Budget & Finance Opinion

5 Mistakes to Avoid When Spending COVID-Relief Funds

ESSER funding can easily trip districts up
By Marguerite Roza — December 01, 2021 5 min read
A group of people on a see-saw balance money and education
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Imagine it’s 2023. Pundits are judging how every school district spent their Elementary and Secondary School Emergency Relief funds. There will be successes but also mistakes made in 2021 and 2022. What will those mistakes be? And what can district leaders do now to avoid them?

It’s worth recalling that the $190 billion COVID-19 relief fund is a grand experiment of sorts. The federal money is so flexible that I’m hard-pressed to find something in the rules that districts can’t use it for. While the law stipulates that 20 percent of the money be used to “address learning loss,” the remaining funds can be applied to anything deemed “reasonable and necessary.” In other words, districts have enormous latitude. That creates opportunity for game-changing spending on behalf of students—and spending blunders, too.

To wit, I share my predictions for some likely mistakes district leaders will make and some prescriptions for how to prevent them.

Mistake 1: Spending in a way that creates a disruptive fiscal cliff

Districts feel flush right now, thanks to the federal aid, but that aid disappears in 2024. And if the enrollment drops that many districts are seeing today continue, those districts will have even less money coming in from local and state sources. Districts can avoid the cliff by sticking with short-term spending commitments to match the short-term nature of the federal money versus locking in spending down the road. That means paying stipends for staff who take on extra duties and using contract staff instead of hiring new employees who expect continued employment. For districts with teacher shortages, it means using one-time hiring or retention bonuses targeting just the areas of need (say STEM or special education teachers) instead of raising base pay systemwide.

A corollary mistake is using the relief funds to offset revenue shortfalls due to permanent enrollment losses. Doing so will only delay hard decisions on downsizing the district until the aid is gone, while using up dollars in ways that may not do much to remedy the academic effects of the pandemic on students.

Mistake 2: Deploying funds inequitably across schools

State agencies now report school-by-school spending data that will make clear how much federal funding per student ultimately landed on each school. That makes it even more important for district leaders to think ahead to how spending decisions today will impact equity in the months to come. For instance, will adding one counselor to each school or an across-the-board percentage-based pay raise ultimately drive more dollars per student to wealthier schools? The answer will be yes when the wealthier schools are smaller (the counselor will cost more per student) or have more experienced teachers (because experienced teachers are paid more than less experienced ones). Similarly, districts end up using dollars inequitably when high-needs schools go months with staff vacancies or when students in high-poverty schools are less likely to participate in tutoring programs or new extracurriculars or when a facilities investment is made at just one school. One way for districts to ensure spending doesn’t flow inequitably is to deliver fixed amounts per pupil to each school (say $250 for each student plus an extra $100 per low-income or English-learner student).

Mistake 3: Issuing problematic procurement contracts that come back to haunt leaders

In many districts, 2021 will be procurement-palooza. Indeed, contracts can be great vehicles for adding capacity, for spending fast while avoiding a fiscal cliff, and for providing innovative ways to deliver services. But procurement contracts that carry even a whiff of possible problems can be trouble: Contracts tend to invite suspicion, and with new money in the mix, there are new vendors and new promises being made. Prepandemic examples of contract conflict for district leaders abound, from a no-bid contract for budgeting software in Kent, Wash., to a mammoth iPad contract in Los Angeles that led to damaging criticism of then-Superintendent John Deasy.

To prevent problems, leaders will want to follow steps that Maryland’s Montgomery County public schools took when that district agreed to pay a startup company an eyebrow-raising $169 million annually over 16 years to lease electric school buses. Those steps include ensuring contracts have measurable outcomes with continued payment hinging on vendors hitting performance targets (and if they don’t, giving districts an out). Contracts for services with students should include measurements for student outcomes or participation rates. And contracts should be publicly vetted, voted on in board meetings, and made fully transparent (perhaps following Chicago’s lead in which every contract is online in a searchable database).

Mistake 4: Failing to make sure the school district community sees and values investments

If a tree falls in the forest and no one hears it, does it make a sound? The corollary here is: If a district makes an investment to help students and no one knows, will anyone value it? Leaving the community and school staff to wonder, “Where did all that federal money go?” is a mistake. District leaders need to reiterate what they are buying, clearly communicate the connection between investments and students, and encourage principals to engage with teachers and parents on how investments are playing out.

Ideally, district leaders keep the focus on connecting spending to goals for students. Like this: “We spent $15 million—some $125 per student—on six hours of weekly tutoring for our most vulnerable students to get them back on track in math.” That way, principals, teachers, tutors, and parents can connect the dots well after the budget is approved.

Mistake 5: Investing without demonstrating real results for students

It’s true that Congress didn’t ask for much in return for the billions in relief aid. There are no specific targets for students even though the public expects the money to help students’ learning, according to a survey of parents by the Walton Family Foundation last spring. But come 2023, if districts can’t show what they’ve achieved for students, the spending choices are doomed to be judged a failure.

That means measuring student progress will be key. This doesn’t have to mean standardized tests (though comparing spending and outcomes by school is vital, by whatever metric is used). If spending on after-school enrichment is supposed to help lure reluctant families back to in-person school, then leaders should measure the degree to which those students are, in fact, returning. And if an investment isn’t working, it’s time to make midcourse corrections to ensure success.

With the magnitude of dollars at play, missteps are inevitable. Some district choices have already fueled alarming headlines. But plans aren’t set in stone, even after they’ve been submitted to the state. Perhaps the most important message for district leaders is this: There’s still time to modify spending decisions that won’t pass muster in the rearview mirror.

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