I’m tapping this out en route back from SXSW EDU, where I had the honor of presenting with Edunomics Lab Director and W/A Sr. Advisor Dr. Marguerite Roza about the state of school finance and what’s likely ahead for K-12. 

The room was full and energetic, but more cautious than optimistic after a tumultuous year of funding freezes, grant cancellations, and litigation. (Great White’s 80s hit “Once Bitten Twice Shy” applies and I’ll keep referencing it until conditions change or the eye rolls become too much.)

But how shy? Where are we in 2026 compared to 2025? Today, I’m looking back on the Top 5 events of the first year of Trump’s second term and ranking their severity and staying power for the K-12 market. I pull this from a longer, geekier list of events shaping the market today. If you want to learn more about that or think other events should be on the Top 5, get in touch. I look forward to the reactions.

1. OMB Formula Fund Withholding — July 2025

The unexpected stomach punch. The Office of Management and Budget (OMB) delayed $6.2 billion in expected July 1 formula fund releases—including Title II-A, III-A, IV-A, IV-B, and WIOA Adult Education—citing alignment with presidential priorities. Districts that had already committed to staffing and summer programming faced immediate cash-flow shortfalls. Funds were eventually released, but the precedent of mid-cycle formula funding freezes altered planning assumptions. Congress has since addressed OMB’s ability to do that again (more below), but this was a trust-crusher for local CFOs trying to plan out the next few years, and it’s going to take time to recover. 

2. ESSER Liquidation Freeze & Two-Tiered Reinstatement

Secretary McMahon voided ESSER liquidation extensions on March 28, 2025, freezing more than $3 billion in COVID-19 relief reimbursements before a court order partially reversed the action. States that sued were excluded from “project-specific” extensions, creating a two-tiered reimbursement system (red and blue). Districts planning ESSER-funded purchases faced unexpected cash-flow gaps and uncertainty about whether reimbursements would materialize. ED eventually released the funding, but it caused concern about other prior funding agreements with the agency. 

3. January 2025 OMB Discretionary Grant Freeze

OMB Memo M-25-13 directed all agencies to pause discretionary grants pending review for alignment with executive orders on DEI, immigration, and gender policy. Although formula programs were nominally exempted, the freeze injected deep uncertainty into competitive grant pipelines and signaled that grant awards already made could be revisited. In the end, courts threw this out, but the episode made it clear that grant oversight management was a tool that the administration would use in support of its objectives, a strategy that’s playing out in 2026, as we have noted earlier. 

4. ED Structural Disruption: Layoffs, OCR Backlog & Interagency Transfers.

Mass layoffs gutted ED’s program and compliance capacity—IES lost 100+ staff, OCR built a backlog of 25,000 unresolved cases, and the Office of Educational Technology was shuttered. Interagency agreements have begun to transfer CTE, Title I and other programs to the Department of Labor, creating ambiguity about which agency governs what. But all throughout, there’s never been a concern about the amount of funding and the timing of the funds. So, while there has been disruption in the support at the state level and some local level, the predictability of these funding streams has not been affected.

5. FY2026 Appropriations — Congress Holds the Line

The February 2026 Consolidated Appropriations Act preserved core formula funding—Title I at $18.4 billion, IDEA at $14.2 billion—rejecting the administration’s proposed $11.8 billion cut and the House proposal to eliminate Title II-A and III-A. The bipartisan vote signals Congressional resistance to deep structural cuts, and OMB interpretations about what Congress meant to allocate and when. The bill does not constrain the administration’s interagency transfer authority, but it sends a clear signal that Congress expects the funds to arrive in full and on time in 2026. 

So, where are we as of March 2026?

Despite an extraordinary year, most federal dollars ultimately came through. Congress pushed back on OMB, and the FY2026 appropriations process set clearer guardrails. With the worst of the federal drama likely behind us, school leaders may (I hope) shift their attention to harder, slower-moving challenges: declining birth rates, flat enrollments, and the unforgiving arithmetic of rising costs against marginal revenue growth.

This article is sourced from Whiteboard Notes, our weekly newsletter of the latest education policy and industry news read by thousands of education leaders, investors, grantmakers, and entrepreneurs. Subscribe here.