With Covid Money Set to Expire, Many School Districts are Struggling to Spend It

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New Hampshire school districts received nearly a billion dollars in federal aid since the outbreak of COVID-19. The funding is meant to help pay for remote learning technology, HVAC upgrades, and learning loss initiatives.

But the money is due to expire in September 2024 – and some researchers warn that schools could be facing a funding cliff if they don’t prepare.

A recent study of New England states by the Georgetown University Edunomics Lab, a research center, found that New Hampshire schools are on average facing a 3 percent budget cut in the next year, in part because of the loss of federal funding and in part because of a continuing drop in enrollment.

“The school finance landscape is shifting rapidly,” said Marguerite Rosa, a research professor and the director of the Edunomics Lab, during a briefing to reporters in October. “And there’s fiscal shocks coming that we haven’t ever seen before.”

The hardship will not hit school districts equally; schools with more low-income students will face greater budget headaches, researchers found. Schools with more low-income students received more federal COVID-relief money, but also stand to lose higher amounts of it if they don’t spend it.

Concord School District will likely need to reduce its budget by 2 percent to account for the loss of the COVID relief funding, researchers projected. Manchester School District, which has a higher proportion of students who qualify for free and reduced-price lunch, will face a 10 to 14 percent drop in funding, the study found.

The end of federal Elementary and Secondary School Emergency Relief, or ESSER, funding could be important to the upcoming spring school budget season. School boards are preparing to draft budgets for the 2024-2025 school year and release them to residents to approve at town and school meetings in March.

According to researchers, the ESSER money may have helped New Hampshire districts mask bigger problems with declining enrollment and delay the need to downsize accordingly. The anticipated sudden loss of funding could require schools to reduce personnel, the researchers found.

In Concord, the projections suggested 11 positions might need to be cut; in Manchester, 35 to 60 positions could be at risk.

Compounding the problem is the fact that despite receiving millions of dollars under the ESSER fund, many school districts have struggled to spend it all in time.

The study found that New Hampshire schools have spent their COVID relief money at a slower rate than the national average. And schools with higher portions of lower-income students have much more money left over than those with more higher-income students, researchers found.

School districts where more than 25 percent of students qualify for free and reduced-price lunch have an average of 69 percent of their funds remaining – compared to 46 percent of funds remaining in districts with less needy kids, according to the researchers.

“With more to spend up against the deadline, these districts are at risk of a steeper fiscal cliff once the funds expire,” the researchers wrote in a presentation accompanying the report.

In total, school districts have spent 87 percent of the total amount of ESSER funding, according to a dashboard by the Department of Education.

Barrett Christina, executive director of the New Hampshire School Boards Association, said school boards across the state are aware of the coming deadline to spend the ESSER money, and will be calibrating their budgets this spring to spend down as much of the remaining money as they can.

But he said it is unlikely that schools will be able to spend down all of it.

“As a matter of economics, I don’t think 100 percent of the money is going to be spent,” Christina said in an interview. “But I’m certainly aware that districts and superintendents are budgeting appropriately and trying to find ways to use the money within the allowable uses of it.”

The issue with leftover COVID relief money is not unique to New Hampshire schools, according to the Georgetown researchers. While Congress was quick to appropriate the money at the peak of the pandemic in 2021, schools across the country have struggled to spend it down efficiently.

Part of the difficulty has been caused by the overall economy. The ESSER funds were in part designed to be used to install or upgrade HVAC systems to improve air circulation in schools, a major concern as districts moved back into full-time learning in 2021. But supply chain problems and a shortage of labor has meant that many of those infrastructure projects have faced long delays, impeding the districts’ ability to spend down the federal aid.

School districts also sought to use the federal aid to fund paraprofessional positions to address learning loss caused when students moved to remote learning in 2020 and 2021. But a broader difficulty in hiring and an exodus in existing teachers and paraprofessionals has made filling those positions difficult.

In New Hampshire, the end of COVID money is compounded by another phenomenon: falling enrollment. This month, the Department of Education reported that New Hampshire public school enrollment in the current school year dropped 1.4 percent from last year, and has fallen 20.5 percent since 2002. Lower enrollment means schools receive less money in state adequacy aid and federal funding programs.

Georgetown researchers say that combination of factors – enrollment drops and funding lapses – means New Hampshire schools should expect the hardest budgeting conditions to arrive in the next coming school year.

“We’ve been calling ‘24-’25 the bloodletting (year),” said Rosa.

State figures suggest schools will need to make adjustments when the federal money ends.

Of the nearly $900 million that has been budgeted by New Hampshire school districts since 2021, about 25 percent has gone to pay for staffing costs, according to the New Hampshire Department of Education. Another 25 percent has gone to “inspection, testing, maintenance repair, replacement, and upgrade” services.

Christina noted that school boards that had been using the COVID money to help pay for staffing costs are going to need to find off-ramps to account for the money ending soon, either by finding local money to continue paying those staff or eliminating those positions. This budget season will be the last chance to use the rest of the ESSER money to facilitate that off-ramp.

Some districts may try and use the funding for more short-term expenses, such as professional development for teachers.

When it comes to staffing, Christina noted that the Legislature’s decision to increase the state school funding formula to provide more dollars per student could help some districts absorb some of the cuts in federal aid. But he said that personnel costs have always been the most important costs for school boards to keep contained.

“I remember having conversations with school board members and administrators back in 2020, 2021, saying, ‘Be mindful of how you’re spending this money, because your salaries and your staffing are your real budget drivers,’” Christina said. “So I think we’re probably going to see a mix.”

New Hampshire Bulletin is part of States Newsroom, a network of news bureaus supported by grants and a coalition of donors as a 501c(3) public charity. New Hampshire Bulletin maintains editorial independence. Contact Editor Dana Wormald for questions: info@newhampshirebulletin.com. Follow New Hampshire Bulletin on Facebook and Twitter.

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