As Covid-19 emergency funding dries up, some rural schools may face a steep fiscal cliff in 2024

Some rural school districts — particularly those with greater poverty levels — are set to face steep budget reductions when Covid-19 emergency funding closes this September.

To offset the effects of Covid-19 on public education, the federal government issued historic amounts of pandemic relief aid through the Elementary and Secondary School Emergency Relief Fund (ESSER) to states and districts across the country beginning in March 2020.

Over the past several years, The Daily Yonder reports, the public school system has had access to nearly $190 billion, which states and districts have spent on a variety of needs including technology, transportation, school infrastructure, mental health support, after-school programing, tutoring, faculty training and increased staffing.

But by the end of September 2024, the relief aid will end indefinitely, leaving districts to operate with significantly smaller budgets.

According to an analysis from FutureEd, rural districts accessed an average of $5.7 million dollars in aid in the final wave of ESSER funding. While amounts vary, this means the average rural district may face a budget reduction of roughly $2,000 per student.

And the cliff gets even steeper for rural districts serving high-needs students. One in every 7 students in rural America experiences poverty. Rural districts with greater poverty levels received more ESSER funds on average, and thus face larger reductions. 

How school districts spent ESSER funds determines how easily they'll navigate the fiscal cliff, said Lori Taylor, an economist and K-12 education finance expert at Texas A&M University.

"The federal government basically said that these were supposed to be one-time funds," she said in an interview with the Daily Yonder. "A lot of folks spent as if they were going to be a permanent addition to their budget."

How rural schools planned to spend Covid-19 relief funds

According to a data analysis from Bella DiMarco and Phyllis W. Jordan at FutureEd, rural schools planned on spending their funds on a mixture of one-time purchases and recurring expenses.

Much like other geographic settings, 48% of rural schools planned on investing their third round of ESSER aid on upgrading their heating, ventilation, and air conditioning (HVAC), including one rural school district in Maine that "plans to spend half its ESSER III allotment, about $1.3 million, to install a mechanical HVAC system in one of its four schools that previously did not have a system throughout the building."

Additionally, 33% of rural schools planned to spend their round three aid on transportation, and 39% on instructional materials. Schools that spend their ESSER money on these one-time purchases will have an easier time facing the upcoming budget decreases this fall.

But many rural schools also planned to invest their ESSER funds on recurring expenses like school staffing and after school or summer programming. Almost half of all districts from any geographic setting planned to spend relief aid on hiring and paying teachers and academic staff. 

"Rural districts, in general, face more staffing challenges," DiMarco told the Daily Yonder. "If districts have been using ESSER funds to hold onto staff, paying salaries, or even bonuses … they [are] going to run into that issue of 'what happens when the money runs out?'"

To support student mental health during the pandemic, many schools planned to hire psychologists and mental health staff. Forty one percent of urban districts and 40% suburban districts planned to hire mental health staff, while only 28% of rural districts reported investing in these new staff.

Allen Pratt, executive director for the National Rural Education Association told FutureEd that many rural areas lack mental health professionals, preventing many schools from even considering this option. 

Schools that did expand mental health offerings may be faced with tough decisions when their budgets shrink this fall and they are no longer able to afford the extra support staff.

When districts are in crisis mode, they are making decisions to get their students through the year without learning loss, Taylor said. "I don't think that in the crisis moments of Covid-19, people were thinking far enough ahead."

Another general concern is that smaller rural schools have thinner margins of error, Taylor said. "One large family moves in and that's a financial shock to the rural school, or one large family moves out and that's a financial shock to the rural school." she said. "So their budgeting has to be, in many ways, more precise."

No matter how popular or successful an after school program, or new staff hires or bonuses were, no matter the positive impact this extra funding had for public schools, Taylor says there's a perception in the field that September is a "return to normality."

"The situation is that education has to compete with healthcare, has to compete with highways, has to compete with the taxpayer's desire to keep money in their own pockets," she said. "And absent a crisis, you don't have this willingness to go into debt."

Cushioning the fall

While districts are required to obligate, or designate, their funds by September 2024, the United States Education Department announced that schools can apply for extensions, to delay the final spending deadline to April 2026 to relieve stress on schools. 

This is particularly important for overstretched rural administrators, who will now have additional time to make spending arrangements. 

Chalkbeat also reports that state governments, who provide a majority of funding for public schools, could increase education spending to cushion the fall for schools. 

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