A coalition of 16 state attorneys general, led by New York’s Letitia James, is fighting the U.S. Department of Education in court for a second time after the department cut more than $1 billion in federal grants for school-based mental health services. The states won a permanent injunction in December 2025 blocking the cuts, but the Education Department then attempted to achieve the same result through a different administrative method, prompting a fresh lawsuit in 2026.
What the grants were and why they were cut
The terminated grants came from two programs Congress created after school shootings. The Mental Health Service Professional Demonstration Grant Program was established in 2018 following the Parkland, Florida, shooting. The School-Based Mental Health Services Grant Program was created in 2020 and expanded after the 2022 shooting in Uvalde, Texas. Both were designed as five-year initiatives with annual appropriations of more than $100 million each, aiming to place 14,000 new mental health professionals in schools, especially in low-income and rural areas.
On April 29, 2025, the Education Department notified dozens of grantees that their funding would be discontinued, citing a misalignment with current administration priorities. The department specifically referenced DEI goals as the basis for targeting the grants. No evidence of grantee nonperformance was offered, according to the complaint filed in the U.S. District Court for the Western District of Washington at Seattle.
New York alone faces the loss of at least $19 million in approved funding. The State University of New York system would lose more than $7.6 million of that. At SUNY Binghamton, mental health professionals who serve more than 9,000 rural students would have to be pulled, leading to layoffs of 10 full-time staff and several part-time employees and graduate assistants. SUNY Buffalo would be forced to end a fellowship program training school social workers, jeopardizing care for an estimated 3,000 students in Western New York.
The legal challenge and the second lawsuit
The coalition argues that the funding terminations violate the Administrative Procedure Act because the department failed to provide notice that the programs would be canceled. The states also claim the department breached binding grant agreements and violated federal regulations that require continuation decisions to be based on grantee performance, for which the department offered no evidence of failure.
The 16 states involved are New York, California, Colorado, Connecticut, Delaware, Illinois, Maine, Maryland, Massachusetts, Michigan, New Mexico, Nevada, Oregon, Rhode Island, Washington, and Wisconsin. The first lawsuit, filed in 2025, resulted in a permanent injunction blocking the administration’s attempt to end the grants.
According to James’s office, the Education Department then tried to evade that court order by implementing the same policy through a different procedural route. That led to the second lawsuit, filed in 2026. The case tests whether a court can enforce grant continuity when an agency uses alternative means to achieve the same result.
Update - September 4, 2026
On July 27, 2026, U.S. District Judge Kymberly K. Evanson granted a temporary restraining order blocking the Education Department from terminating the school-based mental health grants, finding the states were likely to succeed on their claims that the termination plan was arbitrary, capricious, and contrary to law under the Administrative Procedure Act [8]. The order, issued in the second lawsuit filed by 15 states on July 10, enjoined the department from implementing its termination plan — specifically from evaluating already-awarded grants against new, unpublished priorities that did not exist when the grants were approved [9].
Judge Evanson ruled that the department's termination plan was 'startlingly similar' to the unlawful discontinuation procedure she had permanently enjoined in December 2025, and found that the states were likely to prevail on both their APA and Spending Clause claims [9]. The TRO expires on August 24, 2026, at which point the court may issue a preliminary injunction or extend the temporary pause pending a final decision [9].
New York Attorney General Letitia James called the ruling the second time the coalition had stopped the administration 'from illegally stripping mental health care away from students,' and said the order preserves New York's access to millions in funding for in-school mental health services while the case proceeds [10].