Hi Kmamom!
What stinks is that they did not plan for this all the while they were raising funds for the kid.
Since you do not have the money to give them you can't give it to them and I would just be honest about that. Even if you did have the money, people might not be okay with $500 going to one person via their fundraising efforts. What I would be willing to do is hold something expressly dedicated to raising the $500 for this cause. Perhaps a coin drive or something of that nature that can be done relatively quick.

I just got a call from the school we have a student attending a national conference over spring break that is a huge honor etc. Her trip expenses have been covered and the teacher has been helping her since last spring to raise funds but now the PTO is being asked to help send Mom. The PTO have been asked to help with her $500 airline ticket!
We have a couple fundraiser ideas that we can do in this short notice as our budget is down to the penny.

I feel bad saying "no"-- risk loosing my head if I say "Here's you're $500!" ----hopefully we can raise at least part of the funds. Our Principal is in the same boat with me.

Would you even try to help? Am I thinking with my heart again ?