The United States Department of Education is facing renewed legal scrutiny after states alleged it failed to fully comply with a court order that called for the reinstatement of previously revoked school mental health grants.According to the California-led court filing on March 17, the department restored only six months of funding to affected recipients instead of a full year, despite a court order to restore the grants.Sixteen states previously filed a lawsuit after school districts were notified in April 2025 that their grants would be revoked. President Donald Trump’s administration has said the programs are inconsistent with its policy priorities on diversity, equity and inclusion.The dispute returned to court when the United States Circuit Court of Appeals for the Ninth Circuit upheld a lower court ruling directing the department to reconsider its decision to terminate the grants.States now argue that the partial funding decision threatens the continuity of mental health services in schools. Some districts have already issued early termination notices and cut internship programs at high-need schools, according to the March 17 filing.
Funding conflict Linked to policy change
The legal dispute is part of an ongoing dispute over federal education funding approved during President Joe Biden’s administration. In April 2025, the Department of Education canceled up to $1 billion in multi-year grants under the School-Based Mental Health Services Grant Program and the Mental Health Service Professional Demonstration Grant.The department later introduced revised funding guidelines in September. They state that grant funds cannot be used for activities such as promoting gender ideology, political activism, racial stereotyping or what may be described as a hostile environment for students.Under the revised criteria, grants previously awarded were not reinstated through the new application process.In December, the department distributed more than $208 million in new grants aligned with updated priorities. This comes despite a federal court order issued the same month that required the restoration of earlier grants in 16 states.The order covers about 50 schools, colleges and non-profit organizations. The department appealed the decision, but an appeals court rejected its challenge last month.
States alleged incomplete compliance
Despite the appeals decision, the states said the department has limited the funding period to six months, describing it as a “risk mitigation measure” associated with financial and operational uncertainty while the litigation continues.The department has also asked the affected grant recipients to submit performance reports by June 1. States said the condition effectively sets up a mid-year review that can determine whether funding continues.“Defendants make clear that they may refuse to provide funding after June 1,” the states said in a March 17 filing. K-12 dive. This approach shortens the budget cycle and creates uncertainty for grant recipients, he added.
Concerns over program continuity
States and grant recipients have argued that federal regulations allow such grants to be rescinded only after performance reviews, which had not occurred when funding was withdrawn in 2025.They also say that frequent changes in funding have affected the provision of mental health services in schools.“Without assurance of a full year of funding, some grantees will lose essential staff and be unable to properly plan and budget for the fall semester,” the California Attorney General’s Office said in a March 18 statement. K-12 diveStates continue to deal with full restoration of funding and clarity on future distribution.
