H.R. 369 — States’ Education Reclamation Act of 2025

This section sets forth 12 congressional findings asserting that the Department of Education is inconsistent with federalism principles, has expanded from a $14 billion budget to $73.5 billion in annual discretionary appropriations over 41 years while education performance for 17-year-olds has stagnated since 1971, pays employees an average salary of $112,724 (vs. $61,730 nationally for public school teachers and $53,975 in North Carolina), and has promoted overregulation, standardization, bureaucratization, and litigation at the expense of parental and local control.

This section abolishes the Department of Education and repeals all programs administered by the Secretary of Education or the Department (except those transferred under section 7), including each program under the Department of Education Organization Act and the General Education Provisions Act. (Thus, the federal agency responsible for administering approximately $80 billion annually in K-12, higher education, and special education programs ceases to exist, subject to any program transfers.)

This section establishes grants to each state for FY2025 through FY2033, to be transferred by the Secretary of the Treasury by July 1 of the preceding fiscal year directly to the state in accordance with 31 U.S.C. §6503 (i.e., federal cash management requirements that schedule transfers and require states to minimize the time elapsing between receipt and program disbursements and to pay interest to the Treasury on funds held). Grant amounts equal each state's FY2025 federal appropriations for elementary and secondary education programs (except amounts transferred under section 7) and for postsecondary education programs (except amounts transferred under section 7), with necessary sums appropriated for FY2025 through FY2033. States must expend funds in the fiscal year awarded or the succeeding fiscal year; use elementary and secondary funds for any purpose permitted by state law, including teacher salary increases; use postsecondary funds for any purpose permitted by state law; and ensure grants supplement, not supplant, non-federal funds.

This section establishes administrative and fiscal accountability requirements for states receiving grants under section 4. Specifically, it (1) requires each state to contract by October 1, 2025, and annually thereafter, with an approved auditing entity (i.e., one approved by the Secretary of the Treasury, the state's chief executive officer, and independent of government agencies) to audit the prior fiscal year's (ending September 30) grant expenditures and transfers for compliance with section 4, with audit results due to the state legislature and Secretary by April 30, 2026, and annually thereafter; (2) imposes a 100% penalty on any state funds used in violation of section 4(d) or (e), payable to the Treasury or offset against future grants; (3) requires annual reports by January 31, 2026, and thereafter, to the Secretary and state legislature detailing grant amounts, audit results, and activities, with public posting on a state website; (4) withholds grant payments for late audits or reports, or section 4 violations until corrected; (5) limits the Secretary of the Treasury's and Attorney General's roles to specified functions such as approving auditors, enforcing penalties, and nondiscrimination oversight; and (6) preserves state authority to impose civil or criminal penalties for fund misuse.

This section prohibits discrimination in any program funded in whole or in part with grants to states under section 4 of the Act, on the basis of (1) disability under Section 504 of the Rehabilitation Act of 1973 (29 U.S.C. 794); (2) sex under Title IX of the Education Amendments of 1972 (20 U.S.C. 1681 et seq.); or (3) race, color, or national origin under Title VI of the Civil Rights Act of 1964 (42 U.S.C. 2000d et seq.). If the Attorney General determines noncompliance by a state or subrecipient, the Secretary of the Treasury must notify the state's chief executive officer, who has 60 days to secure compliance; absent compliance, the Attorney General may institute a civil action or exercise enforcement powers under the applicable statutes.

This section directs the transfer of specified Department of Education programs to other federal departments not later than 24 months after the date of enactment. The transfers include (1) job training programs, including under the Carl D. Perkins Career and Technical Education Act of 2006, to the Department of Labor; (2) special education grant programs under the Individuals with Disabilities Education Act to the Department of Health and Human Services; (3) Indian education programs to the Department of the Interior; (4) Impact Aid programs under title VIII of the Elementary and Secondary Education Act of 1965 to the Department of Defense; (5) the Federal Pell Grant program under title IV of the Higher Education Act of 1965 (i.e., grants to low-income undergraduate students) to the Department of the Treasury; (6) Federal student loan programs to the Department of the Treasury; (7) programs under the Institute of Education Sciences to the Department of Health and Human Services; and (8) the D.C. Opportunity Scholarship Program to the Department of Health and Human Services. This section limits such transfers to administrative responsibility only and excludes any transfer of Department of Education personnel.

This section directs the Comptroller General of the United States to submit to the House Committee on Education and the Workforce and the Senate Committee on Health, Education, Labor, and Pensions, not later than 90 days after enactment, a report that includes (1) a review and evaluation of the feasibility of reducing the federal tax burden to enhance state and local education funding while commensurately eliminating federal grants for education programs; and (2) an evaluation of the feasibility of successor federal agencies maintaining programs transferred under section 7.

This section establishes definitions for terms used in the Act, including (1) elementary school and secondary school, as defined in section 8101 of the Elementary and Secondary Education Act of 1965 (20 U.S.C. 7801); (2) institution of higher education, as defined in section 102 of the Elementary and Secondary Education Act of 1965 (20 U.S.C. 1002); and (3) State, as defined in section 103 of the Higher Education Act of 1965 (20 U.S.C. 1003).