State education officials warn federal budget and rescinded ESSER extensions could force districts to return millions

Gilbert Campbell, deputy secretary of education, and Anne Bordenaro, director of federal and education support programs at the Agency of Education, told the Appropriations committee on May 23 that the state has received some federal K‑12 allocations but faces mounting uncertainty from federal budget proposals and a recent reversal on COVID-era ESSER liquidation extensions.

“The good, the bad, and the ugly,” Campbell said, summarizing the agency’s update for lawmakers.

The agency reported a mix of near-term certainty and looming risks. Anne Bordenaro said the agency “did receive on May 14 our title 1 allocations for school year 2526,” and that final Title I allocation notices are expected on July 1 and Oct. 1 as required by federal law. She told the panel the agency also has received IDEA awards and recent Perkins (career and technical education) allocations and has provisionally loaded district hold‑harmless amounts into grant systems so districts can begin budgeting.

But officials flagged larger federal changes that could reduce funding or complicate eligibility. Bordenaro summarized elements of the White House’s FY26 “skinny budget,” saying it proposes eliminating some programs and consolidating others: “There are proposed elimination of title 3 … adult learning, preschool development grants, teacher quality partnership grants, as well as cuts to Perkins for CTE” and a proposed consolidation of IDEA and other ESEA programs into block grants with unspecified cuts to other programs.

Campbell and Bordenaro said a separate process — the reconciliation bill and other FY25 carryover decisions — could cut Medicaid and SNAP benefits, which the agency uses for direct certification of students for free and reduced‑price meals. Bordenaro explained the knock‑on effect: if fewer children are certified via Medicaid or SNAP, districts could lose an automated method of identifying meal‑eligible students and would need to collect forms, increasing administrative burden and possibly changing funding flows.

The agency also described a new federal review process for late‑liquidation requests tied to ESSER (COVID relief) funds. Under the prior administration the Department of Education had broadly allowed “late liquidation” extensions; the current Education Department rescinded that approach and is asking states and districts to resubmit new project‑level justifications under new discretionary criteria. Campbell told the committee that as of May 19 the state had submitted 54 liquidation extension requests — 49 district projects totaling about $9,000,000 and five state projects totaling about $1,200,000 — with an additional batch of about $1,400,000 going in the same day. He said total outstanding invoices in the current queue are “around the $10.11, $12,000,000” range (invoices already paid by districts or the state and awaiting federal reimbursement).

Campbell said the agency has not yet received determinations on those submissions and that other states report many rejections, especially for projects that are not direct student services (for example, professional development, educator mental‑health supports, reporting contracts and some construction closeouts). He said the department had previously approved about $17,000,000 in liquidation extensions nationwide and that Vermont had used ESSER and related funds to support programs including Read Vermont and other literacy coaching efforts.

The agency described several concrete exposures: roughly $2,000,000 at the state level and district exposures that include multiple construction projects — three districts with projects “to the tune of over a million dollars” — and approximately $750,000 in paused Read Vermont coaching work that officials said would need to be replaced from other funds if reimbursement is denied.

Campbell said the agency is coordinating weekly office hours with districts, working with U.S. Sen. Bernie Sanders’ staff on drafting and strengthening submissions, and preparing to update the Joint Fiscal Office and the Appropriations Committee if federal decisions arrive while the Legislature is not in session. “So as of May 19, we had submitted 54 liquidation extension requests,” Campbell said.

Bordenaro urged planning for uncertainty in FY26 federal appropriations and the reconciliation process and noted protections that could blunt short‑term impacts: once a student is certified eligible for free or reduced meals on July 1, that eligibility generally carries through the school year under USDA rules; and state Title I allocations are based on census poverty figures at the national level, not solely local meal certification. She also outlined technical limits on using tax data for direct certification, saying many low‑income households do not file taxes and household definitions differ between tax law and USDA rules.

The agency said it will continue submitting the highest‑quality liquidation requests possible and coordinating with federal and congressional staff. The attorney general’s office has not yet joined a multistate lawsuit challenging the Education Department’s letter rescinding broad liquidation extensions; Campbell said the state is exploring options but emphasized immediate priority on getting quality project submissions finalized.

Agency leaders said they will keep the Joint Fiscal Office and appropriations members advised of developments and expect to return early in the next legislative session with updates.

Less critical operational details include the agency’s estimate that the state budget currently covers universal school meals at roughly $70,000,000 per year and that the state and districts together received roughly $500,000,000 in ESSER and related COVID funds previously, of which the ARP ESSER portion was $256,000,000. Officials said about $12,000,000 of that ARP ESSER money had not been obligated at the time of the initial closeout but that many reimbursements had been submitted under the late‑liquidation process.

The agency’s update focused on actions staff are taking to preserve funding and on potential downstream impacts if federal policy changes reduce direct certification or cut Medicaid and other safety‑net programs that feed into education allocations.

The agency will return with more information as federal decisions are issued and as the agency aggregates any determinations on submitted liquidation requests.