Labor & Employment Law Daily Wrap Up, LITIGATION NEWS, TRENDS—Multistate coalition settles AmeriCorps lawsuit, securing funding and notice protections through FY 2026-27, (Sep 14, 2026)

By WK Editorial Staff

A coalition led by California Attorney General Rob Bonta said the agreement ensures AmeriCorps funding will continue flowing for the coming service year while requiring advance notice of any future large-scale program cuts or layoffs.

A coalition of 23 state attorneys general and the governors of Kentucky and Pennsylvania have reached a settlement with the Trump administration that preserves funding for AmeriCorps programs through fiscal year 2026-27 and creates safeguards against future efforts to sharply reduce the national service agency’s operations.

According to the settlement announcement, the administration agreed to obligate all congressionally appropriated AmeriCorps funding for fiscal year 2026-27 by September 30, 2026, ensuring support for service programs nationwide without interruption.

The settlement stems from litigation filed in April 2025 after the administration moved to eliminate nearly 90 percent of AmeriCorps’ workforce, cancel contracts, and terminate approximately $400 million in AmeriCorps-supported programs. The states argued that the actions threatened a broad network of nonprofit organizations and local programs that rely on AmeriCorps funding and personnel to carry out community-based initiatives.

In announcing the agreement, California Attorney General Rob Bonta characterized the outcome as a continuation of earlier court victories that restored funding and programs. Bonta said the settlement provides certainty for participating organizations, volunteers, and communities ahead of the upcoming service year.

No mass layoffs during FY. A central feature of the agreement is a commitment by the administration that AmeriCorps does not intend to undertake mass layoffs or widespread program terminations during fiscal year 2026-27. The settlement also requires the agency to provide the coalition with at least 30 days’ notice before any future mass terminations of staff or volunteer programs. That notice period would allow the states time to evaluate and potentially challenge any proposed actions in court.

The notice provision addresses one of the coalition’s principal concerns throughout the litigation: that abrupt reductions in staffing and program funding could disrupt services and leave nonprofit partners, host organizations, and communities with little opportunity to prepare. AmeriCorps-supported programs often operate on annual grant cycles and depend on stable funding and member placements to deliver services ranging from tutoring and mentoring programs to disaster recovery assistance and community development projects.

Builds on prior actions. The settlement follows a series of earlier legal developments that strengthened the coalition’s position. In June 2025, a federal court granted a preliminary injunction requiring the administration to reinstate AmeriCorps programs the coalition argued had been unlawfully canceled. Later, in August 2025, after the states sought additional court relief, the federal Office of Management and Budget agreed to release more than $184 million in AmeriCorps funding that had been withheld. The coalition says those actions restored critical support for programs in California and other states.

According to the attorney general’s office, the lawsuit had already resulted in the restoration of nearly $400 million in terminated AmeriCorps programs before the parties reached the latest agreement. State officials described the settlement as preserving those gains and extending protections into the current fiscal year.

Pause, not end. The agreement does not immediately end the litigation. Instead, it pauses the case through February 1, 2027. Under the settlement, the coalition will voluntarily dismiss the lawsuit without prejudice if AmeriCorps fulfills its commitments. However, the states retain the ability to seek renewed court intervention if they conclude the agency has not complied with the agreement. The coalition may also pursue challenges to other actions it believes are unlawful, either through amendments to the existing case or through separate litigation.

The coalition backing the settlement includes attorneys general from Maryland, Colorado, Delaware, Arizona, Connecticut, the District of Columbia, Hawaii, Illinois, Maine, Massachusetts, Michigan, Minnesota, Nevada, New Jersey, New Mexico, New York, North Carolina, Oregon, Rhode Island, Vermont, Washington, and Wisconsin, along with California. The governors of Kentucky and Pennsylvania also joined the effort.

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