs and priorities.³ Federal K-12 education block grants could take many forms, but they ultimately would distribute more funding to states with fewer requirements for how funds are allocated within states and reduced federal spending and reporting requirements.

While the Trump administration has signaled support for block-granting of federal education funding,⁴ the idea dates back nearly half a century. Soon after the U.S. Department of Education was established in October 1979, Republican presidential candidates and some policy analysts and advocates called for shuttering the agency and moving federal funding support for school systems to block grants. Block grants were also part of the Heritage Foundation’s 1981 “Mandate for Leadership” — widely considered to be the policy blueprint for the Reagan administration. The most recent incarnation of this proposal is detailed in another Heritage Foundation publication, “Project 2025,” which echoes a decades-long call for the elimination of the U.S. Department of Education by moving aid programs to other agencies and then block-granting that funding to states.⁵

Under a more flexible block grant structure, the federal government could loosen restrictions on how K-12 funds are allocated, how funds are used, or both. Completely removing all restrictions is likely to face political headwinds, particularly if changes are made in a way that creates winners and losers financially or if federal lawmakers wish to retain some control over the use of funds.

Both sets of decisions are important — how dollars are allocated at the state and local levels and how those dollars are used to improve student outcomes — particularly given that federal dollars intentionally target resources to marginalized student groups (e.g., multilingual students, students with disabilities, students from low-income families). That is precisely why states should approach any newfound flexibility on funding decisions judiciously.

Options for State Policymakers to Distribute K-12 Block Grants

If states have carte blanche to allocate federal funds according to their priorities, how might they do so? As of the publication of this memo, there is no concrete proposal for block-granting federal education funding. But given the administration’s apparent desire to move in this direction, state policymakers should be ready to adapt quickly. This memo offers policy considerations grounded in two assumptions about what could be true if block-granting happens:

• Similar funding levels: Block grants would provide similar total funding to states compared to amounts received in fiscal year (FY) 2024, less expiring COVID-19 pandemic-related funding. While Project 2025’s education policy prescriptions call for a phase-out of ESEA Title I, Part A funding — the largest source of federal K-12 education funding — over a decade (which would require federal legislation),⁶ this memo assumes flat funding.

• “No strings attached:” States would have wide latitude to deploy block-granted funding as they see fit, both in terms of how funds are allocated to schools and how funds are used. This would require state policymakers to translate their new flexibility to local contexts. While the potential conversion of federal K-12 education funding to block grants would likely include some guardrails on the use of and accountability for those dollars, the scope of those measures is unknown at this point. As such, this memo assumes minimal federal constraints on how states could deploy block grants.

Three State Approaches to Managing Block Grants

Priorities in ESEA and IDEA — such as funding to support students from low-income families, students with disabilities, and others — should remain priorities for state policymakers, even with less prescriptive federal requirements. Most states already direct their own K-12 resources and support to the same student groups and priorities (though in widely varying ways).

State policymakers can think in terms of three broad approaches to allocating block-granted federal education funding — each of which offers advantages and drawbacks — that would maintain these underlying commitments (Table 1). States will likely need to combine two or all three of these approaches, since any one option is unlikely to adequately meet the range of student needs addressed by current federal policy. (See “State Formulas as a Mechanism to Support Priorities via Block Grants” for how states can use existing state student-weighted funding formulas to allocate federal funds.)

One critical consideration for state policymakers if they choose to change how federal funds are allocated is the extent to which those changes would create “winners” and “losers” at the local level. These are not new funds. Changes to the method for allocating funds to local K-12 school systems may better align funding with student needs overall, but shifts in the amount of funding allocated to individual school systems will impact the level of service and support currently being provided to students. Policymakers should assess the impact of changes at the local level to determine the wisdom and feasibility of big shifts in funding allocations while prioritizing the needs of students. Phasing in changes over time could allow states to gradually move toward strategic realignment of funding allocations while minimizing abrupt shifts in funding at the local level.

State policymakers should also avoid replacing state or local dollars with federal dollars. While it is unclear whether current requirements that federal education dollars “supplement, not supplant” state and local funds would persist in a block grant scenario, simply swapping out federal funds for state dollars would substantially reduce the overall investment in education. States may also need to establish their own “supplement, not supplant” or “maintenance of effort” policies to prevent local entities with sufficient local tax resources from simply replacing discretionary local dollars with federal funds and reducing supports for students.

State Formulas as a Mechanism to Support Priorities via Block Grants

Every state has a K-12 formula (or set of formulas) that distributes state education funding. These formulas play a major role in school finance — nearly half of all K-12 education revenue comes from states. In contrast, federal grants are a relatively small but meaningful part of K-12 funding, typically accounting for less than $1 of every $10 allotted for K-12 public schools (excluding one-time relief funding as was offered to schools during the Great Recession and the pandemic).⁷ Most states (39) and the District of Columbia already distribute the lion’s share of K-12 funding through weighted student formulas (WSFs) or a hybrid model that includes a WSF, which provides more funding to support specific student and/or community needs (poverty and special education-related needs typically generate the most targeted funding in these hybrid models).⁸ States that do not use WSFs often have separate categorical formulas that are structured to address specific student needs by supporting a limited range of uses.

If the federal government converts its funding to block grants, states could consider using existing state funding formula mechanisms, such as weights or categorical funding streams, to direct block-granted federal education aid. For example, weights for poverty and concentrated poverty could help direct dollars that would have otherwise been allocated by the formula for ESEA Title I, Part A. Special education weights could be used to direct funding from IDEA, Part B (Table 2). 

For example, Tennessee’s state formula, the Tennessee Investment in Student Achievement (TISA), provides an additional 25% in funding for each low-income student enrolled and another 5% on top of that in districts where 35% or more students are low-income (Disclosure).⁹ Under a block-grant scenario, Tennessee could choose to use its Title I funds to increase the percentage of either or both of those funding weights, which would increase the amount of funding per low-income student and/or funding for districts and charter schools serving the highest concentrations of low-income students. Although that strategy focuses on the same populations of students as current Title I allocations, the formula is not the same. Shifting Title I allocations to the TISA methodology would change the amount flowing to individual schools and school systems, and state policymakers would need to consider the impact of those changes at the local level.

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