• Executive View
  • Spending Federal Relief Funds – What to Consider!

    The recent decision by the Federal Department of Education mandating that New Jersey reverse path on reducing state funding to school districts places a continuing aura of uncertainty over the current and future funding for New Jersey school districts. The order reflects a determination that the state violated the Maintenance of Equity provision in the American Rescue Plan Elementary and Secondary School Relief Fund (ARP ESSER). The impact of the decision is the reinstatement of $173 million in aid to some of the state's poorest school districts to remain eligible for $2.5 billion in federal American Rescue Plan COVID relief funding for New Jersey schools.

    The state aid cuts were dictated by Senate Bill 2 (S2) shepherded to passage by Senate President Steve Sweeney. This law initiated a phase-out of “adjustment aid,” a category of state transition aid. The FY22 Budget proposed by Governor Phil Murphy and passed by the Legislature included the aid cuts. Interestingly, the budget also authorized a transfer of set-aside funds in the event New Jersey was found to be out of compliance with the Maintenance of Equity requirement.

    The influx of significant resources and the potential of “running off a cliff” at the end of the funding cycle if dollars are targeted to ongoing expenditures has spurred interest into strategies for developing district spending plans. An August 2021 School Administrator article written by Marguerite Roza and Chad Aldeman offers valuable insight and a set of principles for district personnel to guide spending decisions. I am pleased to share an abbreviated version of their guidance here:

    Is the district on pace to be financially sustainable?

    School districts already have begun obligating their federal money. Some have added staff, awarded pay raises, contracted for building repairs, purchased equipment, and backfilled existing budgets and more. With spending pressures coming from every direction, districts going forward could establish a multiyear spending schedule for the remaining funds.

    Rather than let the money slowly drain away and mix with other funds, district leaders could commit to drawing it down in prescheduled allotments, such as 40 percent in 2021-22, 30 percent in 2022-23, 20 percent in 2023-24, and 10 percent in 2024-25.

    A spending schedule coupled with multiyear forecasting can help districts steer away from spending federal relief funds on recurring costs, such as across-the-board salary raises or hiring new, full-time employees in permanent roles. Instead, district leaders might consider other, more financially sustainable options for adding labor, such as outsourcing, paying stipends to current staff who agree to take on more work or other creative ideas.

    Are the relief funds flowing equitably across the district’s schools?

    The numbers vary widely by state and district, but the latest round of relief funds represents about $2,450 per student nationwide. To avoid inequitable allocations, district leaders can start by calculating how much money they will receive and then frame their spending decisions on the per-student allocations by school.

    Moreover, now that states are reporting school-by-school spending figures (found in New Jersey School Performance Reports), leaders have a tool to help monitor whether their spending is likely to enhance equity or exacerbate existing inequities. In addition to the per-pupil costs of interventions, leaders will want to explore how the federal dollars are being allocated across schools in the district, and how much of the spending thus far has gone toward the most disadvantaged students. If district leaders cannot answer those questions, or if the money is disproportionately going toward the most advantaged students, it may be time to re-evaluate.

    Is funding reaching students with the highest needs?

    The pandemic affected students differently. In addition to targeting spending based on schools and student demographics, district leaders also may want to consider the different academic and social and emotional needs of students. While we can’t yet quantify all the needs, research suggests that academically some students suffered steep setbacks while others stayed on pace or even fared better than normal.

    If the pandemic did not affect all students the same, then one-size-fits-all approaches such as extending the school year for all students or reducing class sizes across the board may be unnecessary and expensive. Instead, targeted approaches may be a better fit to keep costs from escalating while helping struggling students get back on track.

    Districts that operated in-person for much of the year may have different priorities. They may be further along in terms of diagnosing student needs and tailoring their offerings accordingly. Those districts may look toward different types of enrichment activities, facilities or curriculum upgrades or other practices to allow students and families to have a say over how the dollars are spent.

    How can spending reflect ongoing input from families?

    Some leaders will bristle at a call for ensuring community input into spending plans. Expectations that school districts hold large public forums to provide for hours of what may seem like ill-informed public comment on complex budget issues may feel like a stretch right now. But soliciting public input need not happen only at school board meetings.

    Principals are a particularly important stakeholder group trusted by parents and teachers, and some districts are sending funds directly to schools so they can make decisions that work for their students and families.
    Getting that input does mean being transparent about the range of options on the table, the trade-offs involved with each and the metrics that will be used to evaluate success.

    Are the investments working?

    Maybe the most important step in making sure the funds do the most for students isn’t a financial step at all. It means taking time away from the spreadsheets to spell out the intended outcomes and then measuring the effects on students.

    School district officials can start by creating a way to gauge student progress (or participation or other goals) to see whether investments are achieving their intended objectives. Are reading skills improving? Are middle schoolers engaged? Are high schools on track for their postsecondary goals? Such measures could work to help principals and other leaders modify efforts as they seek to ensure success.

    One thing is certain: School districts should prepare to be judged for how they spent their federal relief money. Relief funds undoubtedly will draw big scrutiny. Those who spend the time to compute costs, identify desired outcomes, involve their communities and be nimble along the way will have the most to show for it.

    Thanks to our research colleagues for sharing their insights and guidelines! See the complete article at Wise Spending of Your Federal Relief Funds.