How to know if your district is at risk of the looming fiscal cliff

"Time is running out," reads a new report from The Education Trust. Districts have millions of ESSER dollars left to spend. Some have managed these funds poorly. Here's how to ensure you're prepared once these resources are eliminated.

September 2024 has been labeled by one economist as “the bloodletting” as district leaders prepare for a looming fiscal cliff that month caused by the elimination of federal ESSER funding, which leaders have relied on as a financial cushion in order to provide salary raises and other incentives. But as the deadline to spend these funds draws near, the question for leaders remains: How should we spend the remaining money, and have we spent it wisely?

“Time is running out to spend the unprecedented, one-time federal pandemic-relief funds—the deadline will happen around September 30, 2024,” a new research brief from The Education Trust reads. “Between now and then, there is an opportunity for families and education advocates to encourage their school district leaders to spend down and sustain investments that are successfully addressing educational inequities.”

To this end, district leaders can ensure that the last stages of their federal dollar spending are made in a way that ensures their district’s sustainability and equitable opportunity for their students. As the spending deadline quickly approaches, The Education Trust encourages leaders to ask themselves the following three questions:

  1. How are district ESSER investments equitably addressing the unique needs of students in the district? Are students with the highest need getting access and seeing success?
  2. What are the stated goals of district ESSER investments? Are these programs achieving goals? How do we know?
  3. How do ESSER investments fit into districts’ overall strategy for addressing the needs of students?

Districts could face an estimated slash of $1,200 per student in the 2024-25 school year due to declining enrollment coupled with the end of ESSER funds, the report adds. As this school year gets underway, district leaders will have some tough choices to make to mitigate these damages. But how can you know whether your district is truly at risk?

More from DA: How your teachers are feeling about AI and their jobs this school year

In addition to this brief, Education Resource Strategies published a resource for leaders on how to assess their district’s risk of the upcoming fiscal cliff. After analyzing trends in ESSER spending in dozens of districts across the country, the researchers identified six key factors that may serve useful for district leaders wanting to determine whether their community is at risk. According to the brief, this is what K12 leaders need to reflect on ahead of September 2024.

1. How large were our ESSER allocations?

Larger districts received considerable amounts of ESSER funds. Its elimination will cause considerable changes to their overall financial picture, the brief declares.

2. Did we increase teacher salaries?

Many districts used this opportunity to invest in programs and initiatives to increase their recruitment and retention efforts. However, these districts will see their baseline operating costs increase, according to the brief.

“When it becomes more expensive for school districts to maintain their existing services, it becomes more difficult to find ways to reduce spending,” it reads.

3. Did we increase our staff?

Similar to raising teacher salaries, districts also used federal dollars to avoid eliminating school staff amid ongoing shortages. But how will they sustain these costs once ESSER funds are eliminated?

4. What were the changes in per-pupil funding?

“Districts receiving more per-pupil funding from the state or local levels will be more insulated from the effects of ESSER dollars going away,” the brief reads.

States like Tennessee, Maryland and Massachusetts, for example, have adjusted their formulas so that more money will be allocated to public school districts, especially those serving high-needs students. They’ll expect larger declines in revenue once ESSER expires.

“Districts whose state and local per-pupil funding levels remain similar to pre-pandemic baseline levels will have to make more significant reductions in spending or rely on reserves to maintain investments and smooth reductions in spending over time,” according to the brief.

5. Limited unrestricted fund balance

In some cases, school districts can carry forward unspent revenue as a fund balance, according to the report. But some districts have fewer limitations due to state or local regulations, also known as an “unrestricted” or “unassigned” fund balance.

Districts with fewer limitations will have more flexibility on how they spend down ESSER.

6. Unspent ESSER dollars

As the spending deadline nears, it will only become more difficult for districts to invest these funds in a way that’s both impactful for students and sustainable. While there are still ways to invest any remaining resources, those who have large amounts left to spend face a greater risk of facing an “unwelcome fiscal cliff.”

Micah Ward
Micah Ward
Micah Ward is a District Administration staff writer. He recently earned his master’s degree in Journalism at the University of Alabama. He spent his time during graduate school working on his master’s thesis. He’s also a self-taught guitarist who loves playing folk-style music.

Most Popular