As the end of ESSER funding approaches in September 2024, K–12 district leaders are reflecting on which investments were effective to help shape their priorities in the post-ESSER years ahead. In this third and final article in our series on K–12 district funding, we follow the flow of funds to attempt to answer three key questions:

• Did K–12 districts spend the stimulus effectively and meet their priorities?
• How can district leaders navigate the end of stimulus funding?
• What are schools likely to spend on in the poststimulus years to come?

District leaders believe that stimulus funding was effective but wish they had spent more on late-pandemic priorities

Most of the school districts we surveyed (75 percent) believe that their strategic allocation of stimulus funds was moderately or highly effective in achieving their goals over the past three years. Recent studies back this perception. While the true impact of ESSER is difficult to gauge given the lack of systemic data collection and accountability associated with the funding, recent studies have compared student test achievement data across similar districts that received different amounts of funding. These studies have found small improvements in student achievement from the incremental funding, similar to those found in previous studies of school financing (approximately a week of learning per additional $1,000 of spending)—with greater improvements in math than in reading, and with larger improvements in districts that historically had low levels of total spending.

School district leaders report that ESSER funds were most useful for COVID-19-related initiatives, such as investing in student devices and pandemic-related safety measures, and in addressing learning loss. However, the interventions that district leaders perceive as effective are not necessarily what they would have spent more on in retrospect. Our survey uncovered four distinct categories of spending (Exhibit 1):

• Double down: interventions seen as effective and on which districts wish they had spent more. These included a series of interventions to address the impacts of the pandemic—including addressing learning loss and mental health challenges—as well as some more evergreen interventions, such as retaining and supporting the professional development of existing teachers and instructional staff. Specifically, districts report that they wish they had been able to stand up high-dosage tutoring programs and technology-supported acceleration more rapidly and at greater scale, but that implementation challenges impeded progress on these fronts.
• Less is more: interventions seen as ineffective and on which districts wish they had spent less. According to our respondents, the initiatives in this category included reducing out-of-district placements (where students are placed in special schools or programs outside their local school districts), hiring more teachers and instructional staff, expanding assessment and accountability programs, and providing a range of student support, well-being, and safety services. This buyer’s remorse likely has a few drivers: the ongoing costs of additional teachers and staff could be hard to sustain beyond the stimulus, and some of the student support, well-being, and safety measures haven’t addressed the root causes of student absenteeism and behavior challenges that still may be manifesting in classrooms.
• Necessary stopgaps: interventions seen as effective at the time but on which districts wish they had spent less. These mostly involved addressing immediate needs related to the pandemic or using up short-term, one-off funding to purchase such items as student devices or pandemic-related safety items. Purchasing personal devices for the whole district was effective in a virtual/hybrid learning environment but now may seem redundant in the face of large budget shortfalls and new priorities in a fully in-person classroom.
• Tough to solve: interventions seen as effective but on which districts wish they had spent more. This appears on first glance to be the most counterintuitive category: interventions here didn’t yield results, yet districts would like to have put more money behind them. Qualitative responses from districts shed some light here. These interventions primarily addressed persistent and interrelated challenges—student absenteeism, special needs education, and student behavior. For example, chronic absenteeism (missing at least 10 percent of a school year) has almost doubled since the prepandemic era, causing disruptions to student learning and well-being. More than 80 percent of public schools reported increases in student behavior issues since the pandemic, including student misconduct, rowdiness, and disrespect toward educators. While some interventions to address learning loss (for example, high-dosage tutoring) have been shown to be effective, interventions to address absenteeism and student behavior are at an earlier stage of the evidence journey. School districts wish they could have spent more money to find more effective solutions to these ongoing and stubborn issues.

These retrospective musings reflect shifts in spending priorities during the pandemic. At first, school leaders focused on initiatives related to virtual/hybrid instruction and return-to-school mandates. For example, in the 2022 survey, 56 percent of district decision makers reported HVAC/ventilation as one of their top five priorities, while 59 percent ranked student devices and 38 percent ranked student physical health in that category. Not knowing if a third round of funding was coming and lacking data to reveal the accumulating learning loss, districts poured money into projects intended to be one-time capital expenditures. By 2024, the portion of districts prioritizing these areas had dropped by more than 20 percentage points.

As the pandemic advanced, K–12 priorities shifted to fighting persistent achievement challenges. The third round of ESSER funding was legislated with a more controlled mandate, with guidance that 20 percent of the funds be earmarked for learning loss interventions. This ruling, along with new data on the magnitude of learning loss and mandates for returning to in-person instruction, led to a pivot in spending during the 2022–23 school year toward addressing the needs of students receiving special education services, retaining instructional staff, and combating student absenteeism. A few priorities remained high on the list throughout the stimulus period: supporting student mental health and social-emotional learning and addressing learning loss through tutoring and technology (Exhibit 2).

District leaders expect tighter budgets and worry about the impact on students

ESSER represents the largest infusion of federal funding into K–12 education in decades. The total stimulus funding is equivalent to about one-third of annual K–12 spending, spread over a three- to five-year period. When the funding stops, school district leaders can expect average budget declines of 5 to 8 percent, assuming no compensatory increase in state or local funding. Therefore, experts have been sounding the alarm for a “fiscal cliff”—a sharp reduction in spending—when ESSER ends. Our survey suggests that more than half (53 percent) of decision makers expect a fiscal cliff in their district’s spending when ESSER concludes.

Several additional factors could compound ESSER-related budget declines

ESSER-related budget declines could be compounded by inflation, continued declines in student enrollment, and the rising cost of labor. Historically, national public school revenues have increased 2 percent a year and outpaced inflation. However, 77 percent of districts are concerned that funding may no longer keep up with inflation, driven by the rising costs of labor, transportation, and food service. On the enrollment front, hold harmless provisions during the pandemic largely protected districts from pandemic-related enrollment drops. As these expire, districts with declining enrollment will face corresponding budget declines.

Districts may have limited degrees of freedom to cut costs

Approximately 80 percent of K–12 expenditure is on staff and salaries, which are contractually hard to cut. A further portion of the expenditure is locked into specific funding requirements. For example, maintenance-of-effort requirements under Part B of the Individuals with Disabilities Education Act stipulate that local educational agencies cannot reduce year-to-year spending on students receiving special education services. This could leave districts facing much larger magnitudes of cost reduction in the remaining spending categories.

Schools are looking to mitigate short-term pressures

District leaders anticipate filling the funding gap through local legislatures (40 percent of districts expect local funding to backfill their budgets) or surplus funds. Some local municipalities have already stepped up for their districts. For example, the City of Boston invested an additional $81 million in the Boston Public Schools system in anticipation of ESSER’s expiration. Additionally, we have seen districts dipping into surplus funds and reserves to cover budget shortfalls. Faced with a $41 million budget gap resulting from stimulus funds expiring, the Bridgeport School District’s board approved a plan to leverage $12.8 million from the district’s surplus fund to narrow the shortfall.

District leaders worry about the impact of budget shortfalls on students

According to our survey, 60 percent of district leaders are concerned about their district’s ability to fund programs after ESSER expiry, and 57 percent worry that a potential fiscal cliff would cause declines in student learning and achievement. However, leaders are less concerned about these issues this year than they were in 2023 (Exhibit 3). This may be because they have already begun preparing for future declines in funding.

Different districts, different effects

School districts may experience the next few years differently based on a variety of factors. Districts that are likely to be most vulnerable in this environment are those that received more ESSER funding (a higher share of Title I), are experiencing declining enrollment, are in states that aren’t backfilling their budgets, face challenges related to student achievement and student poverty (for example, inner-city districts), and used stimulus funds on recurring costs rather than one-time costs (for instance, salaries and annual vendor contracts). Some districts have already posted budget forecasts with deficits of more than 10 to 20 percent for the 2024–25 school year.

Go-forward priorities revolve around student and teacher supports

In a changing fiscal environment, district leaders are primarily concerned with the well-being and opportunities of their core stakeholders: students and staff. Our survey respondents have fully shifted away from pandemic-related concerns toward longer-term considerations. These include recovering learning loss, supporting student mental health, and addressing absenteeism and challenges in student behavior.

While priorities are broadly consistent across districts, high-income districts are more likely to emphasize student mental health and social-emotional learning and less likely to focus on absenteeism and learning recovery. Middle-income districts may be less likely to prioritize social-emotional learning and postsecondary readiness, whereas low-income districts are likely to focus more on student absenteeism and learning recovery, with less emphasis on student mental health and special education (Exhibit 4).

These priorities likely reflect underlying realities for these districts. Higher-income students may have bounced back faster from pandemic learning loss and absenteeism and experienced less severe student behavior challenges, allowing high-income districts more freedom to invest in second-order priorities. By contrast, low-income districts may need to address fundamental challenges of bringing students back into the classroom and providing a safe classroom environment in the face of rising behavioral issues.

These priorities translate into expected budgets. Given schools’ budget-related challenges, spending in most categories will likely decelerate in the coming years. Our survey reveals five major trends in investments (Exhibit 5):

• Keeping the trains running. Districts hope to avoid cutting instructional or administrative staff, the top spending category. To retain staff, there is a desire to manage or limit special education and substitute teaching costs. The latter is more likely in a less tight labor market, whereas limiting special education costs is more challenging because of maintenance-of-effort requirements. Also worth noting: districts anticipate maintaining their current spending on administrative tools and software, as these items represent a relatively small share of the budget and are usually necessary for operations.
• Pumping the brakes on pandemic priorities. Districts expect a deceleration in spending on large, expensive programs and provisions, including those to counter learning loss. With pandemic-related concerns no longer a priority, districts are more likely to defer maintenance and upgrades on existing facilities. But the schools we surveyed also indicate that they anticipate eliminating programs that could make a difference, such as before- and after-school programs, summer learning programs, and tutoring. This could be because of optimism that students are overcoming learning losses, despite evidence to the contrary.
• Signaling tighter allocations. Districts want to manage resources carefully in the poststimulus period, which could result in tighter times ahead for purveyors of instructional materials and tools, including core and supplemental curriculum materials as well as learning management systems. Certain items in these categories are likely to be more resilient. These include formative assessment and curricula for intervention and special education, which remain ongoing K–12 priorities.
• Turning to tough challenges. Schools anticipate a moderate increase in spending on student support programs, given the top-of-mind challenges of student behavior and absenteeism. Our survey reveals that schools wish they had spent more during the stimulus period on these issues and plan to continue steady or slightly increasing investments. Some of this increased expenditure is a response to rising labor and material costs (for example, increased transportation and food expenditures), but some of the spending reflects renewed efforts to identify students needing additional attendance or behavior supports (such as early-warning systems and multitiered systems of support).
• Steering investments in innovation. Finally, while remaining mostly focused on sustaining existing programs, district leaders are also looking to make thoughtful and targeted investments in innovation. Specifically, they expect to increase spending on AI-driven teacher and student solutions (albeit from a very small base). Some examples of investments in this area include tools to support teachers with lesson planning and grading, chatbots to assist students at critical moments in their learning, and administrative tools to detect and prevent cheating.

We anticipate some spending slowdowns to be more disruptive than others, based on a combination of both the historic stimulus growth rate and the overall share of budget that the expenditure category represents.

Where do K–12 districts go from here?

Given the forthcoming fiscal challenges, schools will face significant efforts to maintain and improve the quality of education for all students. From 2019 to 2022, the pandemic erased two decades of student academic progress and widened achievement gaps between high- and low-income schools. Learning loss recovery efforts have closed a small portion of those gaps to date. How districts allocate their resources from now on may determine the extent of recovery. School administrators may want to consider evidence-based interventions, supports, and programs to address persistent learning gaps and to tackle challenges with student behavior and absenteeism. They may also want to examine their spending patterns during the pandemic and evaluate what worked and what didn’t. As they consider options to close budget gaps, they can then take a fresh look across priorities rather than basing budgets on prior years.

Vendors of educational products may be in for a bumpy ride. More than half of our survey respondents (60 percent) report that they may need to consolidate vendor contracts in the future. This, coupled with the fact that ESSER fueled an estimated $23 billion increase in spending on vendors, may require K–12 suppliers to reevaluate their sales development strategies and potential exposure to poststimulus consolidation. Our research suggests that budget-constrained schools will be looking for the highest-impact solutions, so vendors may need to better understand the financial situation of their target customers, communicate the value of their products more effectively, and provide additional services and training to support capacity-constrained districts in implementing solutions.

Philanthropic organizations can play an important role where local and state funding is insufficient. While philanthropic funding cannot fill in the entire gap left by ESSER funding, it can make a difference: ensuring that evidence-based interventions such as high-dosage tutoring are still available for the neediest students, providing technical assistance to districts to support more effective resource allocation, and helping to measure the impact of investments.

Now, more than ever, school districts, the communities they serve, and the investors, suppliers, and philanthropists in the education ecosystem need to continue placing students at the center of their initiatives and investing strategically in their future.

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