Schools face a funding cliff. How bad will the fall be?

A school building is shown as parents walk their children to school on the first day in the Detroit school district. A welcome back sign is displayed in the lawn.
Parents walk their children to school at Mark Twain School for Scholars in Detroit. In coming years, schools face a funding cliff as temporary COVID relief money runs out. (Ethan Bakuli/Chalkbeat)

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It’s an ominous phrase that is top of mind for many school district officials: the “funding cliff.”

This refers to the imminent end of billions of dollars in federal COVID relief money that schools have been relying on during the pandemic. “The feds pushed a lot of money into the K-12 system,” said Lori Taylor, an education finance researcher at Texas A&M University. “Now the districts are being weaned off of that funding — they’re losing that shock absorber, that cushion.”

This has educators and experts nervous: the money might be gone before students have fully recovered academically and could lead to painful layoffs and other budget cuts. Some schools have already begun cutting back on recovery programs including tutoring, summer school, and extra staff, like college advisors. 

But what is not yet clear is how steep the fall from the funding cliff will be. That’s because there are many other factors that will shape school budgets, including money from other sources. Plus, schools are making spending choices now that could lead to bigger or smaller cuts later.

What we do know is that high-poverty schools face a bigger cliff, that more federal money won’t be forthcoming, and that school budgets will be shaped both by districts’ own financial decisions and those made by state politicians. How precisely this plays out could affect classrooms and students for years to come.

Here, Chalkbeat offers a guide to the federal school funding cliff and what factors will make or break school budgets after the federal money runs out.

Schools got a lot of federal money, but it’s running out — and no more is coming

Schools have received a large infusion of federal money since the pandemic:  roughly $190 billion or close to $4,000 per student. 

The money was meant to address the consequences of the pandemic on schools, including learning loss. In practice, local officials had wide discretion over how to spend it. Money from the final pot has to be earmarked by the end of September 2024 (though schools can seek an extension for when that money is actually spent). The latest data shows that schools still have funding left, but are on track to use it all by the deadline. 

Some advocates had hoped that even more federal dollars would be on the way. For instance, the Los Angeles teachers union had sought to make federal relief permanent. But this is not going to happen. The recent deal that President Joe Biden struck with Congressional Republicans limits new federal spending on education for the next couple years. 

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In sum, the infusion of temporary federal money really will be temporary. Once it’s spent, it’s gone.

High-poverty schools got more federal money, so face a steeper cliff

The COVID relief was not spread evenly across schools. Nationally, districts in more affluent areas received just over $1,000 per student, with some getting even less. High-poverty districts, on the other hand, got over $6,000 per student. A handful of very high poverty districts, like Detroit, received massive sums of money. There was also variation from state to state, with schools in the South getting more federal money as a percent of their total budgets. 

This means that some schools will face little or no funding cliff while others will face steep cliffs.  “Districts serving our neediest kids have further to fall,” noted a recent analysis published by the Brookings Institution.

The scope of cuts will depend on how schools have chosen to spend federal money

“A lot depends on how prudent they were in their use of the federal funds,” said Taylor. “Federal funds should have been interpreted as one-time money.” 

It’s clear that a good chunk of the funding was indeed used for one-time expenses: HVAC and other building upgrades, personal-protective equipment for COVID, bonuses for staff.

Detroit, for instance, earmarked over half of its COVID relief for long-deferred facilities upgrades. “One thing that I’ve tried to do as superintendent is be disciplined with finances,” superintendent Nikolai Vitti recently told Chalkbeat. “I always think about recurring revenue with recurring expenditures, and one-time revenue with one-time expenditures.”

On the other hand, at least some districts have used COVID money for ongoing operating costs like paying teachers’ salaries and maintaining buildings. State data show that schools have been adding staff in recent years. As federal aid runs out, layoffs might follow. 

There’s also a third, mushier category: supplementary expenses that schools have added to try to make up for learning loss or address other needs. Those might include expanded summer school programming, after-school tutoring time, vendor contracts, temporary new staff.  Some have already begun cutting. Detroit eliminated some positions like college transition advisors. Districts in Montgomery County, Maryland, and Reno, Nevada have cut back on tutoring. 

As the funding cliff approaches, these recovery add-ons may start to vanish even more rapidly. This programming may be easier to cut because it’s not part of core instruction, but could still be painful to lose, especially when students remain behind academically. 

Generous state or local funding could cushion the fall

The biggest chunk of education funding comes from states, and they have been increasing spending on schools of late. One recent analysis found that most states have increased education spending in their budgets this year, often by substantial amounts.  Last year, California passed a record state budget, which included a one-time $7.9 billion learning-recovery grant to schools, on top of the one-time federal aid.

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If state funding continues to increase, districts could be protected from major cuts even as federal money dwindles.

David Lauck, CFO of Alliance College-Ready, a charter network in Los Angeles, says he’s not expecting immediate cutbacks thanks to funding increases from California. “We do not anticipate any major dropoff in programming,” he said.

More local funding could also help cushion schools. Officials in Kansas City are planning to use higher property tax revenue to keep some of the staff they added with federal aid. “We’ve done the work so we can retain them,” said Jennifer Collier, the superintendent of Kansas City Public Schools. “The cuts were not as deep as we originally thought.”

But states could soon face budget challenges, limiting their ability to help schools

States governments also received a separate $195 billion worth of temporary federal money. This has supported the generous education funding for schools, but it also means states face their own funding cliff. Moreover, many states are projecting that revenue from state taxes will decline next year.

“With more fiscal data coming in, the long-term health of state budgets looks murky,” concluded Lucy Dadayan, principal research associate with the Urban Institute.

That could create a double whammy for schools: federal funds run out and states don’t have the ability to provide an additional buffer. Once again, high poverty schools are more at risk because they tend to be most reliant on state funds. Local funding is also not a guaranteed backstop. The higher-poverty schools that face the greatest fiscal cliff typically have less property wealth to draw from.

The budget situation will likely vary by state. A number of Republican-leaning states have adopted tax cuts and private school choice programs, which could strain state budgets. 

But there is some good news for public schools. States have built up substantial “rainy day” funds that could bolster budgets. Plus the broader economy, contrary to some predictions, is looking relatively strong. That’s a more promising indicator for state revenue, since a strong economy tends to mean higher funding from sales and income taxes.

Bruce Baker, a University of Miami professor and school finance researcher, says he suspects the upcoming funding cliff won’t be as bad as what happened after the Great Recession, when schools made deep cuts after federal aid runs out. But he said this will vary from place to place and that schools are to some extent at the mercy of state politicians.

“A lot of these cliffs are going to be a function of state choices,” said Baker.

Matt Barnum is interim national editor, overseeing and contributing to Chalkbeat’s coverage of national education issues. Contact him at mbarnum@chalkbeat.org.

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