Key points 

• Schools face funding loss without compliance with federal guidance 

• The State Department of Education says it will enforce the cuts

• Shortened Covid fund deadlines result in additional monetary strain

The threat of federal funding loss for Arizona public schools becomes more salient by the day as the Arizona Department of Education probes for compliance with new federal interpretations of the law, and the U.S. Department of Education walks back extensions granted to schools to spend Covid relief funds.

The result is outstanding reimbursements and a fear of further lost funds, which could jeopardize about 7.6% of the state’s education funding, equaling about $767 million in grant awards in 2024. 

With new guidance from the U.S. Department of Education on Covid deadlines, diversity, equity, and inclusion, or DEI, and privacy law, State Superintendent of Public Instruction Tom Horne maintains the department is within its rights to withhold federal funding in line with advisements from the federal government. 

Privacy.

Schools first got a warning over student privacy and parental rights. 

On March 28, U.S. Secretary of Education Linda McMahon sent a letter to states alerting of alleged misapplications of Family Educational Rights and Privacy Act (FERPA) and Protection of Pupil Rights Amendment (PPRA) by failing to disclose the entirety of a student’s mental and physical health, with a particular gesture toward pronouns and gender identity. 

“Attempts by school officials to separate children from their parents, convince children to feel unsafe at home, or burden children with the weight of keeping secrets from their loved ones is a direct affront to the family unit. When such conduct violates the law the Department will take swift action,” McMahon wrote. “This letter reminds educational institutions receiving federal financial assistance that they are obligated to abide by FERPA and PPRA if they expect federal funding to continue.”

Horne forwarded the memo to schools and asked for documentation showing compliance with federal privacy laws, echoing the threat of lost federal funds if they fail to comply. 

The U.S. Department of Education set an April 30 deadline to prove compliance. As it stands now, the Arizona Department of Education has received about 365 responses out of 658 attestations so far. 

Diversity, equity and inclusion.

On April 3, schools got another “reminder” of legal obligations under Title VI from the U.S. Department of Education, again warning schools of lost federal funds if they adopt any diversity, equity and inclusion programs or consider race in admissions, hiring, promotion and scholarships. 

In response, Horne sent out another round of letters and a form to attest to compliance with the federal department’s holding. The U.S. Department of Education set an April 24 deadline to return all attestation letters, and any districts or charters that fail to certify compliance will see a hold on federal funding. 

Then, on April 11, Horne went a step further and threatened Kyrene School District with a $1.5 million federal funding loss via press release because of an alleged adoption of DEI language in its “Staff Social Emotional Wellness Policy.” 

Erin Helm, executive director of communications and engagement for Kyrene School District, said the district had received no formal or informal notice of any funds being withheld and noted the policy at issue had not yet been formally adopted by the Governing Board, rather the board gave it preliminary first-read approval.

And though they haven’t adopted the policy at the center of the state department’s threat, they maintain the Staff Social Emotional Wellness policy, as well as the district’s existing DEI policy, to be legal.  

“All Kyrene policies, including policies around inclusion and social-emotional wellness, are in compliance with state and federal law, including Title VI of the Civil Rights Act,” Superintendent Laura Toenjes said in a statement, “I encourage anyone with questions to read the language in Kyrene’s policies, some of it pulled directly from Title VI.” 

So far, the department has received 324 attestations out of 658 districts and charters, though Doug Nick, a department spokesman, noted that not all charters receive federal funds. 

A spokesperson for Attorney General Kris Mayes declined to say whether the Attorney General’s Office would consider legal action against the underlying U.S. Department of Education policy, or any future actions taken by the Arizona Department of Education to withhold federal funds.

Covid grants cut short.

But, the attorney general is involved in another area of looming federal funding loss. 

In a letter sent March 28, the federal department of education walked back an extension for schools to spend ESSER funds through March 2026 to March 28, 2025. 

“Extending deadlines for COVID-related grants, which are in fact taxpayer funds, years after the COVID pandemic ended is not consistent with the Department’s priorities and thus not a worthwhile exercise of its discretion,” McMahon wrote. 

Mayes, along with 15 other attorneys general, sued to restore access to the ESSER funding, citing one instance of already interrupted funding in Arizona. 

Cedar Unified School District, a district with one K-8 school, Jeddito Elementary, located on the Navajo Nation, stands to lose out on about $1 million set aside for bathroom renovations and virtual tutoring, with $486,749 awaiting reimbursement and $569,375 yet to be spent. 

The result of no reimbursement and a lack of funds has so far meant the loss of six staff members, including one teacher, three classroom aides, a school bus driver and a custodian, and the potential loss of additional teachers and staff if the prior granted extension on ESSER funds is not honored by the new administration. 

The school also had to cancel its online tutoring contract, which the superintendent claims has improved academic performance. The school is currently looking to finish up bathroom and infrastructure repair projects but cannot do so without funding. 

“DOE’s continued suspension or withholding of ESSER III Extended Liquidation funds may cause Cedar Unified to lay off more staff members, further delay necessary school infrastructure repair projects, and deprive students of much needed academic support services that will be difficult if not impossible to recover,” Superintendent and Principal at Cedar Unified School District Dean Slaga wrote in a declaration to the court. 

Beyond Cedar Unified, the Arizona Department of Education estimates that less than ten other local education agencies could be affected by the extension deadline change, which would cost around $3.6 million in total. 

In any case, Horne believes in the department’s ability to comply with federal orders, including refusing to disburse federal funds, if necessary. 

“The Arizona Department of Education has been responsible for distributing both federal and state education dollars to the schools for many decades and we must do so in accordance with the law,” Horne said in a prepared statement. 

“The U.S. Department of Education has issued guidance that requires my department to certify that all public districts and charters that take federal money use those funds according to that guidance, and that cannot be ignored.”