NC joins multi-state lawsuit over withheld $165M in federal school funding as rural districts brace for cuts

North Carolina Attorney General Jeff Jackson joined a coalition of 24 states and the District of Columbia in suing the U.S. Department of Education and the Office of Management and Budget, claiming the agencies unlawfully withheld federal funding for public schools.

Each county school district, Moore, Lee, and Harnett were asked for statements on the lawsuit. No school district responded.

The lawsuit, filed June 30, 2025, comes in response to the federal government’s decision to freeze more than $165 million in education funding designated for North Carolina schools. The freeze was announced just before the start of the new fiscal year, despite Congress authorizing the funds for release on July 1.

The withheld funds were designated for teacher training, after-school and summer programs, English-language learner support, migrant education, and adult literacy. About $68 million was set aside for teacher professional development and over $30 million for after-school initiatives.

State officials say the delay could lead to the loss of nearly 1,000 educator jobs and force schools to scale back essential services. Several districts have already implemented hiring freezes, and some are considering cuts to tutoring and enrichment programs if the funds are not restored soon.

Rural communities are expected to feel the impact most acutely. According to the North Carolina Department of Justice, nine of the 10 most affected districts, based on per-student losses, are located in rural counties. Southeastern regions still recovering from Hurricane Helene could lose over $18 million in support, with more than $6 million at risk in other disaster-affected areas.

State Superintendent Maurice “Mo” Green warned that many districts have only two to three months’ worth of reserve funds to continue operations. Without immediate relief districts could be forced to make staffing and program cuts that would harm student learning.

The lawsuit, filed in federal court, argues that the Department of Education and the Office of Management and Budget violated statutory obligations by failing to distribute funds on time and by withholding money Congress had already appropriated. The suit requests a preliminary injunction to force the agencies to release the funds immediately.

Gov. Josh Stein backed the lawsuit, saying North Carolina would explore all legal avenues to prevent the loss of critical resources. Plaintiffs argue that the delay is arbitrary, capricious, and unconstitutional under the Administrative Procedure Act.

School leaders across the state say a decision is needed within weeks to avoid disruptions as the 2025–2026 school year begins. Some school systems are set to welcome students back as early as late July and early August.

July 15, 2025

Stephanie M. Sellers