Change—some of it much-needed—is coming in the relationship between federal and state governments. As Congress debates spending priorities and looks for places in the federal budget to cut in order to start addressing the country’s $36 trillion debt, funding for states is likely on the chopping block.

This likely reality comes with both challenges and opportunities. It’s an opportunity to restore the balance of federalism and empower states to own their own destinies. However, Louisiana has become incredibly reliant on federal government funding, with those dollars making up about half of the state budget over the last couple of years.

We’ve seen the result of reduced or temporary state funding recently on a small scale. These instances often force the legislature to abandon, disregard, or alter state priorities; dedicate significant resource to compliance activities; and use temporary funding to launch large programs that can’t be sustained once federal grants run their course.

There’s a lot to unpack: how should the legislature and state agencies prepare for the looming reality of cuts? Do we really understand the implications—both in policy and budgeting—of saying yes to federal grants? How can decisions today prepare Louisiana not only to survive the coming change, but ultimately to thrive in the new environment?

It starts with understanding the depth and layers of the issues at hand.

The Pelican Institute for Public Policy has been examining the implications of this ”federal grantstanding” in Louisiana, examining the use of federal education funds over the past several years, including Elementary and Secondary School Emergency Relief Fund (ESSER) spending on top of existing federal Title I funding and IDEA grants. While pandemic relief dollars were intended to aid states in responding to the pandemic, they included notable shifts in the way the federal government has traditionally worked with state leaders.

Early Childhood Funding

Prior to the pandemic, federal early childhood funds were used primarily to fund subsidies for low-income parents in Louisiana who needed childcare while working or in school and one-time grants were given to states to increase the number of children served. As part of the pandemic relief package, Congress awarded additional funding for these subsidies as well as new dollars to “stabilize” the child care industry, temporarily paying early childhood centers’ rent, staff compensation, cleaning supplies, and more.

Now, Louisiana lawmakers are having to consider calls to maintain or expand what the feds started even as federal dollars go away. This could be as much as $100 million a year, based on some recommendations from advocates. This was not a plan considered when the funds were initially accepted from Washington.

K-12 Education Spending

In K-12 education, the feds bypassed the policymaking of governors, state legislatures, and state education officials by giving school systems unfettered access to the largest infusion of emergency aid in our nation’s history. Louisiana school systems received approximately $4 billion in one-time disaster aid ostensibly to reverse student learning loss.

While state officials urged school leaders to focus spending on tutoring and other student needs, some prioritized—and some might even say misused—ESSER funds to pay for new roofs as well as gymnasium and football stadium expansions and renovations. Yet in the 2024 regular legislative session, school leaders lobbied for and eventually received increased state funding for tutoring because they claimed they couldn’t otherwise afford it. They continue to request those funds in the FY2025-2026 state budget.

Policymaking Through Grantmaking

And, it’s not just a question of budget priorities; it’s policy, too. Last year, the Biden Administration issued a 1,500-page regulation under Title IX that laid out many controversial policy positions, including one requiring school districts who receive federal funds to avoid any restrictions on transgender bathrooms. The threat: if you don’t comply, the funding could end. Louisiana’s State Superintendent of Education Cade Brumley refused to comply, and it took a group of states to challenge the regulation in court. (And they won.) Regardless of one’s position on that issue, should the federal government make that decision for states and local communities, many of which have passed laws addressing these very questions?

Planning, Assessing impact, Transparency, and Sustainability

For a state that receives as much federal funding as Louisiana, there are some big questions that must be answered about the impact of federal grants on state education policy. More transparency is needed whenever those dollars come into states.

Access Louisiana Education Funding Data at https://www.treasury.la.gov

Pelican’s report offers additional insights and recommendations for federal and state leaders to better align on state policy priorities, minimize “strings attached” and unnecessary bureaucratic hurdles, and avoid creating new federally funded programs that can’t be sustained. Read the report here.

Recommendations

The report offers the following recommendations:

  1. Congressional leaders and federal education officials should work with states to identify states’ biggest education needs, prioritize any federal funding opportunities accordingly, and minimize federal policy directives, red tape, and bureaucracy as part of the grantmaking process. Appropriations for federal grant programs and allocations to states and local school systems should empower state education agencies to advance state priorities.
  2. Congress should use the Congressional Review Act (CRA) to address cases of federal overreach in grantmaking programs and through federal agencies’ allocations of federal funds. Where new requirements or restrictions are imposed on states’ and localities’ use of funds that are not authorized by law, members of Congress should be able to rescind those provisions as they do with problematic federal regulations.
  3. Where the CRA is not leveraged or leveraged successfully, state attorneys general in collaboration with receiving agencies should not hesitate to take action through the courts when federal bureaucrats attempt to enforce new rules or otherwise legislate policy through grantmaking or requirements tied to the allocation of federal funds.
  4. State leaders should coordinate across executive and legislative branches of government to jointly plan for and actively monitor the use of federal funds and how federal requirements are being addressed—not just as a compliance exercise, but to reveal federal requirements that may conflict with state priorities and policies. State legislatures should play a more active role in consulting with state agencies about applying for and receiving federal funds, as well as planning for sustainability of funded activities and services if needed.
  5. State agency boards and state legislatures should regularly monitor how federal funding is being used to advance state priorities, particularly in annual budget hearings where additional state funding is requested.
  6. To enhance transparency, state websites and dashboards displaying public school finance information should include expenditures of federal dollars relative to state education priorities and identify unspent and carryover funds. The Louisiana Department of Education (LDOE) has begun to report this information and other state agencies in Louisiana and across the nation should do the same.