SCHOOL SYSTEMS HAVE been awash in millions of dollars of federal aid meant to cope with the impact of the COVID pandemic, but the gravy train will quickly turn into a catastrophic derailment for districts that have poured the one-time money into recurring costs, according to a Georgetown University education finance expert.
Marguerite Roza, who directs the university’s Edunomics Lab research center, offered a grim warning to education officials on Thursday in a presentation at Harvard’s Kennedy School. Roza said a lot of the country’s 14,000 school districts, which have faced enrollment declines and other factors putting a squeeze on funding, “are propping up their budgets” with the federal aid. But with a September 2024 deadline to spend the federal money, school systems could face a sudden and painful budget crisis after that date, Roza said in her talk, titled “The Fiscal Cliff Coming to a District Near You.”
The federal government has committed $190 billion to schools through the Elementary and Secondary School Emergency Relief, or ESSER, program. The money, which amounts to more than $3,500 per pupil, has come in three waves, but the bulk of it – about $128 billion – has not been spent yet, Roza said. Massachusetts districts received $2.9 billion in ESSER funding.
Thanks to the ESSER money, Roza said, districts are benefiting in the current school year from funding levels above what they normally would receive, a situation that she said will continue for the 2023-24 school year. But she has dubbed the following 2024-25 school year, when the federal funding will suddenly be gone, “the bloodletting,” suggesting some districts will have to make drastic spending cuts to balance their budgets going forward.
She cited Minneapolis as an example of questionable spending, saying the district has used half of its ESSER funds to make up for budget gaps created by years of declining enrollment. “When the funds run out, that’s the cliff we’re talking about,” she said.
Roza shared budget projections for the Spokane, Washington, school district, which show the system already in the red, with a $7.7 million deficit this year. That explodes, however, to $62 million in the 2024-25 school year and $114 million the following year. Closing the budget hole would require cuts of about $4,000 per pupil in the district of 28,000 students.
Former Massachusetts education secretary Jim Peyser, who facilitated the session, said districts in the state could be “approaching or falling off that cliff” after spending or making plans to spend ESSER funds on initiatives with recurring costs.
In December, the nonprofit Boston Schools Fund issued a report warning of a “potential fiscal cliff” facing the Boston Public Schools, which have seen steep enrollment losses and tapped ESSER funds to help stabilize the district’s budget.
James Mikolowsky, director of policy at the Massachusetts Business Alliance for Education, said it’s hard to know without more information the extent to which lots of Massachusetts districts may be at risk.
“I don’t think we have enough publicly available information to know how concerned we should be about whether this fiscal cliff is going to be a big problem for districts in Massachusetts,” said Mikolosky.
MBAE is part of a consortium of groups, EdImpact Research, that formed to track and analyze ESSER spending by Massachusetts districts. Mikolosky said the initial reports on ESSER plans submitted to the state a year ago often lacked enough detail to know whether districts were using the money for new hiring or other recurring costs that will create a budget crunch.
He said Massachusetts districts could, in theory, be better positioned than those in other states to avoid the ESSER cliff if their budget planning has factored in state aid that is supposed to be ramped up over the next several years as part of the Student Opportunity Act passed in 2019.
