A new national assessment of school infrastructure shows that despite increased local investment, U.S. school facilities continue to face a massive and growing funding shortfall, underscoring the urgency of modernizing aging buildings nationwide.
The 2025 State of Our Schools report, published by the 21st Century School Fund, the International WELL Building Institute (IWBI) and the National Council on School Facilities (NCSF), estimates that the U.S. now falls short by $90 billion every year in the funding required to responsibly maintain, modernize and replace school facilities. The findings reveal that while districts have boosted spending significantly over the past decade, costs and needs have risen even faster.
Since earlier editions of the report in 2016 and 2021, the funding gap has grown sharply. The shortfall increased from $46 billion in 2016 to $85 billion in 2021, before expanding further as construction costs escalated, building inventories grew and deferred maintenance accumulated across aging campuses.
“Even as local districts have stepped up by increasing their annual spending on school facilities from $95 billion in 2016 to more than $150 billion now, they are still falling behind,” said Mary Filardo, Executive Director, 21st Century School Fund and lead author of the report. “As the funding gap for our critical school infrastructure grows, it becomes even harder to climb out of this hole unless we begin to better share the load across levels of government and embrace a dynamic solution set that ensures every public dollar delivers a stronger return on investment.”
PK-12 school facilities represent the second-largest category of public infrastructure investment in the country, behind only highways. Nearly 60 million students, educators and staff occupy these buildings each day, making schools central to community health, safety and economic vitality. However, unlike transportation systems that benefit from robust federal and state funding, school infrastructure remains overwhelmingly financed at the local level.
According to the report, local school districts fund 80% of school facility needs, while states provide 17% and the federal government contributes just 3%. This imbalance has left many districts struggling to address long-term capital needs while also covering routine operations and maintenance.
“With a $90 billion annual shortfall, the magnitude of this crisis is undeniable and utterly unacceptable. It’s simply impossible for local districts to continue to shoulder this burden disproportionately,” said Rachel Hodgdon, President and CEO, International WELL Building Institute. “Without greater responsibility across all levels of government, particularly the federal government, our country will continue to underfund the very infrastructure that determines the health, safety, and educational outcomes of millions of children. Where our children learn matters, and access to safe, healthy, and modern learning environments should be a right, not a privilege.”
The report also highlights stark disparities in school facility investment across geographic and socioeconomic lines. High-poverty districts have invested 30% less capital in their school buildings than low-poverty districts, while rural districts receive less than half the per-student capital investment seen in suburban and urban systems. These inequities leave disadvantaged communities facing greater barriers to maintaining safe, healthy and modern learning environments.
Compounding the issue, districts are increasingly relying on debt to make up for funding gaps. By the end of fiscal year 2023, local school districts collectively carried more than $500 billion in long-term debt, with $22 billion paid annually in interest, further straining operating budgets.
The $90 billion annual funding gap reflects combined shortfalls in both capital investment and ongoing operations and maintenance. On average, the U.S. spends $82 billion per year on capital improvements, falling $56 billion short of what is needed. Annual spending on facility operations and maintenance totals $70 billion, leaving an additional $34 billion gap. Together, these deficits account for the full $90 billion shortfall.
To address the crisis, the report outlines a pathway to achieving modern school facilities by 2050, emphasizing the need for shared responsibility and stronger capacity at every level of government. A central recommendation is the creation of a stable federal incentive funding program of $25 billion annually, which the report says could reduce overall annual requirements by $75 billion, delivering a 34% return on investment.
The authors also call for expanded federal support for state capacity grants to improve facility data collection, planning, technical assistance and workforce training, helping states and districts manage modernization projects more effectively and equitably.
Together, the findings reinforce that while progress has been made, closing the school facilities funding gap will require sustained, coordinated investment to ensure all students have access to safe, resilient and modern learning environments—regardless of where they live.
Originally reported by Facility Executive.
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