Mental health grant cancellations at issue in new lawsuit from 15 states

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Dive Brief:

A group of 15 states alleges the U.S. Department of Education is seeking to terminate "some or all" of $1 billion in mental health grants — despite a permanent block preventing the department from doing so in a case brought last year by many of the same states, according to a lawsuit filed Friday.
The original lawsuit filed last year by 16 states challenged the department's decision to discontinue the mental health grants due to conflicts with the administration's priorities over their support for diversity, equity and inclusion. In December 2025, a U.S. district court ruled those cancellations unlawful.
Because the original court blocked "discontinuances," the department now plans to "terminate" the grants, the states’ new lawsuit says.

Dive Insight:

"But though the precise mechanism by which the Department plans to end the protected grants may have changed, its illegality has not," the states said in their new lawsuit.

The two lawsuits — one decided last year and the new one filed last week — stem from the department's decision in February 2025 to abruptly terminate funding for the Mental Health Service Professional Demonstration Grant Program and the School-Based Mental Health Services Grant Program.

Those programs were established after the 2018 Marjory Stoneman Douglas High School shooting in Parkland, Florida, and then expanded after the 2022 massacre at Robb Elementary School in Uvalde, Texas.

Under the Biden administration, recipients that increased “the diversity, and cultural and linguistic competency, of school-based mental health services providers, including competency in providing identity-safe services" were prioritized.

However, the Education Department, under the second Trump administration, sent letters discontinuing the multiyear funding for many recipients that had met the Biden administration's criteria, saying the plans of the districts in question “reflect the prior Administration’s priorities and policy preferences and conflict with those of the current Administration.”

States sued over the administrative procedures leading to the abrupt cancellations, resulting in U.S. District Judge Kymberly Evanson’s December 2025 ruling in State of Washington v. U.S. Department of Education. “Nothing in the existing regulatory scheme comports with the Department’s view that multi-year grants may be discontinued whenever the political will to do so arises," Evanson said in the decision.

The department lost an appeal of that decision earlier this year, meaning it had to make new decisions on whether to continue or discontinue the grants. The suing states allege the agency provided only six months of funding and said it would make determinations after a mid-year review.

The 15 states said in their new lawsuit that the department is still seeking to end "some or all" of the grants beginning July 31. The states have filed the lawsuit proactively, hoping to preserve the funding.

"The first time this administration tried to take mental health services away from children, we beat them in court,” said New York Attorney General Letitia James in a July 10 statement. New York is one of the 15 states in the new lawsuit challenging the department. “Now they are trying to carry out the same illegal scheme and abandon students who need support."

However, the department said in court documents in the first iteration of the dispute that the suing states are misconstruing the original court block, interpreting it to protect states from any discontinuations at all, rather than only those made as a result of improper procedures.

"Reversing course, the States now contend that the Court’s injunction sweeps far more broadly," the department said in a July 1 court document. However, the department said, the court order never gave states "a legal entitlement to receive federal funding."

James said that if the department successfully terminates the state's funding, New York alone would lose $19 million, including $7.6 million for the State University of New York system.

That would lead the university system to pull mental health professionals from schools serving more than 9,000 rural students and lay off full-time and part-time employees. New York school districts could also lose funding.

In addition to New York, the following states filed the original lawsuit last year, of which only Nevada didn't join in the lawsuit filed last week: