Unexpended Education Funds

Each year as Congress considers the Federal Education Budget, there are charges that education is under-funded and states need more resources. Others maintain that states do not need more federal education funding, because they are unable to spend all of the federal money they already have.

To properly assess the debate, it is important to understand the distinction between: 1) funds that states do not spend and must return to the Department of Treasury, and 2) unexpended funds that states have not yet spent.

Typically, states spend over 99% of their federal education funding. The "unspent" funding that critics reference are in fact unexpended funds. These unexpended funds are dollars that have not yet been spent, but in most cases will be used by states and local school districts within the period of time allowed under federal law.

Are Federal Education Funds Going Unused?

In recent history, only a small percentage of education funds have been returned to the Treasury. Almost every state returns a small portion of their funding, which includes funding for formula and discretionary programs.

In 2006, the states that returned the most money were New York ($2.2 million), South Dakota ($1.2 million) and Texas ($1.1 million). Puerto Rico returned by far the largest amount of funding ($15.8 million) – or 42.6% of the total returned funds.[1]

There are a variety of reasons that states return federal education funding. In some cases, school districts simply do not use all available funding or contract costs come in lower than expected, but states do not find out in time to redistribute funds to other districts. It is in the best interest of states and territories where large amounts of funds are returned, notably Puerto Rico, to examine why the federal dollars are not being used.

Unexpended Funds Still Available for Use

Unexpended funds refer to dollars that have not been spent, but are still available for use within the time period allowed under the law. Under federal law, states have over two years (27 months) to obligate funding, and another four years (48 months) to actually pay for services.

The amount of unexpended funds for each state varies over time, for a number of reasons. States cannot draw down funds until they are billed for services or goods. For long term projects and other types of expenses, bills may not come in until long after services or goods are purchased. These funds are referred to as obligated funds, since they have already been committed for a specific project.

There are distinctions between unexpended, obligated, and unobligated funds. Unexpended funds, funds which have not yet been spent, are comprised of both obligated and unobligated funds. Obligated funds refer to dollars that have been committed for goods and services, but not yet spent. In contrast, unobligated funds have been neither committed nor spent.

U.S. Department of Education has Less Unobligated Funds than Other Agencies

Almost all federal agencies have unobligated, unexpended funds. In fact, in comparison to many other federal agencies, the Department of Education has much less in unobligated, unexpended funds.

  

The unobligated funds shown for each agency do not necessarily mean dollars are wasted or will go unused. Like the Department of Education, most federal agencies have funds that have not yet been used, but are available to be used within an amount of time specified under the law.