In February 2025, the U.S. The Department of Education offered incentives to its staff to encourage early resignation and retirement. Then, in March 2025, the department announced plans to cut its workforce in half. Linda McMahon, who now serves as Secretary of Education under the Trump Administration, said, “That was the president’s mandate–his directive to me.” 

How will this affect Colorado schools? In this brief, our Senior Economist, Chris Stiffler, explains the role of the federal Department of Education, how it allocates funds to Colorado schools, the programs supported by that funding, and how federal funding compares to state and local contributions.

What is the U.S. Department of Education?

The U.S. Department of Education was established on May 4, 1980, with the mission to promote student achievement and global competitiveness by fostering educational excellence and ensuring equal access. Its goals include strengthening the federal commitment to equal educational opportunity, supporting state and local efforts to improve education, encouraging public involvement, advancing education resources, improving coordination and management of federal education programs, and increasing accountability to the public and government. It accounts for 3.5% percent of the federal budget. 

How much federal funding does the U.S. Department of Education provide Colorado? 

In fiscal year (FY) 2024, Colorado’s schools received $1.27 billion in federal funding from the U.S. Department of Education, and other federal agencies making up 9%of the total funding for Colorado’s schools. This amount is higher than usual because of the pandemic relief programs such as the Elementary and Secondary School Emergency Relief Fund (ESSER) which ended in September 2024. Without the pandemic relief federal dollars, federal funding tends to be around 5-6% of Colorado’s total school funding each year.

Colorado schools receive federal fundings through more than just the U.S. Department of Education. Schools also get funding from the Department of Agriculture for nutrition programs. In addition the Department of Health and Human Services, Department of Justice, Department of Treasury, and the Institute of Museums and Library Services also send federal funding to Colorado school programs.

This year, The U.S. Department of Education provided $992 million to Colorado schools for some of the most vulnerable students to “provide equitable learning environments for all students.” Each school district receives different amounts. These resources help level the playing field for high-poverty school districts which typically get less local funding because of property taxes. Some of the federal dollars are tied to the Individuals with Disabilities Education Act, or IDEA, which covers special education for disabled students. The U.S. Department of Education also allocates dollars through five title programs to address learning, economic and language barriers in public schools. Each of the five programs addresses a different educational gap.

• Title I provides money to schools with economic disadvantages
• Title II covers professional development for teachers
• Title III supports programs for English language learners
• Title IV provides technology support
• Title V supports rural school districts

In addition to the grants that go to K-12 schools, the U.S. Department of Education also provides Pell Grants to help low-income undergraduate students pay for college. In FY 2024 those Pell Grants totaled $616 million. Unlike loans, Pell Grants do not have to be repaid, except under certain conditions. They are rewarded based on financial need, determined by the Free Application for Federal Student Aid (FAFSA).

Source: Fiscal Year 2024 Report of Expenditures of Federal Funds by State Agency

How will changes to the U.S. Department of Education impact Colorado? 

Changes to the U.S. Department of Education would primarily affect funding for specific student populations like economically disadvantaged students, English language learners, and students with special needs.

How can Colorado address potential cuts to federal education funding?

One way states can boost school funding is by increasing state revenue through taxes, but Colorado is unable to do so. Unlike every other state, Colorado cannot make up for lost federal education funding due to the Taxpayers Bill of Rights (TABOR). TABOR is a constitutional amendment approved in 1992 that limits annual growth in state and local revenues to the rate of population growth plus inflation. It also mandates voter approval to exceed these revenue limits and requires any excess revenue to be refunded to taxpayers. Colorado’s TABOR is the most restrictive tax and expenditure limit  in the country. 

Due to TABOR and other factors, Colorado’s public education system faces chronic underfunding, leading to a deficit of over $10 billion that has persisted for more than a decade. Last year was the first in fifteen that schools were funded at levels determined by voters in 2000. And now those gains are in jeopardy. Despite a $1.6 billion surplus in last year’s state budget, none of that funding could be directed to education due to TABOR restrictions. As a result of these restrictive revenue laws, Colorado continues to rank near the bottom in areas like starting educator pay, wage competitiveness, and per-pupil funding as noted by the Colorado Education Association. 

“Get it Done” Initiative

Great Education Colorado, a nonprofit focused on improving education funding, is launching the “Get it Done” initiative to significantly boost school funding, potentially via a ballot measure. This effort is based on studies indicating Colorado needs an additional $3.5 billion to $4.1 billion annually to adequately support school districts. Read more about the initiative and other local grassroots efforts to generate more money for Colorado in the Colorado Sun.

Contact: Chris Stiffler, Senior Economist, stiffler@coloradofiscal.org