Interagency Agreements

Updated August 17, 2026

NAFIS continues to closely monitor implementation of the Interagency Agreement (IAA) transferring administration of the Impact Aid Program from the U.S. Department of Education to the Department of Labor.

Background

In November 2025, the Trump Administration announced plans to transfer several K-12 education programs—including Impact Aid—to the Department of Labor through a series of interagency agreements (IAAs) as part of their work to dismantle the Department of Education. Some of these agreements have since been challenged in court, with implementation continuing as those cases move through the judicial system.

NAFIS is deeply concerned about how the IAAs will affect Impact Aid, including its potential effects on program operations and the federal government’s obligation to federally impacted communities. Read our official statement, issued 11/21/25.

Congressional Activity

The Department of Education cannot be abolished without an act of Congress. Congress is now considering legislation that could either codify or limit the Administration’s use of IAAs.

In July, House Education and Workforce Committee advanced a package of 10 bills that would permanently reorganize the U.S. Department of Education by transferring many of its responsibilities to other federal agencies, codifying many of the interagency agreements (IAAs). The package includes H.R. 9610, the Less Bureaucracy, Better K-12 Education Act, introduced by Rep. Mark Harris (R-NC). The bill would transfer functions currently administered by the Office of Elementary and Secondary Education—including the Impact Aid Program—to the Department of Labor. The committee approved the package on July 15.

Other bills in the package would transfer education programs to the Departments of Treasury, Health and Human Services, State, and Interior. The legislation faces significant challenges in the Senate, where bipartisan support would likely be needed to advance.

In late July, the Senate Health, Education, Labor, and Pensions (HELP) Committee approved bipartisan legislation that would prevent the U.S. Department of Education from transferring several major education offices to other federal agencies without congressional approval. The bill (S. 5046), introduced by Sens. Tim Kaine (D-VA), Susan Collins (R-ME), and Lisa Murkowski (R-AK), passed the committee on a 13-9 vote. If enacted, it would prohibit the Department from transferring the Offices of Special Education and Rehabilitative Services, Elementary and Secondary Education (including the Impact Aid Program), Postsecondary Education, and Indian Education to other agencies. The legislation would not block agreements involving career and technical education, student loan programs, or civil rights enforcement.

The committee also approved an amendment requiring the Department to publicly report to Congress on the costs of implementing its interagency agreements, including staffing changes associated with those transfers.

The bill represents the Senate’s most significant legislative effort to date to limit the Administration’s reorganization of the Department of Education. While its path forward is uncertain, Sen. Kaine indicated that the proposal could become part of broader appropriations negotiations.

Regardless of their views on the IAAs, several Members of Congress have publicly voiced support for the Impact Aid Program, including:

Sen. Rounds Questions Secretary of Education on Impact Aid:

During an April 28, 2026, congressional hearing, Sen. Mike Rounds (R-SD) questioned the Secretary of Education about the future of Impact Aid and its administration under the IAA.

Rep. Comer Seeks Assurances on Impact Aid:

During a May 14, 2026, congressional hearing, Rep. Comer (R-KY) sought assurances on the future of Impact Aid from the Secretary of Education.

As Congress debates the future of federal education programs, implementation continues on several interagency agreements transferring programs to other agencies, including the co-administration of the Impact Aid Program by the Departments of Education and Labor. NAFIS is closely monitoring the transition and working with federal officials to ensure the program continues to operate effectively and efficiently for federally impacted school districts.

NAFIS Advocacy

NAFIS has actively advocated to ensure the transition does not disrupt payments to school districts or diminish the expertise needed for effective program administration. Through meetings with Department officials, congressional outreach, and ongoing engagement with federal stakeholders, NAFIS has elevated key priorities to protect federally impacted school districts.

As implementation continues, NAFIS is encouraged by progress in addressing many of the concerns raised with the Department.

Maintaining Program Expertise

NAFIS urged the Department to retain experienced Impact Aid staff to preserve institutional knowledge and ensure uninterrupted program administration.

Status: All indications from the Department and congressional champions are that the dedicated, knowledgeable
staff critical to the effective administration of the program will continue in their roles under the IAA.

Protecting the FY 2026 Grant Cycle

NAFIS requested that any operational changes occur only after the completion of the FY 2026 application and payment cycle to avoid disruptions for school districts.

Status: The Division of Impact Aid Programs (formerly the Office of Impact Aid Programs) completed final payments
for FY 2026 in record time through existing U.S. Department of Education payment systems.

Preserving the Impact Aid Grant System

NAFIS emphasized that the existing online grant system should remain fully operational until a proven replacement
is available.

Status: On June 23, 2026, the Department extended Groundswell Corporation’s contract for administering
the Impact Aid Grant System (IAGS) for an additional five years. This ensures that IAGS will continue through
the remainder of the Trump Administration and into the next administration.

NAFIS continues working directly with federal officials and Congress to monitor implementation of the IAA, keep members informed, and advocate for a seamless transition that protects the timely and effective delivery of Impact Aid.